Daewoo Singapore v CEL Tractors: Scheme of Arrangement & Third-Party Guarantees

Daewoo Singapore Pte Ltd appealed a decision by the High Court of Singapore sanctioning a scheme of arrangement between CEL Tractors Pte Ltd and its creditors, including Daewoo, under Section 210 of the Companies Act. The scheme included a clause releasing third-party guarantors from their obligations. Daewoo objected, arguing that the scheme could not discharge a guarantor's liability. The Court of Appeal dismissed the appeal, holding that the scheme was valid and binding on all creditors, including Daewoo.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding a scheme of arrangement releasing a third-party guarantor. The court held the scheme valid, binding creditors to its terms.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Daewoo Singapore Pte LtdAppellantCorporationAppeal dismissedLost
CEL Tractors Pte LtdRespondentCorporationAppeal dismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Chao Hick TinJustice of AppealYes
L P TheanJustice of AppealNo
Yong Pung HowChief JusticeNo

4. Counsels

Counsel NameOrganization
Tan Cheng HanTan Cheng Yew & Partners
David ChanShook Lin & Bok
Vinodh S CoomaraswamyShook Lin & Bok

4. Facts

  1. CEL Tractors proposed a scheme of arrangement with ten creditors.
  2. Daewoo, one of the creditors, held a guarantee from Mr. Lim Chee Seng for CEL Tractors' debt.
  3. Clause 4.3 of the scheme required creditors to release guarantors upon CEL Tractors fulfilling its obligations.
  4. Daewoo objected to the scheme, arguing it unfairly discharged the guarantor's liability.
  5. The scheme was approved by a majority of creditors representing 95.62% of the debts.
  6. Daewoo voted against the scheme.
  7. The High Court sanctioned the scheme, leading to Daewoo's appeal.

5. Formal Citations

  1. Daewoo Singapore Pte Ltd v CEL Tractors Pte Ltd, CA 600031/2001, Daewoo Singapore Pte Ltd v CEL Tractors Pte Ltd[2001] SGCA 53

6. Timeline

DateEvent
Guarantee given by Lim Chee Seng
Court order obtained by CEL Tractors to convene a meeting of creditors
Scheme of arrangement proposed
Judgment issued

7. Legal Issues

  1. Binding effect of scheme of arrangement
    • Outcome: The court held that the scheme of arrangement was valid and binding on all creditors.
    • Category: Substantive
    • Sub-Issues:
      • Effect of scheme on third-party guarantees
  2. Validity of term releasing third-party guarantor
    • Outcome: The court held that a scheme of arrangement could incorporate a term releasing a third-party guarantor from liability.
    • Category: Substantive

8. Remedies Sought

  1. Enforcement of Guarantee
  2. Monetary Damages

9. Cause of Actions

  • Breach of Guarantee

10. Practice Areas

  • Commercial Litigation
  • Insolvency Law

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Johnson v DaviesEnglish Court of AppealYes[1998] 2 BCLC 252England and WalesThe judge agreed with the reasoning in Johnson v Davies and accordingly held that a scheme of arrangement could similarly discharge the liability of a third party such as a guarantor.
Hill v Anderson Meat IndustriesSupreme Court of New South WalesYes[1971] 1 NSWLR 868AustraliaCited as a leading case establishing that a scheme of arrangement does not affect the liability of a guarantor to pay the debt of the company which he has guaranteed.
Hill v Anderson Meat IndustriesNew South Wales Court of AppealYes[1972] 2 NSWLR 704AustraliaCited as a leading case establishing that a scheme of arrangement does not affect the liability of a guarantor to pay the debt of the company which he has guaranteed.
Gan v SandersSupreme Court of VictoriaYes[1994] 15 ACSR 298AustraliaFollowed Hill v Anderson Meat Industries in holding that a deed of arrangement did not discharge a third-party surety.
Re Southern World AirlinesHigh Court of New ZealandYes[1993] 1 NZLR 597New ZealandCited for the principle that a scheme of arrangement does not extinguish third-party liabilities.
Buttle v Allan as Official Liquidator of Buttle & Co Sharebrokers (in liquidation)New Zealand Court of AppealYes[1994] 1 NZLR 396New ZealandAffirmed the principle in Hill v Anderson Meat Industries that a scheme of arrangement does not affect the liability of a guarantor.
Ex p Jacobs, re JacobsCourt of AppealYes[1875] LR 10 Ch App 211England and WalesCited for the principle that a discharge by operation of law does not discharge a surety.
Re London Chartered Bank of AustraliaHigh Court of JusticeYes[1893] 3 Ch 540England and WalesCited for the principle that a scheme of arrangement is an alternative mode of liquidation and does not require a reservation of rights against sureties.
Dane v Mortgage Insurance CorpCourt of AppealYes[1894] 1 QB 54England and WalesCited for the principle that a scheme of arrangement does not discharge a surety.
Re Garner`s MotorsHigh Court of JusticeYes[1937] Ch 594England and WalesCited for the principle that a discharge by operation of law does not discharge other joint debtors.
Re A and C ConstructionsSupreme Court of South AustraliaYes[1970] SASR 565AustraliaCited for the principle that a scheme of arrangement can involve an outsider.
Re Glendale Land Development (in liquidation)Supreme Court of New South WalesYes[1982] 7 ACLR 171AustraliaCited for the principle that a scheme of arrangement can involve an outsider.
Re Buildmat (Aust)Supreme Court of New South WalesYes[1981] 5 ACLR 689AustraliaCited for the principle that a scheme of arrangement does not discharge the liability of a guarantor, even with an express provision.
Re Andersens Home Furnishing CoUnknownYes[1996] 14 ACLC 1AustraliaCited for the principle that a deed of arrangement does not extinguish the rights of creditors against guarantors.
Re English, Scottish, and Australian Chartered BankUnknownYes[1893] 3 Ch 385UnknownCited regarding the duty of the court in approving a scheme under s 210 of the Act.
Re Dorman, Long & CoUnknownYes[1934] Ch 635UnknownCited regarding the duty of the court in approving a scheme under s 210 of the Act.
Re Wedgwood Coal and Iron CoUnknownYes[1877] 6 Ch D 627UnknownCited regarding the duty of the court in approving a scheme under s 210 of the Act.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 1994 Ed) s 210Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Scheme of arrangement
  • Third-party guarantee
  • Creditors
  • Guarantor
  • Companies Act
  • Release of liability
  • Binding effect
  • Operation of law

15.2 Keywords

  • Scheme of arrangement
  • Guarantee
  • Creditor
  • Debtor
  • Companies Act
  • Singapore
  • Court of Appeal

17. Areas of Law

Area NameRelevance Score
Company Law90
Schemes of Arrangement85
Guarantees70
Bankruptcy40
Contract Law30
Arbitration10

16. Subjects

  • Company Law
  • Insolvency
  • Schemes of Arrangement
  • Guarantees