Mercantile & Maritime Investments Pte Ltd v Iceberg Energy Pte Ltd

• Jurisdiction: Singapore
• Judge: Ang Cheng Hock J
• Judgment Date: 25 March 2022
• Docket Number: Companies Winding Up No 81 of 2021 and Summons No 3994 of 2021
• Court: High Court (Singapore)

Mercantile & Maritime Investments Pte Ltd

and

Iceberg Energy Pte Ltd and another matter

[2022] SGHC 64

Ang Cheng Hock J

Companies Winding Up No 81 of 2021 and Summons No 3994 of 2021

General Division of the High Court

Arbitration — Stay of court proceedings — Plaintiff issuing statutory demand for outstanding amounts under loan facility — Loan facility containing arbitration clause — Defendant arguing that it was implied term of letter of intent entered into between parties that plaintiff would not call on loan facility during exclusivity period in letter of intent — Whether defendant had shown prima facie dispute coming within scope of arbitration agreement in loan facility

Civil Procedure — Further arguments — Defendant company seeking to make further arguments after winding-up order was made — Defendant subsequently seeking to make new further arguments different from those stated in its initial request for further arguments — Whether defendant should be granted extension of time to make new further arguments — Whether defendant acted in abuse of process by attempting to make new further arguments — Whether defendant's further arguments were to be confined to those outlined in its initial request for further arguments — Section 29B(2) Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed)

Companies — Winding up — Plaintiff issuing statutory demand for outstanding amounts under loan facility — Defendant alleging that it enjoyed cross-claim against plaintiff for amounts due under separate transaction — Whether defendant had shown that it enjoyed genuine and substantial cross-claim raising triable issues

Held, allowing SUM 3994, recalling the winding-up order made at the 14 Jul Hearing and dismissing CWU 81, and ordering the parties to bear their own costs for SUM 3994 and CWU 81:

(1) IEL did not act in abuse of process by attempting to make further arguments which were not the same as those that had been set out in the 19 Jul Letter. There was no evidence to show that MMI had sought an extension of time for a purpose other than to advance legitimate arguments as to why the winding-up order should not have been made. The fact that IEL had changed its position by seeking to make new further arguments that were not the same as those outlined in the 19 Jul Letter was not per se evidence of an abuse of process, especially where IEL had provided an explanation for that change in position which MMI did not challenge as untrue: at [52].

(2) There was nothing wrong in principle for IEL to seek to make new further arguments that were not consistent with those outlined in the 19 Jul Letter. There was nothing in s 29B(2) of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) which constrained the scope of the further arguments that could be made to those which had been outlined in the initial request for further arguments. As a matter of principle, there should be no limitation on the types of further arguments an applicant could make, provided that they were relevant and might have a bearing on the court's decision. Any such limitation was inconsistent with the rationale underlying the process for further arguments, which was to give the court an opportunity to review its decision whenever it was open to the possibility of changing its mind: at [53].

(3) Further evidence could be allowed in support of new arguments, but was not allowed where the evidence was sought to support or strengthen previously raised arguments. The new further arguments that IEL wanted to advance had previously been peripherally raised at the 14 Jul Hearing, but they were not considered at any length by the court at that time as they were entirely unsubstantiated. Allowing further evidence on IEL's further arguments did not have the effect of allowing IEL to plug earlier gaps in evidence that were identified by the court. IEL was therefore permitted to adduce further evidence in support of its new further arguments: at [54] to [56].

(4) A debtor-company which sought to obtain a stay or dismissal of a winding-up application needed only to raise triable issues. To do so, the debtor had to show that there existed a substantial and bona fide dispute, whether in relation to a dispute over the debt claimed, or where the debt was undisputed, in relation to a cross-claim for an amount equal to or exceeding the undisputed debt. On the other hand, where there was an arbitration agreement between the parties, it sufficed for the debtor to show a prima facie dispute or cross-claim falling within the scope of that agreement. However, if the court found that the dispute was raised by the debtor in an abuse of process, it would nevertheless refuse to stay or dismiss the winding-up application: at [58] and [59].

