Re Swiber Holdings Ltd

• Jurisdiction: Singapore
• Judge: Kannan Ramesh J
• Judgment Date: 01 October 2018
• Neutral Citation: [2018] SGHC 211
• Date: 01 October 2018
• Docket Number: Originating Summons No 767 of 2016 (Summons No 4055 of 2017)
• Published date: 05 October 2018
• Plaintiff Counsel: Wilson Zhu, Sim Kwan Kiat and Chan Min Hui (Rajah & Tann Singapore LLP)
• Defendant Counsel: Andrew Chan Chee Yin, Andrew Teo Jun Yi and Arjun Rajagopalan (Allen & Gledhill LLP),Wong Pei Ting (Allen & Gledhill LLP),Mabel Tan (Virtus Law LLP),Suresh Sukumaran Nair and Nicole Foo (Nair & Co LLC)
• Court: High Court (Singapore)
• Hearing Date: 01 December 2017,27 November 2017
• Subject Matter: Companies,Judicial management order,Receiver and manager

Kannan Ramesh J: Introduction

This was an application by British and Malayan Trustees Ltd (“BMT”) for directions and orders on matters arising out of BMT’s appointment as trustee of certain notes (“the Notes”) issued by Swiber Holdings Ltd (“Swiber”), which is under judicial management. The central issue in this application was whether, in creditors’ meetings held during the judicial management of Swiber, BMT was the proper party to vote in respect of the Notes and, if so, whether and how it should take into account the views of the ultimate beneficial owners of the Notes in exercising its vote. Further, two other issues arose. The first issue was whether BMT was entitled to have its expenses in performing its duties as trustee charged on and paid out of Swiber’s property. The second issue was whether certain holders of trust certificates issued by Swiber (“the Trust Certificate Holders”) who filed submissions in this application could claim their costs of and incidental to the application.

On 1 December 2017, I gave the relevant directions and indicated that I would issue detailed grounds of decision given the novelty and significance of the issues that arose in this application. I now deliver my grounds of decision.

Facts The Notes

By a trust deed dated 20 July 2007, which was amended on 22 July 2010 and further amended and restated on 21 December 2012 (“the Deed”), BMT, a trust company registered under the Trust Companies Act (Cap 336, 2006 Rev Ed), was appointed trustee of the Notes. The Notes were issued under Swiber’s $1,000,000,000 Multicurrency Debt Issuance Programme, and comprised: $160,000,000 7.125% notes due 2017 comprised in series 014 (“the Series 14 Notes”); $100,000,000 5.55% notes due 2016 comprised in series 015 (“the Series 15 Notes”); and CNY 450,000,000 7.75% notes due 2017 comprised in series 017 (“the Series 17 Notes”).

Swiber issued the Notes under a global custodian arrangement. Under such a structure, one or more notes representing the entire principal amount of a series are placed with a common depository (under the Classical Global Note (“CGN”) structure) or a nominee for a clearing system (under the New Global Note structure): see Colin Bamford, Principles of International Financial Law (Oxford University Press, 2011) at paras 6.58 and 6.69. Here, the Notes were issued under the CGN structure: they were placed with a depository, the Central Depository (Pte) Ltd (“the CDP”). I will thus refer only to the CGN structure in this paragraph. The structure has the following notable features: First, the issuer makes a covenant to pay that is typically either expressed in favour of the “holder” of the notes or a trustee where the notes are constituted by a trust deed: see Jennifer Payne, Schemes of Arrangement: Theory, Structure and Operation (Cambridge University Press, 2014) (“Payne”) at p 185. Where a trustee is involved, the trustee holds the covenant to pay on trust for the noteholders. Second, the depository that holds the global note(s) holds the note(s) for one or more clearing systems. The clearing systems hold their interests on trust for persons who hold accounts with the clearing systems. These account holders hold the beneficial interest in the notes on their own account, or for clients who are either the ultimate beneficial owners or intermediaries holding their interests for the ultimate beneficial owners. Here, although the Deed also referred to Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking SA (“Clearstream”), the clearing system appeared to be the CDP.

Under cl 2.3 of the Deed, Swiber covenanted to pay the redemption monies of the securities it issued under the Deed “to or to the order of or for the account of the Trustee”. In other words, Swiber’s obligation to make payment in respect of the Notes was owed to the trustee, ie, BMT. Under cl 2.3, BMT was to “hold the benefit of this covenant on trust for the Securityholders and Couponholders of the relevant Series”. The term “Securityholders” was defined under cl 1.1 to refer to “the Noteholders and the Perpetual Securityholders”. I note here that Swiber only issued “Notes” as defined under the Deed, and hence only the provisions pertaining to “Notes” were material in this application.

