VTB Bank (Public Joint Stock Co) v Anan Group (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Dedar Singh Gill JC
• Judgment Date: 19 November 2018
• Neutral Citation: [2018] SGHC 250
• Court: High Court (Singapore)
• Docket Number: Companies Winding Up No 183 of 2018
• Year: 2018
• Published date: 15 April 2020
• Hearing Date: 07 September 2018
• Plaintiff Counsel: Shobna d/o V Chandran, Lee Chia Ming, Ashwin Nair Vijayakumar and Alexander Choo Wei Wen (Dentons Rodyk & Davidson LLP)
• Defendant Counsel: Daniel Soo and Cumara Kamalacumar (Selvam LLC)
• Citation: [2018] SGHC 250

Dedar Singh Gill JC: Introduction

This was an application by the plaintiff, VTB Bank (Public Joint Stock Company) (“the Plaintiff”) to wind up the defendant, Anan Group (Singapore) Pte Ltd (“the Defendant”), on the ground that it was unable to pay its debts. The Defendant opposed the application on the basis that there was a disputed debt between them that was governed by an arbitration agreement. This raised the issue of what standard of proof the Defendant was required to meet. Was it the orthodox standard for a dismissal of a winding up application, which requires the Defendant to show triable issues, or a different lower standard?

At the conclusion of the hearing on 7 September 2018, I found in favour of the Plaintiff and ordered that the Defendant be wound up. I now set out the full grounds of my decision.

Background facts

The Plaintiff is a state-owned Russian bank. The Defendant is a Singapore-incorporated company and its principal activity is that of a holding company.

The Global Master Repurchase Agreement

On 3 November 2017, the Plaintiff entered into a repurchase transaction with the Defendant on the terms set out in a global master repurchase agreement (“the GMRA”).¹ Under the GMRA, the Defendant agreed to sell global depository receipts (“GDRs”) of shares in EN+ Group PLC (“EN+”) against payment of the purchase price by the Plaintiff, and to repurchase the GDRs on a later date at pre-agreed rates (“the Transaction”). The Defendant was under an obligation to maintain sufficient collateral in respect of the Transaction by maintaining the Repo Ratio (calculated in accordance with the formula in cl 20 of Annex 1 to the GMRA) at a level below the Margin Trigger Repo Ratio (defined as 60% in the GMRA), failing which the Plaintiff could exercise its contractual right to call on the Defendant to top up the amount of collateral. The Defendant was also under an obligation to maintain the Repo Ratio at a level below the Liquidation Repo Ratio (defined as 75% in the GMRA).

On 7 November 2017, pursuant to the GMRA, the Defendant sold the Plaintiff approximately 35,714,295 EN+ GDRs for approximately US$249,999,990. At the time, EN+ shares were worth approximately US$13 per share.²

On 6 April 2018, the United States Department of Treasury’s Office of Foreign Assets Control designated certain persons to its Specially Designated Nationals List, and among those on the list included EN+, Mr Oleg Deripaska (the ultimate controlling shareholder of EN+), and two direct major shareholders of EN+. The effect of this designation was that any assets belonging to these persons and subject to the US jurisdiction were frozen, and US persons were generally prohibited from dealing with them (“the OFAC Sanctions”). According to the Defendant, the OFAC Sanctions caused the share price of EN+ to plummet.³

On the same day, the Plaintiff issued a margin trigger event notice, informing the Defendant that the Repo Ratio had exceeded the Margin Trigger Repo Ratio and sought payment of a sufficient cash margin to restore the level of the Plaintiff’s collateral.⁴ The Defendant failed to do so within the contractually stipulated timeframe.

On 9 April 2018, EN+ shares were trading at US$5.60 per share.⁵

On 10 April 2018, the Plaintiff issued a notice to the Defendant setting out the circumstances of the Defendant’s defaults under the GMRA.⁶ This was followed by a default notice on 12 April 2018, in which the Plaintiff designated 16 April 2018 as the early termination date.⁷

On 24 April 2018, the Plaintiff sent a calculation notice to inform the Defendant that the balance payable to the Plaintiff as of that date was US$170,292,452.03.⁸

On 19 July 2018, the Plaintiff sent a revised calculation notice to the Defendant setting out the revised balance payable as of that date, which was US$166,432,652.28.⁹

On 23 July 2018, the Plaintiff’s solicitors served a statutory demand for the sum of US$170,388,766.03 (being the revised balance payable plus accrued interest) on the Defendant.¹⁰ Three weeks lapsed without the Defendant paying the sum owed, or securing or compounding the same to the reasonable satisfaction of the Plaintiff.

