Re: Attilan Group Ltd

CourtHigh Court (Singapore)
JudgeAedit Abdullah J
Judgment Date08 November 2017
Neutral Citation[2017] SGHC 283
Citation[2017] SGHC 283
Defendant CounselLeong Kah Wah and Lim Ruo Lin (Lin Ruolin) (Rajah & Tann Singapore LLP),Tee Su Mien (Rajah & Tann Singapore LLP)
Subject MatterInsolvency Law,Companies,Super priority,Rescue financing,Schemes of arrangement,Related creditors
Plaintiff CounselLawrence Lee Mun Kong (Aptus Law Corporation)
Published date21 November 2017
Hearing Date14 August 2017,11 September 2017,17 July 2017
Date08 November 2017
Docket NumberOriginating Summons No 783 of 2017
Aedit Abdullah J: Introduction

This case concerns an application by a company for, among other things, the court’s leave to convene a meeting of creditors to consider a proposed scheme of arrangement under s 210(1) of the Companies Act (Cap 50, 2006 Rev Ed) (“CA”) (“s 210(1)”), as well as super priority to be granted in respect of rescue financing sought to be obtained by the company under the recently introduced s 211E of the CA (“s 211E”).


The company, Attilan Group Limited (“the Applicant”), is a locally incorporated company that is listed on the main board of the Singapore Exchange.1 It is the holding company of a group of companies active in the media and education business (“the Group”).2

At the end of 2016, the Applicant issued two circulars to its shareholders. The first circular sought approval for a proposed diversification of the Group business to include early childhood education.3 The second circular concerned the proposed issue of 1.0% unsecured equity-linked redeemable structured convertible notes due in 2018 for a total of up to S$50,000,000 to an intended subscriber, Advance Opportunities Fund 1 (“the Subscriber”), under a subscription agreement (“the Subscription Agreement”).4 The Subscription Agreement provides that the Subscriber subscribes for convertible loan notes which may be converted into the Applicant’s shares and that the subscription is over several tranches and sub-tranches. On 5 January 2017, the Applicant’s shareholders approved the resolutions under both these circulars.5

Phillip Asia Pacific Opportunity Fund Ltd (“Phillip Asia”), a locally incorporated company, is a creditor of the Applicant. Phillip Asia is a creditor because the Applicant, through its subsidiary, provided a guarantee dated 24 April 2014 to Phillip Asia for the benefit of Turf Group Holdings Limited, a company which was previously part of the Group.6 On the basis of this guarantee, Phillip Asia issued a letter of demand against the Applicant on 16 January 2017, and thereafter instituted a suit in the High Court, vide, Suit No 223 of 2017 (“the Suit”), against the Applicant on 13 March 2017.7

Since the issuance of the letter of demand by Phillip Asia, the Applicant has incurred various liabilities. These include contingent debts arising from put options given by the Applicant to investors (“the Put Option Holders”), who had in turn invested in 2013 to 2014 into a fund (“the Fund”) that was managed by the Applicant’s subsidiary, Tap Private Equity Pte Ltd. According to the Applicant, the put options were effectively guarantees by the Applicant to the Put Option Holders that they would be repaid their principal amounts invested.8 Further, a guarantee was given by the Applicant to Tremendous Asia Management Inc (“TAMI”) in respect of several advances disbursed by TAMI to various members of the Group, in consideration of TAMI deferring legal proceedings on these outstanding advances.9 The nature and extent of these liabilities are disputed by Phillip Asia.

In the meantime, as a result of the Suit by Phillip Asia, the Subscriber has refused to subscribe further under the Subscription Agreement.10

In light of its financial difficulties, the Applicant sought a scheme of arrangement (“the Scheme”) to restructure, turnaround its financial affairs and to remain as a going concern. The salient features of the Scheme involve the issuance of new shares of the Applicant, an expansion and diversification of the Group’s business funded by a subscription of further convertible equity-linked notes under the Subscription Agreement, and a moratorium on court proceedings against the Applicant.11 In connection with the Scheme, the Applicant sought leave to convene a meeting of its creditors under s 210(1). The Applicant also sought for subsequent sums disbursed by the Subscriber under a subscription agreement to be treated as “rescue financing” and be given super priority in the event of the Applicant’s winding up.12

At the hearing before me on 14 August 2017, Phillip Asia was represented by Rajah and Tann Singapore LLP (“R&T”) and objected to the Applicant’s application for both the calling of the creditors’ meeting as well as super priority. Six individual unsecured creditors of the Applicant, who were all Put Option Holders, also appeared, similarly represented by R&T. While these individual creditors belatedly indicated that they did not consent to the proposed Scheme, they did not expressly oppose the Scheme.13

