Metalform Asia v Holland Leedon: Injunction Against Winding-Up Petition for Breach of Warranty

Metalform Asia Pte Ltd (MA) sought an injunction against Holland Leedon Pte Ltd (HL) in the High Court of Singapore, before Woo Bih Li J, on 5 May 2006, to prevent HL from presenting a winding-up petition based on an undisputed debt. MA argued it had a counterclaim against HL for breaches of warranties under a sale and purchase agreement. The court dismissed MA's application, finding that MA had agreed to look to an escrow amount to meet any claim under the warranties and that the counterclaim was not based on substantial grounds. The court also found no collateral purpose behind HL's threat to file a winding-up petition.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Metalform Asia sought an injunction to prevent Holland Leedon from presenting a winding-up petition. The court dismissed the application, finding no collateral purpose.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Metalform Asia Pte LtdPlaintiffCorporationApplication dismissedLost
Holland Leedon Pte LtdDefendantCorporationApplication dismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Woo Bih LiJudgeYes

4. Counsels

Counsel NameOrganization
Chew Kei-JinTan Rajah & Cheah
Moiz Haider SithawallaTan Rajah & Cheah
CR RajahTan Rajah & Cheah
Lavinia RajahTan Rajah & Cheah
Lee Eng BengRajah & Tann
Low Poh LingRajah & Tann
Steven ChongRajah & Tann

4. Facts

  1. Metalform Asia (MA) purchased the business of Holland Leedon (HL) for US$267m.
  2. The purchase was based on earnings before interest, tax, depreciation and amortisation (EBITDA) multiplied by 7.
  3. HL supplied steel to MA between July 2004 and June 2005.
  4. MA owed HL US$16,877,641.93 and $112,667.17 for the steel supply.
  5. MA sought an injunction to restrain HL from presenting a winding-up petition based on the undisputed debt.
  6. Allen & Gledhill was holding $25m in an escrow account to meet any claim under the warranties.
  7. MA agreed to look to the escrow amount to meet any claim under the warranties.

5. Formal Citations

  1. Metalform Asia Pte Ltd v Holland Leedon Pte Ltd, OS 1996/2005, [2006] SGHC 74

6. Timeline

DateEvent
Sale and purchase agreement signed
Holland Leedon supplied steel to Metalform Asia
Holland Leedon supplied steel to Metalform Asia
Metalform Asia made a partial payment of US$2m
Metalform Asia raised counterclaim
Leedon sent an email with terms for refinancing
Judgment issued

7. Legal Issues

  1. Restraint of Winding-Up Petition
    • Outcome: The court held that the plaintiff's counterclaim was not based on substantial grounds and that there was no collateral purpose behind the defendant's threat to file a winding-up petition.
    • Category: Substantive
    • Sub-Issues:
      • Bona fide cross-claim
      • Substantial grounds for cross-claim
      • Collateral motive
      • Irreparable harm
    • Related Cases:
      • [1989] SLR 164
      • [1999] 1 WLR 147
  2. Breach of Warranty
    • Outcome: The court found it was not possible to conclude that the claims for breaches of warranties were clearly unsustainable at this stage.
    • Category: Substantive

8. Remedies Sought

  1. Injunction to restrain presentation of winding-up petition

9. Cause of Actions

  • Breach of Warranty

10. Practice Areas

  • Commercial Litigation
  • Insolvency Law

11. Industries

  • Manufacturing

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Re Sanpete Builders (S) Pte LtdHigh CourtYes[1989] SLR 164SingaporeCited for the principle that a court may restrain the filing of a winding-up petition if the debtor has a bona fide cross-claim based on substantial grounds.
In re Bayoil SAUnknownYes[1999] 1 WLR 147UnknownCited for the principle that a court may restrain the filing of a winding-up petition or decline to make an order on a winding-up petition if the debtor has a bona fide cross-claim based on substantial grounds.
Mann v GoldsteinUnknownYes[1968] 1 WLR 1091UnknownCited to support the argument that motive is irrelevant where the debt is undisputed, but distinguished as a general, not absolute, rule.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Bankruptcy Act (Cap 20, 2000 Rev Ed)Singapore
Companies Act (Cap 50, 1994 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Winding-up petition
  • Injunction
  • Sale and purchase agreement
  • Breach of warranty
  • Escrow account
  • Undisputed debt
  • Counterclaim
  • EBITDA
  • Collateral purpose

15.2 Keywords

  • winding-up
  • injunction
  • breach of warranty
  • escrow
  • Singapore

17. Areas of Law

Area NameRelevance Score
Winding Up85
Injunctions75
Contract Law50
Company Law40
Breach of Warranty30

16. Subjects

  • Insolvency
  • Contract Law
  • Civil Procedure