Econ Piling v Sambo E&C: Scheme of Arrangement & Release of Joint Debtor Liability

In Econ Piling Pte Ltd and NCC International Aktiebolag v Sambo E&C Pte Ltd, the Singapore High Court addressed whether a Scheme of Arrangement, which released Econ Piling from its debts and liabilities, also released NCC International, Econ's partner in a joint venture, from its joint liability. Sambo E&C had commenced arbitration against Econ and NCC for claims arising from a sub-contract. The court held that the Scheme of Arrangement did not release NCC from its joint liability with Econ, as the scheme only discharged Econ's liability by operation of law, not by accord and satisfaction.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

The High Court held that the Scheme of Arrangement did not release NCC from its joint liability with Econ.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case concerning whether a scheme of arrangement released a joint debtor (NCC) from liability when the other joint debtor (Econ) was released.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Econ Piling Pte LtdPlaintiff, DefendantCorporationLiabilities compromised by Scheme of ArrangementLost
NCC International AktiebolagPlaintiff, DefendantCorporationAppeal DismissedLost
Sambo E&C Pte LtdDefendant, PlaintiffCorporationAppeal UpheldWon

3. Judges

Judge NameTitleDelivered Judgment
Steven ChongJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Balachandran s/o PonnampalamRobert Wang & Woo LLC
Karam S ParmarTan Kok Quan Partnership
Esther YangTan Kok Quan Partnership

4. Facts

  1. Sambo commenced arbitration against Econ and NCC for claims arising from a sub-contract.
  2. Econ was placed under judicial management, and a Scheme of Arrangement was proposed and sanctioned.
  3. The Scheme aimed to compromise the rights and claims of all creditors against Econ.
  4. The Scheme did not expressly provide for NCC to be released from its joint partnership liabilities with Econ.
  5. NCC and Econ were partners in a joint venture.
  6. Sambo commenced arbitration after the Scheme was proposed but before it was sanctioned.

5. Formal Citations

  1. Econ Piling Pte Ltd and another v Sambo E&C Pte Ltd and another matter, Originating Summons No 1084 of 2009/Z and Originating Summons No 54 of 2010/S, [2010] SGHC 120

6. Timeline

DateEvent
Land Transport Authority invited tenders for construction of underground stations.
Econ and NCC entered into a Joint Venture Agreement.
ENJV's tender for the Contract was accepted by LTA.
ENJV engaged Sambo as their domestic sub-contractor for the Sub-Contract via letter of award.
Letter of award signed.
Deed of Variation altered parties’ participating interests in the JVA.
Econ had fallen into financial difficulties.
Econ was placed under judicial management.
Scheme of Arrangement was proposed by the judicial manager to Econ’s creditors.
Sambo commenced an ad hoc arbitration against ENJV.
The High Court sanctioned the Scheme of Arrangement.
Scheme administrator was given a discharge.
Scheme administrator completed the distribution.
Econ and NCC applied for the High Court to determine two questions of law.
OS 1084/2009 and OS 54/2010 heard together.
Oral decision delivered with brief grounds.
Decision Date

7. Legal Issues

  1. Release of Joint Debtor Liability
    • Outcome: The court held that the Scheme of Arrangement released Econ Piling but not NCC International from their joint liabilities to Sambo E&C.
    • Category: Substantive
    • Sub-Issues:
      • Release by Accord and Satisfaction
      • Release by Operation of Law
      • Effect of Scheme of Arrangement on Joint Liabilities
  2. Interpretation of Scheme of Arrangement
    • Outcome: The court interpreted the Scheme of Arrangement to determine whether it was intended to release NCC International from its joint liabilities.
    • Category: Substantive
    • Sub-Issues:
      • Scope of Release
      • Intention of Parties

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation
  • Arbitration
  • Insolvency

