Denmark Skibstekniske Konsulenter A/S I Likvidation v Ultrapolis 3000 Investments Ltd

• Jurisdiction: Singapore
• Judgment Date: 16 September 2011
• Date: 16 September 2011
• Docket Number: Companies Winding Up No 196 of 2010
• Court: High Court (Singapore)

Denmark Skibstekniske Konsulenter A/S I Likvidation (formerly known as Knud E Hansen A/S)

Plaintiff

and

Ultrapolis 3000 Investments Ltd (formerly known as Ultrapolis 3000 Theme Park Investments Ltd)

Defendant

[2011] SGHC 207

Quentin Loh J

Companies Winding Up No 196 of 2010

High Court

Arbitration—Award—Effect—Debtor company seeking to strike out winding-up petition filed against them where there was previous arbitral award by petition creditor against debtor company—Debtor company arguing that it had genuine cross-claim against petitioning creditor—Whether consideration that cross-claim was one which debtor company had been unable to litigate and doctrine of abuse of process should be extended to encompass previous arbitration proceedings—Section 12 (6) International Arbitration Act (Cap 143 A, 2002 Rev Ed)

Insolvency Law—Winding up—Debtor company seeking to strike out winding-up petition filed against them where there were ongoing arbitration proceedings on cross-claim—Whether standard of proof that debtor company had to meet in order to resist winding-up application was no more than that for resisting summary judgment application—Whether there was genuine and serious cross-claim against petitioning creditor—Whether petitioning creditor had collateral purpose in bringing winding-up petition—Whether granting of winding-up application would cause irreparable harm to debtor company—Section 254 (2) (a) Companies Act (Cap 50, 1994 Rev Ed)

The defendant (‘Ultrapolis’) , owed the plaintiff (‘DSK’) , €686,693.30 plus interest (‘the undisputed debt’) pursuant to an arbitration award issued in Copenhagen (‘the Corrected Award’) . DSK's application to register the Corrected Award as a judgment under the International Arbitration Act (Cap 143 A, 2002 Rev Ed) (‘the IAA’) , was vigorously contested by Ultrapolis, unsuccessfully, in separate proceedings before Belinda Ang Saw Ean J (seeDenmark Skibstekniske Konsulenter A/S I Likvidation v Ultrapolis 3000 Investments Ltd [2010] 3 SLR 661 (‘DSK (No 1) ’) ) , and the Court of Appeal.

Soon after Ultrapolis's appeal was dismissed, DSK served a statutory demand under s 254 (2) (a) of the Companies Act (Cap 50, 1994 Rev Ed) on Ultrapolis requiring payment for the undisputed judgment debt. As Ultrapolis did not comply with the statutory demand, DSK applied to the court for Ultrapolis to be wound up.

Ultrapolis averred that the winding-up application should fail because: (a) Ultrapolis had a genuine cross-claim against DSK; (b) DSK had a collateral purpose in bringing the winding-up application, namely, to circumvent the second arbitration proceedings that Ultrapolis had commenced after being served with DSK's statutory demand; and (c) the granting of the winding-up application would cause irreparable harm to Ultrapolis's business.

Held, granting the application:

(1) The standard of proof that a debtor company, like Ultrapolis, had to meet in order to resist a winding-up application was no more than that for resisting a summary judgment application, ie, the debtor company need only raise triable issues. This standard of proof applied to all ‘cross claim’ and ‘disputed debt’ cases, regardless of whether the defence was mounted before or after the winding-up application was filed. Indeed, a defendant who was granted unconditional leave to defend in summary judgment proceedings upon demonstrating a triable cross-claim should not be twice vexed by allowing the petitioning creditor to re-litigate the same issue at the hearing of the winding-up application. In this respect, any linguistic divergence between the ‘triable issue’ test and the ‘unlikely to succeed test’ was a distinction without difference: at [23] and [25] to [27].

(2) It was clear that the court would, in the absence of special circumstances, dismiss or stay the winding-up application where: (a) there was a genuine and serious cross-claim; and (b) the cross-claim was equal to or greater than the claim of the petitioning creditor. A debtor company was not precluded from relying on a cross-claim simply because it could reasonably have litigated the cross-claim before the application was presented. Consequently, the failure to litigate a claim was simply one factor, albeit a weighty one, amongst others to be balanced in deciding whether the cross-claim was a genuine one or an abuse of process or a collateral attack on a previous decision: at [28], [29], [31] and [36].

(3) There was no reason why this factor, viz, whether the cross-claim was one which the company had been unable to litigate, in particular and the doctrine of abuse of process in general should not be extended to encompass previous arbitration proceedings. This was borne out by the preponderance of both authority and principle: at [37].

