1

2
Singapore Law Reports/2013/Volume 2/Chimbusco International Petroleum (Singapore Pte Lt! "
#alallu!in bin $b!ullah an! other matters%2013& S'(C )) * %2013& 2 SLR +01 * 2+ ,ebruar- 2013
2. pages
%2013& 2 SLR +01
Chimbusco International Petroleum (Singapore) Pte Ltd v Jalalludin bin
Abdullah and other matters
[20!" S#$C %%
$igh Court
&inodh Coomaras'am( JC
)an*ruptc( +riginating Summons ,o -%2 o. 202 (/egistrar0s Appeals ,os 21! and 223 o.
202)4 )an*ruptc( +riginating Summons ,o 5%5 o. 202 (/egistrar0s Appeals ,os 213 and
22! o. 202)4 )an*ruptc( +riginating Summons ,o 51 o. 202 (/egistrar0s Appeals ,os
21% and 22% o. 202)4 Companies 6inding 7p +riginating Summons ,o 25 o. 2024
Companies 6inding 7p +riginating Summons ,o 50 o. 202 and Companies 6inding 7p
+riginating Summons ,o 5 o. 202
!4 2!4 23 August 2028 24 204 2 September 20284 22 9ebruar( 20!
Insolvency Law -- Bankruptcy -- Bankruptcy order -- Whether court had power or obligation to
order (with or without conditions) stay of bankruptcy proceedings pending resolution of dispute
over underlying debt
Insolvency Law -- Winding up -- Winding-up order -- Whether court could order defendant to
provide security for full amount of debt as condition of stay of insolvency proceedings where
defence was shadowy
Insolvency Law -- Winding up -- Winding-up order -- Whether plaintiff bore legal burden of proving
that there are no triable issues
Insolvency Law -- Winding up -- Winding-up order -- Whether standard to determine if insolvency
proceedings should continue (where underlying debt is disputed) same as standard applied in
application for summary judgment
9acts
/he !e0en!ants 1ointl- an! se"erall- guarantee! a !ebt owe! b- 'as /ra!e (S Pte Lt! (2'as
/ra!e2 to the plainti003 Chimbusco International Petroleum (Singapore Pte Lt! (2Chimbusco24
'as /ra!e !e0aulte! in pa-ment o0 the !ebt4 Chimbusco !i! not commence a ci"il action against
the guarantors4 Instea!3 it instea! ser"e! statutor- !eman!s on them4 /he guarantors 0aile! to
satis0- Chimbusco5s statutor- !eman!s4 Chimbusco there0ore commence! insol"enc-
procee!ings against them4 /he guarantors3 together with 'as /ra!e3 then commence! Suit 6o
378 o0 2012 to !ispute their liabilit- to Chimbusco4 /he ban9ruptc- applications against three
personal guarantors were hear! b- the $ssistant Registrar (2$R2 on 3 #ul- 20124 She or!ere! a
con!itional sta- o0 these ban9ruptc- applications pen!ing the resolution o0 Suit 378/20124
Chimbusco an! the three personal guarantors then appeale! against the $R5s !ecision to a 1u!ge
in chambers4 /he 1u!ge hear! the ban9ruptc- appeals together with Chimbusco5s win!ing*up
applications against three corporate guarantors4 /he 1u!ge sta-e! the ban9ruptc- procee!ings
an! the win!ing*up procee!ings on con!ition that the guarantors pro"i!e securit- to Chimbusco
3
0or the 0ull
!"# $L% &!" at &!
amount o0 the !ebt claime! against them within three wee9s o0 his or!er4 (owe"er3 the
guarantors 0aile! to pro"i!e an- securit- b- the !ea!line4 Chimbusco there0ore sought ban9ruptc-
or!ers an! win!ing*up or!ers against the guarantors4
$eld4 dismissing the personal guarantors0 appeals and ma*ing the ban*ruptc( orders and
'inding up orders:
1) :here the !ebt which 0orms the basis o0 insol"enc- procee!ings has not been
a!1u!icate! b- a ci"il court an! is !ispute!3 the applicable stan!ar! 0or !etermining
whether the cre!itor shoul! be permitte! to continue the procee!ings is the same as
the stan!ar! applie! in summar- 1u!gment procee!ings un!er ; 17 o0 the Rules o0
Court (Cap 3223 R )3 200< Re" =!4 /hat is3 the cre!itor ma- continue the
insol"enc- procee!ings where the insol"enc- court is satis0ie! that there are no
triable issues> at %70& an! %71&4
1) /he plainti00 bears the legal bur!en o0 pro"ing that there are no triable issues4 /he
!e0en!ant5s onl- bur!en is an e"i!ential one4 /he concept o0 triable issues is well*
establishe! in the law relating to summar- 1u!gment an! it is there0ore unhelp0ul to
a!opt terminolog- 0rom the criminal law to 0rame the plainti005s bur!en as one o0
establishing the absence o0 triable issues be-on! a reasonable !oubt> at %73& to
%7)&4
1) /he court retains a resi!ual !iscretion to !ismiss insol"enc- procee!ings e"en i0 it is
satis0ie! that there are no triable issues> at %7<&4
1) /he court has a power but not an obligation to sta- ban9ruptc- procee!ings where
the un!erl-ing !ebt is !ispute!4 /he use o0 the wor! 2shall2 in rr .+(1 an! 128 o0
the ?an9ruptc- Rules (Cap 203 R 13 200< Re" =! must be rea! in accor!ance with
legislati"e intent4 /he legislati"e intent can be gleane! 0rom ss <7(13 <)(7 an!
<)() o0 the ?an9ruptc- $ct (Cap 203 200. Re" =!3 which clearl- gi"es the court a
broa! !iscretionar- power to sta- ban9ruptc- procee!ings an! to impose terms an!
con!itions4 Section <)()(i o0 the ?an9ruptc- $ct in particular gi"es the court the
power to grant in insol"enc- procee!ings what is the 0unctional e@ui"alent o0
con!itional lea"e to !e0en! in a ci"il suit> at %)3& to %))& an! %).&4
1) /he guarantors5 !e0ences as to their liabilit- were all base! on oral agreements4 /he
@uestions o0 whether these oral agreements were reache! an! whether
Chimbusco5s emplo-ee ha! an- authorit- to ma9e certain oral representations were
triable issues4 /here0ore3 Chimbusco coul! not be grante! the uncon!itional
insol"enc- or!ers which it sought> at %<7& an! %<)&4
1) /he guarantors5 !e0ence3 howe"er3 raise! triable issues which were sha!ow- at
best4 /here0ore3 the guarantors shoul! be grante! onl- the 0unctional e@ui"alent o0
con!itional lea"e to !e0en! in a ci"il suit3 vi'3 a sta- o0 the insol"enc- procee!ings
on con!ition that the- 0urnish securit- 0or the amounts which Chimbusco claime!
against them4 /he $R5s !ecision to sta- the ban9ruptc- procee!ings on con!ition
that the personal guarantors 0urnish securit- to Chimbusco3 was correct> at %<<&3 %82&
an! %83&4
1) :hen imposing a con!ition on a !e0en!ant5s abilit- to resist an insol"enc-
application or summar- 1u!gment3 the 0ull sum o0 the claim will or!inaril- be the
starting point 0or the securit- it is to 0urnish4 /here was no
!"# $L% &!" at &!#
e"i!ence that the sum which the guarantors were or!ere! to 0urnish as securit-
was so large as to be impossible to pro"i!e4 /he appropriate con!ition on which to
7
sta- the insol"enc- procee!ings was there0ore the 0ull amount claime! against them
un!er the guarantees> at %++& to %.2&4
1) ;n the 0acts3 no sta- o0 the insol"enc- procee!ings or sta- o0 eAecution o0 the
insol"enc- or!ers woul! be grante! pen!ing appeal against these or!ers4 /he
guarantors ha! been gi"en the opportunit- to pro"i!e securit- as a con!ition o0
obtaining a sta- o0 the procee!ings3 but 0aile! to !o so4 /he- shoul! not ha"e the
bene0it o0 a sta- without satis0-ing the con!ition4 /here was no e"i!ence that the
guarantors 0aile! to satis0- the con!ition !ue to their 0inancial position or 0or reasons
be-on! their control4 ;r!er )< r 1(7 o0 the Rules o0 Court an! r 72(b o0 the
?an9ruptc- Rules ma9e clear that an appeal !oes not operate as a sta- o0
insol"enc- procee!ings or a sta- o0 eAecution o0 insol"enc- or!ers4 /here was also
no e"i!ence that the guarantors woul! su00er irretrie"able pre1u!ice or !amage i0 the
insol"enc- or!ers were not sta-e! pen!ing appeal> at %.7& to %.)& an! %.8&4
Case(s) re.erred to
( ) B* *hewing +um Ltd, %e %1.8)& 1 :LR )8. (re0!
(bdul $alam (sanaru -illai v .omanbhoy ) $ons -te Ltd %2008& 2 SLR(R +)<B B %2008& 2 SLR
+)< (re0!
BL/ %ealty II Ltd, %e %2010& =:(C 18.1 (Ch (re0!
*algary ) 0dmonton Land *o Ltd, %e %1.8)& 1 :LR 3)) (re0!
*heong $eok Leng v -- %1.++& 1 SLR(R )30B B %1.++& SLR )<) (re0!
1enmark $kibstekniske 2onsulenter (3$ I Likvidation v 4ltrapolis #!!! Investments Ltd %2011& 7
SLR ..8 (re0!
+ao Bin v 5*B* $ecurities -te Ltd %200.& 1 SLR(R )00B B %200.& 1 SLR )00 (re0!
Lee 2iang Leng $tanley v Lee 6an *hew, %e %2007& 3 SLR(R <03B B %2007& 3 SLR <03 (re0!
Lim Leong 6uat v *hip 6up 6up 2ee *onstruction -te Ltd %200+& 2 SLR(R 8+<B B %200+& 2 SLR
8+< (re0!
7 / 8orke 7otors v 0dwards %1.+2& 1 :LR 777 (re0!
-acific %ecreation -te Ltd v $ 8 9echnology Inc %200+& 2 SLR(R 7.1B B %200+& 2 SLR 7.1 (re0!
$ociety of Lloyd:s v Beaumont %200<& ?PIR 1021 (!ist!
Wee $oon 2im (nthony v Lim *hor -ee %200<& 2 SLR(R 380B B %200<& 2 SLR 380 (re0!
Wong 2wei *heong v (B.-(7%5 Bank ./ %2002& 2 SLR(R 31B B %2002& 3 SLR ).7 (!ist!
Legislation re.erred to
?an9ruptc- $ct (Cap 203 200. Re" =! ss <7(13 <)(2(e3 <)(73 <)()3 <)()(i3 123(1(a
?an9ruptc- Rules (Cap 203 R 13 200< Re" =! rr .+(23 128 (cons!B rr 72(b3 .8(13 .+(2(b3
128(b
Companies $ct (Cap )03 200< Re" =! ss 2)8(13 2)8(2
Interpretation $ct (Cap 13 2002 Re" =! s 1.(c
!"# $L% &!" at &!;
Companies $ct 1.7+ (c 3+ (CD
Insol"enc- $ct 1.+< (c 7) (CD s 2<<(3
)
Rules o0 Court (Cap 3223 R )3 200< Re" =! ; )<3 ; 17
;ditorial note:
/he !e0en!ant5s appeal to this !ecision in Ci"il $ppeal 6o 11+ o0 2012 is sche!ule! 0or hearing b-
the Court o0 $ppeal in the wee9 beginning 12 $ugust 20134
Wendy 9an and 9ony 9an ($tamford Law *orporation) for the plaintiff<
(ndre 7aniam $* and 1erek 9an (Wong-artnership LL-) for the defendants<
2aren (ng (Insolvency ) -ublic 9rustee:s 5ffice) for the 5fficial %eceiver=
&inodh Coomaras'am( JC:
Introduction
[" /he @uestion be0ore me is whether I shoul! allow3 !ismiss or sta- on con!itions * an! i0 so on
what con!itions * insol"enc- procee!ings which the plainti003 Chimbusco International Petroleum
(Singapore (2Chimbusco2 has brought against siA !e0en!ants4 /he issue arises because the
plainti00 !oes not ha"e a 1u!gment which !etermines that the !e0en!ants are in!ebte! to it4
[2" Chimbusco tra!es oil4 It ha! mutual !ealings with a compan- 9nown as 'as /ra!e (S Pte Lt!