(5) The key distinction between the triable issue standard and the prima facie standard of review was whether the court examined the genuineness or merits of the defences put forth by the debtor-company. Where the triable issue standard applied, the court had to thoroughly examine the evidence and critically consider the merits of those defences to determine if they were frivolous. Where the prima facie standard of review applied, the debtor only had to assert a defence giving rise to a dispute falling within the scope of the parties' arbitration agreement, and the court did not have to inquire into the merits of that defence: at [60].

(6) IEL only had to establish on a prima facie standard that the Loan Facility was not repayable at the date when the SD was issued. This dispute fell within the scope of the arbitration agreement in the Loan Facility, as was common ground between the parties: at [62].

(7) The Letter of Intent followed prior loan agreements that had been entered into between the parties (of which the Loan Facility was one). According to Mr Ghai, these agreements were meant to provide IEL with cash so it could begin work on the Retail Project while parties were still in discussions about the Proposed Investment before its terms were finalised. The parties had expected those discussions to conclude by the repayment date of the Loan Facility, but that did not happen, and so the Letter of Intent (and later the supplemental Letter) were entered into to extend the period in which those discussions could take place, until 9 May 2021. The Letter of Intent defined the Exclusivity Period as commencing on the date of the Letter of Intent and ending on the later of 9 May 2021 or the date on which the Loan Facility was repaid in full. The manner in which the Exclusivity Period was defined meant that Mr Ghai remained bound to continue the discussions on the Proposed Investment until 9 May 2021, even if IEL had been able to repay the Loan Facility before that date. This had the effect of ensuring that the parties' discussions about the Proposed Investment would not be stymied by extrinsic developments, such as if IEL no longer required cash to work on the Retail Project before the Proposed Investment was finalised. The objective of the Letter of Intent was therefore to delineate a definite period of time in which both MMI and Mr Ghai were obliged to use all reasonable endeavours to negotiate and finalise the Proposed Investment. If MMI recalled the Loan Facility before 9 May 2021, it was possible that this would have jeopardised those discussions and would have defeated the very object which the Letter of Intent sought to achieve. There was a prima facie dispute over whether there had been an implied term in the Letter of Intent which limited MMI's right to call on the Loan Facility until 9 May 2021 and accordingly, a prima facie dispute over whether the Loan Facility was indeed repayable as at 14 April 2021: at [64] to [66] and [70].

(8) MMI claimed that Mr Ghai had decided not to discuss the Proposed Investment any further, but IEL had stated in the 8 Apr E-mail responding to the Letter of Demand that Mr Ghai was still willing to collaborate with MMI on the Retail Project. There was a dispute of fact over whether MMI and Mr Ghai had brought the Letter of Intent to a premature end and terminated the Exclusivity Period earlier, which in turn had an impact on whether MMI could call on the Loan Facility before 9 May 2021. This was also a dispute which fell within the scope of the arbitration agreement in the Loan Facility: at [71].

(9) Given that there was a prima facie dispute over whether the Loan Facility was repayable as at 14 April 2021, IEL could not be said to be “indebted” to MMI for any part of the sum claimed in the SD as at that date, and MMI could no longer rely on the SD as proof of IEL's inability to pay its debts. As MMI had not put forward any other evidence of IEL's insolvency in its supporting affidavit for CWU 81, the entire basis on which MMI sought the winding-up of IEL fell away: at [77].

(10) Given IEL's position that it had a valid cross-claim against MMI which exceeded the amount due under the Loan Facility, IEL's failure to make any repayment after 9 May 2021 and as at the time of the 14 Jul Hearing could not be taken as an indication of its inability to repay debts and did not give rise to any evidence of its insolvency: at [78].

(11) A premature statutory demand made in respect of a debt that had not fallen due for payment was substantively invalid. The defect associated with the SD therefore could not be described as an irregularity to begin with. Section 264(2) of the Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018), which dealt with the treatment of procedural irregularities, had no relevance in this case: at [82].

(12) IEL's alleged cross-claim arose from an alleged separate agreement between MMI and IEL under which the latter was to be compensated in respect of work done for the Wholesale Business, which was distinct and independent of the Loan Facility. Any cross-claim arising from that agreement did not constitute a dispute that would fall within the arbitration agreement in the...