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Singapore High Court Determines Landmark Cross-Border Bankruptcy Case

In an increasingly globalised world, it is common for a company or an individual's economic footprint to go beyond geographical boundaries. However, in the event of insolvency, uncertainties regarding the interplay of proceedings in separate jurisdictions may arise. In the landmark case of Tang Yong Kiat Rickie v Sinesinga Sdn Bhd [2014] SGHCR 06, the Singapore High Court had the opportunity to consider the validity of a local bankruptcy in light of a concurrent foreign bankruptcy.

The case involved concurrent bankruptcy proceedings in Singapore and Malaysia, where bankruptcy orders against the Plaintiff had first been obtained in Malaysia and then in Singapore. The Plaintiff sought to annul the Singapore bankruptcy order, submitting that the Defendants had not obtained leave from the Malaysian Courts to commence proceedings against the Plaintiff in Singapore, and that distribution ought to take place in Malaysia under Malaysian bankruptcy law.

The High Court upheld the Singapore bankruptcy order, finding that it was not unjust in the circumstances for the Plaintiff to be subjected to bankruptcy in both jurisdictions. The Singapore order was well-founded, and the Plaintiff's creditors and assets were situated across both Singapore and Malaysia, thus justifying the concurrent distribution.

The Defendants were successfully represented by
Chua Beng Chye, Raelene Pereira, and Cherie Tan (for the 1st Defendant), as well as Ryan Loh and Matthew Teo (for the 2nd to 4th Defendants) from the Business Finance & Insolvency Practice.

We featured this case in the June 2014 issue of our Client Update. To view this Update, click
here.


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First International Cartel Decision Issued by CCS

Kala Anandarajah, Dominique Lombardi and Marcus Teo from the Competition & Antitrust, and Trade Practice, together with the Japan Desk, successfully acted for the immunity applicants, JTEKT Corporation ("JTEKT") and its Singapore subsidiary, Koyo Singapore Bearing (Pte) Ltd ("KSBP"), in the first international cartel decision issued by the Competition Commission of Singapore ("CCS"). The decision issued on 27 May 2014 is also the first cartel decision by the CCS involving both the foreign parent companies and their Singapore subsidiaries. Whilst the total financial penalties imposed on the parties by the CCS amounted to S$9,306,977, JTEKT and KSBP were granted full immunity for being the first to have disclosed the cartel to the CCS before an investigation had started.

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Claim for Defective Marine Propulsion Units

Ian Teo, Navin Anand, and V Bala from the Admiralty & Shipping Practice represented the Plaintiff shipbuilder in a claim against the Defendant for the supply of four defective marine propulsion units ("Propulsion Units") in the case of Pacific Marine & Shipbuilding Pte Ltd v Xin Ming Hua Pte Ltd [2014] SGHC 102. The High Court allowed the Plaintiff's claim, awarding damages of more than S$3 million.

The Plaintiff had entered into a contract with a customer to construct two vessels ("Shipbuilding Contract"). The Plaintiff then entered into a contract with the Defendant for the provision of four Propulsion Units for installation onto the vessels ("Supply Contract"). However, after installation, the Propulsion Units were found not to be operating normally. Eventually, the Plaintiff’' customer terminated the Shipbuilding Contract, and the Plaintiff rejected the Propulsion Units and sought to claim against the Defendant.

The case revolved around whether Propulsion Units were defective or whether, as claimed by the Defendant, the problems could be attributed to external causes. After examining the conflicting expert evidence, the High Court accepted the Plaintiff's submission and found that, on a balance of probabilities, the Propulsion Units were in fact defective. This is because the Plaintiff managed to show that the problems in the operation of the Propulsion Units were not due to external causes, and the Defendant was not able to show otherwise.

Therefore, the Court held that the Defendant was in breach of the Sale of Goods Act (Cap. 393) and the warranty clause of the Supply Contact. The Court thus awarded damages for the purchase price of the Propulsion Units, costs incurred as a result of the Defendant's breach, and losses relating to the termination of the Shipbuilding Contract.