(2'as /ra!e24 /hose !ealings ga"e rise to mutual cre!its an! mutual !ebits4 /he- maintaine! a
running account4 $s at 2. ,ebruar- 20123 the net position between the two arising was that 'as
/ra!e owe! Chimbusco CSE13301)33724034 /his net position arose 0rom !ealings between
$ugust 2011 an! Fecember 20114
[!" Chimbusco ob"iousl- ha! a !irect claim against 'as /ra!e 0or this !ebt4 In a!!ition3
Chimbusco ha! the bene0it o0 personal an! corporate guarantees 0or this !ebt 0rom ten
guarantors> three in!i"i!uals an! se"en companies4 ?ut Chimbusco !i! not see9 to obtain a
1u!gment3 either that 'as /ra!e was liable to Chimbusco 0or this !ebt as principal !ebtor or that
an- o0 the ten guarantors was liable to Chimbusco 0or this !ebt un!er their guarantees4
[3" ;n 3 $pril 20123 Chimbusco commence! win!ing*up procee!ings against two o0 the ten
guarantors4 ;n 7 $pril 20123 it commence! ban9ruptc- procee!ings against one guarantor4 ;n 1<
an! 18 $pril 20123 it commence! win!ing*up procee!ings against two more guarantors4 ;n 2)
$pril 2012 all o0 the ten guarantors together with 'as /ra!e initiate! Suit 6o 378 o0 2012 (2S3782
against Chimbusco4 /he purpose o0 S378 was to secure a 1u!icial !etermination that Chimbusco
was not entitle! to pursue 'as /ra!e or the guarantors4 ;n 2 Ga- 20123 Chimbusco
!"# $L% &!" at &!>
commence! ban9ruptc- procee!ings against two more guarantors4 $n! on 31 Ga- 20123 it
commence! win!ing*up procee!ings against the 0inal three guarantors as well as against the
principal !ebtor3 'as /ra!e4
[%" ;n 1 #une 20123 Philip Pillai # or!ere! that 0our o0 the corporate guarantors be woun! up4
/he- were woun! up not because Pillai # 0oun! that the- owe! mone- to Chimbusco4 /he- were
woun! up because the- a!mitte! that the- were insol"ent4 ;n < #ul- 20123 Lai Siu Chiu # or!ere!
that 'as /ra!e3 the principal !ebtor3 be woun! up4
[1" /he siA remaining insol"enc- procee!ings came be0ore me4 /hree o0 them came be0ore me
on appeal 0rom an assistant registrar eAercising ban9ruptc- 1uris!iction4 /he other three came
be0ore me at 0irst instance as win!ing*up procee!ings against the three remaining corporate
guarantors4 /he guarantors in"ite! me to !ismiss all siA o0 these insol"enc- procee!ings4
Chimbusco in"ite! me to ma9e siA insol"enc- or!ers4 I !i! not !o either4 Instea!3 I sta-e! all siA
procee!ings on con!ition4 /he con!ition was that the guarantors pro"i!e securit- to Chimbusco
<
0or the !ebt claime! against them within three wee9s o0 m- or!er4 /he !ea!line was 17
September 20124
[-" ;n 1+ September 20123 the siA insol"enc- procee!ings came be0ore me again4 $ll siA
guarantors ha! 0aile! to pro"i!e an- securit- at all4 /he papers in the insol"enc- procee!ings
were in or!er4 Chimbusco submitte! that I shoul! ma9e the insol"enc- or!ers which the- sought4
/here was no impe!iment to m- !oing so4 I there0ore a!1u!icate! the three in!i"i!ual guarantors
ban*rupt an! or!ere! that the three corporate guarantors be woun! up3 all uncon!itionall-4
[2" /wo o0 the three in!i"i!ual guarantors who appeale! to me an! two o0 the three corporate
guarantors who appeare! be0ore me at 0irst instance ha"e now appeale! against m- !ecision4 I
now set out m- reasons4
9actual bac*ground
Three documents executed on or around 15 July 2011
[5" Chimbusco an! 'as /ra!e5s mutual business !ealings an! running account starte! in or
aroun! $ugust 20104 $s a result o0 these !ealings3 'as /ra!e owe! Chimbusco a net !ebt4
Chimbusco was concerne! about getting pai!4 /o a!!ress that concern3 on or about 1) #ul- 20113
the parties be0ore me eAecute! three !ocuments4
[0" /he 0irst !ocument was an un!ate! instalment pa-ment agreement4 In this agreement3 'as
/ra!e ac9nowle!ge! its in!ebte!ness to Chimbusco4 /his agreement permitte! 'as /ra!e to
repa- its !ebt to Chimbusco b- monthl- instalments o"er time in consi!eration 0or Chimbusco
re0raining 0rom 0orthwith commencing legal procee!ings
!"# $L% &!" at &!?
against 'as /ra!e4 'as /ra!e also agree! to pa- interest on its !ebt at 24)H per annum 0rom 1
#ul- 2011 onwar!s4
[" /he secon! !ocument was a 1oint an! se"eral corporate guarantee !ate! 1) #ul- 20114 It
was eAecute! b- all se"en corporate guarantors4 It secure! all amounts3 !ebts an! liabilities !ue
an! owing b- 'as /ra!e to Chimbusco plus interest an! costs4 /he corporate guarantors also
un!ertoo93 as a continuing obligation3 to !ischarge all obligations an! liabilities which were then
or shoul! at an- time be owing 0rom 'as /ra!e to Chimbusco4 /he corporate guarantees are
unlimite! in amount4 $ll se"en o0 the corporate guarantors are a00iliate! with 'as /ra!e through
common ownership or common control4
[2" Chimbusco5s insol"enc- procee!ings against three o0 those se"en corporate guarantors
came be0ore me4 /he- are>
1a) Para!igm Shipping Pte Lt! (2Para!igm Shipping23 the !e0en!ant in Companies
:in!ing Cp ;riginating Summons 6o (2C:C2 +. o0 2012B
1b) (ir (uat /ra!ing Pte Lt! (2(ir (uat23 the !e0en!ant in C:C .0 o0 2012B an!
1c) Peta Garine Ser"ices Pte Lt! (2Peta Garine23 the !e0en!ant in C:C .1 o0 20124
[!" /he thir! !ocument was a 1oint an! se"eral personal guarantee !ate! 1) #ul- 2011 eAecute!
b- three in!i"i!ual guarantors4 /hese guarantees are limite! in amount> the- limit the personal
guarantor5s 1oint an! se"eral liabilit- to CSE7m plus interest an! costs4
[3" /he three personal guarantors are !irectors o0 one or more o0 the se"en corporate
guarantors4 /he- are>
2a) Gr Goh! Iain ?in $b!ullah (2Gr Iain23 the !e0en!ant in ?an9ruptc- ;riginating
Summons 6o (2?2 .<1 o0 20124
2b) Gr #alallu!in ?in $b!ullah (2Gr #alallu!in23 the !e0en!ant in ? .). o0 20124
8
2c) Gr Gohamma! ?in $b!ul Rahman (2Gr Gohamma!23 the !e0en!ant in ? 8)2 o0
20124
[%" Chimbusco5s insol"enc- procee!ings against the corporate guarantors an! the personal
guarantors are 0oun!e! on their respecti"e guarantees4 =ach o0 the two guarantees ha! a cop- o0
'as /ra!e5s instalment pa-ment agreement ph-sicall- anneAe! to it4
[1" $0ter these three !ocuments were eAecute!3 Chimbusco an! 'as /ra!e continue! their
mutual !ealings4 $s at 2. ,ebruar- 20123 'as /ra!e owe! Chimbusco a net !ebt o0
CSE13301)33724033 inclu!ing interest4 /his !ebt arose 0rom mutual !ealings between $ugust an!
Fecember 20114
!"# $L% &!" at &!@
Chimbusco demands payment
[-" ;n 2. ,ebruar- 20123 Chimbusco !eman!e! in writing pa-ment o0 this !ebt 0rom 'as /ra!e
as principal !ebtor an! 0rom all ten o0 'as /ra!e5s guarantors4 /he- !i! not !en- that the- were
liable to pa-4 ?ut the- !i! not pa-4
[2" ;n "arious !ates in Garch 20123 Chimbusco ser"e! statutor- !eman!s 0or pa-ment o0 this
!ebt on all se"en corporate guarantors pursuant to s 2)7(2(a o0 the Companies $ct (Cap )03
200< Re" =!4 /he- still !i! not !en- that the- were liable4 ?ut the- still !i! not pa-4
[5" ;n "arious !ates3 also in Garch 20123 Chimbusco ser"e! statutor- !eman!s on the personal
guarantors pursuant to s <2(a o0 the ?an9ruptc- $ct (Cap 203 200. Re" =!4 /hese !eman!s
were in the sum o0 CSE732023)82412 because o0 the limit o0 CSE7m plus interest an! costs un!er
the personal guarantees4 /he personal guarantors too !i! not pa-4 6or !i! the personal
guarantors ma9e an- attempt to set asi!e the statutor- !eman!s un!er r .8(1 o0 the ?an9ruptc-
Rules (Cap 203 R 13 200< Re" =! on the groun!s set out in r .+(2(b> that the- 2!ispute! %the
!ebt& on groun!s which appear 444 to be substantial24 6or !i! the personal guarantors !ispute in
an- other wa- that the- were liable 0or the !ebt which Chimbusco !eman!e!4
[20" Chimbusco then applie! to win! up the principal !ebtor an! the se"en corporate guarantors
an! to ban*rupt the three personal guarantors4 I ha"e !etaile! the chronolog- o0 these
procee!ings at %7&4 It was onl- on 2) $pril 2012 that the guarantors raise! an- !ispute at all about
their liabilit-4 /he- !i! so when 'as /ra!e an! all ten guarantors commence! S378 against
Chimbusco4
Bankruptcy applications heard at first instance
[2" $ssistant Registrar =laine Chew (2the $R2 hear! the three ban9ruptc- applications on 3 #ul-
20124 She 0oun! a number o0 triable issues o0 0act an! law un!erl-ing the !ebt which 0orme! the
basis o0 the ban9ruptc- applications4 So she !i! not ma9e ban9ruptc- or!ers4 ?ut she 0oun! also
a number o0 unsatis0actor- points in the personal guarantors5 case4 She conclu!e! that the
personal guarantors ha! onl- barel- met the threshol! o0 showing a substantial !ispute as to the
un!erl-ing !ebt4 /here0ore3 she !i! not !ismiss the ban9ruptc- applications either4 Instea!3 she
or!ere! that the ban9ruptc- applications be sta-e! pen!ing the resolution o0 S3784 ?ut she
impose! a con!ition> each personal guarantor was to 0urnish securit- o0 CSE1m to Chimbusco
within three wee9s4 I0 the- !i! not3 the sta- woul! lapse4 /he court coul! an! woul! then ma9e
ban9ruptc- or!ers against the personal guarantors4
!"# $L% &!" at &!&
All parties appeal
[22" $ll parties appeale! against the $R5s !ecision4 Chimbusco appeale! b- wa- o0 Registrar5s
$ppeals (2R$2 2+33 2+7 an! 2+) o0 20124 Chimbusco argue! that the $R was wrong to ha"e
accepte! that there were triable issues an! conten!e! that the $R shoul! ha"e ma!e the
+
ban9ruptc- or!ers outright4 /he personal guarantors appeale! b- wa- o0 R$ 6os 2<33 2<7 an!
