Jurong Shipyard v BNP Paribas: Injunction Against Winding Up for Disputed Debt

Jurong Shipyard Pte Ltd (JSPL) sought an injunction against BNP Paribas (BNPP) to prevent BNPP from commencing winding-up proceedings based on a disputed debt of US$50,723,070. JSPL argued that the debt arose from unauthorized forex transactions conducted by its former Chief Financial Officer, Wee Sing Guan, and that BNPP was aware or should have been aware of Wee's lack of authority. The High Court of Singapore, presided over by Justice Lee Seiu Kin, allowed JSPL's application, finding that JSPL had raised triable issues regarding BNPP's knowledge of Wee's alleged unauthorized actions.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application allowed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Jurong Shipyard sought an injunction to restrain BNP Paribas from commencing winding-up proceedings for a disputed debt. The court allowed the application.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Jurong Shipyard Pte LtdPlaintiffCorporationInjunction GrantedWon
BNP ParibasDefendantCorporationApplication DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Lee Seiu KinJudgeYes

4. Counsels

Counsel NameOrganization
Hing Shan Shan BlossomDrew & Napier LLC
Davinder SinghDrew & Napier LLC
Lin Yan YanDrew & Napier LLC
Lim Pei Hoon JoanDrew & Napier LLC
Sim Jek Sok DisaRajah & Tann
Kam Su Cheun AurillRajah & Tann
Tammy Low Wan JunRajah & Tann
Sundaresh MenonRajah & Tann

4. Facts

  1. JSPL entered into forex transactions with BNPP.
  2. Wee Sing Guan, JSPL's CFO, engaged in forex hedging activities.
  3. JSPL's primary foreign currency inflows were in USD.
  4. JSPL and BNPP entered into facility letters for forex transactions.
  5. The facility letters stated that the facilities would be used for hedging purposes.
  6. JSPL passed a board resolution authorizing entry into the ISDA Master Agreement.
  7. Wee entered into various forex transactions with BNPP, including exotic instruments.
  8. JSPL discovered substantial losses from unauthorized transactions confirmed by Wee.
  9. JSPL sent letters to its bankers, including BNPP, about Wee's dismissal and the unauthorized transactions.
  10. BNPP issued a statutory demand to JSPL for US$50,723,070.
  11. JSPL offered to put an equivalent sum in escrow, which BNPP rejected.
  12. JSPL filed an originating summons for an injunction to restrain BNPP from commencing winding-up proceedings.

5. Formal Citations

  1. Jurong Shipyard Pte Ltd v BNP Paribas, OS 1727/2007, [2008] SGHC 86

6. Timeline

DateEvent
JSPL started forex hedging activities.
Master Agreement dated as of this date.
JSPL board passed a resolution to enter into the ISDA Master Agreement.
Master Agreement executed by BNPP.
SCM announced Wee had entered into unauthorized transactions.
JSPL notified its bankers, including BNPP, about Wee's dismissal and the unauthorized transactions.
JSPL invited its bankers to close out outstanding forex transactions.
BNPP replied, stating the transactions were binding.
SCM announced the appointment of PwC as independent investigating accountants.
BNPP outlined the procedure for close-out.
Close-out Agreement executed.
Transactions closed out; Agreed Value was USD 50,723,070.
BNPP sent confirmation letter for termination of transactions.
JSPL responded, denying liability for the transactions.
BNPP issued a statutory demand to JSPL, which was later retracted.
SCM announced it would subscribe for redeemable preference shares in JSPL.
JSPL offered to put an equivalent sum in escrow.
BNPP served a fresh statutory demand on JSPL.
JSPL filed the originating summons.
Court heard applications regarding the admission of various affidavits.
Judgment reserved.

