British Steamship Protection And Indemnity Association Limited & Anor v Charles Thresh & Anor

CA/CA 2/2024 (“CA 2”) was an appeal to the Court of Appeal (“CA”) against the decision of the judge of the General Division of the High Court (the “Judge”). The Judge recognised liquidation proceedings commenced in the Supreme Court of Bermuda (the “Proceeding”) and the winding-up order dated 28 October 2022 made therein (the “Winding-Up Order”), as a foreign main proceeding under the UNCITRAL Model Law on Cross-Border Insolvency (the “Model Law”) as adopted in Singapore (the “SG Model Law”). The CA affirmed the Judge’s decision. The Proceeding and Winding-Up Order related to British Steamship Protection and Indemnity Association (Bermuda) Limited (the “Company”). The Company was incorporated in Bermuda and registered under the Bermuda Insurance Act 1978 (the “Bermuda IA”) as a licensed insurer, subject to the terms of its licence and the provisions of the Bermuda IA. The Company commenced insurance business in compliance with the terms of its licence. However, it subsequently failed to comply with the terms of its licence and carried on insurance business from operations outside of Bermuda, purportedly under its licence. The central question in CA 2 was whether the Company’s insurance activities outside of Bermuda undertaken in breach of the terms of its licence, were relevant in determining its centre of main interests (“COMI”) under the SG Model Law.

•  The CA found that the Proceeding was a foreign proceeding within the meaning of Art 2(h) of the SG Model Law. The Proceeding was found to be conducted under a law relating to insolvency or adjustment of debt and to be collective in nature: at [19], [21]-[24], [26]-[30].

•  The CA found that the Company’s COMI was in Bermuda. As the Company was incorporated in Bermuda, its registered office was presumed to be its COMI, unless there was evidence to the contrary, of which there was none. The Company’s business activities and record keeping were centred in Bermuda as it was an insurer licenced to carry on insurance business “in and from within” Bermuda, subject to the terms of its licence and the Bermuda IA. Accordingly, third parties, especially creditors, would inter alia perceive that they were procuring insurance cover from or extending credit to a Bermudan incorporated, licenced and regulated entity, and thus would expect primary insolvency proceedings in relation to the Company to be opened in Bermuda: at [45]-[48].

•  The CA held that in the event the Company had conducted insurance business in breach of its licence, that would not be relevant to the assessment of the Company’s COMI: at [51]–[52], [56]-[59].

•  The CA found that the conduct that was based on a failure to fulfil the Company’s statutory obligations under the Bermuda IA or the terms of its licence was not relevant to the COMI analysis. To take into account such conduct would be tantamount to having regard to business activities that were not legitimate. The COMI analysis ought to proceed on the basis that the Company has met its statutory obligations: at [61]–[65].

•  The CA observed that the activities of the foreign representative might be relevant in the COMI analysis in certain cases, depending on the circumstances. This was a tentative departure from the decision of the General Division of the High Court in Re Tantleff, Alan [2023] 3 SLR 250, where it was stated that such activity was not relevant: at [67]-[70].

•  The CA agreed with the Singapore International Commercial Court’s interpretation of the threshold for refusal of recognition on public policy grounds under the SG Model Law in Re PT Garuda Indonesia (Persero) Tbk and another matter [2024] 3 SLR 254 (“Garuda”), which was a departure from the position as expressed by the General Division of the High Court in Re Zetta Jet Pte Ltd and others [2018] 4 SLR 801: at [75]-[77].

•  The CA found that recognition of the Proceeding and the Winding-Up Order was not contrary to Singapore’s public policy. There was no breach of natural justice and due process as the critical question of whether adequate notice of the Proceeding was given to the Company was a matter of Bermudan law. The appellants had adduced no evidence to show that the service effected on the Company was impermissible as a matter of Bermudan law. Also, there was no merit in the appellants’ allegation that the recognition application was tainted by misrepresentations on the part of the JPLs, or that, the JPLs failed to protect the interests of the Company’s creditors by bringing the recognition application: at [71]-[74], [79]-[83].