2<) o0 20124 /he- argue! that the $R ought to ha"e !ismisse! the ban9ruptc- applications
outright4 $lternati"el-3 the- argue! that she was wrong to ha"e impose! con!itions on their sta-4
[2!" $ll siA appeals were 0iAe! 0or hearing be0ore me4 I hear! them together with Chimbusco5s
win!ing*up applications against the last three corporate guarantors> Para!igm Shipping3 (ir (uat
an! Peta Garine4 $0ter hearing the parties5 submissions3 I !ismisse! the personal guarantors5
three appeals with costs4 I allowe! Chimbusco5s three appeals in part4 I or!ere! as 0ollows>
3a) /he personal guarantors woul! ha"e a sta- o0 the ban9ruptc- applications pen!ing
the outcome o0 S378 i0 the- pro"i!e! securit- in the 0ull amount * CSE732023)82412 *
that was !eman!e! 0rom them in the statutor- !eman!s ser"e! on them4
3b) /he personal guarantors were to pro"i!e that securit- 1ointl-4
3c) /he- were to 0urnish the securit- within three wee9s4
[23" G- or!er in e00ect ga"e the personal guarantors 0rom 3 #ul- 2012 up to 17 September 2012
to come up with the securit-3 albeit now in the sum o0 CSE742m instea! o0 CSE3m as ha! been
or!ere! b- the $R4
[2%" I ma!e substantiall- the same or!er in the three win!ing*up applications against the three
corporate guarantors4 /he corporate guarantors woul! ha"e a sta- o0 the win!ing*up applications
pen!ing the outcome o0 S378 i0 the- pro"i!e! securit- 0or the 0ull amount which Chimbusco
claime! against them as at the !ate o0 the win!ing*up applications * CSE13301)3372403 * within
21 !a-s4 /o ensure that Chimbusco was not o"ersecure!3 I permitte! the corporate guarantors to
!e!uct 0rom their securit- an- securit- which the personal guarantors ma- pro"i!e4
Guarantors fail to proide security
[21" 6one o0 the guarantors pro"i!e! an- securit-4
[2-" ;n 1+ September 20123 the parties appeare! be0ore me again on the guarantors5 application
0or 0urther arguments4 I hear! the 0urther arguments4 I a00irme! m- earlier !ecision4 Counsel 0or
Chimbusco in"ite! me to ma9e the ban9ruptc- an! win!ing*up or!ers4 /here was nothing to stop
me 0rom !oing so4 /he guarantors ha! 0aile! to pro"i!e securit- within the time I ha! stipulate!4
/he ;00icial Recei"er con0irme! that the papers were in or!er4 ?ut counsel 0or the guarantors
in!icate! that he ha!
!"# $L% &!" at &!A
instructions to appeal to the Court o0 $ppeal against m- !ecision o0 27 $ugust 2012 an! to see9
0rom me a sta- pen!ing appeal in respect o0 0our o0 the siA guarantors be0ore me4 /he- were Gr
#alallu!in3 Gr Iain3 Para!igm Shipping an! (ir (uat4 I 0iAe! that sta- application to be hear! on
20 September 20124
[22" Counsel 0or the guarantors 0urther in!icate! that he ha! no instructions to appeal in respect
o0 Gr Gohamma! an! Peta Garine or to see9 a sta- o0 the insol"enc- procee!ings against them4
I there0ore a!1u!icate! Gr Gohamma! ban*rupt in ? 8)2 o0 2012 an! or!ere! that Peta Garine
be woun! up in C:C .1 o0 20124
[25" ;n 1. September 20123 I hear! arguments on the remaining 0our guarantors5 application 0or
a sta- pen!ing appeal4 I !ecline! the sta-4 Counsel 0or the guarantors then in!icate! that he ha!
instructions to renew his application 0or a sta- be0ore the Court o0 $ppeal on an urgent basis4 I
there0ore a!1ourne! the 0our remaining insol"enc- procee!ings brie0l- to permit him to ma9e that
application4
[!0" ;n the morning o0 21 September 20123 Lai Siu Chiu #3 eAercising the powers o0 the Court o0
$ppeal in an interlocutor- matter3 !ismisse! the 0our guarantors5 renewe! applications 0or a sta-
pen!ing appeal4 In the a0ternoon o0 21 September 2012 the matters came bac9 be0ore me4 /here
.
being no sta-3 I or!ere! that (ir (uat be woun! up in C:C .0 o0 20123 I a!1u!icate! Gr Iain
ban*rupt in ? .<1 o0 20123 I or!ere! that Para!igm Shipping be woun! up in C:C +. o0 2012
an! I a!1u!icate! Gr #alallu!in ban*rupt in ? .). o0 20124
[!" /hese 0our guarantors are now the appellants in C$ 11)3 11<3 118 an! 11+ o0 2012
respecti"el-4
<he legal principles
[!2" /he @uestion I ha! to a!!ress was whether on the material be0ore me3 I shoul! in respect o0
each insol"enc- procee!ing> (a ma9e uncon!itional insol"enc- or!ersB (b !ismiss
uncon!itionall- the insol"enc- procee!ingsB or (c sta- the insol"enc- procee!ings pen!ing the
outcome o0 S3783 with or without con!itions4
!ummary "ud#ment test of triable issue applies in insolency
[!!" :hether the respon!ing part- owes the initiating part- mone- is a @uestion which a court has
to !etermine both in a ci"il suit 0or mone- as well as in insol"enc- procee!ings4 ?ut there are
!i00erences between the two t-pes o0 procee!ings4 /hose !i00erences a00ect the conteAt in which a
court consi!ers that @uestion in each t-pe o0 procee!ings4 Foes that ma9e a !i00erence to the
substanti"e test which the court applies to !etermine the issueJ
!"# $L% &!" at &"!
[!3" /he answer is no4 /he Court o0 $ppeal in -acific %ecreation -te Ltd v $ 8 9echnology Inc
%200+& 2 SLR(R 7.1 (2-acific %ecreation2 recognise! the !istinction between ci"il procee!ings
an! insol"enc- procee!ings4 It accepte! that a win!ing*up or!er was a 2!raconian or!er2 to ma9e
(at %1<&*%18&4 ?ut it ne"ertheless hel! that>
4a) a 1u!ge hearing win!ing*up procee!ings is entitle! to e"aluate the strength o0 the
e"i!ence presente! b- a compan- resisting the procee!ings on the groun!s that it
is not in!ebte! to the initiating part-B an!
4b) the stan!ar! 0or e"aluating that e"i!ence an! !etermining whether the compan-
ought to be woun! up is 2no more than that 0or resisting a summar- 1u!gment
application3 ie3 the !ebtor*compan- nee! onl- raise triable issues in or!er to obtain
a sta- or !ismissal o0 the win!ing*up application2 (at %23&4
Ciil proceedin#s compared to insolency proceedin#s
[!%" Fespite the !i00erences between the two t-pes o0 procee!ings3 that must be correct4 /he
substanti"e purpose o0 a ci"il suit is to a!1u!icate on the merits the !ispute between plainti00 an!
!e0en!ant o"er their pri"ate rights4 /he !e0ault rule is that that a!1u!ication will ta9e place
!eplo-ing the unabri!ge! ci"il process inclu!ing !isco"er- an! cross*eAamination at trial4 /hat
ci"il process can be abri!ge! in suitable cases b- wa- o0 eAception to that !e0ault rule4 /he
plainti00 will be entitle! to ta9e a!"antage o0 the abri!ge! process an! secure 1u!gment b- that
means i0 it can show that there are no triable issues4 :hiche"er metho! o0 a!1u!ication is 0oun!
appropriate3 the ci"il suit5s substanti"e en!point is a 0ormal a!1u!ication o0 the parties5 rights
which is 0inal sub1ect onl- to appeal4 ;nce the ci"il court has a!1u!icate! on the ci"il suit3 it will go
on to assist the "ictor to recei"e an! retain the 0ruits o0 its "ictor- 0or its in!i"i!ual bene0it4
[!1" Insol"enc- procee!ings are not about in!i"i!ual bene0it4 In!ee!3 one o0 the 0un!amental
ob1ecti"es o0 insol"enc- procee!ings is to preclude action 0or in!i"i!ual bene0it4 :here an entit-5s
liabilities eAcee! its assets or where it is unable to pa- its !ebts in 0ull as the- 0all !ue3 it is
insol"ent4 It is then in the collecti"e interest o0 all o0 the insol"ent5s cre!itors to substitute 0or
piecemeal in!i"i!ual action an or!erl- process 0or conser"ing3 collecting3 realising an! !istributing
its assets pari passu4 Insol"enc- law comprises the legal rules applicable to initiate an! carr- out
10
that or!erl- process4 :here a part- initiates insol"enc- procee!ings3 there are onl- two @uestions
o0 0act 0or the insol"enc- court> (a !oes the initiating part- ha"e the stan!ing re@uire! b- the
insol"enc- procee!ings it in"o9esB an! (b is the respon!ing part- insol"ent4 I0 the answer to both
@uestions is -es3 the court will almost in"ariabl- ma9e an insol"enc- or!er4 I0 it !oes3 the
insol"ent5s assets will be eAternall- a!ministere! 0or the
!"# $L% &!" at &""
collecti"e bene0it o0 all o0 its cre!itors ta9en as a whole an! not 0or an- particular cre!itor5s
bene0it4
[!-" /o put it brie0l->
5a) Ci"il procee!ings !etermine pri"ate rights 0or pri"ate bene0it4 Insol"enc-
procee!ings alter status 0or collecti"e bene0it4 I0 the court ma9es an insol"enc- or!er
against a !ebtor3 it ceases as against the worl! to be an autonomous economic
entit-4 $n! i0 the insol"ent is a compan-3 it will e"entuall- cease to eAist e"en as a
legal entit-4
5b) In ci"il procee!ings to reco"er mone-3 !etermining whether the !e0en!ant in!ee!
owes mone- to the plainti00 is the ultimate substanti"e ob1ecti"e o0 the procee!ings4
/hat @uestion also arises when a ci"il court has to consi!er whether to abri!ge the
or!inar- ci"il process b- which the court achie"es that substanti"e ob1ect4 In
insol"enc- procee!ings3 that issue is a 0un!amental threshol! issue which
!etermines stan!ing4
[!2" :here a cre!itor commences insol"enc- procee!ings a0ter ha"ing ha! its rights a!1u!icate!
in a ci"il suit3 its stan!ing to bring insol"enc- procee!ings is irre0utabl- establishe!> the !ebtor is
estoppe! 0rom !isputing the !ebt on which the cre!itor relies 0or his stan!ing4 ?ut where a
putati"e cre!itor commences insol"enc- procee!ings without ha"ing ha! its rights a!1u!icate! in
a ci"il suit3 the putati"e !ebtor remains able to !ispute the threshol! issue o0 whether there is in
0act a !ebt4 $n! in insol"enc- procee!ings3 there is 0or all practical purposes onl- an abri!ge!
proce!ure * on a00i!a"its alone * to !etermine this threshol! issue4
[!5" In this situation3 it is right that the insol"enc- court shoul! not automatically re0er the parties
to the ci"il court without e"aluating the merits o0 the !ispute be0ore it4 I03 on e"aluating the same
e"i!ence3 the ci"il court woul! 0in! it appropriate to !etermine the parties5 rights b- the summar-
1u!gment proce!ure3 it woul! be a waste o0 time an! mone- to re0er the parties to the ci"il court4
/he insol"enc- court is in 1ust as goo! a position as the ci"il court to !etermine whether the
putati"e !ebtor is in!ee! a !ebtor3 e"en though the @uestion is pose! in a !i00erent conteAt an!
