Founder Group (Hong Kong) Ltd v Singapore JHC Company Pte Ltd
| Jurisdiction | Singapore |
| Judge | Sundaresh Menon CJ,Steven Chong JCA,Kannan Ramesh JAD |
| Judgment Date | 28 November 2023 |
| Docket Number | Civil Appeal No 41 of 2022 |
| Court | Court of Appeal (Singapore) |
[2023] SGCA 40
Sundaresh Menon CJ, Steven Chong JCA and Kannan Ramesh JAD
Civil Appeal No 41 of 2022
Court of Appeal
Arbitration — Agreement — Separability — Party seeking to rely on arbitration agreement while alleging contract in which arbitration agreement was contained was null and void — Whether doctrine of separability applied
Insolvency Law — Winding up — Creditor bringing winding-up application on basis of disputed debt — Whether creditor had standing to bring winding-up application as contingent creditor — Section 124(1)(c) Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed)
Insolvency Law — Winding up — Defendant disputing debt arising under contract containing arbitration agreement — Whether creditor had standing to bring winding-up application — Section 124 Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed)
Held, allowing the appeal:
(1) It was important to note that the requirement of standing to make a winding-up application and the grounds on which the application could be granted were distinct inquiries. Disputes over whether the indebtedness had been established could affect both parts of the inquiry, as they would affect whether a claimant had standing as a creditor but could also have a bearing on whether the company was or should be deemed to be insolvent. Nonetheless, the two inquiries were distinct and for conceptual clarity, they needed to be addressed separately: at [24].
(2) FGHK's contention that the AnAn requirements did not apply to the question of standing was mistaken. Where a debt was subject to a dispute that fell within the scope of an applicable arbitration clause (those being the first and second AnAn requirements), it could not be assumed at that point that the company was in fact a debtor, that being the precise question that the parties had agreed to refer to arbitration. Rather, it was only when the dispute had been resolved by arbitration in the claimant's favour, that the claimant could be considered a creditor of the defendant. It was for that reason that the court would ordinarily dismiss the winding-up application in such circumstances, provided that there had been no abuse of process on the defendant's part (that being the third AnAn requirement): at [32], [35] and [36].
(3) The fact that JHC could be found liable to pay the US$47.43m debt, if the arbitration were decided in FGHK's favour at some future date, did not make FGHK a contingent creditor. JHC's position was that the payment obligation was never meant to be enforced and that the Contracts were null and void. JHC therefore disputed the very existence of a payment obligation, and it could not be said that JHC was subject to a present obligation that was contingent upon the happening of a stipulated event: at [41] and [42].
(4) A disputed liability could in principle be considered a contingent liability where the liability itself was not disputed and the only dispute was over whether the contingency that crystallised the liability had occurred. Even then, however, there was a separate inquiry into the merits of the application. Thus, a creditor that established its standing to present a winding-up application as a contingent creditor despite the existence of a dispute as to whether the contingency had occurred might nonetheless not be able to establish grounds for winding up if it relied on a debt that was disputed by the defendant in good faith and on substantial grounds, or if there was such a dispute as to the contingency: at [45] and [47].
(5) JHC was not entitled to invoke the arbitration agreements in the Contracts and the AnAn requirements did not apply to the dispute it raised. JHC's position was that the Contracts were sham transactions and that there was no genuine intent on its part to enter into the Contracts. This logically included the arbitration agreements. There was no evidence that as a matter of Chinese law, the doctrine of separability enabled JHC to nevertheless invoke the arbitration agreements. As a matter of Singapore law, the doctrine of separability did not guarantee the survival of the arbitration clause in all circumstances and did not permit a party to invoke an arbitration clause that was contained in a contract which it maintained was not valid or binding: at [51], [53] and [55].
(6) JHC's position was manifestly inconsistent in that it claimed that the Contracts were null and void on the one hand, but then sought to rely on the arbitration agreements that were contained therein. It was plain that the real reason for JHC's inconsistent position was its desire to delay enforcement of the debt arising under the Contracts. This was clearly an abuse of process: at [62].
(7) JHC had not raised a dispute over the debt in good faith and on substantial grounds. While JHC's defence was that the Contracts were not meant to be enforced, JHC was unable to explain why it took this position, or why the Contracts were entered into at all. The sole basis for JHC's position was the fact that the debt of US$47.43m had sat on JHC's books for several years with no steps being taken by FGHK to enforce it. This was a wholly unsatisfactory explanation, as there might be any number of reasons why a creditor withheld promptly enforcing a debt: at [64] to [68].