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When a Foreign Counsel Should be Allowed to Act Before the Singapore Court

Singapore has geared itself towards becoming an international hub for legal services, and in line with this, the legal sector has gone through some recent moves towards liberalisation. One of the areas that has traditionally been cordoned off for Singapore practitioners is litigation before the local Courts.

In Re Beloff Michael Jacob QC [2014] SGCA 25, the Court of Appeal has set out an analytical framework applicable to all cases in which ad hoc admission of foreign counsel is sought under section 15 of the Legal Profession Act (Cap. 162) ("LPA") and considered the exercise of the Court's discretion to allow foreign counsel to appear before the Court having regard to the factors stated in the Legal Profession (Ad Hoc Admissions) Notification 2012 and the circumstances of the case.

This case is also the first reported decision of the Court of Appeal which examined the ad hoc admission regime for foreign senior counsel after legislative amendments were made to section 15 of the LPA in 2012. The Court of Appeal found that the underlying rationale of the regime is that admission will only be allowed on the basis of need, and it will not be a free for all.

In this case, nTan Corporate Advisory Pte Ltd ("nTan") sought to set aside an earlier Court of Appeal decision concerning value-added fees for financial advisory services provided by nTan. nTan also sought to have Mr Beloff Michael Jacob QC, a UK Queen's Counsel ("Beloff QC"), admitted on an ad hoc basis to represent it before the Singapore Courts in the setting aside application. While the High Court had allowed the admission of Beloff QC, the Court of Appeal reversed the High Court's decision.

The Appellants were represented, inter alia, by Lee Eng Beng SC, Low Poh Ling, Raelene Pereira, and Jonathan Lee from the Business Financy & Insolvency and Appeals & Issues Practices.

We featured this case in the June 2014 issue of our Client Update. To view this Update, click here.

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Court of Appeal Rules on Frustration of Supply Contract in Indonesian Sand Ban Case

The Indonesian sand ban of 2007 led to a great deal of upheaval in many construction and supply agreements, particularly in Singapore, where the active construction industry relied almost entirely on Indonesia as its source of sand. Since then, much judicial ink has been spilt over the resulting collapsed contractual relationships. The cases have afforded the Court the opportunity to make important pronouncements on contract law, and the latest case in this vein is the Court of Appeal decision of Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd [2014] SGCA 35.

The case involved a series of contracts for the supply of ready-mixed concrete ("RMC") which was interrupted by the Indonesian sand ban. The contracts eventually fell through, with both supplier and contractor commencing legal claims against the other. The supplier sought to establish that the sand ban caused the contracts to be discharged by frustration, while the contractor argued that the supplier was in repudiatory breach of the agreements.

The High Court found in favour of the contractor, but upon appeal, the Court of Appeal overturned the High Court's decision. It held that the sand ban did in fact constitute an act of frustration, and that the contractor had not shown repudiatory breach on the part of the supplier.

The Appellant supplier was successfully represented in this matter by Francis Xavier SC, Muthu Arusu, Winston Kwek, Avinash Pradhan, Istyana Ibrahim, and Tng Sheng Rong from the Commercial Litigation, Shipping & Admiralty, and International Arbitration Practices.

We featured this case in the June 2014 issue of our Client Update. To view this Update, click here.

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A Bank's Duty to Examine Documents Provided for Letters of Credit

Letters of credit are a common financial instrument, particularly in the arena of international trade. While letters of credit serve to grant greater security and efficiency to the payment process, a certain level of risk is transferred to the issuing bank. What then are the duties of a bank with respect to the examination of documents before making payment under a letter of credit? This was the question faced by the Singapore High Court in the case of Abani Trading Pte Ltd v BNP Paribas [2014] SGHC 111.

The case involved a shipping transaction, with a letter of credit issued by the Defendant bank on the instructions of the Plaintiff. The Defendant eventually made payment upon the receipt of the necessary documents, including a bill of lading. However, the Plaintiff complained that the Defendant should not have accepted the bill of lading because it was not compliant, and that the Defendant had breached its duty or the terms of the letter of credit by failing to examine the documents with due care before making payment.

