Petroprod Ltd v Larsen Oil and Gas Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 30 June 2010
• Date: 30 June 2010
• Docket Number: Suit No 866 of 2009 (Summons No 6203 of 2009)
• Court: High Court (Singapore)

Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore)

Plaintiff

and

Larsen Oil and Gas Pte Ltd

Defendant

[2010] SGHC 186

Tan Lee Meng J

Suit No 866 of 2009 (Summons No 6203 of 2009)

High Court

Arbitration–Stay of court proceedings–Arbitrability–Avoidance claims by company in liquidation under ss 98 and 99 Bankruptcy Act (Cap 20, 2009 Rev Ed)–Whether arbitrable–

Arbitration–Stay of court proceedings–Arbitrability–Avoidance claims by company in liquidation as defrauded and prejudiced creditor under s 73B Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed)–Whether arbitrable

In the main action, the plaintiff, a company in liquidation, sought (a) the avoidance of a number of payments that the plaintiff made to the defendant on the ground that these payments amounted to unfair preferences or transactions at an undervalue within the meaning of ss 98 and 99 of the Bankruptcy Act (Cap 20, 2009 Rev Ed), read with s 329 (1) of the Companies Act (Cap 50, 2006 Rev Ed); and (b) the avoidance of a number of payments made by the plaintiff's subsidiaries to the defendant pursuant to s 73B of the Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) on the ground that they were made with the intent to defraud it as a creditor of its subsidiaries. The payments were made pursuant to a Management Agreement between the plaintiff and the defendant. The plaintiff pleaded in its statement of claim that the Management Agreement gave the defendant control over its finances and the finances of its subsidiaries.

The defendant applied for a stay of the main action in favour of arbitration, relying on an arbitration clause in the Management Agreement, which was made pursuant to the Arbitration Act (Cap 10, 2002 Rev Ed).

Held, dismissing the application to stay the main action in favour of arbitration:

(1) The concept of arbitrability ought to be taken into account when a court was asked to exercise its discretion to grant a stay under s 6 (2) of the Arbitration Act: at [12].

(2) The rights created by the avoidance provisions in ss 98 and 99 of the Bankruptcy Act (read with s 329 (1) of the Companies Act) existed for the benefit of the general body of creditors in an insolvency or insolvency-related context. The policy underlying the provisions would be compromised if their enforcement was subject to private arrangements, including an agreement to arbitrate, between the company and the wrongfully advantaged creditor or transferee. The avoidance claims in relation to the payments made by the plaintiff to the defendant were therefore not arbitrable: at [16] and [22].

(3) The same policy considerations applied with equal force to the plaintiff's claims under s 73B (1) of the Conveyancing and Law of Property Act in respect of the payments made by its subsidiaries to the defendant. It was arguable that this claim should be resolved through arbitration since the plaintiff, the allegedly prejudiced creditor, had agreed with the defendant to arbitrate. However, there was likely to be a substantial overlap of factual issues when considering the claims in relation to the payments made by the plaintiff's subsidiaries to the defendant and the claims in relation to the plaintiff's own payments to the defendant. In the interest of a swift, economical and internally consistent settlement of all the disputes in question, it would be preferable for all the claims to be considered in the same forum. As some of these claims were non-arbitrable in nature, that forum was the High Court: at [24].

New Cap Reinsurance Corp Ltd v A E Grant, Lloyd's Syndicate No 991 [2009] NSWSC 662 (refd)

Taunton-Collins v Cromie [1964] 1 WLR 633 (folld)

Arbitration Act (Cap 10,2002 Rev Ed) ss 6, 6 (1) ,6 (2)

Bankruptcy Act (Cap 20,2009 Rev Ed) ss 98, 99,148A

Companies Act (Cap 50,2006 Rev Ed) ss 329 (1) ,329 (2)

Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) ss 73B, 73B (1)

International Arbitration Act (Cap 143A, 2002 Rev Ed) ss 6, 11 (1)

Corporations Act2001 (Cth) s 588FF (1)

David Chan and Carol Teh (Shook Lin & Bok LLP) for the plaintiff

Leonard Chia and Eric Chew (Asia Ascent Law Corporation) for the defendant.

Judgment reserved.

Tan Lee Meng J

Introduction

1 The defendant, Larsen Oil and Gas Pte Ltd ( Larsen ), sought to stay an action ( the main action ) instituted against it by the plaintiff, Petroprod Ltd ( Petroprod ) for the purpose of avoiding a number of transactions that allegedly violate insolvency laws. Larsen contended that its dispute with Petroprod in the main action should be referred to arbitration in accordance with the terms of its contract with the latter. According to counsel, this is the first time in this jurisdiction that a stay of proceedings in favour of arbitration is being sought in relation to the type of claims in the main action.

Background

2 Petroprod, a Cayman Islands company, has a number of wholly-owned subsidiaries ( the four subsidiaries ) that are relevant to the present proceedings. These are Petroprod 1 Ltd ( PP1 ), Petroprod 2 Ltd ( PP2 ), Petroprod 3 Ltd ( PP3 ), and Petroprod D&P 1 Ltd ( DPL ). Petroprod pleaded in its Statement of Claim in the main action that it is a creditor of all the four subsidiaries at the material time.

3 PP1, PP2 and PP3 are one-ship corporations. Their business is to effect the conversion of their vessels into...