0or a !i00erent purpose4 $n! in corporate insol"enc-3 thought not in personal insol"enc-3 where a
compan- raises !isputes which woul!3 in a ci"il court3 result in a summar- 1u!gment 0or the
plainti003 !ismissing the insol"enc- procee!ings pre1u!ices the compan-5s general bo!- o0
cre!itors in at least one ob"ious wa-4 It sets at large the commencement o0 the relation bac9
perio! !uring which a li@ui!ator can re"erse "ulnerable pre*insol"enc- transactions 0or the
collecti"e bene0it o0 all cre!itors4
[30" So the applicable stan!ar! 0or !etermining whether corporate insol"enc- procee!ings shoul!
continue in the absence o0 an a!1u!ication o0 the initiating part-5s rights is3 rightl-3 whether the
plainti00 can show that
!"# $L% &!" at &"
there are no triable issues3 1ust as in summar- 1u!gment procee!ings un!er ; 17 o0 the Rules o0
Court (Cap 3223 R )3 200< Re" =!4
[3" /he position is i!entical when it comes to personal insol"enc-4 In ban9ruptc- procee!ings3 r
128(b o0 the ?an9ruptc- Rules pro"i!es that the court 2shall !ismiss2 a cre!itor5s ban9ruptc-
application where the statutor- !eman! upon which the application is base! is such that the court
woul! ha"e set it asi!e ha! the !ebtor ma!e an application un!er r .8(1 o0 the ?an9ruptc-
11
Rules4 In or!er to set asi!e a statutor- !eman! un!er r .8(13 a !ebtor nee! onl- show that the
!ebt is !ispute! on groun!s which appear to the court to be substantial (see r .+(2(b o0 the
?an9ruptc- Rules4 /his too has been interprete! to mean that there must be 2some real !oubt
about the @uestion3 thus3 a triable issue3 upon which 0urther e"i!ence or arguments were
re@uire!2 (see Wee $oon 2im (nthony v Lim *hor -ee %200<& 2 SLR(R 380 (2(nthony Wee2 at
%1.&4
[32" It appears to me3 with !i00i!ence3 that all o0 this must be right4 ?oth conceptuall- an!
pragmaticall-3 it cannot be the case that a cre!itor or a !ebtor gains an a!"antage or su00ers a
!isa!"antage on the legal test to be satis0ie! in a!!ressing the same @uestion o0 0act simpl-
because o0 the nature o0 the procee!ings in which that @uestion is raise! or base! on whether it
is a natural person or a compan-4
Three obserations
[3!" I must ma9e three obser"ations4 /he 0irst relates to the bur!en o0 proo04 In ci"il procee!ings3
the bur!en rests on the plainti00 to establish its case4 /his is so e"en i0 it in"o9es the summar-
1u!gment proce!ure4 $ summar- 1u!gment is * !espite being summar- * still a 1u!gment on the
merits4 $n! the legal bur!en o0 proo0 on the merits remains alwa-s with a plainti004 $ plainti00
cannot re"erse or a"oi! the legal bur!en o0 proo0 it woul! bear at trial b- the eApe!ient o0
appl-ing 0or summar- 1u!gment4 So too a plainti00 cannot re"erse or a"oi! the legal bur!en o0
proo0 it woul! bear in a ci"il suit b- commencing insol"enc- procee!ings4 So the legal bur!en o0
proo0 remains on the plainti00 e"en in insol"enc- procee!ings4
[33" /here is another reason wh- the legal bur!en must rest on the applicant in insol"enc-
procee!ings4 :hen a putati"e !ebtor alleges in insol"enc- procee!ings that it owes no !ebt to
the applicant * no matter the proce!ural 0orm in which the challenge is raise! * the !ebtor is in 0act
challenging the applicant5s "er- stan!ing to bring the procee!ings4 ;n that 0un!amental issue too3
the legal bur!en ought to rest on the plainti004 So while it is common to spea9 in the conteAt o0
both ci"il procee!ings an! insol"enc- procee!ings o0 a defendant ha"ing to establish triable
issues3 that must be ta9en as a re0erence to an evidential bur!en4 ;nce the !e0en!ant has
satis0ie! the evidential bur!en o0 raising one or more triable issues3 the plainti00 remains oblige! to
!ischarge his legal bur!en to show that each issue is not triable4
!"# $L% &!" at &"#
[3%" /he secon! obser"ation is that the legal bur!en on the plainti00 is sometimes spo9en o0 as
being a bur!en to establish its entitlement be-on! reasonable !oubt4 Counsel 0or the guarantors
use! that term in submissions4 ,rom the !e0en!ant5s perspecti"e3 that woul! mean that all that
the !e0en!ant must !o to !ischarge its (e"i!ential bur!en is to raise a reasonable !oubt4 I !o not
consi!er it help0ul to spea9 in terms o0 the criminal stan!ar! o0 proo0 in a ci"il case or in
insol"enc- procee!ings4 /he concept o0 a triable issue is well*establishe! in the law relating to
summar- 1u!gment applications4 It can be transpose! an! applie! @uite easil- in insol"enc-
procee!ings4 It !oes not nee! embellishment4 /hat is all the more so when that embellishment is
apt to con0use instea! o0 clari0-4
[31" /he 0inal obser"ation is that a court must retain a resi!ual !iscretion to !ismiss insol"enc-
procee!ings e"en i0 it is satis0ie! that there are no triable issues4 In the case o0 ban9ruptc-
procee!ings3 this is clear 0rom s <)(2(e o0 the ?an9ruptc- $ct> the court ma- !ismiss a
ban9ruptc- application i0 2it is satis0ie! 0or other su00icient cause no or!er ought to be ma!e
thereon24 In the case o0 win!ing*up procee!ings3 a court alwa-s retains a !iscretion whether to
ma9e an or!er e"en i0 the plainti005s !ebt an! the !e0en!ant5s insol"enc- are establishe! as 0act4
/his is analogous to the power o0 a ci"il court hearing a summar- 1u!gment application to !ecline
to a!opt the summar- proce!ure i0 it 0eels that 2there ought 0or some other reason to be a trial2
(see ; 173 r 3 o0 the Rules o0 Court4 $gain3 transposing the concept 0rom the summar- 1u!gment
1urispru!ence is help0ul4 $lthough the circumstances will be rare where this !iscretion will be
eAercise! in insol"enc- procee!ings3 the !iscretion !oes eAist4
12
[3-" (ow !oes a !ebtor !ischarge the e"i!ential bur!en o0 showing a triable issue o"er the !ebt
which the cre!itor relies uponJ It is insu00icient 0or the !ebtor merel- to allege that a !ispute
eAists4 /he court is entitle! to * an! in a sense oblige! to * e"aluate the e"i!ence brought 0orwar!
b- the parties an! !etermine whether there eAists a !ispute which in"ol"es to a substantial eAtent
!ispute! @uestions o0 0act which re@uires a trial (see -acific %ecreation (%37& supra at %18& an!
%1.& in relation to win!ing*up applications an! (nthony Wee (%71& supra at %1+& in relation to
ban9ruptc- applications4
Court has po$er to stay bankruptcy proceedin#s
[32" ?e0ore I mo"e on to !iscuss m- reasons 0or granting the guarantors a sta- o0 the insol"enc-
procee!ings an! 0or imposing con!itions on that sta-3 I shoul! establish the source o0 the court5s
power to sta- a win!ing up application an! a ban9ruptc- application whether uncon!itionall- or on
terms4
[35" It was common groun! be0ore me that the court has the power to sta- a win!ing*up
application on con!ition un!er ss 2)8(1 an! 2)8(2(f o0 the Companies $ct (Cap )03 200< Re"
=! (2Companies $ct24 I there0ore nee! sa- nothing 0urther about the power to sta- win!ing*up
procee!ings4
!"# $L% &!" at &";
[%0" $s regar!s a ban9ruptc- application3 the guarantors initiall- submitte! that i0 the court 0in!s
that the !ebt on which a statutor- !eman! is base! is !ispute! on groun!s which appear to the
court to be substantial3 the court is oblige! to set asi!e the statutor- !eman! an! !ismiss the
ban9ruptc- application4 /he guarantors rel- on Wong 2wei *heong v (B.-(7%5 Bank ./
%2002& 2 SLR(R 31 (2Wong 2wei *heong24
[%" Rule 128 o0 the ?an9ruptc- Rules pro"i!es as 0ollows>
=ismissal o. ban*ruptc( application
17. /he court shall dismiss a cre!itor5s ban9ruptc- application where **
1.
1. the statutor- !eman! upon which the application is base! is such that the court
woul! ha"e set it asi!e ha! the !ebtor ma!e an application un!er rule .8(1B 444
1
%emphasis a!!e!&
Rules .8 an! .+ o0 the ?an9ruptc- Rules pro"i!e as 0ollows>
Application to set aside statutor( demand
1.-(1) Sub1ect to paragraph (23 the !ebtor who has been ser"e! with a statutor- !eman!
ma- **
1. within 17 !a-sB or
2. where the !eman! was ser"e! outsi!e 1uris!iction3 within 21 !a-s3
2 0rom the !ate on which the !eman! is ser"e! or !eeme! in accor!ance with these
Rules to be ser"e! on him3 appl- to court b- wa- o0 originating summons 0or an or!er
setting asi!e the statutor- !eman!4
1) 6o appearance nee! be entere! to an originating summons un!er this rule4
13
1..
$earing o. application to set aside statutor( demand
1.-(1) ;n the hearing o0 the application3 the court ma- either summaril- !etermine the
application or a!1ourn it3 gi"ing such !irections as it thin9s appropriate4
2) /he court shall set asi!e the statutor- !eman! i0 **
2.
3. the !ebt is !ispute! on groun!s which appear to the court to be substantialB
3.
3
%emphasis a!!e!&
[%2" In Wong 2wei *heong at %3&3 the court sai!>
!"# $L% &!" at &">
;n a plain rea!ing o0 r .+(2(b o0 the ?an9ruptc- Rules3 i0 the !ebtor !isputes the claim in the statutor-
!eman! an! that !ispute appears to the court to be substantial3 the ban9ruptc- court is obliged to set
asi!e the statutor- !eman! 444 %emphasis a!!e!&
/he guarantors rel- on this passage in Wong 2wei *heong4 /he- argue that once a court hearing
a ban9ruptc- application has 0oun! that there are triable issues3 the !ebt is !ispute! on
substantial groun!s an! the man!ator- 2shall2 obliges the court to !ismiss the ban9ruptc-
application4 I note also that in Wong 2wei *heong3 the court reiterate! its "iew that the language
in the opening sentence o0 r 128 o0 the ?an9ruptc- Rules is 2peremptor-2 (at %1+& in the conteAt
o0 interpreting r 128(c o0 the ?an9ruptc- Rules in relation to ser"ice o0 the statutor- !eman!4
[%!" ?ut 2shall2 in a legislati"e pro"ision !oes not necessaril- mean that the pro"ision is
man!ator-> it is alwa-s a @uestion o0 legislati"e intent (*heong $eok Leng v -ublic -rosecutor
%1.++& 1 SLR(R )30 at %78&4 /o glean the legislati"e intent behin! rr .+(2 an! 1283 I must rea!
those pro"isions in the light o0 ss <7(13 <)(7 an! <)() o0 the ?an9ruptc- $ct4 /hat $ct is3 o0
course3 the parent $ct un!er which the ?an9ruptc- Rules are ma!e4 I must also bear in min! the
strictures o0 s 1.(c o0 the Interpretation $ct (Cap 13 2002 Re" =! which pro"i!es that no
subsi!iar- legislation is to be inconsistent with an- primar- legislation4
[%3" Sections <7(13 <)(7 an! <)() o0 the ?an9ruptc- $ct pro"i!e as 0ollows>
Po'er o. court to sta( or dismiss proceedings on ban*ruptc( application
1.-(1) /he court ma- at an- time3 0or su00icient reason3 ma9e an or!er sta-ing the
procee!ings on a ban9ruptc- application3 either altogether or 0or a limite! time3 on such
terms an! con!itions as the court ma- thin9 1ust4
2..
Proceedings on creditor0s ban*ruptc( application
1.- 444
3..