While the matter was adjourned for deliberation, the Court of Appeal issued its judgment in SK Engineering & Construction Co Ltd v Conchubar Aromatic Ltd and another appeal [2017] SGCA 51 (“Conchubar”). Accordingly, I invited all interested parties to make brief submissions on the impact, if any, of that decision on the present proceedings. By agreement, the Applicant and Phillip Asia filed and exchanged further submissions on 11 September 2017.14

The Applicant’s case

In its application, the Applicant primarily seeks: (a) leave of court under s 210(1) to call a meeting of creditors to consider the proposed Scheme, and (b) for further financing provided by the Subscriber to be considered “rescue financing” and be given super priority under s 211E in the event of the Applicant’s winding up. In its written and oral submissions, the Applicant relies primarily on the matters deposed in the various affidavits filed on its behalf.

In relation to the amounts owed to TAMI by the Applicant, the Applicant maintains that TAMI is owed S$2,355,394 from the Applicant.15 TAMI is a contingent creditor of the Applicant as the Applicant had given TAMI a guarantee in respect of advances disbursed by TAMI to various members of the Group (see [5] above). Even though TAMI is also concurrently a debtor to the Applicant because TAMI had provided a counter indemnity dated 1 January 2015,16 no equitable set-off is possible between the two debts since the transactions are not related or connected with each other: Pacific Rim Investments Pte Ltd v Lam Seng Tiong and another [1995] 2 SLR(R) 643.17

As for whether the Put Option Holders and TAMI should be placed in the same class of creditors as Phillip Asia, the Applicant cites The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal [2012] 2 SLR 213 (“TT International”) for the proposition that the court should apply the dissimilarity principle to determine the proper classification of its creditors. Applying that principle, the court considers the most likely scenario aside from the approval of the scheme. If the positions of two groups of creditors under the proposed scheme as compared to under the most likely scenario differ to dissimilar extents, these two groups of creditors would have to be placed in different voting classes. Here, the most likely scenario in the event that the Scheme is not approved would be liquidation. Comparing the situation under the proposed Scheme to the situation in which the Applicant is liquidated, the Put Option Holders, TAMI and Phillip Asia are all favoured or prejudiced to similar extents as each other given that they are all beneficiaries of some form of guarantee given by the Applicant. Thus, they should not be classed separately.18

In terms of creditor support, the Applicant contends that the Scheme has garnered support from 20 creditors holding total debts with the value of S$28,878,358, representing 76% of the total debts owed to the Scheme creditors.19

In respect of the relevance of Conchubar, the Applicant notes that the Court of Appeal did not find that there was a lack of clarity or uncertainty in the schemes proposed in that case, but only that there was no “meaningful compromise” because of intervening events. In the present case, there is similarly no uncertainty in the proposed Scheme.20 As for the discounting of related creditors’ votes, following Conchubar, what mattered is whether there exists any relationship between the creditors and the scheme company. There is no such relationship alleged in the present case. Phillip Asia should be in the same class as the contingent creditors (ie, the Put Option Holders and TAMI) because their positions are analogous.21 In any event, the issue of proper classification of creditors should only be considered at a later stage of the s 210 process.22

As for super priority, the Applicant submits that the statutory requirements have been met. All creditors have been notified of the application. It has also been shown that the Applicant is in dire need of funds and the loan from the Subscriber is necessary for the Applicant’s survival: the definition of “rescue financing” under s 211E(9) of the CA (“s 211E(9)”) is thus met. The Applicant further avers that its management team approached several parties, including high net worth individuals and financial institutions, to discuss the possibility of any of them providing loans to the Applicant as working capital and to fund the Applicant’s exploration of new investments.23 However, there was no success. Further, being loss-making, the Applicant finds it difficult to raise funds through bank borrowings and/or the issue of equity. In the circumstances, the terms imposed by the Subscriber are the best possible that could be obtained by the Applicant. The Applicant further cites general weakness and volatility in the stock market, insufficient cash flow, currency fluctuation, soft consumer demand, and competitive environment, to demonstrate its financial difficulties. Notably, the Applicant has also offered Phillip Asia the same terms of super priority in return for future financing, as that offered to the Subscriber.24

Phillip Asia’s case

Phillip Asia argues against both aspects of the Applicant’s application: (a) for leave to convene a creditors’ meeting to consider the proposed Scheme, and (b) for subsequent loans disbursed by...

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