Re IM Skaugen SE and other matters

JurisdictionSingapore
CourtHigh Court (Singapore)
JudgeKannan Ramesh J
Judgment Date27 November 2018
Neutral Citation[2018] SGHC 259
Citation[2018] SGHC 259
Date27 November 2018
Defendant Counseland Daniel Tan (WongPartnership LLP),Cassandra Goh (Allen & Gledhill LLP),Ong Tun Wei Danny, Yam Wern-Jhien and Tay Shi Ing (Rajah & Tann Singapore LLP),Tan Hui Tsing (Gurbani & Co.),David Chan, Zhang Yiting and Daryl Fong (Shook Lin & Bok LLP),Alexander Yeo (Allen & Gledhill LLP)
Subject MatterSchemes of arrangement,Companies,Moratorium under s 211B Companies Act
Plaintiff CounselBalakrishnan Ashok Kumar, Tay Kang-Rui Darius, Lee Lieyong Sean and Koh Wei Lun (BlackOak LLC) (instructed counsel) / Lauren Tang (Virtus Law LLP) (instructing counsel)
Docket NumberOriginating Summonses No 673—675 of 2018
Hearing Date27 June 2018,28 June 2018
Published date21 March 2019

[2018] SGHC 259

High Court

Kannan Ramesh J

Originating Summonses Nos 673 to 675 of 2018

Re IM Skaugen SE and other matters

Balakrishnan Ashok Kumar, Tay Kang-Rui Darius, Lee Lieyong SeanandKoh Wei Lun (BlackOak LLC) (instructed), Lauren Tang (Virtus Law LLP) for the applicants;

Ong Tun Wei Danny, Yam Wern-JhienandTay Shi Ing (Rajah & Tann Singapore LLP) for Man Energy Solutions SE;

David Chan, Zhang YitingandDaryl Fong (Shook Lin & Bok LLP) for Zhonghua Hull No 451 LLC, DHJS Hull 2007-001 LLC, DHJS Hull 2007-002 LLC, Taizhou Hull No WZL 0501 LLC, Taizhou Hull No WZL 0502 LLC, Taizhou Hull No WZL 0503 LLC and Teekay Group;

Tan Hui Tsing (Gurbani & Co) for Gasmar AS;

Alexander Yeo (Allen & Gledhill LLP) for Nordea Bank Finland plc, Singapore branch;

Cassandra Goh (Allen & Gledhill LLP) for Alameda Shipping Company Pte Ltd, Conception Shipping Company Pte Ltd, Innovation Shipping Company Pte Ltd, Orinda Shipping Company Pte Ltd and Shasta Shipping Company Pte Ltd;

Daniel Tan (WongPartnership LLP) for IM Skaugen Nordic Trustees Bondholders.

Case(s) referred to

Assoc of St Croix Condominium Owners v St Croix Hotel Corp 682 F 2d 446 (3rd Cir, 1982) (folld)

Bristol Airport plc v Powdrill [1990] Ch 744; [1990] 2 All ER 493 (refd)

Capgro Leasing Associates, Re 169 BR 305 (ED NY, 1994) (folld)

Conchubar Aromatics Ltd, Re [2015] SGHC 322 (folld)

Electro Magnetic (S) Ltd v Development Bank of Singapore Ltd [1994] 1 SLR(R) 574; [1994] 1 SLR 734 (folld)

Furness v Lilienfield 35 BR 1006 (D Md, 1983) (refd)

Man Diesel Turbo SE v IM Skaugen Marine Services Pte Ltd [2018] SGHC 132 (refd)

Metropolitan Realty Corp, Re 433 F 2d 676 (5th Cir, 1970) (refd)

Ng Huat Foundations Pte Ltd, Re [2005] SGHC 112 (distd)

Pacific Andes Resources Development Ltd, Re [2018] 5 SLR 125 (folld)

Royal Bank of Scotland NV, The v TT International Ltd [2012] 2 SLR 213 (refd)

Southern Land Title Corp v Mitchell 375 F 2d 874 (5th Cir, 1967) (refd)

Tan Cheng Bock v AG [2017] 2 SLR 850 (refd)

Legislation referred to

Bankruptcy Code (US) s 362

Companies (Amendment) Act 2017 (Act 15 of 2017)

Companies Act (Cap 50, 2006 Rev Ed) ss 211B(4)(a), 211B(4)(b) (consd) ss 210, 210(1), 210(10), 211, 211A–211J, 211B, 211B(1), 211B(1)(c), 211B(2)(b), 211B(4), 211B(4)(c), 211B(4)(d), 211B(5)(a), 211B(5)(b), 211B(6), 211B(7), 211B(8), 211B(9), 211B(13), 211C(1), 211C(2)(c), 211D, 211G, 211H, 212, 227C, 227C(c), 227D(4)(c)

Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) ss 18, 18A

Insolvency, Restructuring and Dissolution Act (Act 40 of 2018)

Interpretation Act (Cap 1, 2002 Rev Ed) s 9A(1)

Companies — Schemes of arrangement — Moratorium under s 211B Companies Act (Cap 50, 2006 Rev Ed) — Related companies seeking moratorium for group restructuring plan — Majority creditor of one company opposing application — Whether applicants needed to show both evidence of creditor support and provide brief description of intended compromise or arrangement — Whether opposing creditor of one company within group fatal to restructuring of group — Sections 211B(4)(a) and 211B(4)(b) Companies Act (Cap 50, 2006 Rev Ed)

