Blackstone Asia Real Estate Partners Limited (In Liquidation) & 2 Ors v Standard Chartered Bank (Singapore) Limited

1 The appellant companies, Blackstone Asia Real Estate Partners Ltd (“Blackstone”) and Brazen Sky Ltd (“Brazen Sky”), were involved in transferring moneys allegedly misappropriated from 1Malaysia Development Bhd and SRC International Sdn Bhd. Both Blackstone and Brazen Sky were placed into insolvent liquidation in the British Virgin Islands (“BVI”) with liquidators appointed for both companies (the “Liquidators”). The BVI liquidations and the Liquidators were respectively recognised in Singapore as foreign main proceedings and Blackstone and Brazen Sky’s foreign representatives under the UNCITRAL Model Law on Cross-Border Insolvency 1997 (the “Model Law”), as implemented in Singapore (the “SG Model Law”) under the Third Schedule of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (the “IRDA”).

2 The appellants, comprising Blackstone, Brazen Sky and the Liquidators, intended to bring claims for fraudulent and wrongful trading under the IRDA and the equivalent provisions previously in force under the Companies Act (Cap 50, 2006 Rev Ed) (the “Companies Act”) against the respondents who, broadly speaking, comprised two banks with whom Blackstone and Brazen Sky had accounts with (the “Banks”), as well as certain former employees of one of the Banks. The appellants’ case was that the respondents were liable for fraudulent and wrongful trading due to their respective involvements in the flow of misappropriated moneys into and out of Blackstone’s and Brazen Sky’s accounts with the banks. The transactions that the appellants relied on to establish liability occurred between December 2010 and November 2014, a period that long predated the coming into force of the SG Model Law.

3 In order to pursue their intended claims, the appellants applied to the General Division of the High Court for orders under the SG Model Law granting the Liquidators standing to bring claims for fraudulent and wrongful trading. The respondents objected on the basis that Art 23(9) of the SG Model Law prohibited the grant of standing to foreign representatives such as the Liquidators to bring the claims under certain statutory provisions under Singapore insolvency legislation to the extent that they related to transactions entered into before the coming into force of the SG Model Law. The appellants argued that while Art 23(9) meant that the Liquidators did not automatically have standing to bring their intended claims under Art 23(1) of the SG Model Law, the court had a discretion to grant them standing under Art 21(1) of the SG Model Law and should do so in this case as the appellants had prima facie claims against the respondents for fraudulent and wrongful trading.

4 A Judge of the High Court (the “Judge”) agreed with the respondents and held that Art 23(9) was an absolute prohibition against the grant of standing to the Liquidators to bring their intended claims for fraudulent and wrongful trading as the transactions to which the claims related were entered into before the coming into force of the SG Model Law. The Judge thus dismissed the appellants’ applications. The appellants appealed against the Judge’s decision to the Court of Appeal.

5 Article 23(1) of the SG Model Law provided that, upon recognition of a foreign proceeding under the SG Model Law, a foreign representative would have standing to bring claims under certain provisions of Singapore’s insolvency legislation (the “Avoidance and Misconduct Provisions”), including fraudulent and wrongful trading, without need for parallel insolvency proceedings to be opened in Singapore. This was subject to the terms and limitations set out in the other sub-articles of Art 23 and included Art 23(9), which provided that nothing in Art 23(1) applied in respect of any transaction entered into before the coming into force of the SG Model Law: at [28]–[33].

6 The appellants’ argument that Art 23(9) only expressly limited Art 23(1) and therefore did not restrict the court’s discretion to grant the Liquidators standing to bring their intended claims under Art 21(1) was ill-conceived. Articles 21(1) and 23(1) were not alternate gateways through which a foreign representative could access the Avoidance and Misconduct Provisions. Instead, Art 23(1) was the only provision in the SG Model Law that addressed the issue of the foreign representative’s standing to bring claims under the Avoidance and Misconduct Provisions, and this was outside the scope of Art 21(1). This was for four main reasons:

(a) First, to allow Art 21(1) to be an alternate gateway to the Avoidance and Misconduct Provisions would render the self-contained regime under Art 23, which was enacted for the specific purpose of regulating a foreign representative’s standing to bring claims under the Avoidance and Misconduct Provisions, otiose. Where Parliament had enacted a specific provision to address a certain issue that was subject to various limits and controls, it was presumed to have intended that provision to govern that issue over a general provision that could conceivably cover the same issue: at [37]–[40]

(b) Second, nothing in the SG Model Law suggested that Arts 21(1) and 23(1) were intended to govern the same subject-matter, in that the standing of a foreign representative to invoke the Avoidance and Misconduct Provisions under Art 21 was discretionary, requiring the court to consider the merits of the intended claim on a prima facie basis, whereas Art 23 gave standing automatically. The concepts of “relief” and “standing” under Arts 21(1) and 23(1) respectively were conceptually distinct and should not be conflated: at [41]–[42].

(c) Third, the displacement of the foreign representative’s standing to bring claims in respect of transactions entered into before the coming into force of the SG Model Law under Art 23(9) would be pointless if it could be sidestepped by a discretionary power to grant standing in such circumstances under Art 21(1): at [43].

