Daewoo Singapore v CEL Tractors: Scheme of Arrangement & Guarantor Release
Daewoo Singapore Pte Ltd appealed against the High Court's decision to sanction a scheme of arrangement between CEL Tractors Private Limited and its creditors under Section 210 of the Companies Act. Daewoo objected to the scheme, arguing that it unfairly required them to release a guarantor (Mr. Lim Chee Seng) from his obligations. The High Court dismissed the appeal, and the Court of Appeal upheld the dismissal, finding no unfairness or lack of bona fides in the scheme's approval.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Appeal dismissed with costs.
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 under Section 210 of the Companies Act, focusing on the release of a guarantor's obligations.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Daewoo Singapore Pte Ltd | Appellant | Corporation | Appeal Dismissed | Lost | |
| CEL Tractors Private Limited | Respondent | Corporation | Appeal Dismissed | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chao Hick Tin | Judge of Appeal | No |
| L P Thean | Judge of Appeal | No |
| Yong Pung How | Chief Justice | Yes |
4. Counsels
4. Facts
- CEL Tractors proposed a scheme of arrangement with ten creditors.
- Daewoo, one of the creditors, objected to the scheme.
- The scheme included a clause requiring creditors to release guarantors upon CEL Tractors fulfilling its obligations.
- Daewoo had a guarantee from Mr. Lim Chee Seng, a director of CEL Tractors.
- The scheme was approved by a majority of creditors but opposed by Daewoo.
- Daewoo argued the scheme unfairly required them to release a valuable security.
- Daewoo contended a scheme under Section 210 could not discharge a third party's liability.
5. Formal Citations
- DAEWOO Singapore Pte Ltd v CEL Tractors Private Limited, CA 600031/2001, [2001] SGHC 231
6. Timeline
| Date | Event |
|---|---|
| Order of court obtained by CEL Tractors to convene a meeting of creditors. | |
| Scheme of arrangement proposed by CEL Tractors. | |
| Decision date of the appeal. |
7. Legal Issues
- Release of Guarantor
- Outcome: The court held that the scheme of arrangement could include a term requiring the release of a guarantor, provided there was no unfairness, discrimination, or lack of bona fides.
- Category: Substantive
8. Remedies Sought
- Objection to the sanctioning of a scheme of arrangement
9. Cause of Actions
- Scheme of Arrangement under Section 210 of the Companies Act
10. Practice Areas
- Commercial Litigation
- Insolvency
- Corporate Restructuring
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Johnson v Davies | English Court of Appeal | Yes | [1998] 2 BCLC 252 | England and Wales | The 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. He also justified this proposition on the ground of policy. |
| Hill v Anderson Meat Industries | Supreme Court of New South Wales | No | [1971] 1 NSWLR 868 | Australia | Leading case regarding the effect of a scheme of arrangement on the liability of a co-debtor or surety of the company which is subjected to the scheme of arrangement. |
| Hill v Anderson Meat Industries | New South Wales Court of Appeal | No | [1972] 2 NSWLR 704 | Australia | Affirmed the decision in Hill v Anderson Meat Industries [1971] 1 NSWLR 868, holding that the liability of Anderson under the guarantee was not discharged. |
| Gan v Sanders and Anor | Supreme Court of Victoria | No | (1994) 15 ACSR 298 | Australia | Followed Hill v Anderson Meat Industries, holding that the deed of arrangement did not discharge the third party surety. |
| Re Southern World Airlines Ltd | High Court of New Zealand | No | [1993] 1 NZLR 597 | New Zealand | Held that the scheme did not extinguish third party liabilities. |
| Buttle v Allan as Official Liquidator of Buttle & Co Sharebrokers Ltd (In Liquidation) | New Zealand Court of Appeal | No | [1994] 1 NZLR 396 | New Zealand | Affirmed Hill's case as being a correct statement of the law in New Zealand as well as in Australia. |
| Ex p Jacobs, Re Jacobs | Court of Appeal | No | (1875) LR 10 Ch App 211 | England and Wales | Held that the discharge of Phillips was by operation of law and that Jacob was not discharged. |
| Re London Chartered Bank of Australia | High Court of Justice | No | [1893] 3 Ch 540 | England and Wales | Held that there was no need to insert a reservation in the scheme regarding the right of the creditors against the sureties of the company for the latters debts. |
| Dane v Mortgage Insurance Corp Ltd | Court of Appeal | No | [1893] 1 QB 54 | England and Wales | Held that the defendants were liable notwithstanding the scheme of arrangement. |
| Re Garners Motors, Limited | High Court of Justice | No | [1937] 1 Ch 594 | England and Wales | Held that a statutory scheme did not have the effect of discharging the liability of Garners Motors to Temple Press Ltd. |
| Re Norfolk Island And Byron Bay Whaling Co Ltd | Supreme Court of New South Wales | No | (1969) 90 WN (NSW) 351 | Australia | The section is intended to provide a machinery (i) for overcoming the impossibility or impracticability of obtaining the individual consent of every member of the class intended to be bound thereby, and (ii) for preventing, in appropriate circumstances, a minority of class members frustrating a beneficial scheme. |
| Re A and C Constructions Pty Limited | Supreme Court of South Australia | No | [1970] SASR 565 | Australia | Held that the court would not refuse to approve a scheme merely because (i) the scheme provided for an outsider to purchase the company structure in order to obtain a tax benefit, and (ii) that a person other than the company, its members and creditors was a party to the scheme. |
| Re Glendale Land Development Ltd (in liq) | Supreme Court of New South Wales | No | [1982] 9 ACLR 171 | Australia | Held that an arrangement between a company and its relevant creditors was not outside the scope of s 315 merely because it was part of a wider scheme involving an outsider or an outsider was a necessary party to the implementation of the scheme. |
| Re Buildmat (Australia) Pty Ltd And The Companies Act | Supreme Court of New South Wales | No | (1981) 5 ACLR 689 | Australia | Held that, notwithstanding the express provision in the scheme of arrangement, the scheme did not discharge the liability of Buildmat. |
| Re Andersens Home Furnishing Co Pty Ltd | Not Available | No | (1996) 14 ACLC 1,710 | Australia | Held that the deed did not extinguish the rights of the creditors against the guarantors. |
| In re English, Scottish, and Australian Chartered Bank | Not Available | No | [1893] 3 Ch 385 | England and Wales | In approving a scheme under s 210 of the Act, the duty of the court is to consider whether the statutory provisions have been complied with, whether the scheme is fair and reasonable to the creditors as a whole, whether the company and the majority creditors are acting bona fide, and whether the minority is being coerced to promote the interest of the majority. |
| In re Dorman, Long and Company, Ltd | Not Available | No | [1934] 1 Ch 635 | England and Wales | In approving a scheme under s 210 of the Act, the duty of the court is to consider whether the statutory provisions have been complied with, whether the scheme is fair and reasonable to the creditors as a whole, whether the company and the majority creditors are acting bona fide, and whether the minority is being coerced to promote the interest of the majority. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap. 50, 1994 ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Scheme of Arrangement
- Guarantor
- Creditor
- Companies Act
- Section 210
- Release of Security
- Majority Approval
- Bona Fides
- Unfairness
- Discrimination
15.2 Keywords
- Scheme of Arrangement
- Guarantor Release
- Companies Act
- Singapore
- Creditors Rights
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Schemes of Arrangement | 85 |
| Company Law | 75 |
| Bankruptcy | 60 |
| Guarantees | 50 |
| Banking and Finance | 30 |
| Contract Law | 25 |
16. Subjects
- Corporate Law
- Insolvency Law
- Company Law