17
1) :hen a ban9ruptc- application has been ma!e against a !ebtor on the groun! that the
!ebtor **
2. has 0aile! to pa- a 1u!gment !ebt3 an! there is pen!ing an appeal 0rom or an
application to set asi!e3 the 1u!gment or or!er b- "irtue o0 which the 1u!gment
!ebt is pa-ableB or
4. has 0aile! to compl- with a statutor- !eman!3 an! there is pen!ing an
application to set asi!e the statutor- !eman!3
4 the court ma-3 i0 it thin9s 0it3 sta- or !ismiss the application4
1) :here the !ebtor appears at the hearing o0 the application an! !enies that he is **
!"# $L% &!" at &"?
3. in!ebte! to the applicantB or
5. in!ebte! to such an amount as woul! 1usti0- the applicant ma9ing a ban9ruptc-
application against him3
5 the court ma-3 on con!ition that the !ebtor 0urnishes such securit- as the court ma-
or!er 0or pa-ment to the applicant o0 **
1. an- !ebt which ma- be establishe! against the !ebtor in !ue course o0 lawB
an!
1. the costs o0 establishing the !ebt3
6 sta- all procee!ings on the application 0or such time as ma- be re@uire! 0or trial o0 the
@uestion relating to the !ebt4
[%%" ?oth ss <7 an! <) o0 the ?an9ruptc- $ct contemplate that a court hearing a ban9ruptc-
application is not compelle! to !ismiss an application i0 the un!erl-ing !ebt is !ispute! whether
on substantial groun!s or otherwise4 ,urther3 s <)()(i o0 the ?an9ruptc- $ct eApressl-
contemplates that the court hearing a ban9ruptc- application can sta- ban9ruptc- procee!ings to
permit the cre!itor5s claim to be litigate! in the ci"il courts3 on con!ition that the !ebt gi"es
securit- 0or the cre!itor5s !ebt4 /he ?an9ruptc- $ct clearl- gi"es the court a general an! a speci0ic
power to sta- ban9ruptc- procee!ings an!3 0urther3 to !o so on terms an! con!itions4 /o that
eAtent3 the guarantors5 rea!ing o0 rr 128 an! .+(2 o0 the ?an9ruptc- Rules was inconsistent with
the broa! !iscretionar- power to sta- un!er the parent $ct4
[%1" /he guarantors5 response to this apparent inconsistenc- is that the court5s powers to sta-
ban9ruptc- applications un!er ss <7 an! <)() o0 the ?an9ruptc- $ct are general powers to sta-
(rel-ing on Lee 2iang Leng $tanley v Lee 6an *hew %2007& 3 SLR(R <03 (2$tanley Lee2
whereas rr 128 an! .+(2 o0 the ?an9ruptc- Rules are speci0ic obligations to !ismiss the
application where the !ebtor establishes a !ispute as to the !ebt which is substantial4 /he
guarantors submit that the speci0ic pro"ision pre"ails o"er the general pro"ision4
[%-" I !isagree with the guarantors5 submission4 /he guarantors !o not cite an- authorit- 0or the
proposition that a pro"ision in subsi!iar- legislation can pre"ail o"er a pro"ision o0 the parent $ct3
e"en i0 the 0ormer is more 2speci0ic2 than the latter4 In an- e"ent3 I am o0 the "iew that ss <7(13
<)(7 an! <)() * an! in particular s <)()(i * o0 the ?an9ruptc- $ct are !eliberatel- !ra0te! wi!el-
enough to con0er on the court a broa! !iscretionar- power to sta- these ban9ruptc- applications
on such terms an! con!itions as it thin9s 1ust which can be eAercise! e"en i0 the test in r .+(2(b
is satis0ie!4 /he guarantors subse@uentl- conce!e! that the court in!ee! has the power to sta-
both ban9ruptc- an! win!ing up applications4
[%2" ="en i0 I am wrong on this3 in m- "iew the wor!s 2the !ebt is !ispute! on groun!s which
appear to the court to be substantial2 in r .+(2(b o0 the
!"# $L% &!" at &"@
?an9ruptc- Rules re@uires something more than an issue which is merel- triable in the sense
1)
use! in the authorities on summar- 1u!gment applications an! in -acific %ecreation (%37& supra4
[%5" I there0ore hol! that the statutor- scheme o0 the ?an9ruptc- $ct * an! in particular s <)()(i
o0 the ?an9ruptc- $ct * enables a ban9ruptc- court to eAten! the analog- with summar- 1u!gment
procee!ings 0urther3 an! to grant in insol"enc- procee!ings what is the 0unctional e@ui"alent o0
con!itional lea"e to !e0en! in a ci"il suit4 /his must again be correct 0or the same pragmatic
reasons as un!erlie the !ecision in -acific %ecreation4
Application to the .acts
[10" I now gi"e m- reasons 0or sta-ing the win!ing*up an! ban9ruptc- applications against the
guarantors sub1ect to con!itions4
The defences raised by the #uarantors
[1" ?e0ore the $R an! be0ore me3 all ten guarantors !en- an- liabilit- to Chimbusco4 /he- !en-
liabilit- because the- claim to be entitle! to rescin! both guarantees4 /he- rel- on the 0ollowing
allegations in support>
6a) In $pril or Ga- o0 20113 'as /ra!e an! Chimbusco entere! into an agreement
(2$pril/Ga- $greement24 /he agreement was oral4 /he gist o0 the agreement was
that 'as /ra!e woul! incorporate a new compan-4 'as /ra!e woul! sta00 this new
compan- with one or two 'as /ra!e emplo-ees4 'as /ra!e woul! also permit the
new compan- to operate 'as /ra!e5s two barges at cost4 /he re"enue which the
new compan- earne! 0rom operating the barges woul! be use! to pa- the new
compan-5s costs an! 'as /ra!e5s costs associate! with those two barges4 /he
pro0its earne! b- the new compan- woul! be applie! to pa- !own 'as /ra!e5s !ebt
to Chimbusco an! the interest accruing on it4 /he parties woul! later !iscuss an!
agree when to commence per0orming their respecti"e obligations un!er this
agreement4
6b) In Ga- 20113 Gr Keo ?eng #oo (2Gr Keo2 o0 Chimbusco ma!e a representation to
Gr Gohamma! an! Gr #alallu!in3 amongst others4 /he representation was oral4 /he
representation was that Chimbusco woul! per0orm its obligations un!er the
$pril/Ga- $greement onl- i0 two con!itions were met4 ,irst3 'as /ra!e ha! to
eAecute a written instalment pa-ment agreement to pa- a minimum amount o0
CSE8003000 e"er- month towar!s !ischarging 'as /ra!e5s !ebt to Chimbusco4
Secon!3 the guarantors ha! to eAecute guarantees o0 'as /ra!e5s obligations un!er
the instalment pa-ment agreement4
4c) Gr Keo ma!e a 0urther representation to Gr Gohamma! an! Gr #alallu!in4 /his too
was oral4 /he representation was that the instalment pa-ment agreement an! the
guarantees were 2merel-
!"# $L% &!" at &"&
0ormalities re@uire! to be pro!uce! to %Chimbusco5s& hea! o00ice in ?ei1ing3 an! that
%Chimbusco5s& hea! o00ice woul! onl- gi"e the green light 0or %Chimbusco& to
procee! with the per0ormance o0 the %$pril/Ga- 2011& ;ral $greement2 with 'as
/ra!e i0 'as /ra!e signe! the instalment pa-ment agreement an! the guarantors
signe! their respecti"e guarantees4
1d) Gr Keo ma!e these representations in or!er to in!uce 'as /ra!e to sign the
instalment pa-ment agreement an! in or!er to in!uce the guarantors to sign their
respecti"e guarantees4 'as /ra!e an! the guarantors relie! on the representations
an! were so in!uce! in eAecuting the !ocuments the- !i! on 1) #ul- 20114
1e) /he representations are misrepresentation 0or two reasons4
1<
1. ,irst3 Chimbusco 0aile!3 neglecte! or re0use! to enter into an- !iscussions to
per0orm the $pril/Ga- $greement !espite repeate! re@uests 0rom Gr
Gohamma!3 Gr #alallu!in an! Gr Iain4 /hese re@uests too were oral4
1. Secon!3 Chimbusco now see9s to rel- on the guarantees as being legall-
en0orceable an! there0ore not 2merel- 0ormalities24
1
1f) /he primar- case o0 'as /ra!e an! the guarantors is that Gr Keo5s representations
were 0rau!ulent misrepresentations4 /he alternati"e case is that the- were innocent
misrepresentations4
1g) In either case3 both 'as /ra!e an! the guarantors claim to be entitle! to rescin! the
instalment pa-ment agreement an! the guarantees4
/hese allegations are the sub1ect matter o0 S3784
[12" In a!!ition3 Para!igm Shipping an! Peta Garine raise! be0ore me * but signi0icantl- not in
S378 * a 0urther !e0ence which is uni@ue to them4 /he articles o0 association o0 Para!igm
Shipping re@uire e"er- instrument to which its respecti"e corporate seal is a00iAe! to be signe! b-
a !irector o0 Para!igm Shipping an! countersigne! b- a !irector or the compan- secretar- o0
Para!igm Shipping4 Peta Garine has a similar pro"ision in its articles o0 association4 /hese two
companies5 corporate seals were a00iAe! to the corporate guarantee !ate! 1) #ul- 20114 /he
guarantee was signe! on behal0 o0 Para!igm Shipping b- a !irector o0 Para!igm Shipping4 It was
signe! on behal0 o0 Peta Garine b- a !irector o0 Peta Garine4 ?ut Gr Iain countersigne! on
behal0 o0 both companies4 (e is neither a !irector nor the corporate secretar- o0 Para!igm
Shipping or o0 Peta Garine4 Curiousl-3 Gr Iain5s brother is a !irector o0 Peta Garine4 (is brother
has the same name as Gr Iain4 (is brother5s national registration i!entit- car! (26RIC2 number
is S13%LLL&<1C4 Gr Iain5s 6RIC number is S12%LLL&18'4 /he rele"ant article in these two
companies5 articles o0 association is a common one 0oun! in /able $ o0 the Companies $ct4 Peta
Garine an! Gr Iain
!"# $L% &!" at &"A
asserts that Chimbusco was or must ha"e been aware o0 that4 ,urther3 there was no corporate
bene0it either to Para!igm Shipping or to Peta Garine in guaranteeing 'as /ra!e5s !ebts to
Chimbusco4 Chimbusco was there0ore put on in@uir-4 It shoul! ha"e ma!e reasonable in@uiries
about Gr Iain5s authorit- to countersign against the common seal o0 both Para!igm Shipping an!
Peta Garine4 6ot ha"ing !one so3 Chimbusco cannot rel- on the corporate guarantee against
these two companies4
%hy & did not make unconditional insolency orders
[1!" I consi!ere! the 0actual an! legal issues raise! b- the guarantors an! e"aluate! the
e"i!ence place! be0ore me b- both parties on those issues4 (a"ing !one that3 I was not satis0ie!
that Chimbusco ha! put 0orwar! such e"i!ence in response to the guarantors5 e"i!ence as to
establish that it woul! ha"e secure! summar- 1u!gment in a ci"il suit4
[13" ?oth limbs o0 the guarantors5 common !e0ences are base! on oral agreements4 ;n their
0ace3 o0 course3 the issue o0 whether Chimbusco an! 'as /ra!e actuall- reache! an oral
agreement in $pril/Ga- 20113 whether Gr Keo actuall- ma!e the allege! oral representations to
the guarantors an! the issue o0 whether Gr Keo ha! actual or ostensible authorit- to ma9e those
oral representations (i0 he in!ee! !i! so are the @uintessential triable issues4 /he- are all
incapable o0 resolution on a00i!a"it e"i!ence alone4 $lthough it woul! be surprising an! contrar- to
the inherent probabilities i0 all o0 these allegations were 0oun! to be true3 I coul! not 0or the
0ollowing reasons sa- that it was impossible that the- coul! be true an! that there there0ore ought
not to be a trial o0 them>
18
7a) /here was no positi"e contemporaneous !ocumentar- e"i!ence which !irectl-
contra!icte! the guarantors5 account4
7b) Chimbusco ha! the bene0it o0 'as /ra!e5s instalment pa-ment agreement 0rom #ul-
20114 ?ut it is un!ispute! that 0rom the "er- outset3 'as /ra!e ne"er ma!e an- o0
the instalment pa-ments un!er that agreement4 Fespite that3 Chimbusco !i! not
see9 to en0orce its rights against Chimbusco until ,ebruar- 20124
[1%" I there0ore !ecline! to ma9e the uncon!itional insol"enc- or!ers sought b- Chimbusco4
Guarantors' eidence shado$y
[11" ?ut I 0oun! the issues raise! b- the guarantors to be sha!ow-4 I0 the guarantors ha! put this
e"i!ence 0orwar! be0ore me on a summar- 1u!gment application in a ci"il action3 I woul! ha"e
grante! them onl- con!itional lea"e to !e0en!4 I there0ore grante! them the 0unctional e@ui"alent
o0 such lea"e in these procee!ings4 I sta-e! these procee!ings on con!ition that the- 0urnish
securit- 0or the amounts which Chimbusco claims against them4 In eAplaining wh- the !e0ences
were sha!ow-3 I will
!"# $L% &!" at &!
