Re Opti-Medix Ltd (in liquidation) and another matter

• Jurisdiction: Singapore
• Judge: Aedit Abdullah JC
• Judgment Date: 01 June 2016
• Neutral Citation: [2016] SGHC 108
• Date: 03 June 2016
• Published date: 11 November 2016
• Year: 2016
• Hearing Date: 04 May 2016
• Subject Matter: Court not of the place of incorporation,Insolvency,Recognition of foreign insolvency proceedings
• Plaintiff Counsel: Stephanie Yeo Xiu Wen (WongPartnership LLP)
• Citation: [2016] SGHC 108
• Court: High Court (Singapore)
• Docket Number: Originating Summonses No 328 and 330 of 2016

Aedit Abdullah JC: Introduction

Applications were made ex parte in two related cases for the recognition of foreign insolvency proceedings in respect of Medical Trend Limited (“MTL”) and Opti-Medix Limited (“OPL”) (collectively, the “Companies”) and for the appointment of a foreign bankruptcy trustee pursuant to those foreign proceedings. After consideration of the affidavits filed as well as the submissions made by Counsel for the Applicant, I granted the orders sought. These grounds are issued as there has apparently been no written decision on the recognition of foreign liquidators (or bankruptcy trustees as in this case) from jurisdictions other than the place of incorporation of the companies concerned.

Background

The Companies were incorporated in the British Virgin Islands (the “BVI”). Their main business was factoring receivables from medical institutions in Japan. Such factoring was funded by non-recourse notes issued by the Companies. These notes were governed by Singapore law, with a Singapore address for service of notices, but were marketed only in Japan using Japanese brokers. The proceeds were transferred to Singapore bank accounts.

The Companies could not sustain their businesses, as there was insufficient profit to meet coupon and principal payments under the notes. New notes were issued to pay previous ones. Eventually, the Securities and Surveillance Commission of Japan suspended the issuing of new notes by the Companies in 2015. Default followed. Adopting the terminology used in translation of the Japanese documents, bankruptcy proceedings were commenced against the Companies. On 13 November 2015, bankruptcy orders were granted by the Tokyo District Court, and the Applicant was appointed as their Bankruptcy Trustee.

The Companies had primarily Japanese creditors. MTL had an unsecured debt of about ¥5.7 billion. Its ten largest creditors, each of whom held debts of between ¥44 million–351 million, all appeared to be Japanese entities or individuals. There were two Singapore creditors, who were owed about ¥1.6 million and ¥9.6 million respectively. The general debt could not be ascertained by the time of the application to the court.

OPM had a debt of almost ¥13 billion in respect of the loan notes that it had issued. Its ten largest creditors, each of whom held debts of between ¥100 million–341 million, again all appeared to be Japanese entities or individuals. An unknown amount was owed to one Singapore creditor for service fees. And again, the total amount of general debt could not be ascertained.

The Companies appear to have held some balance monies in various Singapore bank accounts. These accounts possibly held several hundred millions of Yen.

The Applicant sought to exercise his powers under the Japanese bankruptcy orders to ascertain, administer, and dispose of the Companies’ assets. It was recognised that as the Companies were possibly under an obligation to register as foreign companies conducting business in Singapore, preferential debts and debts incurred in Singapore would have to be paid before remitting the surplus out of Singapore.

Applicant’s case

The Applicant sought the recognition in Singapore of his appointment as the Bankruptcy Trustee of the Companies. He cited a decision of the Court of Appeal in Beluga Chartering GmbH (in liquidation) and others v Beluga Projects (Singapore) Pte Ltd (in liquidation) and another (Deugro (Singapore) Pte Ltd, non-party) [2014] 2 SLR 815 (“Beluga”), which in turn referred to a decision of Chan Seng Onn J in Re Cosimo Borrelli Originating Summons No 762 of 2010 (“Re Cosimo Borrelli”), granting a declaration that a provisional liquidator of a Cayman company was authorised to recover and take possession of assets in Singapore. He added that Singapore courts have recognised a liquidator appointed by a jurisdiction other the place of incorporation, citing an old case, Re Lee Wah Bank Ltd [1958] 2 MC 81 (“Re Lee Wah Bank”).

The Applicant-Trustee argued that since there were no competing claims by liquidators from different jurisdictions, the Singapore court should recognise his appointment. No prejudice would be suffered as there were only three Singapore creditors, the notes were sold only in Japan, and any debts in Singapore were incurred only for administrative services. Notice of the liquidation had also been advertised in Singapore, and no one had contacted the Applicant’s solicitors.

The Applicant submitted that his appointment should be recognised even though he was not a liquidator appointed in the place of incorporation of the Companies (ie, the BVI), because there was no likelihood of insolvency proceedings in the BVI. He cited three authorities in support: an old Hong Kong case, Re Russo-Asiatic Bank [1929] HKCU 8 (“Re Russo-Asiatic Bank”), Rule 166 of Dicey, Morris and Collins on The Conflict of Laws vol 2 (Sweet & Maxwell, 14th Ed, 2006) at para 30-101, and Tom Smith QC, “Recognition of Foreign Corporate Insolvency Proceedings at Common Law” in Cross Border Insolvency (Richard Sheldon QC gen ed) (Bloomsbury Professional, 4th Ed, 2014) (“Cross Border Insolvency”) at para 6.81.

The Applicant added that the Japanese court should be considered the principal court of liquidation as there was no liquidation elsewhere. Even if it were not the principal court, it was the only court involved in the liquidation of the Companies while the Applicant was their only authorised representative. Liquidation in the BVI was unlikely given that the Companies had no operations there, and no liquidation had been instituted there. Forcing the creditors to commence liquidation in the BVI would only be a waste of resources.

The Applicant highlighted that there was also growing acceptance of the idea of locating the primary place of insolvency proceedings at the centre of main interest (“COMI”) of the company concerned. He cited a speech by Kannan Ramesh JC, “The cross-border project – a ‘dual track’ approach” (accessed 03 June 2016). In the present case, there could be no doubt, whatever the content of the COMI test, that Japan was the only possible COMI for the Companies.

Finally, the Applicant emphasised that an undertaking had been given to pay all...