BWF v BWG

• Jurisdiction: Singapore
• Judge: Valerie Thean J
• Judgment Date: 26 March 2019
• Neutral Citation: [2019] SGHC 81
• Plaintiff Counsel: Kendall Tan, Ting Yong Hong (Rajah & Tann Singapore LLP)
• Docket Number: Originating Summons No 1086 of 2018
• Date: 26 March 2019
• Hearing Date: 15 January 2019,29 November 2018,02 January 2019
• Subject Matter: Winding Up,Arbitration,Restraint of Proceedings,Companies,Agreement
• Year: 2019
• Defendant Counsel: Nish Shetty, Keith Han (Cavenagh Law LLP)
• Court: High Court (Singapore)
• Citation: [2019] SGHC 81
• Published date: 30 April 2020

Valerie Thean J: Introduction

Plaintiff (“BWF”) and defendant (“BWG”) signed a contract for the sale and purchase of crude oil. BWG subsequently formed the view that, despite its performance of its obligations under the contract, BWF had failed to pay its invoice of US$30,245,600. There is no dispute that this sum of US$30,245,600 remains unpaid. BWF informed BWG that it was entitled to various defences under the contract between parties, which also provides that disputes between parties should be referred to arbitration. Notwithstanding this, BWG served a statutory demand on BWF.

By the present originating summons, BWF sought to restrain BWG from bringing winding up proceedings against it, being of the view that the contract between parties obliged them to proceed to arbitration to deal with their various disputes. After hearing parties, I granted the injunction sought by BWF. BWG has now appealed and I furnish my grounds of decision.

Background

BWF is a Singapore-incorporated wholly-owned subsidiary of the national oil company of an Asian country.¹ BWG is a company incorporated under the laws of the Commonwealth of the Bahamas.²

Parties were introduced to each other by a Singapore-incorporated company dealing in fuels and related products (“BWX”). BWF’s case is that, in order to facilitate a wider transaction between BWG and BWX, between 10 to 13 April 2018, BWX, through its oil trader Mr Shi, approached BWF’s deputy director Mr Bui through a series of telephone conversations and WhatsApp chat messages to offer BWF a position as an intermediary between BWG and BWX. As such an intermediary, BWF’s role was to pay BWG upon payment by BWX,³ and did not take on any of the operational, credit risks or liabilities related to the wider transaction. 400,000 net U.S. barrels of Lula normal crude oil (“the Cargo”) was to be sold by BWG to BWF and thereafter, by BWF to BWX using two separate agreements.

On 13 April, after Mr Bui confirmed BWF’s participation with Mr Shi, a trader in BWG’s employ, Mr Chew contacted Mr Bui by WhatsApp with what he termed a “Deal Recap”. This Deal Recap was then sent to Mr Bui over email, followed by an amended Deal Recap, a series of documents being exchanged from 19 to 24 April, and finally, a facsimile from BWG to BWF on 27 April 2018. This facsimile on 27 April is the contract (“the Contract”) upon which the invoice of US$30,245,600, and later disputed statutory demand, rests. The Contract is silent on BWF’s role as an intermediary and responsibility to pay BWG only when paid by BWX. Clause 12 stipulates that it is governed by English law and disputes are to be referred to arbitration in London. The onward contract between BWF and BWX (the “BWF-BWX Contract”) was finalised by facsimile on 3 May 2018.⁴ The price BWX was to pay BWF was US$30,253,600. BWF’s intended profit as intermediary was therefore the differential of $8,000.

According to BWF, such intermediary deals are common in the industry, to enable traders to meet trade volume targets for the financial year; for the intermediaries involved, it is a way to gain experience in relation to new markets or new products.⁵ On BWF’s part, this transaction enabled it to satisfy the trade volume set by its parent company and to gain experience in trading crude oil. Mr Bui thought this would be useful to prepare for a future refinery project and to gain exposure to the Chinese market.⁶ In some cases, there was also an industry practice to have a written side agreement. On 3 May 2018, Mr Bui requested Mr Shi to formalise the intermediary role and the pay when paid condition in a separate tripartite agreement.⁷ Mr Shi responded, while reiterating that BWF would not be required to pay BWG pending receipt of payment from BWX, that BWG preferred not to have such a written agreement.

Prior to BWF being approached by BWX – and BWF contends, unknown to it – on 6 April 2018, Mr Muda, a trader at BWX, emailed BWG to propose a deal where BWG would purchase the Cargo on a delivered ex-ship basis⁸ from BWX and sell it to BWF. Under this proposal, BWG would have to pay BWX within 30 days, and would be paid by BWF within 90 days of the Notice of Readiness (“NOR”) Date.⁹ BWG agreed to the proposal on 13 April 2018, subject to the completion of the contractual documentation.¹⁰ The written contract between BWX and BWG was finalised on 27 April 2018, the same date as the Contract. The effect of this series of contracts was that the same Cargo would originate with BWX and return to BWX.