(d) Fourth, it was significant that Art 23(9) did not form part of the text of the Model Law and had been deliberately inserted by Parliament when the Model Law was implemented in Singapore. It was well-established that Parliament was presumed not to legislate in vain and that the court should strive to place significance to every word, phrase or sentence in a provision. When the court was faced with a provision that had been the subject of conscious and deliberate consideration and drafting by Parliament, the presumption that Parliament did not legislate in vain applied with greater force and became almost irrebuttable: at [24(a)], [45] and [46].

7 The appellants’ reliance on the SG Model Law’s general purpose of promoting efficiency in cross-border insolvency in order to justify reading down Art 23(9) was flawed. The analysis of legislative purpose had to be framed at the correct level of generality. It was important to strike an appropriate balance between the general purpose of a written law and the specific purpose of a particular provision within the written law, especially when the specific provision was an exception or limiting provision. Given that Art 23(9) was a qualification on the operation of Art 23 and the purpose of the SG Model Law as a whole, it was wrong to read it down on the basis that it went against the grain of Art 23 and the SG Model Law as that was its very purpose: at [48]–[55].

8 The issue of retrospective application of legislation arose when applying legislation to events occurring before its enactment would lead to the legal consequences of those events being altered. It was well-established that courts lean against interpreting legislation as having retrospective effect as retrospectivity was prone to causing unfairness to parties who would have formed expectations and made decisions on how to act based on the law as it stood then: at [57]–[60].

9 The purpose of Art 23(9) was to prevent the retrospective application of Art 23(1) to transactions entered into before the coming into force of the SG Model Law. This was because it would be unfair if foreign representatives of foreign companies were allowed to bring claims under the Avoidance and Misconduct Provisions through the SG Model Law when, at the time of the transactions, such claims were subject to certain restrictions upon which parties would have formed expectations as to their potential liabilities under Singapore insolvency law: at [56], [61] and [62].

(a) It would have been unfair to allow the Liquidators to bring the intended claims under the fraudulent and wrongful trading provisions in the Companies Act through the SG Model Law as the law at the time of the relevant transactions involving Blackstone’s and Brazen Sky’s accounts with the Banks either: (i) did not allow foreign companies like Blackstone and Brazen Sky access to these provisions; or (ii) only made these provisions available in the event of a winding-up in Singapore, which would require the foreign company to satisfy the jurisdictional requirement of having a sufficient or substantial connection to Singapore. The effect of the SG Model Law was to dispense with these restrictions and to give foreign representatives like the Liquidators access to the Avoidance and Misconduct Provisions when this was either previously not possible or subject to the need for a winding-up in Singapore. To have allowed the Liquidators to bring the intended claims using the SG Model Law would have exposed the respondents to potential liability through a mechanism that could not have entered their contemplation at the time of the transactions: at [64]–[69].

(b) It would have been unfair to allow the Liquidators to bring the intended claims under the fraudulent and wrongful trading provisions in the IRDA through the SG Model Law as these provisions only came into force years after the relevant transactions involving Blackstone’s and Brazen Sky’s accounts with the Banks had been entered into. The position with respect to wrongful trading was especially unfair as the respondents could never have incurred liability for wrongful trading based on the provision under the Companies Act that was in force at the time of the transactions, as that provision was subject to limitations that were no longer found in the current IRDA provision: at [75]–[79].

10 The case law had recognised that no order as to costs may be made if it would be harsh for a party to bear the costs of legal uncertainty arising from either the nascent state of the law on the point or a change in the law made in the very case at hand. However, the question of the appropriate costs order was a matter of the court’s discretion to be exercised on the specific facts of each case: at [84].

11 The appellants’ submission that no order as to costs should be made notwithstanding the dismissal of their appeals was rejected. There was no occasion to depart from the default rule that costs should follow the event in this case for two reasons. First, even if the existing understanding based on precedents where similar orders to those sought by the appellants had been made was that Art 23(9) did not preclude the grant of standing to a foreign representative to bring claims under the Avoidance and Misconduct Provisions in respect of transactions predating the SG Model Law, this was merely an assumption that had never been tested. Second, the incorrectness of the assumption was clear enough from the language of Art 23(9): at [85].

12 The general rule was that parties advancing or supporting the same cause should ordinarily not be entitled to receive separate sets of costs as they could have been jointly represented. However, the court could make separate costs orders if, on the facts of the case, separate representation was reasonable having regard to factors including: (a) the community of interests among the parties; (b) the size of the sum or the importance of the interest that was the subject-matter of the dispute; and (c) the degree of overlap in the pre-hearing preparations and conduct of proceedings: at [87]–[88].

13 The appellants’ submission that the respondents should be limited to two sets of costs payable to the Banks was rejected. Although there was a community of interests between the respondents to the extent that they were in the same position as far as the main legal issue of Art 23(9) was concerned, the appellants’ submission that the court should engage in a prima facie assessment of the merits of their intended claims when deciding if the Liquidators should be granted standing to bring the intended claims under Art 21(1) fractured the common ground between the respondents. This was because the respondents were called upon to mount individualised defences to the intended claims against them, and it was quite plausible that their cases would not be consistent with each other. To have insisted on common representation in such circumstances would have risked placing counsel in an invidious position: at [90]–[91].