!eal 0irst with the position o0 Gr Keo3 then with the allege! $pril/Ga- $greement an! then with the
allege! oral misrepresentations in #ul- 20114
[1-" I must note at the outset that e"er- 9e- aspect o0 the issues which the guarantors raise is
oral4 /he !e0ence put 0orwar! be0ore me an! in S378 is 0oun!e! upon on an oral
misrepresentation sai! to ha"e been ma!e b- Gr Keo to the principals o0 'as /ra!e an! the 10
corporate guarantors that their guarantee were mere 20ormalities2 an! not to be en0orce! in or!er
to secure Chimbusco5s hea! o00ice5s appro"al o0 -et another oral agreement which3 the
guarantors sa-3 Chimbusco 0aile! to per0orm !espite the guarantors5 oral re@uests that
Chimbusco !o so4 $n! while it is true that there is no positi"e contemporaneous !ocumentar-
e"i!ence be0ore me which !irectl- contra!icte! the guarantors5 account3 it is also true that that
account is not supporte! b- an- contemporaneous !ocumentar- e"i!ence an!3 is in!ee!3 against
the tenor o0 that !ocumentar- e"i!ence an! the weight o0 the inherent probabilities4
Capacity of (r )eo Ben# Joo
[12" /he guarantors rel- hea"il- on oral !iscussions3 agreements an! representations entere!
into with Chimbusco4 In all o0 these !iscussions3 the guarantors or their representati"es !ealt with
Gr Keo4 /he guarantors !escribe Gr Keo as Chimbusco5s general manager4 Chimbusco !enies
this allegation an! !escribes Gr Keo as hea! o0 its bun9er !epartment4 Gr Keo too !enies this
an! !escribes himsel0 as 2(ea! o0 the ?un9er Fepartment2 o0 Chimbusco4 (is business car!
names him as such4 /he guarantors5 allegation regar!ing Gr Keo5s status is against the tenor o0
the !ocumentar- e"i!ence an! the inherent probabilities4
!i#nificance of the $indin#*up order in respect of Gas Trade
[15" 'as /ra!e !i! not !ispute that it was in!ebte! to Chimbusco or the amount o0 the !ebt which
Chimbusco claime! in the win!ing up procee!ings against 'as /ra!e4 'as /ra!e5s onl- groun!
0or resisting the win!ing up was that the $pril/Ga- $greement preclu!e! Chimbusco 0rom see9ing
imme!iate repa-ment o0 the entire !ebt4
[-0" It is res judicata between 'as /ra!e an! Chimbusco that the allege! $pril/Ga- $greement
!oes not preclu!e Chimbusco 0rom claiming imme!iate repa-ment o0 'as /ra!e5s !ebt4
Chimbusco5s win!ing*up application against 'as /ra!e came up 0or hearing be0ore Lai # on <
#ul- 20124 'as /ra!e resiste! it b- rel-ing on the $pril/Ga- 2011 ;ral $greement4 Lai # accepte!
Chimbusco5s argument that the oral agreement raise! no triable issues4 So she woun! up 'as
/ra!e4
1+
[-" ;0 course3 the win!ing up o0 'as /ra!e is not in itsel0 capable o0 raising a res judicata
against the parties be0ore me4 /he parties were !i00erent an! the issues were !i00erent4 6one o0
the parties be0ore me were
!"# $L% &!" at &"
parties to the insol"enc- procee!ings against 'as /ra!e4 /he guarantors5 liabilit- un!er their
guarantees o0 'as /ra!e5s !ebts was not in issue be0ore Lai #4 So I accept the submission o0
counsel 0or the !e0en!ant that Lai #5s or!er to win! up 'as /ra!e !oes not bin! me in an-
particular wa- to approach the triable issues which the guarantors raise be0ore me4
The alle#ed April+(ay A#reement
[-2" (a"ing e"aluate! the e"i!ence m-sel03 howe"er3 I agree! with the $R that the guarantors5
!e0ence3 at best3 raises triable issues which are sha!ow-4 I arri"e! at this conclusion 0or the
0ollowing reasons>
8a) $s the $R obser"e!3 there is no mention o0 the allege! $pril/Ga- $greement
between Chimbusco an! 'as /ra!e or an- !etails o0 it in an- o0 the
contemporaneous correspon!ence between the parties4 'i"en that this oral
agreement ha! to !o with repa-ment o"er time o0 a substantial !ebt o0 about
CSE13m3 it is against the weight o0 the inherent probabilities that there shoul! be no
contemporaneous !ocumentar- e"i!ence o0 at least the broa! terms o0 this oral
agreement or e"en o0 its eAistence4 /his casts a long sha!ow o"er the guarantors5
allegations o0 oral agreements an! representations4
8b) /he $R5s "iew was that there was little commercial sense 0or Chimbusco to enter
into the allege! agreement with 'as /ra!e4 I agree4 It is true that the allege!
$pril/Ga- $greement allowe! an- pro0its ma!e b- the new compan- to be ring*
0ence! 0rom 'as /ra!e5s other cre!itors an! to go eAclusi"el- to Chimbusco4 ?ut it
woul! re@uire Chimbusco to ta9e on the a!!itional business ris9 o0 the new
compan- not being pro0itable4 I thus 0in! that the arrangement contemplate! in the
allege! oral agreement3 while not inconcei"able3 is so improbable as to ma9e it
sha!ow-4 I also note that the commercial sense o0 a commercial arrangement which
a !e0en!ant to a summar- 1u!gment application relies upon to resist the application
is a 0actor which a court ma- consi!er in !eci!ing whether or not to impose
con!itions on a !e0en!ant5s lea"e to !e0en! (see (bdul $alam (sanaru -illai v
.omanbhoy ) $ons -te Ltd %2008& 2 SLR(R +)< at %71&4
5c) In his a00i!a"it 0ile! on 22 Ga- 2012 on behal0 o0 Chimbusco3 Gr Keo !enie! that
Chimbusco an! 'as /ra!e reache! an- oral agreement in $pril/Ga- 20114 $0ter m-
!ecision o0 27 $ugust 20123 Gr Keo 0ile! a 0urther a00i!a"it on 1. September 20124
(e a00irme! this a00i!a"it on behal0 o0 the guarantors4 /he guarantors relie! on that
a00i!a"it to support the 0urther arguments which the- presente! to me on 1.
September 20124 In his later a00i!a"it3 Gr Keo eAplaine! that there were !iscussions
along the lines allege! b- the guarantors in $pril/Ga- 20114 ?ut those !iscussions
ne"er mature! into an
!"# $L% &!" at &
agreement because Chimbusco5s hea! o00ice ha! ne"er appro"e! them4 It is
important to note that both 'as /ra!e an! the guarantors plea!e! the $pril/Ga-
$greement in S378 as a contractuall-*bin!ing agreement4 It is true3 as the
guarantors submit3 that 0or the guarantors5 !e0ence to succee!3 the- nee! not show
that what happene! in $pril/Ga- 2011 is contractuall- bin!ing4 /he guarantors rel-
on these e"ents not 0or an- contractual e00ect but merel- as the substratum 0or Gr
Keo5s representations in #ul- 20114 ?ut it is3 to sa- the least3 o!! that the guarantors
shoul! plea! une@ui"ocall- in S378 that the $pril/Ga- $greement was contractuall-*
bin!ing but then in the applications be0ore me procure3 a!!uce an! rel- on Gr Keo5s
1.
e"i!ence to the contrar-4 /hat too casts a long sha!ow on their !e0ence4
Guarantors' liability under the #uarantee
[-!" I 0oun! the guarantors5 position on their liabilit- un!er the guarantee to be sha!ow- 0or the
0ollowing reasons>
9a) Keo5s une@ui"ocal a00i!a"it e"i!ence 0ile! on behal0 o0 Chimbusco on 22 Ga- 2012
was that he ma!e no representation that the guarantees were mere 0ormalities an!
that he ha! no authorit- to ma9e an- such representations4
9b) ="en i0 Gr Keo ma!e such a representation3 there was no e"i!ence be0ore me that
he ha! an- actual or ostensible authorit- to !o so4 /hat authorit- coul! come onl-
0rom Chimbusco an! coul! not come 0rom Gr Keo himsel0 or 0rom the guarantors5
sel0*engen!ere! belie0s4
6c) ="en i0 Gr Keo !i! ma9e such a representation3 it woul! ha"e been a representation
as to the legal e00ect o0 the guarantees which the guarantors signe! on or about 1)
#ul- 20114 It woul! not ha"e been a representation o0 eAisting 0act4
2d) I 0oun! the guarantors5 claims to ha"e been in!uce! b- an! to ha"e relie! on Gr
Keo5s allege! representation to be against the weight o0 the inherent probabilities4
/he in!i"i!uals are all eAperience! businessmen4 /he- han!le a multi*million !ollar
business4 /he- a00iAe! their signatures an! corporate seals with signi0icant 0ormalit-
to !ocuments4 /hose !ocuments on their 0ace engage! the signatories5 legal liabilit-
0or 'as /ra!e5s !ebts4 $ll o0 this casts a long sha!ow o"er their claims to ha"e been
in!uce! b- an! to ha"e relie! on Gr Keo5s allege! misrepresentations4
2e) 6one o0 the ten guarantors or 'as /ra!e !ispute! the !ebt which Chimbusco
claime! * either as to liabilit- or as to @uantum * when the- recei"e! Chimbusco5s
letters o0 !eman! or when
!"# $L% &!" at &#
Chimbusco ser"e! 0ormal statutor- !eman!s as a precursor to insol"enc-
procee!ings4
2f) /he personal guarantors ma!e no attempt to a"ail themsel"es o0 their statutor- right
to set asi!e the statutor- !eman!s on the basis that the- !ispute! the !ebt claime!
on substantial groun!s4 /he- raise! the arguments against Chimbusco5s !ebt onl-
at the ele"enth hour when ban9ruptc- applications were ser"e! on them4
2g) It was onl- on 2) $pril 20123 when the ten guarantors an! 'as /ra!e commence!
