Re Pacific Andes Resources Development Ltd and other matters

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JC
• Judgment Date: 27 September 2016
• Court: High Court (Singapore)
• Docket Number: Originating Summonses Nos 668 and 812–814 of 2016
• Date: 27 September 2016

Re Pacific Andes Resources Development Ltd and other matters

[2016] SGHC 210

Kannan Ramesh JC

Originating Summonses Nos 668 and 812–814 of 2016

High Court

Companies — Foreign companies — Schemes of arrangement — Foreign company seeking moratorium — Foreign company with business activities in Singapore — Foreign companies subsidiary to foreign parent company with business activities in Singapore — Foreign companies with creditors within Singapore — Debt not subject to Singapore law — Whether foreign company had locus standi to apply for moratorium — Whether sufficient nexus to Singapore went to jurisdiction or discretion of court to grant moratorium — Whether parent company with nexus to Singapore constituted sufficient nexus — Whether creditors within jurisdiction constituted sufficient nexus — Whether debt not subject to Singapore law was bar to jurisdiction — Section 210 Companies Act (Cap 50, 2006 Rev Ed)

Companies — Schemes of arrangement — Company seeking moratorium over proceedings outside Singapore — Whether court had jurisdiction to grant moratorium restraining proceedings outside Singapore — Whether court had jurisdiction to grant moratorium restraining proceedings outside Singapore under s 210(10) Companies Act (Cap 50, 2006 Rev Ed) — Whether court had inherent jurisdiction to grant moratorium proceedings outside Singapore — Section 210 Companies Act (Cap 50, 2006 Rev Ed)

Companies — Schemes of arrangement — Creditors constituting in value and/or number at least equal to statutory threshold for successful scheme indicating resistance to any scheme — Whether court should grant moratorium where creditors constituting in value and/or number at least equal to statutory threshold for successful scheme had indicated resistance to any scheme — Section 210 Companies Act (Cap 50, 2006 Rev Ed)

Insolvency Law — Cross-border insolvency — Schemes of arrangement — Company providing scheme plan with little particularity — Scheme plan dependant on foreign restructuring proceedings — Main asset of company subject to foreign restructuring proceedings — Whether scheme plan had sufficient particularity — Whether lack of particularity indicated lack of bona fides — Section 210 Companies Act (Cap 50, 2006 Rev Ed)

Held, granting the applications in part:

(1) Section 210(10) of the Act did not confer on the court extra-territorial jurisdiction. To construe otherwise would be to create dissonance between the moratorium provisions on liquidation and judicial management: at [16] and [17].

(2) The court had subject matter jurisdiction under s 210 of the Act so long as the applicant was a “company” within the definition provided in s 210(11) of the Act. In exercising subject matter jurisdiction over the scheme, creditors who were within the jurisdiction or participating in the scheme and whose debts were legitimately subject to the scheme would be subject to the in personam jurisdiction of the court for the purpose of the application under s 210. The court, having subject matter jurisdiction over the scheme and in personam jurisdiction over these creditors, was then able to exercise its powers to restrain such creditors only within the limits of s 210(10) of the Act: at [19].

(3) The court did not have the inherent jurisdiction to restrain creditors over whom it had in personam jurisdiction from unsettling efforts to restructure under s 210 of the Act by commencing proceedings elsewhere. The jurisdiction was recognised in liquidation or administration, notwithstanding the existence of statutory provisions for moratorium within jurisdiction, to assist the discharge of statutory obligations of an officer, being a liquidator or an administrator, appointed by the court, including the recovery and protection of the assets of the company. The court was compelled to assist its officer in the discharge of his statutory obligations, and therefore exercised its inherent jurisdiction to restrain creditors from commencing proceedings elsewhere. The court was in effect seeking to protect the integrity of its insolvency jurisdiction over the company and its assets with a view to ensuring that the statutory scheme was complied with. This key element was missing in the scheme of arrangement which was essentially a debtor-in-possession regime. There was no officer of the court appointed nor was there a statutory scheme governing the insolvency: at [22] to [24].