The High Court found in favour of the Defendant, holding that it had not breached its duty or the terms of the letter of credit. In doing so, the Court affirmed the principle of autonomy, emphasising that an issuing bank's duty is confined to examining documents presented under the letter of credit alone and determining on their face whether such documents are compliant. The High Court, therefore, also concluded that issuing banks, when examining documents, are not obliged to take into account matters extraneous to the documents including allegations concerning the transaction underlying the letter of credit.

The Defendant was successfully represented by Toh Kian Sing SC and Jonathan Wong from the Admiralty & Shipping Practice.

We featured this case in the June 2014 issue of our Client Update. To view this Update, click here.

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Contracts for Differences (CFD) Hedgers Case - Court Imposed Fine Instead of Imprisonment Term

Hamidul Haq, Thong Chee Kun, Istyana Ibrahim and Josephine Chee from the White-Collar Crime Practice acted for four individuals charged under section 201(b) of the Securities and Futures Act (Cap. 289) ("SFA").

In essence, the particulars of the charges were that our clients, who were Contracts for Differences ("CFD") hedgers employed by Phillip Securities Pte Ltd ("PSPL"), engaged in a practice with other CFD hedgers which operated as a fraud upon PSPL, by using nominee accounts to either purchase CFDs from PSPL below the prevailing best ask price for the underlying securities or sell CFDs to PSPL above the prevailing best bid price. Our clients elected to plead guilty to the charges. The Prosecution pressed for a custodial term during sentencing as it was submitted that the financial losses caused to PSPL were high. The case is significant as this is the first instance a Singapore Court had to decide on the appropriate sentence for a charge under section 201(b) of the SFA which concerned a CFD security.

Decision of the State Court

In mitigation, it was submitted inter alia that our clients had traded with the consent of all nominee account holders and had voluntarily made full restitution to PSPL even before they were charged in Court. The Defence further argued that the Court ought to accord due consideration to the speculative nature of losses incurred by PSPL in the absence of all the relevant hedging data. It was submitted that the distinct nature of the CFD security in the present case meant that the quantum of losses put forth by the Prosecution was inaccurate and further, that a CFD hedger would have hedged his position in the trade by placing a corresponding transaction for an actual security in the SGX market. Accordingly, this meant that the quantum of losses caused to PSPL would not have been as high as the Prosecution alleged. The Defence urged the Court to impose a high fine instead of an imprisonment term. The Court agreed with the submissions put forth by the Defence. All our clients were sentenced to a fine, ranging from S$60,000 to S$140,000.

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Successful Application for Summary Determination of a Conflicts of Laws Issue and Summary Judgment

In Pacific Harbor Advisors Pte Ltd and Credit Suisse AG, Singapore Branch v Tiny Tantono (sued as representative of the estate of Susanto Lim, deceased) (SUM NO. 5993 of 2013), Gregory Vijayendran, Benjamin Smith and Ronald JJ Wong from the Commercial Litigation Practice successfully represented the Plaintiffs in applying for a summary determination of questions of law relating to the choice of law governing a person's capacity to contract, as well as summary judgment.

The Plaintiffs had commenced a claim against the Defendant (as representative of her deceased husband's estate) for the repayment of approximately US$50.5 million due under a loan provided to her husband's company and guaranteed by her husband. The Defendant challenged the guarantee on the basis that, inter alia, her husband had no capacity to furnish the guarantee under Indonesian law, which governed his capacity and under which the Defendant's consent to the guarantee (as a spouse) was required. The Defendant also alleged that the spousal consents granted were invalid. The Plaintiffs applied for the Court to summarily determine the novel question (on which there is no direct authority) of what law governed the Defendant's husband’s capacity to furnish his guarantee pursuant to Singapore conflicts of laws rules.

Agreeing with the Plaintiffs' submissions, the Court held that the law governing the Defendant's husband's capacity to furnish his guarantee is the objective proper law of the contract which, on the facts, the Court held to be Singapore law. Having decided this, the Court rejected the Defendant's defence that her husband's guarantee was invalid as her husband lacked capacity under Indonesian law to furnish it. Addressing the Defendant's remaining defences, the Court further held that these were not credible and granted final judgment in favour of the Plaintiffs.