On 30 July 2018, a subsidiary of the Defendant, AnAn International Limited, issued a company announcement on the Singapore Stock Exchange (“SGX”) website stating that the Defendant had received a statutory demand from the Plaintiff. The announcement went on to state:¹¹ 4.1 It is understood from [the Defendant] that [it] has objections to the statutory demand, including the fact that the amount claimed was formulated by [the Plaintiff] independently of [the Defendant]. 4.2 It is further understood from [the Defendant] that [it] had, as a cornerstone investor, invested US$500,000,000 in EN+ Group PLC during the latter’s listing on the London Stock Exchange, and that as a result of US governmental sanctions made against EN+ Group PLC and its ultimate controlling shareholder on 6 April 2018, the GDRs suffered great downward price movement. [The Defendant] takes the view that this an unforeseeable force majeure.

On 10 August 2018, the Defendant’s solicitors wrote to the Plaintiff’s solicitors stating that the Defendant “disputes” the outstanding sum, and that the Defendant was in the process of applying for an injunction to restrain the Plaintiff from commencing winding up proceedings.¹²

On 11 August 2018, the Plaintiff’s solicitors responded via letter, highlighting that the Defendant had not, apart from a bare allegation, explained why the sum was disputed, or particularised or substantiated the alleged dispute. It was also pointed out that the GMRA did not contain a force majeure clause. Finally, the Plaintiff indicated its intention to proceed with the winding up application.¹³

Court proceedings The Defendant’s application to restrain the Plaintiff from commencing winding up proceedings

Meanwhile, on 10 August 2018, the Defendant filed an application in Originating Summons No 975 of 2018 (“OS 975”) to restrain the Plaintiff from commencing proceedings or making any application for the winding up of the Defendant on the basis of the statutory demand. In its supporting affidavit for OS 975, the Defendant detailed how the OFAC Sanctions (described at [6] above) came about on 6 April 2018. According to the Defendant, the OFAC Sanctions caused the share price of EN+ to plummet from approximately US$12.20 (on 5 April 2018) to US$5.60 per share (on 9 April 2018). The Defendant went on to state:¹⁴ 22. As a result of the far-reaching OFAC Sanctions which were unforeseeable and were not brought about by the act or default of the [Defendant], the Reference Price and Reference Value was decreased, which resulted in the Margin Trigger Event and the Liquidation Event. The [Defendant’s] position is that the GMRA has been rendered radically different from that which was originally envisaged. 23. As a result of the above, the [Defendant’s] case is that the GMRA has been frustrated, and that therefore, the GMRA is terminated automatically without more, thus releasing [the Plaintiff] and the [Defendant] from further performance. As a result, the alleged debt of US$170,388,766.03 as stated in the Statutory Demand is not due and owing from the [Defendant] to [the Plaintiff].

On 13 August 2018, the Defendant filed Summons No 3677 of 2018 (“SUM 3677”) in OS 975, which was an application for an interim injunction to restrain the Plaintiff from commencing proceedings to wind up the Defendant pending the disposal of OS 975. In the supporting affidavit for SUM 3677, the Defendant again took the position that the GMRA had been frustrated, and so there was a serious question to be tried as to whether the Plaintiff was entitled to the debt amount of US$170,388,766.03.¹⁵

SUM 3677 was heard by Andrew Ang SJ on 13 August 2018. At the hearing, counsel for the Defendant argued that because the alleged dispute as to the debt was governed by an arbitration agreement in the GMRA, the standard of proof it was required to meet was not that of triable issues. Rather, a different lower standard was applicable – the question was whether a prima facie dispute existed. In support of this proposition, the Defendant cited the English Court of Appeal decision of Salford Estates (No 2) Ltd v Altomart Ltd (No 2) [2015] Ch 589 (“Salford”) and the Singapore High Court decision of BDG v BDH [2016] 5 SLR 977 (“BDG”), which I will discuss in greater detail below. After hearing the arguments, Ang SJ dismissed the Defendant’s application on the basis that he was not satisfied that there was a bona fide dispute. Ang SJ also pointed out that the Defendant had not suggested that the OFAC Sanctions had prohibited it from performing its obligations under the GMRA.¹⁶ The Defendant has not appealed against this decision.

The Plaintiff’s winding up application

On 17 August 2018, the Plaintiff filed the present application in Companies Winding Up No 183 of 2018 (“CWU 183”) seeking to wind up the Defendant on two alternative bases: First, that the Defendant is deemed to be insolvent and unable to pay its debts, pursuant to s 254(2)(a) read with s 254(1)(e) of the Companies Act (Cap 50, 2006 Rev Ed) (“the CA”). Second, that it is just and equitable that the Defendant be wound up, under s 254(1)(i) of the CA.

On 20 August 2018, the Plaintiff filed an application in Summons No 3795 of 2018 (“SUM 3795”) to appoint three individuals as joint and several provisional liquidators of the Defendant.

On 24 August 2018, Ang SJ heard SUM 3795 on an expedited basis and granted the Plaintiff’s application to appoint the provisional liquidators.¹⁷ For completeness, I should mention that the Defendant appealed against this decision and also sought a stay of execution pending the outcome of the appeal. However, it subsequently withdrew the stay application after I ordered the Defendant to be wound up on...