S3783 that the- raise! 0or the 0irst time the groun!s o0 !e0ence which the- relie!
upon be0ore me4 Suit 378 was commence! on the e"e o0 the 0irst o0 the se"en
win!ing*up procee!ings against the corporate guarantors4
[-3" In the premises3 I a00irme! the $R5s !ecision to sta- the ban9ruptc- procee!ings on con!ition
that the personal guarantors 0urnish securit- to Chimbusco4
Affixin# of ,aradi#m !hippin# and ,eta (arine's seal
[-%" I now !eal with the corporate guarantors4 :ith one eAception3 the corporate guarantors
a!"ance! no !e0ence which the personal guarantors !i! not a!"ance4 /he one eAception is the
argument raise! b- Para!igm Shipping an! Peta Garine regar!ing the a00iAing o0 the corporate
seal4 I ha"e summarise! that argument abo"e4 ?ut this !e0ence too is sha!ow-4
[-1" /he 0irst point is that this issue relates onl- to the 0ormal "ali!it- o0 the corporate guarantee4
?- this !ocument3 Para!igm Shipping an! Peta Garine engage! their separate liabilit- to
Chimbusco 0or the !ebts o0 'as /ra!e4 Para!igm Shipping an! Peta Garine !o not assert3 let
alone support b- e"i!ence3 that this un!erl-ing transaction was one which the !irectors o0
Para!igm Shipping an! o0 Peta Garine !i! not authorise4 So there is no basis to sa- that the
20
transaction was in an- sense unauthorise! an! so unen0orceable4 In!ee!3 the inherent
probabilities o0 all o0 the material be0ore me is that Para!igm Shipping an! Peta Garine !i!
authorise this transaction4
[--" /he onl- point which Para!igm Shipping an! Peta Garine rel- upon relates to the 0ormal
"ali!it- o0 the corporate guarantee4 ?ut there was no e"i!ence be0ore me that Chimbusco was
aware o0 the contents o0 the articles o0 association o0 Para!igm Shipping or o0 Peta Garine4 So
the basis on which the guarantors sa- that Chimbusco was put on notice o0 these two companies5
internal re@uirements 0or a00iAing the corporate seal is sha!ow-4
[-2" It is correct that Gr Iain is neither a !irector nor the compan- secretar- o0 Para!igm
Shipping4 ?ut he countersigne! the corporate guarantee together with his !aughter4 She is a
!irector o0 Para!igm Shipping4 She is also the ma1orit- sharehol!er o0 Para!igm4 Gr Iain
conce!e! that he countersigne! the guarantee because the other !irector o0
!"# $L% &!" at &;
Para!igm Shipping was not a"ailable to !o so4 /hat supports the in0erence that Para!igm
Shipping authorise! the un!erl-ing transaction itsel04
[-5" It is also correct that Gr Iain is neither a !irector nor the compan- secretar- o0 Peta Garine4
?ut he is the single biggest sharehol!er o0 Peta Garine4 ,urther3 he countersigne! the corporate
guarantee together with Gr Gohamma!4 Gr Gohamma! is a !irector o0 Peta Garine4 Gr Iain an!
Gr Gohama! together hol! close to <0H o0 the shares in Peta Garine4 ,urther3 Gr Iain conce!e!
that he countersigne! the corporate guarantee on behal0 o0 Peta Garine because the other
!irector3 his brother o0 the same name3 was not a"ailable to !o so4 /hat again supports the
in0erence that Peta Garine authorise! the un!erl-ing transaction itsel04
[20" I there0ore hel! that the issue about the in"ali! countersignature against the corporate seals
o0 Para!igm an! Peta Garine was3 at best3 a sha!ow- !e0ence4
[2" /hus3 I ma!e similar or!ers in respect o0 the corporate guarantors as I !i! in respect o0 the
in!i"i!ual guarantors4
-urther eidence from (r )eo
[22" /he guarantors sought to place be0ore me 0urther e"i!ence in the course o0 the 0urther
hearings a0ter m- initial !ecision4 /his e"i!ence came 0rom Gr Keo3 this time a00irming a00i!a"its
on behal0 o0 the guarantors4 I coul! not3 ob"iousl-3 ha"e ta9en this in0ormation into account in
arri"ing at m- original !ecision now un!er appeal4 ?ut it is appropriate that I sa- something about
this e"i!ence4 ,ar 0rom !ispelling the sha!ows which I 0oun!3 this a!!itional e"i!ence merel-
!eepene! them4
[2!" Gr Keo a00irme! an a00i!a"it on 10 September 20124 =Ahibite! to Gr Keo5s 10 September
2012 a00i!a"it is an e*mail !ate! < September 2012 0rom him to Gr Iain5s personal assistant4 In
that e*mail he con0irme! that 2444 in or!er to start an- 0orm o0 !iscussion on the repa-ment plan to
%Chimbusco&3 %Chimbusco5s managing !irector& re@ueste! gastra!e %sic& plus all the subsi!iar-
companies to gi"e a corporate gurantee %sic& an! also 3 ma1or share hol!er5s personal guarantee4
G- un!erstan!ing the gurantees %sic& is 0or 0ormalit- to show bei1ing 0or sincerit- 0rom gastra!e
%sic&42 $lthough the guarantors rel- on this e*mail in support o0 their case3 it merel- !eepene! m-
!oubts about the guarantors5 case4 Its tenor is consistent with a cre!itor who see9s guarantees
0rom a !ebtor5s associates as an essential con!ition o0 eAten!ing to a principal !ebtor the
in!ulgence o0 time b- entering into !iscussions o"er a repa-ment plan to gi"e the principal !ebtor
-et 0urther time4 I also 0oun! it signi0icant that Gr Keo in this e*mail !escribes the guarantees as
20or 0ormalit- to show bei1ing 0or sincerit-2 an! not as 2merel- 0ormalities24 /he guarantees were
un!oubte!l- signs o0 sincerit- gi"en with some 0ormalit-4 ?ut that !oes not
!"# $L% &!" at &>
necessaril- mean that the- were an unen0orceable an! irrele"ant mere 0ormalit-4
21
[23" Gr Keo a00irme! a second a00i!a"it on 1. September 20124 /he guarantors relie! on this in
support o0 their application 0or a sta-4 In this a00i!a"it3 Gr Keo sai!>
I un!erstoo! an! in0orme! Gr Iain that the %guarantees& were a mere 0ormalit- an! were re@uire! to
!emonstrate 'as /ra!e5s sincerit- so that %Chimbusco5s managing !irector& coul! show them to
Chimbusco5s hea! o00ice in ?ei1ing to obtain the green light 0or Chimbusco to procee! with the suggestion
that I ha! ma!e to 'as /ra!e4
/his was a care0ull- cra0te! clari0ication4 Gr Keo !i! not sa- wh- or 0rom whom he 2un!erstoo!2
an- o0 this4
[2%" In the same a00i!a"it o0 1. September 20123 Gr Keo 0or the 0irst time asserte! that he 2!i! 444
as a representati"e o0 Chimbusco3 sa- to Gr Iain an! others that the guarantees were merel-
0ormalities re@uire! to be pro!uce! to Chimbusco5s hea! o00ice in ?ei1ing to obtain the green light
0or Chimbusco to procee! with2 what he !iscusse! with 'as /ra!e in $pril/Ga- 20114 ?ut Gr Keo
cannot3 simpl- b- asserting that he acte! as representati"e o0 Chimbusco3 clothe himsel0 with
authorit- to bin! Chimbusco or to ha"e his representations attribute! to Chimbusco4 /here was
still no e"i!ence be0ore me that Chimbusco ha! gi"en Gr Keo3 eApressl- or implie!l-3 an- such
authorit-4
[21" I shoul! also note that I was not impresse! b- the manner in which the guarantors procure!
a00i!a"its 0rom Gr Keo which appeare! !esigne! to a!!ress the !e0iciencies in his e"i!ence which
ha! been pointe! out progressi"el- in earlier submissions4
%hat conditions are appropriate.
[2-" I mo"e on to the con!itions which I impose! 0or the guarantors to secure the bene0it o0 a sta-
pen!ing the outcome o0 S3784 /he $R or!ere! that the personal guarantors pro"i!e securit- in
the sum CSE1m each4 (er "iew was that re@uiring an unusuall- high amount o0 securit- woul!
sti0le the personal guarantors5 !e0ence4 She or!ere! that the securit- be pro"i!e! b- the personal
guarantors separatel-4 She 0eare! a situation where3 sa-3 two o0 the personal guarantors
0urnishe! securit- but ha! to bear the conse@uences o0 the !e0ault o0 the thir! who !i! not4
[22" I !i! not share the $R5s "iews4 I or!ere! that the personal guarantors pro"i!e 1oint securit- o0
the 0ull amount claime! against them in the ban9ruptc- originating summons> CSE732023)824124
[25" I ma!e this or!er 0or the 0ollowing reasons4 ,irst3 the sum o0 CSE1m per personal guarantor
which the $R or!ere! was neither one*thir! o0 the sum claime! against the three personal
guarantors nor was it the 0ull
!"# $L% &!" at &?
amount o0 the claim against them4 Section <)()(i o0 the ?an9ruptc- $ct gi"es me the power to
or!er the guarantors to pro"i!e securit- up to the 0ull amount claime! un!er the guarantees the-
ha"e each eAecute! (see $tanley Lee at %1+&4 :hen imposing a con!ition on a !e0en!ant5s abilit-
to resist an insol"enc- application or summar- 1u!gment3 the 0ull sum o0 the claim against it will
or!inaril- be the starting point 0or the securit- it is to 0urnish (see $tanley Lee (%)<& supra at %28&3
Lim Leong 6uat v *hip 6up 6up 2ee *onstruction -te Ltd %200+& 2 SLR(R 8+< at %2& an! +ao
Bin v 5*B* $ecurities -te Ltd %200.& 1 SLR(R )00 at %)&an! %1+&4
[50" Secon!3 I accept on the authorit- o0 7 / 8orke 7otors v 0dwards %1.+2& 1 :LR 777 that
ma9ing an or!er con!itional on a !e0en!ant 0urnishing securit- in an amount which it woul! 0in!
impossible to pro"i!e is wrong in principle3 as that !e0eats the purpose o0 the con!ition an! has
the same e00ect as granting an uncon!itional or!er against it4 ?ut counsel 0or the guarantors
ac9nowle!ge! that there was no e"i!ence be0ore me that the total sum which an- o0 the
guarantors were to 0urnish as securit- was so large as to be impossible to pro"i!e4 6or !i! an- o0
the guarantors see9 an opportunit- to place an- such e"i!ence be0ore me4 /here was there0ore
no basis on which to sa- that granting securit- in the 0ull amount o0 Chimbusco5s claim woul!
22
sti0le an- o0 the guarantors5 abilit- to resist the insol"enc- procee!ings4 I there0ore saw no
principle! basis on which to or!er as securit- an-thing less than the 0ull amount which Chimbusco
claime!4
[5" /hir!3 I or!ere! that the securit- be pro"i!e! 1ointl-4 /hat mirrors the basis o0 the personal
guarantors5 liabilit- un!er the personal guarantees un!erl-ing the ban9ruptc- application an! so
is correct in principle4 /he 1oint an! se"eral nature o0 the personal guarantee eAecute! b- them3 i0
uphel!3 was such that each personal guarantor woul! be liable 0or the entire guarantee! sum
shoul! one or more o0 the other personal guarantors re0use to pa-4 I !i! not share the $R5s
concern that in1ustice might arise i0 some o0 the personal guarantors pro"i!e! the securit- but the
others !i! not4 /here was no e"i!ence be0ore her3 or me3 that that might happen4 $n! an or!er
that the personal guarantors 0urnish the securit- 1ointl- was to their bene0it> the- coul! a!1ust inter
se how much each personal guarantor was to pro"i!e so that those with greater means or greater
con0i!ence in the !e0ences * !espite m- 0in!ing that the- were sha!ow- * coul! 0urnish a greater
proportion o0 the securit-3 to the bene0it o0 the others o0 more limite! means or with less
con0i!ence in the !e0ences4
[52" ,or the same reasons3 I grante! lea"e to the corporate guarantors to !e0en! the win!ing*up
applications on the con!ition that securit- be 0urnishe! on the same terms as the personal
guarantors sa"e that the @uantum o0 the securit- which the corporate guarantors were to pro"i!e
was to be the 0ull sum claime! against them un!er the corporate guarantees as at the !ate o0 the
win!ing*up applications * CSE13301)3372403 * less the
!"# $L% &!" at &@
@uantum o0 an- securit- which the personal guarantors pro"i!e! to a"oi! the Chimbusco being
o"ersecure!4
/o stay of proceedin#s and stay of execution
[5!" I now gi"e m- reasons 0or re0using to grant3 pen!ing appeal3 a sta- o0 the insol"enc-
procee!ings or a sta- o0 eAecution o0 the insol"enc- or!ers when the guarantors 0aile! to satis0-
the con!ition which I impose! 0or securing a sta- o0 the insol"enc- procee!ings pen!ing the
outcome o0 S3784
[53" I !i! not grant a sta- o0 the procee!ings 0or two reasons4 ,irst3 the guarantors ha! been
gi"en the opportunit- to pro"i!e securit- as a con!ition o0 obtaining a sta- o0 the procee!ings but
0aile! to !o so (see 1enmark $kibstekniske 2onsulenter (3$ I Likvidation v 4ltrapolis #!!!