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Court Rules Singapore Court had Requisite Matrimonial Jurisdiction, Singapore More Appropriate Forum to Hear Divorce Proceedings

Gregory Vijayendran, Jason Gabriel Chiang and Ronald JJ Wong from the Commercial Litigation Practice acted for the husband in a matrimonial proceedings. Both husband and wife had filed divorce suits which were subsequently consolidated. After the close of pleadings, the wife indicated that she intended to file for divorce in India instead.

In response, the husband applied for an anti-suit injunction against the wife, restraining her from commencing and / or proceeding with divorce proceedings in India. Before the Court could determine the husband's application for the anti-suit injunction, the wife proceeded to file for divorce in India. She subsequently filed an application to challenge the Singapore Court's matrimonial jurisdiction to hear the parties' divorce proceedings pursuant to section 93(1) of the Women's Charter (Cap. 353) ("Women's Charter") on the basis that neither she nor the husband was domiciled or habitually resided for more than three years in Singapore at the time that the respective divorce suits had been filed by the parties. The wife also applied to stay the Singapore divorce proceedings on the grounds of forum non conveniens, arguing that India was clearly the more appropriate forum than Singapore in respect of the parties' divorce. She asserted (among other things) that a final judgment of divorce in Singapore on the factual ground of "unreasonable behaviour" would not be recognised in India.

We defended these assertions and argued that both the Husband and the Wife were domiciled in Singapore, and that in the light of several connecting factors, Singapore was the more appropriate forum to hear the divorce. As such, the Singapore Courts should proceed to hear the divorce. We further argued that the Defendant's institution of divorce proceedings in India and her conduct of the divorce proceedings in Singapore were vexatious and / or oppressive on the Husband. As such, the Wife should be restrained from proceeding with her divorce in India.
 
The Court held that the Singapore Court had the requisite matrimonial jurisdiction pursuant to section 93(1) of the Women's Charter based on the finding that the husband was domiciled in Singapore at the time of the commencement of the divorce proceedings. The Court further held that Singapore was the more appropriate forum to hear the parties' divorce. Consequentially, the Court dismissed the wife's application. The Court also granted the husband's application for an anti-suit injunction against the wife restraining her from proceeding with divorce proceedings in India.


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Successfully Resisted Application to Strike Out Claim for Breach of Separation Agreement and Mental Distress

In one case, Gregory Vijayendran and Dhiviya Mohan from the Commercial Litigation Practice successfully represented the Plaintiff in resisting an appeal by the Defendant against the Assistant Registrar's decision to dismiss an application to strike out the Plaintiff’s claim against the Defendant for breach of a Deed of Financial Arrangement that was executed in contemplation of impending divorce proceedings ("Separation Agreement").

The Plaintiff alleged that the Defendant had breached the Separation Agreement by refusing to allow the Plaintiff access to their daughter on the terms on the Agreement and claimed for damages flowing from the breach, including damages for mental distress. The Defendant subsequently applied to strike out the Plaintiff's claim, contending that it was brought for a collateral purpose and accordingly should be struck out on the grounds that it disclosed no reasonable course of action, was scandalous, frivolous and vexatious and was an abuse of process.

It was argued on behalf of the Plaintiff that (among other things) his claim for damages for mental distress was sustainable as the Separation Agreement fell within the exception in Watts v Morrow and Farley v Skinner, i.e. a contract which object was to provide peace of mind; accordingly damages for mental distress were claimable. Further, it was argued that the Plaintiff's claim was not an abuse of process as the High Court exercising matrimonial jurisdiction has no jurisdiction to award damages as contractual relief for repudiatory breach of the Separation Agreement. Therefore, it was necessary to commence a separate contractual claim in the High Court.

The High Court agreed with the Plaintiff's submissions that the Court exercising its matrimonial jurisdiction could not award damages pursuant to breach of contract and accordingly held that the action was not an abuse of process. The Court also held that on the face of it there was a legally enforceable agreement entered into by both parties and that the Plaintiff had a reasonable cause of action in breach of the Separation Agreement and damages for mental distress. Consequently, the Court dismissed the Defendant's appeal and awarded costs to the Plaintiff.