(4) In the present case, Ultrapolis could and should have brought the cross-claim as early as 2006, some four years ago, during the first arbitration proceedings where the Corrected Award was made. Its cross-claim arose out of the same facts and transaction. Instead, Ultrapolis voluntarily restricted itself to contesting the preliminary issue of jurisdiction before withdrawing from the main oral hearing of the substantive dispute before the arbitral tribunal. Ultrapolis also chose not to challenge the arbitral tribunal's decision on jurisdiction in the Danish Court, which it was entitled to do. Additionally, Ultrapolis did not provide any explanation as to why a cross-claim was not raised in the first arbitration proceedings. The cross-claim appeared to be a thinly veiled collateral attack on the Corrected Award and DSK (No 1) .Consequently, the intervening steps taken by Ultrapolis between the serving of the statutory demand and the filing of the winding-up application appeared to be no more than ill-conceived ploys to stave off liquidation. This failure to litigate the cross-claim clearly showed that the cross-claim was not a genuine one: at [41], [42] and [46].

(5) It accords with both commonsense and the rules of evidence that to establish a genuine cross-claim, a defendant had to do more than baldly assert the fact that a cross-claim existed. The sums cross-claimed by Ultrapolis fluctuated throughout this chequered litigation and were not only inconsistent but unsubstantiated. This pointed to the conclusion that the cross-claimed sums were conjured up to trump the Corrected Award in order to stave off this application. Even if these objections still left Ultrapolis' €280,000 cross-claim intact, this could not be said to be greater than the undisputed debt of €686,693.30 plus interest: at [47] to [49] and [60].

(6) DSK did not have a collateral purpose in bringing the winding-up application. First, the bare fact that DSK was in liquidation per se could not qualify as a collateral purpose for bringing this application. Moreover, this was a voluntary liquidation. Equally, the bald assertion that a partner in the firm that represented the interests of DSK was also the liquidator of DSK could not be a sufficient basis for alleging a collateral purpose. In any case, the interests of the law firm, DSK and the liquidator appeared to be aligned in the bringing of this application. Second, Ultrapolis' fears that the liquidators would prosecute its claims with less vigour were somewhat ironic in light of Ultrapolis' directors' tardy conduct in allowing the cross-claim to lie dormant for close to four years. Third, the second arbitration proceedings were only brought by Ultrapolis after the statutory demand was. This fact alone suggested that it was Ultrapolis and not DSK who were trying to stymie the proper resolution of this dispute: at [62], [64] and [65].

(7) Irreparable harm was only one factor that the court took into account in dismissing a winding-up application. This factor was clearly outweighed by Ultrapolis not having a serious and genuine counter-claim. In any case, any irreparable harm was neutralised by the fact that Ultrapolis was deemed to be insolvent under s 254 (2) (a) of the Companies Act after failing to pay the judgment debt within three weeks of the statutory demand. Finally, Ultrapolis was given the opportunity to provide security to obtain a stay, but they failed to avail themselves of it: at [67].

Abacus Realty Pte Ltd v Indian Overseas Bank [1998] 3 SLR (R) 720; [1999] 1 SLR 1 (refd)

Accessory People Ltd, The v Rouass [2010] EWCA Civ 302 (refd)

Ashworth v Newnote Ltd [2007] EWCA Civ 793 (folld)

Barrow v Bankside Members Agency Ltd [1996] 1 WLR 257 (refd)

Bayoil SA, Re [1999] 1 WLR 147 (refd)

Bradford & Bingley Building Society v Seddon Hancock [1999] 1 WLR 1482 (refd)

Dallal v Bank Mellat [1986] QB 441 (refd)

Denmark Skibstekniske Konsulenter A/S I Likvidation v Ultrapolis 3000 Investments Ltd [2010] 3 SLR 661 (refd)

Dennis Rye Ltd v Bolsover District Council [2009] EWCA Civ 372 (folld)

Goh Nellie v Goh Lian Teck [2007] 1 SLR (R) 453; [2007] 1 SLR 453 (refd)

Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 (refd)

Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (refd)

L H F Wools Ltd, Re [1970] Ch 27 (refd)

Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR (R) 268; [2007] 2 SLR 268 (folld)

Montgomery v Wanda Modes Ltd [2002] 1 BCLC 289 (folld)

Pacific King Shipping Pte Ltd v Glory Wealth Shipping Pte Ltd [2010] 4 SLR 413 (refd)

Pacific Recreation Pte Ltd v S Y Technology Inc [2008] 2 SLR (R) 491; [2008] 2 SLR 491 (refd)

Companies Act (Cap 50, 1994 Rev Ed) s 254 (2) (a)

International Arbitration Act (Cap 143 A, 2002 Rev Ed) ss 12 (6) , 29

Herman Jeremiah and Loh Jen Wei (Rodyk & Davidson) for the plaintiff

Chopra Sarbjit Singh (Lim & Lim) for the defendant

.

Quentin Loh J

Introduction

1 The defendant, Ultrapolis 3000 Investments Ltd (formerly known as Ultrapolis 3000 Theme Park Investments Ltd) (‘Ultrapolis’) , owes the plaintiff, Denmark Skibstekniske Konsulenter A/S I Likvidation (formerly known as...