7. Legal Issues

  1. Authority of Agent
    • Outcome: The court found that JSPL raised triable issues regarding whether BNPP knew or should have known that Wee lacked authority to carry out the Key Transactions.
    • Category: Substantive
    • Sub-Issues:
      • Actual authority
      • Constructive notice of lack of authority
      • Collusion with agent
  2. Contractual Estoppel
    • Outcome: The court found that the authorities relied on by BNPP to support their submissions based on contractual estoppel did not contemplate the scenarios posited by JSPL: viz, BNPP’s officers colluding with Wee to carry out transactions beyond the scope of his authority or BNPP having actual or constructive notice that Wee was carrying out such transactions.
    • Category: Substantive
  3. Injunction to Restrain Winding-Up
    • Outcome: The court allowed the injunction, finding that JSPL had raised triable issues regarding the debt.
    • Category: Procedural
    • Sub-Issues:
      • Disputed debt
      • Abuse of process
  4. Admissibility of Hearsay Evidence
    • Outcome: The court admitted Wee's unsigned statement into evidence, finding that the originating summons was interlocutory in nature.
    • Category: Procedural
    • Sub-Issues:
      • Interlocutory proceedings

8. Remedies Sought

  1. Injunction to restrain winding-up proceedings

9. Cause of Actions

  • Breach of Contract
  • Abuse of Process

10. Practice Areas

  • Commercial Litigation
  • Insolvency
  • Banking
  • Financial Regulation

11. Industries

  • Marine Engineering
  • Banking

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Pacific Recreation Pte Ltd v S Y Technology Inc and Anor AppealCourt of AppealYes[2008] SGCA 1SingaporeCited for the principle that a winding-up petition is not an appropriate means of enforcing a disputed debt and that the threshold test for determining the existence of a substantial and bona fide dispute is that of a prima facie case.
Securicor (M) Sdn Bhd v Universal Cars Sdn BhdHigh CourtYes[1985] 1 MLJ 84MalaysiaCited for the principle that a company has not ‘neglected to pay’ the debt if the debt is disputed on substantial rounds.
Re Ban Hong Co LtdN/AYes[1959] MLJ 100N/ACited for the principle that a winding-up application instituted for the purpose of enforcing a disputed debt is an abuse of process of the Court.
Re Mechanised Construction Pte LtdN/AYes[1989] 3 MLJ 9N/ACited for the principle that a winding-up application instituted for the purpose of enforcing a disputed debt is an abuse of process of the Court.
Apirami Sdn Bhd v Tamil Nesan (M) Sdn BhdN/AYes[1986] 1 CLJ 493N/ACited for the principle that a winding-up application instituted for the purpose of enforcing a disputed debt is an abuse of process of the Court.
Ng Ah Kway v Tai Kit Enterprise Sdn BhdN/AYes[1986] 1 MLJ 58N/ACited for the principle that the Court may order an injunction, stay or dismiss the proceedings if it is not satisfied as to the bona fides of the application.
Instrumech Engineering Sdn Bhd v Sensorlink Sdn BhdHigh CourtYes[2001] 1 MLJ 127MalaysiaCited for the principle that a respondent company may apply for an injunction even before the winding-up application is made, if it receives a statutory demand for payment that it disputes.
Dynaworth Shipping Sdn Bhd v Ling Chung AnnHigh CourtYes[2001] 3 MLJ 399MalaysiaCited for the principle that a respondent company may apply for an injunction even before the winding-up application is made, if it receives a statutory demand for payment that it disputes.
Malayan Resources Corp Bhd v Juranas Sdn BhdHigh CourtYes[2002] 3 MLJ 169MalaysiaCited for the principle that a respondent company may apply for an injunction even before the winding-up application is made, if it receives a statutory demand for payment that it disputes.
Brinds Ltd v Offshore Oil NL (No 3)N/AYes(1985) 10 ACLR 419N/ACited for the principle that in every case it becomes necessary for the court to exercise its discretion as to how far it will allow the question whether or not the dispute is bona fide to be explored.