Facts

The applicants were related companies forming part of a group that operated multigas carriers and vessels. Facing dire financial straits, the applicants sought moratorium relief under s 211B(1) of the Companies Act (Cap 50, 2006 Rev Ed) for breathing space to formulate a compromise or arrangement which they intended to propose to their respective creditors. Each compromise was intended to be a component of a collective restructuring plan for the applicants. MAN Energy Solutions SE (“MAN”) was a majority creditor of one of the applicants, IMSPL Pte Ltd (“IMSPL”), by virtue of an arbitral award obtained in MAN's favour against IMSPL, but was not a creditor of the other two applicants. Apart from MAN, other major creditors of the applicants either supported the applications for moratorium relief or took neutral positions. MAN opposed the applications and submitted that the requirement in s 211B(4)(a) had not been complied with, since IMSPL could not show evidence of support from MAN. MAN took the position that ss 211B(4)(a) and 211B(4)(b) were conjunctive requirements to be fulfilled regardless of whether a compromise or arrangement had been proposed or was intended to be proposed, and thus that the applicants had to show both evidence of support from the creditors for the intended compromise or arrangement, as well as a brief description of the intended compromise or arrangement, containing sufficient particulars to enable the court to assess whether it was feasible. MAN further argued that any intended compromise or arrangement that might be proposed by IMSPL was doomed to fail given MAN's opposition as the majority creditor, and that the applications were not bona fide attempts to rehabilitate the business of the group but rather to delay the enforcement of the arbitral award obtained against IMSPL.

Held, granting the applications:

(1) The legal framework in s 211B of the Companies Act was introduced to enhance moratorium relief available for companies which were proposing or intending to propose a compromise or arrangement to their creditors, by stipulating that relief was available not only where a compromise or arrangement had been proposed but also where one was intended to be proposed, and also by providing for automatic 30-day moratorium upon filing. Since the scheme of arrangement operated as a debtor-in-possession regime, safeguards in ss 211B(4)(a) and 211B(4)(b) were introduced to prevent abuse of the availability of moratorium relief: at [37] and [38].

(2) The requirements in ss 211B(4)(a) and 211B(4)(b) applied disjunctively where a company had proposed a compromise or arrangement to its creditors, which meant that the company needed only to furnish evidence of creditor support and an explanation of the importance of that support to the proposed compromise or arrangement, but did not need to provide a brief explanation of the proposed compromise or arrangement. On the other hand, ss 211B(4)(a) and 211B(4)(b) applied conjunctively where a company had not proposed but intended to propose a compromise or arrangement to its creditors, meaning that such a company would need to show evidence of creditor support and importance of the same, and also provide a brief description of the intended compromise or arrangement. This interpretation accorded with the express statutory language and also legislative intent: at [48(c)], [49] and [51] to [54].

(3) Evidence of creditor support where a company had not proposed, but intended to propose, a compromise or arrangement could not refer to support for the compromise or arrangement itself, as one had not been proposed. Rather, the company would need to show evidence of creditor support for the moratorium: at [50].

(4) The test of creditor support for the purpose of s 211B(4)(a) was similar to the test of creditor support in an application for moratorium relief under s 210(10), being whether, on a broad assessment, there was a reasonable prospect of the proposed or intended compromise working and being acceptable to the general run of creditors. The court should refrain from undertaking a vote count at this stage and instead restrict itself to making a broad assessment, taking into account the quality of the creditor support by paying attention to whether significant or crucial creditors were supportive: at [55] to [58].

(5) In the context of a group restructuring, the court should pay heed to the overall support of the creditors for the group restructuring efforts, of which the intended or proposed compromise was a part. The requirement of creditor support in s 211B(4)(a) referred to the support of the applicant's own creditors, but the court should nonetheless have regard to support for the overall group restructuring efforts by the group's principal creditors in its assessment: at [63].

(6) MAN was not in actual fact the majority creditor of IMSPL, due to various other claims made against IMSPL by other entities. In any case, it was premature to consider whether MAN's objection to the moratorium was fatal, as a clear line should be drawn between the assessment of creditor support for the purpose of granting a moratorium versus the assessment made when deciding whether a scheme meeting should be called. MAN's opposition might not be an insurmountable obstacle to the applicants' restructuring, as creditor resistance might be neutralised in various ways: at [61], [62] and [65] to [67].

(7) Whether an application was bona fide was a multifactorial assessment, having regard to whether the applicant had an honest intent and genuine desire to use the statutory process to effect a plan of reorganisation. In the context of a group restructuring, the mere fact of one entity not having an active business or tangible assets did not suffice to show that that entity's application was brought in bad faith: at [70] to [73].

(8) A moratorium should stay all appeals in proceedings originally brought against the debtor, regardless of whether the debtor was the one who brought the appeal. This was because a moratorium was not only for the benefit of the debtor but also protected the interests of creditors generally: at [82] and [83].

(9) The court should not make an omnibus order for worldwide effect of a moratorium under s 211B(5)(b), as the provision was clearly targeted at restraining specific conduct or a specific party: at [86].

[Observation: The court was empowered to couple the moratorium with such terms and conditions as it felt were necessary to give the moratorium greater efficacy. There could in the appropriate case be an additional requirement for the appointment of a monitoring accountant or a chief restructuring officer answerable to the court, which role could be filled by an external party such as an...

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