Lloyd's Maritime and Commercial Law Quarterly

Professor Francis D Rose

Document

ONE STEP FORWARD, TWO STEPS SIDEWAYS

Jasdeep Singh Gill* and Marius Benedikt Gass†

AnAn v VTB

1. Introduction

In the majority of Commonwealth jurisdictions, Singapore and England included, courts are empowered to wind up a company on the ground of insolvency if the company fails to pay, secure or compound the debt set out in a statutory demand.1 In most of these jurisdictions, it is uncontroversial that a debtor company will generally be able to stave off a winding-up application brought on this ground if it is able to raise a triable issue that the debt is disputed on bona fide and substantial grounds.2 Where the disputed debt is governed by an arbitration agreement, the position is less clear. In particular, the courts across various Commonwealth jurisdictions have not found a common ground in striking the appropriate balance between two regimes with deeply conflicting policy considerations,3 and have arrived at different conclusions on the appropriate threshold which a debtor company is required to meet in order to obtain a stay or dismissal of the winding-up application.

Against this backdrop, the Singapore Court of Appeal in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) 4 (“AnAn”) was faced with the question whether, when the disputed debt is governed by an arbitration agreement, the threshold to obtain a stay or dismissal of the winding-up application is lowered from that of triable issues, such that it is sufficient for the debtor company to establish a prima facie case that there is a dispute between the parties which falls within the scope of a valid arbitration agreement. The Court of Appeal affirmed that, in the context of winding-up applications, when a court is faced with either a disputed debt or a cross-claim that is subject to an arbitration agreement, it should apply a prima facie standard of review, such that the winding-up proceedings will be stayed or dismissed as long as (a) there is a valid arbitration agreement between the parties; and (b) the dispute falls within the scope of the arbitration agreement, provided that the dispute is not being raised by the debtor in abuse of the court’s process. It will be noted that the Singapore Court of Appeal’s decision in AnAn is functionally aligned with the pro-arbitration approach of the England and Wales Court of Appeal in Salford Estates (No 2) Ltd v Altomart Ltd (No 2) 5 (“Salford”), arguably the modern locus

* Advocate and Solicitor (Singapore); Associate, Drew & Napier LLC.

† Trainee Solicitor (England and Wales).

1. UK Insolvency Act 1986, ss 122(1)(f) and 123(1)(a); Singapore Companies Act, s.254(1)(e) and (2)(a); Hong Kong Companies (Winding Up and Miscellaneous Provisions) Ordinance, ss 177(1)(d) and 178(1)(a).

2. Pacific Recreation Pte Ltd v S Y Technology Inc [2008] SGCA 1; [2008] 2 SLR(R) 491, [23]; Mann v Goldstein [1968] 1 WLR 1091, 1096.

3. While arbitration embodies the principle of party autonomy and represents the decentralisation of private dispute resolution, insolvency law is heavily shaped by public policy and exhibits an “inexorable pull” towards the public centralisation of disputes. See Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) [2011] SGCA 21; [2011] 3 SLR 414 (“Larsen Oil”), [1]; In Re United States Lines Inc (1999) 197 F.3d 631 (2nd Cir.).