SINGAPORE COMMODITIES GROUP CO., PTE. LTD. v FOUNDER GROUP (HONG KONG) LIMITED (IN LIQUIDATION)

Facts

Founder Group (Hong Kong) Limited, wound up in Hong Kong in 2021, claimed through its liquidators that Singapore Commodities Group Co, Pte Ltd (SG Commodities) owed it US$14,117,585.50 in trade debts under a copper cathode purchase contract dated 17 December 2015. The two had once been in the same corporate group. SG Commodities disputed the alleged debt, saying the contract was for bookkeeping only and that no copper was delivered. After a statutory demand went unpaid, it began a CIETAC arbitration in Beijing seeking a declaration that no debt existed, and Founder Group applied on 27 May 2022 to wind it up in HC/CWU 120/2022.

On 29 September 2022 the Judge allowed SG Commodities to pay an equivalent sum into court as security for the claim, pending the winding-up application and the arbitration, and stayed the winding up. Founder Group filed no counterclaim. The award of 20 November 2023 refused the declaration but stated expressly that this did not mean the tribunal supported or ruled on Founder Group's claim, noting the lack of delivery evidence. Founder Group then applied for the sum to be paid out to it. At the 19 July 2024 hearing the Judge treated remarks by SG Commodities' counsel as a concession, ordered payment out and gave leave to withdraw the winding-up application: Founder Group (Hong Kong) Ltd (in liquidation) v Singapore Commodities Group Co, Pte Ltd [2024] SGHC 280. SG Commodities appealed in Civil Appeal No 47 of 2024.

Issues

1. Whether the condition for paying the sum out of court to Founder Group had been met.
2. Whether counsel for SG Commodities had conceded at the 19 July 2024 hearing that the sum should be paid out.
3. If there was such a concession, whether SG Commodities should be allowed to withdraw it.

Holding

The Court of Appeal allowed the appeal. It set aside the payment out order and the costs orders below, ordered Founder Group's solicitors to keep holding the sum on interest-bearing deposit under their undertaking, ordered the costs paid below refunded, set aside the leave to withdraw the winding-up application and remitted that application to the Judge. SG Commodities was awarded appeal costs of $55,000 and the costs of the payment out application.

Reasoning

The court held that the power to order payment in and out during a pending winding-up lay in s 128(2)(f) of the Insolvency, Restructuring and Dissolution Act 2018, not O 3 r 2(2) of the Rules of Court 2021. That provision gave no specific guidance, so the terms and context of the payment in order governed. The sum was security for Founder Group's claim pending the arbitration, which the parties must have expected to resolve whether the debt existed. Read in context, Founder Group was entitled to payment out only if it established in the arbitration that it was owed the debt. The award plainly did not do so. The court rejected the Judge's view that the parties' intention had been frustrated: the sum was paid in under a court order, not a contract.

On the concession, applying Poh Huat Heng Corp Pte Ltd and others v Hafizul Islam Kofil Uddin [2012] 3 SLR 1003, the court read the transcript as a whole. Counsel had accepted that payment in could create a security interest, had no instructions to consent, and, though he expressed himself in a confusing way, quickly corrected that his statements went to the alternative case, aimed at avoiding a winding up. There was no unequivocal abandonment of the primary position, so no question of withdrawal arose.

For the remitted hearing, the court noted that the debt remained disputed and pointed to the approach in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158 for disputes covered by an arbitration agreement. In obiter, it cautioned against payments into court that might offend the pari passu principle while a winding-up application is pending, and against validation orders under s 130(1) made without considering the governing principles.

From the judgment