Chimbusco International Petroleum (Singapore) Pte Ltd v Jalalludin bin Abdullah and other matters

• Judge: Vinodh Coomaraswamy JC
• Judgment Date: 28 February 2013
• Neutral Citation: [2013] SGHC 55
• Hearing Date: 03 August 2012,18 September 2012,23 August 2012,24 August 2012,20 September 2012,21 September 2012
• Docket Number: Bankruptcy OS No 752 of 2012 (Registrar’s Appeal No 263 and 284 of 2012), Bankruptcy OS No 959 of 2012 (Registrar’s Appeal No 264 and 283 of 2012), Bankruptcy OS No 961 of 2012 (Registrar’s Appeal No 265 and 285 of 2012), Companies Winding Up OS No 89 of 2012, Companies Winding Up OS No 90 of 2012 and Companies Winding Up OS No 91 of 2012
• Citation: [2013] SGHC 55
• Published date: 12 March 2013
• Year: 2013
• Subject Matter: Bankruptcy,Bankruptcy Order,Insolvency Law,Winding Up Order,Winding Up
• Court: High Court (Singapore)
• Defendant Counsel: Ms Karen Ang (Insolvency & Public Trustee's Office),Mr Andre Maniam SC and Mr Derek Tan (WongPartnership LLP)
• Plaintiff Counsel: Ms Wendy Tan and Mr Tony Tan (Stamford Law Corporation)

Vinodh Coomaraswamy JC: Introduction

The question before me is whether I should allow, dismiss or stay on conditions – and if so on what conditions – insolvency proceedings which the plaintiff, Chimbusco International Petroleum (Singapore) (“Chimbusco”) has brought against six defendants. The issue arises because the plaintiff does not have a judgment which determines that the defendants are indebted to it.

Chimbusco trades oil. It had mutual dealings with a company known as Gas Trade (S) Pte Ltd (“Gas Trade”). Those dealings gave rise to mutual credits and mutual debits. They maintained a running account. As at 29 February 2012, the net position between the two arising was that Gas Trade owed Chimbusco US$13,015,342.031See Affidavit of Zhu Jian filed 2 August 2012, at para 17. This net position arose from dealings between August 2011 and December 2011.

Chimbusco obviously had a direct claim against Gas Trade for this debt. In addition, Chimbusco had the benefit of personal and corporate guarantees for this debt from ten guarantors: three individuals and seven companies. But Chimbusco did not seek to obtain a judgment, either that Gas Trade was liable to Chimbusco for this debt as principal debtor or that any of the 10 guarantors was liable to Chimbusco for this debt under their guarantees.

On 3 April 2012, Chimbusco commenced winding up proceedings against two of the ten guarantors. On 4 April 2012, it commenced bankruptcy proceedings against one guarantor. On 16 April 2012 and 17 April 2012, it commenced winding up proceedings against two more guarantors. On 25 April 2012 all of the ten guarantors together with Gas Trade initiated Suit No 347 of 2012 (“S347”) against Chimbusco. The purpose of S347 was to secure a judicial determination that Chimbusco was not entitled to pursue Gas Trade or the guarantors. On 2 May 2012, Chimbusco commenced bankruptcy proceedings against two more guarantors. And on 31 May 2012, it commenced winding up proceedings against the final three guarantors as well as against the principal debtor, Gas Trade.

On 1 June 2012, Philip Pillai J ordered that four of the corporate guarantors be wound up. They were wound up not because Pillai J found that they owed money to Chimbusco. They were wound up because they admitted that they were insolvent. On 6 July 2012, Lai Siu Chiu J ordered that Gas Trade, the principal debtor, be wound up.

The six remaining insolvency proceedings came before me. Three of them came before me on appeal from an Assistant Registrar exercising bankruptcy jurisdiction. The other three came before me at first instance as winding up proceedings against the three remaining corporate guarantors. The guarantors invited me to dismiss all six of these insolvency proceedings. Chimbusco invited me to make six insolvency orders. I did not do either. Instead, I stayed all six proceedings on condition. The condition was that the guarantors provide security to Chimbusco for the debt claimed against them within three weeks of my order. The deadline was 14 September 2012.

On 18 September 2012, the six insolvency proceedings came before me again. All six guarantors had failed to provide any security at all. The papers in the insolvency proceedings were in order. Chimbusco submitted that I should make the insolvency orders which they sought. There was no impediment to my doing so. I therefore adjudicated the three individual guarantors bankrupt and ordered that the three corporate guarantors be wound up, all unconditionally.

Two of the three individual guarantors who appealed to me and two of the three corporate guarantors who appeared before me at first instance have now appealed against my decision. I now set out my reasons.

Factual background Three documents executed on or around 15 July 2011

Chimbusco and Gas Trade’s mutual business dealings and running account started in or around August 2010. As a result of these dealings, Gas Trade owed Chimbusco a net debt. Chimbusco was concerned about getting paid. To address that concern, on or about 15 July 2011, the parties before me executed three documents.

The first document was an undated instalment payment agreement. In this agreement, Gas Trade acknowledged its indebtedness to Chimbusco. This agreement permitted Gas Trade to repay its debt to Chimbusco by monthly instalments over time in consideration for Chimbusco refraining from forthwith commencing legal proceedings against Gas Trade. Gas Trade also agreed to pay interest on its debt at 2.5% per annum from 1 July 2011 onwards.