On 24 April 2018, BWG sent its invoice to BWF for the sum of US$ 30,245,600, stated to fall due on 11 July 2018,¹¹ on the premise that BWG discharged the Cargo at the contractually agreed destination port, Dongjiakou.¹² Subsequently, on 4 May 2018, BWF in turn sent its commercial invoice dated 24 April 2018 to BWX for the sum of US$30,253,600, stated to fall due on 10 July 2018.¹³ The parties now disagree over whether there is sufficient evidence of proper delivery of the Cargo.

BWX did not make payment to BWF, and BWF subsequently failed to pay the amount of US$30,245,600 to BWG, that being the amount owed to BWG under the Contract, excluding interest accruals (“the Disputed Debt”).¹⁴ By 3 July 2018, it became clear that BWX was unable to effect payment of the purported purchase price for the Cargo to BWF by 10 July 2018.¹⁵

On the morning of 4 July, Mr Bui and a colleague from BWF met with a BWG representative, Mr Chew. Mr Bui and his colleague state on affidavit that Mr Chew revealed that BWG had purchased the Cargo from BWX, and had procured Credit Agricole to issue a letter of credit to BWX, which had paid out 30 days after the purported NOR.¹⁶ BWX had therefore received US$30 million from BWG.¹⁷ This was the first time, Mr Bui states, that he had any inkling that the series of deals were in fact a financing transaction pursuant to which BWG loaned US$30 million to BWX. Mr Bui decided then that it was crucial for the tripartite agreement to be recorded in writing, and made the request.¹⁸ Representatives from BWX, BWF and BWG met for this purpose.¹⁹ At the conclusion of the meeting, BWX stated that it would follow on with an instalment payment proposal for payment to BWF.²⁰ Matters between BWF and BWG, on the other hand, remained unresolved as Mr Bui rejected Mr Chew’s request to pay BWG before BWF was paid by BWX.

On 6 July 2018, BWX sent a proposed repayment schedule to BWF. This was forwarded by BWF to BWG.²¹ BWG refused to accept any change in contractual terms for payment, and sent payment reminders instead to BWF on 9 and 12 July 2018.²²

On 12 July 2018, BWF sent an email to BWG stating that they would like to settle the matter amicably and would write to BWG on a “without prejudice” basis. On the same day, BWF entered into a settlement agreement with BWX (“the Settlement Agreement”), providing for payment of the sum of USD 30,253,600 in four instalments.²³

Concurrently and separately, Mr Bui had discussed the matter with Ms Li, a Senior Manager at a Chinese state-owned oil trading company, who made investigations which included conversations with Mr Xu Yuan, the general manager of Hai Yuan Trading Pte Ltd, a wholly owned Singapore incorporated subsidiary of Haike Chemical Group Ltd (“Haike”), an independent oil refiner in China, on 16 and 21 August 2018.²⁴ Ms Li affirmed an affidavit to the effect that Hai Yuan was the receiver named in the NOR tendered by BWG to BWF.²⁵ Hai Yuan, being the procurement arm of Haike, purchases crude oil for importation into China, which is then utilised as feedstock by Haike’s refinery. The contention was that this transaction in question involved the purchase of cargo from Petrobas, to Hai Yuan, and on to Haike. Unauthorised copies of the documents had been made by an employee of Haike, which were then used as source documents to create the documents that were used in this case. Ms Li believed that the present transaction was a phantom trade, creating only an impression of a physical trade, in order for BWX to obtain a loan from BWG.²⁶

On 13 August 2018, BWG served a statutory demand under s 254 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”) (“the Statutory Demand”) on BWF.²⁷ BWF responded on 20 August 2018 to dispute the debt claim, requesting that the dispute be referred to arbitration, and for BWG to desist from winding-up proceedings. Solicitors further corresponded without a successful resolution, and on 3 September 2018, BWF filed an originating summons to set aside the Statutory Demand, and to ask for an injunction to restrain winding up proceedings.

In the meanwhile, BWX breached the Settlement Agreement with BWF on 10 August 2018, when the first instalment of US$5,000,000 fell unpaid. BWF exercised its rights pursuant to Clause 4 of the Settlement Agreement on 17 August 2018, entitling BWF to treat the entire Settlement Sum as falling due and owing on 10 July 2018.²⁸ Subsequently, BWF’s solicitors served BWX with a letter on 30 August 2018 requiring payment of the sums outstanding under the Settlement Agreement. After the failure of BWX to pay or make any offer to secure or compound the debt to the satisfaction of BWF, BWF filed CWU 260/2018 on 1 November 2018 to wind-up BWX. As at 2 January 2019 when I dealt with this application, CWU 260/2018 had been stayed by another judge pending the outcome of an application brought by BWX under s 211B of the Companies Act.

Issues

The Contract contained a dispute resolution clause which stipulated that issues should be construed in accordance with English law, and disputes referred to arbitration in London. Clause 12 (“the arbitration clause”) read as follows:²⁹

THIS CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH ENGLISH LAW. ANY DISPUTE, DIFFERENCE OR CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY QUESTION REGARDING ITS EXISTENCE, VALIDITY OR TERMINATION,...