1 The Company was incorporated in Bermuda on 18 June 2010 and registered under the Bermuda IA as a Class 2 Insurer effective on 15 July 2010. As a Class 2 Insurer, the Company was authorised to underwrite insurance business in and from within Bermuda, subject to the terms of its licence and the Bermuda IA.

2 Although the Company initially complied with the terms of its licence, it subsequently did not. As a result, on 12 September 2022, the regulator, the Bermuda Monetary Authority (the “BMA”), brought the Proceeding to wind up the Company under the Bermuda Companies Act 1981 (the “Bermuda CA”) and the Bermuda IA. The BMA relied on the following breaches, namely that: (1) the Company failed to appoint an approved auditor since 2019 as required by s 16 of the Bermuda IA; (2) the Company failed to file statutory financial returns from 2019 to 2021 as required by s 18A of the Bermuda IA; (3) the Company failed to maintain adequate accounting and record keeping systems and meet reporting requirements as required by s 46 of Bermuda’s Insurance Code of Conduct 2015 read with the Schedule to the Bermuda IA; (4) the Company failed to appoint and maintain a principal representative (the “PR”) as required by s 8 of the Bermuda IA; and (5) the Company failed to maintain a registered office as required by s 62 of the Bermuda CA.

3 The Winding-Up Order was made, and the respondents were appointed as the joint provisional liquidators (the “JPLs”). The JPLs sought recognition of the Proceeding and the Winding-Up Order in HC/OA 697/2023 (the “Application”) as a foreign proceeding under Art 17(2)(a) of the SG Model Law. A letter from the Supreme Court of Bermuda requesting assistance for the JPLs was tendered in support of the Application.

4 The 1st appellant, British Steamship Protection And Indemnity Association Limited (“BSP”), a company registered in the Marshall Islands, was the sole shareholder of the Company. The 2nd appellant, British Steamship Management Ltd (“BSM”), a company registered in the Marshall Islands, was the manager of the Company and one of its creditors. BSP was the principal shareholder of BSM. The appellants were effectively controlled by Mr Li Yu, who was also an executive director of the Company prior to its winding-up. Mr Li Yu is a Singaporean resident in Singapore.

5 The following issues arose for determination in CA 2:

a. Whether the Proceeding was a foreign proceeding within Art 2(h) of the SG Model Law. This gave rise to the following sub-issues:

i. Whether the Proceeding was conducted under a law relating to insolvency or adjustment of debt; and

ii. Whether the Proceeding was collective in nature.

b. Whether the Proceeding was a foreign main proceeding under Art 17(2)(a) of the SG Model Law.

c. Whether recognition of the Proceeding was contrary to the public policy of Singapore.

6 The Proceeding was found to be conducted under a law relating to insolvency or adjustment of debt because the relevant part of the law under which the Proceeding was brought included provisions dealing with the insolvency of a company. The Proceeding was found to be collective in nature because it concerned all creditors of the Company generally and dealt with substantially all of the assets and liabilities of the Company: at [19], [21]-[24], [26]-[30].

7 The concept of COMI is central to the recognition of a foreign proceeding as a foreign main proceeding under the SG Model Law. Recognition as a foreign main proceeding has consequences on the reliefs that follow. Automatic relief follows recognition of a foreign main proceeding: at [33].

8 The starting point in the determination of COMI is the presumption in Art 16(3) of the SG Model Law which provides that in the absence of proof to the contrary, the debtor’s registered office is presumed to be its COMI. This presumption can be displaced by other factors which point to COMI being in a place other than the registered office. The weight to be given to each factor depends on the circumstances of each case. COMI is ascertained based on factors readily and objectively ascertainable by third parties, especially creditors: at [36]-[37].