(8) FGHK therefore had standing as a creditor to bring a winding-up application. As there was no real dispute over JHC's indebtedness, the court allowed the appeal and ordered that JHC be wound up: at [69].
(9) FGHK had proposed the appointment of liquidators from Alvarez & Marsal (SE Asia) Pte Ltd (“A&M (SE Asia)”). However, as FGHK's Liquidators were from the same global network of offices as A&M (SE Asia), the court declined to appoint the liquidators from A&M (SE Asia), and instead appointed alternative liquidators: at [70].
(10) It was appropriate to order JHC's directors to bear costs jointly and severally with JHC. There was a clear lack of good faith in JHC's defence. It could also be reasonably inferred that JHC's directors were closely connected to the proceedings, and that they caused the incurring of costs. Further, it was relevant that JHC was unlikely to be able to satisfy any costs orders against it, given that it had been unable to meet its debts for several years: at [78] to [82].
AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158 (folld)
Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] 1 SLR 349 (folld)
BCY v BCZ [2017] 3 SLR 357 (folld)
BWG v BWF [2020] 1 SLR 1296 (folld)
Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 (refd)
DB Trustees (Hong Kong) Ltd v Consult Asia Pte Ltd [2010] 3 SLR 542 (folld)
Fiona Trust & Holding Corp v Privalov [2007] 4 All ER 951 (folld)
Marty Ltd v Hualon Corp (Malaysia) Sdn Bhd [2018] 2 SLR 1207 (folld)
Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR(R) 268; [2007] 2 SLR 268 (folld)
National Mutual Life Association of Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 (refd)
Pacific Recreation Pte Ltd v S Y Technology Inc [2008] 2 SLR(R) 491; [2008] 2 SLR 491 (folld)
People's Parkway Development Pte Ltd, Re [1991] 2 SLR(R) 567; [1992] 1 SLR 413 (folld)
RCMA Asia Pte Ltd v Sun Electric Power Pte Ltd [2020] SGHC 205 (not folld)
SAAG Oilfield Engineering (S) Pte Ltd v Shaik Abu Bakar bin Abdul Sukol [2012] 2 SLR 189 (refd)
SIC College of Business and Technology Pte Ltd v Yeo Poh Siah [2016] 2 SLR 118 (folld)
Sim Chay Koon v NTUC Income Insurance Co-operative Ltd [2016] 2 SLR 871 (folld)
Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd [2021] 2 SLR 478 (refd)
Tomolugen Holdings Ltd v Silica Investors Ltd [2016] 1 SLR 373 (folld)
William Hockley Ltd, Re [1962] 1 WLR 555 (folld)
The appellant, Founder Group (Hong Kong) (in liquidation) (“FGHK”), was a company incorporated in the Hong Kong Special Administrative Region (“Hong Kong”) of the People's Republic of China (“PRC”). The respondent, Singapore JHC Co Pte Ltd (“JHC”), was a company incorporated in Singapore.
Prior to 2020, FGHK and JHC were part of the same group of companies and were owned and controlled by Peking University Founder Group Co Ltd (“PUFG”), which was a company incorporated in the PRC. In 2021, ownership and control of JHC were transferred from PUFG to a consortium of investors.
FGHK continued to be owned by PUFG, but it was ordered to be liquidated by the Hong Kong Court of First Instance on 19 July 2021. Liquidators of FGHK were appointed on 18 October 2021 (the “Liquidators”).
According to the Liquidators, they discovered upon a review of FGHK's books and records that a sum of approximately US$47.43m was due and payable by JHC to FGHK. This sum pertained to an alleged sale of copper cathodes by FGHK to JHC pursuant to three contracts (the “Contracts”). Each of the Contracts stated that any disputes which could not be resolved amicably would be submitted to the China International Economic and Trade Arbitration Commission for arbitration in Beijing, and that the governing law of the Contracts was Chinese law.
On 18 February 2022, the Liquidators issued a statutory demand to JHC for US$47.43m, but this demand was not satisfied. On 27 May 2022, the Liquidators (acting on behalf of FGHK) filed HC/CWU 121/2022, seeking an order that JHC be wound up on the basis that: (a) it was unable to pay its debts within the meaning of s 125(1)(e) of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (“IRDA”); or (b) it was just and equitable to wind up the company pursuant to s 125(1)(i) of the IRDA. JHC resisted the winding-up application by disputing that the debt of US$47.43m was due and payable to FGHK, among other grounds.
On 29 September 2022, a judge of the General Division of the High Court (“the Judge”) dismissed the...
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