The second document was a joint and several corporate guarantee dated 15 July 2011. It was executed by all seven corporate guarantors. It secured all amounts, debts and liabilities due and owing by Gas Trade to Chimbusco plus interest and costs. The corporate guarantors also undertook, as a continuing obligation, to discharge all obligations and liabilities which were then or should at any time be owing from Gas Trade to Chimbusco2Para 8 of Adeliene Yuana Mohd Zain’s Affidavit (21 June 2012) in CWU89/2012 and para 13 of the Plaintiff’s written submissions (5 July 2012).. The corporate guarantees are unlimited in amount. All seven of the corporate guarantors are affiliated with Gas Trade through common ownership or common control.

Chimbusco’s insolvency proceedings against three of those seven corporate guarantors came before me. They are: Paradigm Shipping Pte Ltd (“Paradigm Shipping”), the defendant in Companies Winding Up Originating Summons (“CWU”) No 89 of 2012; Hir Huat Trading Pte Ltd (“Hir Huat”), the defendant in CWU 90 of 2012; and Peta Marine Services Pte Ltd (“Peta Marine”), the defendant in CWU 91 of 2012.

The third document was a joint and several personal guarantee dated 15 July 2011 executed by three individual guarantors. These guarantees are limited in amount: they limit the personal guarantor’s joint and several liability to US$4 million plus interest and costs.3Para 7 of Zain’s Affidavit (Bankruptcy) (25 May 2012) in B961/2012 read with para 16(c) of Zain’s Affidavit (Companies Winding Up) (4 May 2012) in CWU51/2012.

The three personal guarantors are directors of one or more of the seven corporate guarantors. They are: Mr Mohd Zain Bin Abdullah (“Mr Zain”), the defendant in B961 of 2012. Mr Jalalludin Bin Abdullah (“Mr Jalalludin”), the defendant in B959 of 2012. Mr Mohammad Bin Abdul Rahman (“Mr Mohammad”), the defendant in B752 of 2012.

Chimbusco’s insolvency proceedings against the corporate guarantors and the personal guarantors are founded on their respective guarantees. Each of the two guarantees had a copy of Gas Trade’s instalment payment agreement physically annexed to it.

After these three documents were executed, Chimbusco and Gas Trade continued their mutual dealings. As at 29 February 2012, Gas Trade owed Chimbusco a net debt of US$13,015,342.03,4Para 8 of Zhu Jian’s Affidavit Supporting Winding Up Application (Companies Winding Up) (31 May 2012) in CWU89/2012. including interest. This debt arose from mutual dealings between August and December 2011.

Chimbusco demands payment

On 29 February 2012, Chimbusco demanded in writing payment of this debt from Gas Trade as principal debtor and from all ten of Gas Trade’s guarantors. They did not deny that they were liable to pay. But they did not pay.

On various dates in March 2012, Chimbusco served statutory demands for payment of this debt on all seven corporate guarantors pursuant to s 254(2)(a) of the Companies Act (Cap 50, 2006 Rev Ed).5Paras 10 to 11 of Zhu Jian’s Affidavit Supporting Winding Up Application (Companies Winding Up) (31 May 2012) in CWU89/2012, CWU90/2012 and CWU91/2012. They still did not deny that they were liable. But they still did not pay.

On various dates, also in March 2012, Chimbusco served statutory demands on the personal guarantors pursuant to s 62(a) of the Bankruptcy Act (Cap 20, 2009 Rev Ed). These demands were in the sum of US$4,202,572.126Para 7 of Zhu Jian’s Supporting Affidavit (Bankruptcy) (2 May 2012) in B752/2012, B959/2012 and B961/2012. because of the limit of US$4 million plus interest and costs under the personal guarantees. The personal guarantors too did not pay. Nor did the personal guarantors make any attempt to set aside the statutory demands under r 97(1) of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) on the grounds set out in r 98(2)(b): that they “disputed [the debt] on grounds which appear . . . to be substantial”. Nor did the personal guarantors dispute in any other way that they were liable for the debt which Chimbusco demanded.

Chimbusco then applied to wind up the principal debtor and the seven corporate guarantors and to bankrupt the three personal guarantors. I have detailed the chronology of these proceedings at [4]. It was only on 25 April 2012 that the guarantors raised any dispute at all about their liability. They did so when Gas Trade and all ten guarantors commenced S347 against Chimbusco.

Bankruptcy applications heard at first instance

Assistant Registrar Elaine Chew (“the AR”) heard the three bankruptcy applications on 3 July 2012. She found a number of triable issues of fact and law underlying the debt which formed the basis of the bankruptcy applications. So she did not make bankruptcy orders. But she found also a number of unsatisfactory points in the personal guarantors’ case.7Notes of Evidence (“NE”) of B752/2012, B959/2012 and B961/2012, 3 July 2012, pp 16 and 17. She concluded that that the personal guarantors had only barely met the threshold of showing a substantial dispute as to the underlying debt. Therefore, she did not dismiss the bankruptcy applications either. Instead, she ordered that the bankruptcy applications be stayed pending the resolution of S347. But she imposed a condition: each personal guarantor was to furnish security of US$1 million to Chimbusco within...