Bryanston Finance Ltd v De Vries (No 2)N/AYes[1975] 2 WLR 41N/ADiscusses the test to be used in deciding whether to grant an injunction against winding up and whether proceedings in respect of applications for such injunctions are interlocutory for the purpose of admitting hearsay affidavit evidence.
Tang Choon Keng Realty (Pte) Ltd v Tang Wee ChengN/AYes[1992] 2 SLR 1114N/ACited for the principle that the right not to be involved in litigation which would constitute an abuse of process of the court.
Metalform Asia Pte Ltd v Holland Leedon Pte LtdN/AYes[2007] 2 SLR 268N/ACited for the principle that where a company disputes a debt claimed by a creditor, the court will restrain a creditor from filing a petition to wind up the company.
Savings & Investment Bank v Gasco Investments (No 2)N/AYes[1988] 2 WLR 1212N/ADiscusses the test for an interlocutory proceeding is whether the court is being asked to keep matters in the status quo until the final rights of the parties are decided.
Gilbert v EndeanN/AYes(1878) 9 Ch.D 259N/ACited for the principle that those applications only are considered interlocutory which do not decide the rights of the parties, but are made for the purposes of keeping things in status quo till the rights can be decided.
American Cyanamid Co v Ethicon LtdN/AYes[1975] AC 396N/ADiscusses the test to be used in deciding whether to grant an injunction against winding up.
Niger Merchants Co. v. CapperN/AYes(1877) 18 Ch.D. 557N/ADiscusses the test to be used in deciding whether to grant an injunction against winding up.
Savings and Investment Bank v GascoN/AYes[1984] 1 WLR 271N/ACited for the principle that the purpose of the exception is to enable a deponent to put before the court in interlocutory proceedings, frequently in circumstances of great urgency, facts which he is not able of his own knowledge to prove.
Colchester Borough Council v Smith and othersN/AYes[1992] Ch 421N/ACited for the doctrine of contractual estoppel.
Binder v AlachouzosN/AYes[1972] 2 QB 151N/ACited for the doctrine of contractual estoppel.
Peekay Intermark Ltd v Australia and New Zealand Banking Group LtdCourt of AppealYes[2006] EWCA Civ 386England and WalesCited for the doctrine of contractual estoppel.
Orient Centre Investments Ltd v Societe GeneraleCourt of AppealYes[2007] 3 SLR 566SingaporeCited for the doctrine of contractual estoppel.
Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings AssociationN/AYes[1992] 2 SLR 828N/ACited for the principle that the directors’ subjective intent at the time they signed the 1 November 2004 resolution is irrelevant if on an objective view they intended to be bound by its terms.
Reardon Smith Line Ltd v Hansen TangenN/AYes[1976] 1 WLR 989N/ACited for the principle that the directors’ subjective intent at the time they signed the 1 November 2004 resolution is irrelevant if on an objective view they intended to be bound by its terms.
Criterion Properties plc v Stratford UK Properties LLCHouse of LordsYes[2004] UKHL 28United KingdomCited for the principle that if the third party knows that the agent does not have actual authority to carry out the act, any apparent authority is negatived as well.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322 R 5, 2006 Rev Ed)
Rules of Court (Cap 322 R 5, 2006 Rev Ed) O 41 r 5

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Companies Act (Cap 50, 2006 Rev Ed) s 254(2)(a)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Forex transactions
  • Hedging
  • ISDA Master Agreement
  • Board resolution
  • Unauthorized transactions
  • Statutory demand
  • Winding-up proceedings
  • Close-out Agreement
  • Agreed Value
  • Contractual estoppel
  • Actual authority
  • Constructive notice
  • Suspense account

15.2 Keywords

  • Jurong Shipyard
  • BNP Paribas
  • Winding up
  • Injunction
  • Disputed debt
  • Forex
  • Agency
  • Contractual estoppel

17. Areas of Law

Area NameRelevance Score
Winding Up80
Contract Law70
Insolvency Law70
Banking Law60
Banking and Finance50
Injunctions50
Company Law40
Commercial Disputes40
Summary Judgement30
Civil Procedure30

16. Subjects

  • Agency
  • Contract Law
  • Civil Procedure
  • Insolvency Law
  • Banking Law
  • Financial Derivatives