Investments Ltd %2011& 7 SLR ..8 at %<8&4 /o grant them a sta- o0 the procee!ings pen!ing
appeal woul! be to gi"e them the bene0it o0 a sta- without satis0-ing the con!ition which I ha! 0elt
was necessar- to a!!ress the sha!ow- nature o0 the !e0ences4 $n! the purpose o0 the sta-
woul! be to permit them to raise the "er- same sha!ow- !e0ences on appeal4 Secon!3 there was
no e"i!ence be0ore me that the guarantors 0aile! to satis0- this con!ition because the- were not
in a 0inancial position to pro"i!e the securit- or 0or reasons be-on! their control4 I there0ore too9 it
that the 0ailure to satis0- the con!ition was a consi!ere! !ecision3 ta9en because the guarantors
!i! not wish to ris9 their mone- in the e"ent o0 0ailure in the Court o0 $ppeal an! in S3784
[5%" $s 0or a sta- o0 eAecution o0 the insol"enc- or!ers3 the law is clear4 $ sta- o0 eAecution o0
insol"enc- or!ers * as much as an- other t-pe o0 or!ers * will not be grante! simpl- because the
or!ers are being appeale! (see ; )< r 1(7 o0 the Rules o0 Court4 In ban9ruptc- procee!ings3 the
?an9ruptc- Rules ma9e speci0ic pro"ision that an appeal !oes not operate as a sta- (see r 72(b4
[51" In insol"enc- procee!ings as in or!inar- ci"il procee!ings3 there0ore3 the onus is there0ore
s@uarel- on the !e0en!ant to show wh- it is appropriate to sta- the procee!ings or to sta-
eAecution o0 the or!ers rather than to let the insol"enc- procee!ings run their normal course (see
In re *algary ) 0dmonton Land *o Ltd %1.8)& 1 :LR 3)) at 3)+*3). interpreting a pro"ision o0
the Companies $ct 1.7+ (c 3+ (CD materiall- similar to s 28.(1 o0 the Companies $ct4 Such
sta-s ha"e been grante! where all the cre!itors ha! been pai! or pro"i!e! 0or or where3 in
23
relation to a compan- 0acing win!ing up3 a scheme o0 arrangement has been agree! to b- the
cre!itors (see =!war! ?aile- M (ugo 'ro"es3 *orporate InsolvencyB Law and -ractice3
(LeAis6eAis3 3r! =!3 2008 (2?aile- M 'ro"es2 at para 17412+4
[5-" ,urther3 the guarantors !i! not show that there woul! be an- irretrie"able pre1u!ice or
!amage to their business or personal interests i0 I
!"# $L% &!" at &&
!i! not sta- the ban9ruptc- an! win!ing up or!ers pen!ing appeal4 In 0act3 there is authorit- 0or
the proposition that3 as a matter o0 practice3 a sta- o0 eAecution o0 a win!ing up or!er will not
normall- be grante! pen!ing an appeal against that or!er4 In In re ( ) B* *hewing +um Ltd
%1.8)& 1 :LR )8.3 the =nglish Chancer- Court note! that (at ).2*).3>
444 there are "er- goo! reasons 0or the practice o0 ne"er or!ering a sta-3 an! the- are these> as soon as a
win!ing up or!er has been ma!e the ;00icial Recei"er has to ascertain 0irst o0 all the assets at the !ate o0
the or!erB secon!l-3 the assets at the !ate o0 the presentation o0 the petition3 ha"ing regar! to the
possible repercussions o0 section 228 o0 the $ct o0 1.7+ %which is materiall- similar to s 2). o0 the
Companies $ct&B an! thir!l-3 the liabilities o0 the compan- at the !ate o0 the or!er3 so that he can 0in! out
who the pre0erential cre!itors are3 an! also the unsecure! cre!itors4
Supposing there is an appeal an! the win!ing up or!er is ultimatel- a00irme! b- the Court o0 $ppeal3 an!
there has been a sta-3 his abilit- to !isco"er all these things is "er- seriousl- hampere!> it ma9es it "er-
!i00icult 0or him3 possibl- a -ear later3 to ascertain what the position was at !i00erent times a -ear
pre"iousl-4 ?ut assuming a sta- is not grante!3 i0 the business is being carrie! on at a pro0it3 as I
un!erstan! this business now is3 no a!!itional harm is !one b- re0using a sta-4 $s I un!erstan! it3 i0 the
;00icial Recei"er is gi"en an in!emnit-3 sa- b- the %!e0en!ants&3 who are running this business3 he will
allow it to be carrie! on3 an! the %!e0en!ants&3 in this case3 coul! be appointe! special managers an!
carr- on the business as the- ha"e been !oing4 I0 the business is being carrie! on at a pro0it3 cre!itors o0
the business3 a0ter the !ate o0 the win!ing up or!er3 woul! be pai! in priorit- to the unsecure! cre!itors at
the !ate o0 the or!er as part o0 the eApenses o0 the win!ing up4 /hen3 i0 the appeal is allowe!3 the
business is han!e! bac9 as a going concern3 it has not su00ere! an- loss4 ;0 course3 i0 the business can
onl- be carrie! on at a loss * it shoul! not be carrie! on at all4
/hose3 I thin93 are reall- the reasons wh-3 in practice3 a sta- is not grante! * a pro0itable business can be
carrie! on as it was be0ore an! han!e! bac9 as a going concern i0 the appeal is allowe!4 I0 it is not
allowe! then3 o0 course3 cadit Cuaestio4
/his was more recentl- cite! with appro"al in In the matter of BL/ %ealty II Limited %2010& =:(C
18.1 (Ch at %11&*%12&4
[52" /he guarantors relie! on another !ecision o0 the =nglish Chancer- Court in $ociety of
Lloyd:s v Beaumont and other debtors %200<& ?PIR 1021 (2Beaumont2 to support their argument
that the bankruptcy procee!ings or or!ers shoul! be sta-e! pen!ing appeal4 In Beaumont3 the
plainti003 the Societ- o0 Llo-!5s (2Llo-!5s23 sought ban9ruptc- or!ers against a number o0 its
members (also 9nown as 26ames2 on the basis o0 statutor- !eman!s sent 0rom about 6o"ember
2002 onwar!s4 /hese !eman!s were base! on 1u!gment !ebts against the 6ames obtaine!3 in
man- cases3 a0ter protracte! litigation which was still ongoing at the time o0 the hearing to set
asi!e the statutor- !eman!s4 In ,ebruar- 20073 a consent or!er was ma!e to sta- the ban9ruptc-
petitions until the !etermination o03 inter alia3 an application
!"# $L% &!" at &A
b- the 6ames 0or permission to amen! their plea!ings to inclu!e a new cause o0 action against
Llo-!5s4 In Ga- 200)3 the 6ames5 application was re0use!3 an! so was lea"e to appeal that or!er4
/he 6ames then sought to appeal against the latter or!er3 an! sought to sta- the ban9ruptc-
petitions pen!ing the !etermination o0 the appeal4
[55" /he =nglish (igh Court grante! the sta- sought b- the 6ames on3 amongst others3 the
0ollowing groun!s>
27
10a) ,irst3 the court accepte! that the approach o0 the courts to the eAercise o0 their
!iscretion un!er s 2<<(3 o0 the Insol"enc- $ct 1.+< (c 7) (CD (which pro"i!es the
court with a general power to !ismiss or sta- ban9ruptc- procee!ings a9in to s
<7(1 o0 the ?an9ruptc- $ct when there is a bona fide appeal against an or!er or
1u!gment on which a ban9ruptc- petition is base! is 2in"ariabl-2 to a!1ourn the
hearing o0 the petition until the appeal has been !eci!e! (Beaumont at %21&3 %2)&
an! %38&4
10b) Secon!3 the court note! that i0 the 6ames5 appeal were to succee!3 the claim 0or
!amages pursuant to the newl- plea!e! cause o0 action woul! at least e@ual the
1u!gment !ebt upon which the ban9ruptc- petitions were brought (Beaumont at
%2<&4
7c) /hir!3 the court note! the !raconian e00ects o0 a ban9ruptc- or!er as well as the
stigma attache! to such an or!er (Beaumont at %2<&3 %28& an! %38&4
3d) ,ourth3 the court note! that the =nglish courts in other relate! actions ha! 0oun!
that Llo-!5s ha! a ma!e a misrepresentation to its members an! that the 6ames in
general were innocent "ictims o0 0ailings an! incompetence (Beaumont at %2<&4
3e) ,i0th3 the court note! that i0 it re0use! the sta- o0 ban9ruptc- procee!ings3 the
6ames woul! appeal this or!er an! this woul! onl- a!! to the costs o0 litigation
(Beaumont at %38&4
3f) SiAth3 the court ha!3 prior to the hearing3 ma!e an or!er the e00ect o0 which was to
compel the 6ames to put on the table all their !e0ences to the petitions against
them once an! 0or all (Beaumont at %3+&4
[00" I !i! not 0in! Beaumont to be persuasi"e authorit- on the 0acts o0 this case3 0or the 0ollowing
reasons>
11a) :hile I accepte! that a ban9ruptc- or!er coul! ha"e !raconian e00ects3 I note! that
a ban9ruptc- or!er is not irre"ersible4 /he personal guarantors can appl- to ha"e
their ban9ruptc- annulle! shoul! the- be 0oun! not liable un!er the 1oint an! se"eral
personal guarantees gi"en b- them (see s 123(1(a o0 the ?an9ruptc- $ct4
1 !"# $L% &!" at &#!
11b) /here was no e"i!ence be0ore me that the ban9ruptc- or!ers * or in!ee! the
win!ing*up or!ers * woul! ha"e an- irre"ersible e00ects on the personal guarantors
or the corporate guarantors4
8c) $s to the 0ourth groun!3 I note! that this wor9e! against the personal guarantors in
the present case as Lai # ha! eApresse! !oubt about the eAistence o0 the allege!
oral agreement in the 'as /ra!e win!ing*up application4
4d) /he siAth groun! was not applicable on the 0acts o0 the insol"enc- procee!ings
be0ore me4
[0" In the premises3 I !ecline! to sta- the procee!ings or to ma9e the or!ers with a sta- o0 the
or!ers4 I accor!ingl- ma!e the ban9ruptc- or!ers against Gr #alallu!in an! Gr Iain4 I also ma!e
the win!ing*up or!ers against Para!igm Shipping an! (ir (uat4
Conclusion
[02" ,or the reasons abo"e3 I !ismisse! the personal guarantors5 appeals an! re1ecte! the
corporate guarantors5 submissions that no win!ing*up or!ers shoul! be ma!e4
[0!" Costs 0ollowing the e"ent3 I or!ere! a single set o0 costs in 0a"our o0 Chimbusco 0or the
Registrar5s $ppeals 0iAe! at SE103000 plus reasonable !isbursements4 Chimbusco is also
separatel- entitle! to the costs o0 the ban9ruptc- an! win!ing*up procee!ings in ? 8)2 o0 20123 ?
.). o0 20123 ? .<1 o0 20123 C:C +. o0 20123 C:C .0 o0 2012 an! C:C .1 o0 20123 such costs
2)
to be taAe! i0 not agree!4 In ?.). o0 20123 ?.<1 o0 20123 C:C +. o0 2012 an! C:C .0 o0 20123
these costs will inclu!e the costs o0 an! inci!ental to the guarantors5 application 0or 0urther
arguments on 1+ September 2012 an! their unsuccess0ul sta- application on 20 September
20124
Reporte! b- /erence $ng an! Clara /ung4