9 The CA found that the Company’s COMI was in Bermuda. As the Company was incorporated in Bermuda and had a registered office there, its registered office was presumed to be its COMI, unless there was evidence to the contrary. There was no evidence to displace the presumption. As the Company carried on a regulated business, where it was licenced and regulated, and the terms of its licence were pertinent. The Company’s business activities and record keeping were centred in Bermuda as it was licenced to carry on insurance business “in and from within” Bermuda, subject to the terms of its licence and the Bermuda IA. Accordingly, third parties, especially creditors, would inter alia perceive that they were procuring insurance cover from or extending credit to a Bermudan incorporated, licenced and regulated entity, and thus would expect primary insolvency proceedings to be opened in relation to the Company in Bermuda: at [45]-[48].

10 This perception of Bermuda being the Company’s COMI would be reinforced by two further facts. First, under the mutual insurance scheme, the policyholders of the Company were required, as a condition of their policies, to obtain an interest in the Company (by purchasing a share in the Company’s parent, BSP) which they were to hold for the term of their coverage. Second, the insurance premiums were paid into the Company’s bank account in Bermuda with the Hongkong and Shanghai Banking Corporation (“HSBC”). This only changed in or around 19 December 2021 pursuant to instructions from Mr Li Yu. Policyholders would thus have expected to look to the Company in Bermuda for matters concerning their policies including claims that they wished to make thereunder: [47]-[48].

11 The CA found that if the Company had conducted insurance business in breach of its licence (ie not in and from within Bermuda), that would not be relevant to the assessment of its COMI. This was because one of the factors for assessing COMI in the UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation (2013) (the “2013 Guide”) was the location in which the debtor was subject to supervision or regulation. This factor came to the fore in the present case as the Company was carrying on a regulated activity in a regulated industry (insurance business) under Bermuda’s authority and was subject to Bermuda’s supervision and regulation: [51].

12 The CA held that this approach was consistent with the objective approach in determining COMI. Policyholders of the Company would have a reasonable expectation that the Company would conduct its business activities according to the terms of its licence and the applicable laws. Thus, only legitimate factors and conduct should be taken into account in assessing COMI: at [52], [56]-[59].

13 The CA found that the Company’s failure to fulfil its statutory obligations under the Bermuda IA could not be taken into account in the COMI analysis. To do so would be tantamount to taking into account business activities that were not legitimate. It would also encourage an errant company to capitalise on its breach of statutory obligations. The COMI analysis ought to proceed on the basis of the Company having met its statutory obligations. In this connection, the Company could not rely on its failure to comply with its continuing obligation to maintain a registered office in Bermuda to displace the presumption that its COMI was at its registered office: at [61]–[65].

14 The CA observed that the activities of the foreign representative might be relevant in the COMI analysis in certain cases, depending on the circumstances. This was a tentative departure from the General Division of the High Court’s decision in Re Tantleff, Alan [2023] 3 SLR 250, where it was stated that such activities were not relevant for the purposes of assessing COMI: at [67]-[70].

15 The CA agreed with the Singapore International Commercial Court’s interpretation of the threshold for refusal of recognition on public policy grounds under the SG Model Law in Re PT Garuda Indonesia (Persero) Tbk and another matter [2024] 3 SLR 254 (“Garuda”), which was a departure from the position expressed by the General Division of the High Court in Re Zetta Jet Pte Ltd and others [2018] 4 SLR 801: at [75]-[77].

16 The CA found that recognition of the Proceeding was not contrary to Singapore’s public policy. There was no breach of natural justice and due process because the critical question of whether adequate notice of the Proceeding was given to the Company was a matter of Bermudan law. The appellants had adduced no evidence to show that the service effected on the Company was impermissible as a matter of Bermudan law. Also, there was no merit in the appellants’ allegation that the recognition application was tainted by misrepresentations on the part of the JPLs, or that, the JPLs failed to protect the interests of the Company’s creditors by bringing the recognition application: at [71]-[74], [79]-[83].

17 The CA dismissed the appeal with costs of $40,000 inclusive of disbursements to the JPLs to be paid by the appellants: [87].