(4) The existence of a statutory provision enabling the grant of a moratorium was not conclusive as to whether the court had and ought to exercise inherent jurisdiction. The argument that the court did not have inherent jurisdiction in the case of a scheme of arrangement to restrain a creditor from commencing proceedings because that would make s 210(10) of the Act otiose was undermined by the fact that such jurisdiction had been recognised in the contexts of judicial management and liquidation, notwithstanding the existence of moratorium provisions that echoed the language of s 210(10) of the Act. The issue instead was whether the court ought to safeguard its jurisdiction by restraining a creditor over which it had jurisdiction from interfering with a statutory insolvency scheme, such as judicial management or liquidation, administered by its officer in the discharge of a statutory obligation. Such a statutory insolvency scheme did not exist in the context of s 210 of the Act: at [26].

(5) In considering the locus standi of a company to make an application under s 210(10) of the Act, the issue of whether the company had a substantial connection and “sufficient nexus” with Singapore was a matter of discretion and not of jurisdiction. A review of the Singapore authorities showed that they had in substance approached the issue as a matter of discretion and not of jurisdiction. In those cases, the concepts of jurisdiction and discretion were conflated simply because the dichotomy between jurisdiction and discretion was not a point of focus: at [32], [33] and [35].

(6) On the facts, PARD, while incorporated in Bermuda, was listed and conducted economic activity in Singapore. It was not inaccurate to conclude that PARD's COMI or Centre of Main Interest was in Singapore. The court therefore had the jurisdiction to hear an application by PARD under s 210 of the Act. However, the position as regards the Subsidiaries was different. The Applicants were unable to point to any assets within jurisdiction or any nexus that they might have with Singapore. Therefore, save for PARD, the Subsidiaries did not have locus standi to present applications under s 210 of the Act: at [36], [37] and [53].

(7) It was irrelevant to the question of nexus that the Subsidiaries were wholly owned by PARD and integral to the Frozen Fish Business which had contributed significantly to PARD's revenue. Nexus in this context was that which enabled a court to wind up a foreign company. The fact that the Subsidiaries were wholly owned by PARD did not afford a basis. Neither did the fact that they were part of PARD's business offer any foothold. The Subsidiaries were independent legal entities and the fact that they had intended to present a group restructuring plan that was composite, inter-dependent and inter-connected did not have the effect of or warrant the piercing or lifting of the corporate veil such that they could be regarded as one composite entity. While it was possible to file for a scheme of arrangement that proposed a composite inter-dependent plan involving the Applicants, all the Applicants in such a situation had to establish locus standi through the existence of assets within or sufficient nexus to jurisdiction: at [39].

(8) PARD had sufficient nexus to Singapore. This was evidenced by several factors, namely, PARD being the guarantor of the liabilities of the Subsidiaries and therefore their largest contingent creditor; being listed in Singapore; having issued the SGD Bonds on the Singapore Exchange; having an office in Singapore; having its annual general meetings in Singapore; having a bank account; and having four subsidiaries incorporated in Singapore which owned real properties as assets. However, these facts did not show nexus between the Subsidiaries and Singapore: at [40].

(9) The fact that the Applicants had creditors within jurisdiction did not assist. The remarks in Re Magyar Telecom BVUNK[2015] 1 BCLC 418 (Ch) on the relevance of the presence of creditors within jurisdiction were made in the context of several other considerations. The mere presence of creditors within jurisdiction per se was not necessarily a sufficient factor: at [41], [42] and [44].

(10) If the debt owed to the creditor had a connection to the jurisdiction, then the presence of that creditor within jurisdiction could be regarded as a relevant factor in an overall assessment of sufficient nexus. This was significant in the context of banks that had undertaken lending through branches in various parts of the world. While it was correct to say that the banks were subject to the in personam jurisdiction of the court by reason of being creditors within jurisdiction, it would be incorrect to assert that jurisdiction as regards their business activity elsewhere. That would be to conflate the court's in personam jurisdiction over the bank by reason of the presence of the branch within jurisdiction with the court's subject matter jurisdiction over the company: at [44] and [45].

(11) The fact that the debt that was sought to be compromised was not subject to Singapore law or the jurisdiction of Singapore courts was not in and of itself a bar to the court exercising jurisdiction if the applicant could otherwise show sufficient nexus to jurisdiction. The principle in Antony Gibbs & Sons v La Société Industrielle et Commerciale des MétauxELR(1890) LR 25 QBD 399 (“Gibbs”) that a discharge of a debt was not effective unless it was in accordance with the law governing the debt did not create an obstacle to the exercise of...