Clause 1.1 of the Deed defined “Noteholders” by reference to the Terms and Conditions of the Notes in Schedule 1, Part III of the Deed (“the Note Conditions”). Clause 1.1(b)(iii) of the Note Conditions defined a “Noteholder” as the bearer of any Bearer Note or the person in whose name a Registered Note was registered in the Register. The “Register” was defined under cl 1.1(b)(i) of the Note Conditions to refer to the register kept by the “Registrar”, Citicorp Investment Bank (Singapore) Limited (“Citicorp”). Clause 1.1(b)(ii) further provided that where the notes were represented by a Global Security or a Global Certificate held by a common depository for Euroclear, Clearstream or the CDP, as was the case here with CDP being that depository, the “Noteholder” would be “the bearer of the Global Security or … the person whose name is show[n] on the Register”. Accordingly, the Noteholders referred to CDP or the persons whose names were registered in the register maintained by Citicorp.

Clause 8 of the Deed provided that as a general rule, only the Trustee, ie, BMT, was entitled to enforce Swiber’s obligations under the Notes, unless certain contingencies arose. Clause 8 stated: 8. POWER TO INSTITUTE PROCEEDINGS 8.1 In relation to the Notes: (a) at any time after an Event of Default shall have occurred or after the Notes shall have become due and repayable, the Trustee may … institute such proceedings against the Issuer as it may think fit to enforce repayment of the Notes and payment of accrued interest and to enforce the provisions of the Issue Documents; (b) the Trustee shall not be bound to take any steps … to enforce the performance by the Issuer of any of the provisions of the Issue Documents or of the Notes or the Coupons relating to them unless (i) it shall have been so requested in writing by the holders of not less than 25 per cent. in principal amount of the Notes outstanding or so directed by an Extraordinary Resolution and (ii) it shall have been indemnified to its satisfaction by the Noteholders against all actions, proceedings, claims, demands and liabilities to which it may thereby become liable and all costs, charges, damages and expenses which may be incurred by it in connection therewith; and (c) only the Trustee may pursue the remedies available under the general law or under the Issue Documents, the Notes or the Coupons relating to them to enforce the rights of the Noteholders or Couponholders or the provisions of the Issue Documents, the Notes or the Coupons relating to them. No Noteholder or Couponholder shall be entitled to proceed directly against the Issuer to enforce the performance of any of the provisions of the Issue Documents, the Notes or the Coupons relating to them unless the Trustee, having become bound as aforesaid to take proceedings, fails or neglects to do so within a reasonable period and such failure or neglect is continuing.

[emphasis added in italics]

In short, cl 8.1(a) of the Deed vested BMT, as the trustee, with the right to institute proceedings against Swiber to enforce Swiber’s obligations pertaining to the Notes. Under cl 8.1(b), BMT would only be bound to take steps to enforce Swiber’s obligations if it was directed by holders of not less than 25% of the outstanding principal amount of the Notes or an extraordinary resolution to do so, and indemnified to its satisfaction by the Noteholders for its associated costs and expenses. Notably, cl 8.1(b) provided for BMT to be indemnified by the Noteholders, not Swiber, for its costs in enforcing Swiber’s duties in relation to the Notes upon an event of default. Clause 8.1(c) made clear that BMT alone was entitled to enforce Swiber’s obligations pertaining to the Notes, unless BMT, having been bound to take steps to enforce Swiber’s obligations, failed to do so within a reasonable period and such failure or neglect was continuing.

The Deed also entitled the Noteholders to elect to obtain direct rights against Swiber (“the Direct Rights”) upon an event of default. Schedules 2, 3 and 4 of the Deed set out the Forms of Temporary Global Security, Permanent Global Security and Global Certificates for the Notes. All of the Forms included the following provision (with minor variations):

If there shall occur any Event of Default entitling the Trustee to declare all of the Notes to be due and payable, as provided in the Conditions, the Trustee may exercise the right to declare Notes represented by this Global Certificate due and payable in the circumstances described in the Conditions by stating in the notice given to the Issuing and Paying Agent and the Issuer (the “default notice”) the principal amount of Notes (which may be less than the outstanding principal amount of this Global Certificate) which is being declared due and payable.

Following the giving of the default notice, the holder of the Notes represented by this Global Certificate may (subject as provided below) elect that direct rights (“Direct Rights”) under the provisions of the Deed of Covenant shall come into effect in respect of a principal amount of Notes up to the aggregate principal amount in respect to which such default notice has been given.

[emphasis added in italics and bold italics]

In other words, upon an event of default, BMT would be entitled to declare the relevant notes due and payable by issuing a default notice. The Noteholders would then be entitled to elect for the Direct Rights against Swiber in respect of a principal amount of the Notes.

Finally, cl 16 of the Deed provided for Swiber to remunerate BMT for its services. Clause 16.1 imposed a general obligation on Swiber...