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Court Affirms Liquidators' Decision to Appoint Solicitors of Petitioner Creditor to Conduct Examination of Directors of Wound-Up Company

K. Muralidharan Pillai, Sim Wei Na and Ryan Tan from the Commercial Litigation Practice successfully acted for the Liquidators of Longains Investment Pte Ltd ("Liquidators") to resist an application filed by the directors of Longains Investment Pte Ltd ("Directors") to disqualify Rajah & Tann LLP ("R&T") from acting for the Liquidators in examination proceedings against the Directors. In dismissing the Directors' application, the High Court affirmed the commonplace practice of liquidators appointing the solicitors of a petitioning creditor to act for the liquidators after the company has been wound up.

Brief facts

Longains Investment Pte Ltd ("Longains") was wound up as a result of its failure to make payment of a civil judgment debt owed to a bank ("Bank"). Following this, the Bank successfully applied to wind up Longains. R&T represented the Bank to obtain the civil judgment as well as the winding up order against Longains. After the Liquidators reviewed the affairs of Longains, they requested the Directors to provide further information and documents. As the directors were not forthcoming with information and documents, the Liquidators instructed the Bank's solicitors, R&T, to act for the Liquidators to file an application to examine the Directors on the affairs of the Company pursuant to section 285 of the Companies Act (Cap. 50). The Liquidators also obtained the Bank's agreement to fund the examination proceedings.

Leave for examination was granted by the Honourable Judicial Commissioner Tan Siong Thye. On the first day of examination before an Assistant Registrar, Counsel for the Directors stated the Directors' objection for R&T to carry out the examination on the basis that the same set of solicitors had acted for the Bank in the winding up application against Longains and therefore, the firm was in a position of conflict of interest and should not be allowed to act for the Liquidators in the examination proceedings. The examination was adjourned for the Directors to file an application to disqualify R&T from conducting the examination of the Directors. In the disqualification application filed by the Directors, they also alleged that the Bank was purportedly negligent in advising the sale of a structured product that led to the civil judgment debt and claimed that R&T would be in a position of conflict of interests as the firm is unlikely to advise the Liquidators to set aside the judgment obtained by the Bank against Longains.

Holding

The Honourable Judicial Commissioner Edmund Leow heard and dismissed the Directors' disqualification application on 30 May 2014 in chambers. It was argued on behalf of the Liquidators that it was commonplace and some cases say, to be encouraged for liquidators to pursue a specific step in the winding up, such as the carrying out of examinations using funds from a creditor as very frequently, such arrangement may be the only means for the liquidator to carry out his duties more thoroughly or comprehensively than would otherwise be the case. Therefore, barring exceptional circumstances, it was innocuous for liquidators to appoint the petitioning creditor’s solicitors for the above purposes and no such exceptional circumstances existed in this case. The learned Judicial Commissioner agreed that it was, indeed, a commonplace practice for liquidators to appoint solicitors of the petitioning creditor to act for the liquidators after a company has been wound up.

As regards the Directors' argument that they may wish to request the Liquidators to look into setting aside some orders obtained by the Bank against Longains, Leow JC was of the view that the Liquidators must assume that all existing court orders are correct, including the order appointing the Liquidators; otherwise, the Liquidators will not be able to function. If the Directors had evidence and grounds to set aside any existing judgments and orders obtained by the Bank, they should state their case to the Liquidators for their consideration. Until then, the Directors' assertion of a potential claim against the Bank was purely hypothetical and it would not be right to disqualify the Liquidators' solicitors from acting on the basis of a hypothetical situation.

Significance

The practice of liquidators appointing the same solicitors as a petitioning creditor is widely practiced and frequently leads to significant savings in time and costs. Nonetheless, it remains important for liquidators and creditors to ensure that there are no exceptional circumstances which would render it inappropriate for the liquidators to appoint the same set of solicitors as the petitioning creditor. From case law, such exceptional circumstances include situations where the liquidators have to assess the validity of the petitioning creditor's security over the company's assets and where there is publicly known and extreme personal animosity between the petitioning creditor and the directors of the wound-up company.

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Acquisition of Boncafé group

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Acquisition of Goodpack Limited

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Syndicate of International Banks Grants SingTel S$2.1 Billion Credit Facility

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First Ever Investment in the Thilawa Special Economic Zone

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