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Deanplan Ltd v MahmoudHigh CourtYes[1992] 1 WLR 467England and WalesCited for the principle that whether a release of one joint debtor was by way of accord and satisfaction is a question of construction.
Watts v AldingtonCourt of AppealYes[1999] L&TR 578England and WalesCited to highlight the criticism of the rule that release of a joint debtor releases all other joint debtors.
Re CEL Tractors Pte LtdHigh CourtYes[2001] 1 SLR(R) 700SingaporeCited for the principle that a scheme of arrangement, once sanctioned, binds all creditors, including objecting creditors.
Morris v Wentworth-StanleyQueen's BenchYes[1999] QB 1004England and WalesCited for the principle that discharge of one joint debtor by accord and satisfaction discharges all other joint debtors.
In re Garner’s Motors LimitedHigh CourtYes[1937] Ch 594England and WalesCited for the principle that a scheme of arrangement only discharges the liability of one of the joint debtors by operation of law and does not discharge the other joint debtors.
Hill v Anderson Meat IndustriesSupreme Court of New South WalesYes[1971] 1 NSWLR 868AustraliaCited for the principle that a scheme of arrangement only applies to the relationship between the debtor and its creditors and does not concern the guarantor in the absence of any special arrangement in the guarantee.
Hill v Anderson Meat IndustriesCourt of Appeal of New South WalesYes[1972] 2 NSWLR 704AustraliaCited for the principle that the discharge or release of a guarantor did not apply where the obligation of the principal debtor was discharged by operation of law.
Re Southern World AirlinesHigh CourtYes[1993] 1 NZLR 597New ZealandCited with approval by the Court of Appeal in Daewoo Singapore Pte Ltd v CEL Tractors Pte Ltd [2001] 2 SLR(R) 791.
Buttle v Allan as Official Liquidator of Buttle & Co Sharebrokers (in liquidation)High CourtYes[1994] 1 NZLR 396New ZealandCited with approval by the Court of Appeal in Daewoo Singapore Pte Ltd v CEL Tractors Pte Ltd [2001] 2 SLR(R) 791.
Daewoo Singapore Pte Ltd v CEL Tractors Pte LtdCourt of AppealYes[2001] 2 SLR(R) 791SingaporeCited for the principle that a scheme of arrangement affects only the rights of the creditors against the company, and does not affect the rights of the creditors against a third party, such as a guarantor.
Ex parte Jacobs, In re JacobsCourt of AppealYes(1875) LR 10 Ch App 211England and WalesCited for the principle that if the acceptor is discharged from his liability by operation of law by becoming a bankrupt, the liability of the drawer to the holder is not thereby affected.
The Oriental Insurance Co Ltd v Reliance National Asia Re Pte LtdCourt of AppealYes[2008] 3 SLR(R) 121SingaporeCited to show that a scheme of arrangement derives its efficacy not from the statute but from the order of court approving the scheme.
Johnson and Another v Davies and AnotherCourt of AppealYes[1998] 3 WLR 1299England and WalesCited to argue that a voluntary arrangement is treated as consensual, but the court clarifies that this is based on the specific wording of the UK Insolvency Act.
In Re London Chartered Bank of AustraliaHigh CourtYes[1893] 3 Ch 540England and WalesCited for the principle that in cases involving release by operation of law, reservation of rights is strictly not necessary in the first place.
The Bank of Canton v Mak Lai Ting and OthersHigh CourtYes[1923] HKLR 27Hong KongCited for the principle that where the principal debt is gone by operation of law, the legal position of joint debtors (whether the liability is joint or several) and sureties is the same.
In Re E.W.A., A debtorKing's Bench DivisionYes[1901] 2 KB 642England and WalesCited for the principle that the release of one of two joint debtors has the effect of releasing the other, unless there is a reservation of rights against the other joint debtor.
Pirie v RichardsonCourt of AppealYes[1927] 1 KB 448England and WalesCited for the principle that where there is a joint contract there is but one cause of action, and the aggrieved party may sue all the joint contractors or he may sue one of them, but for the purposes of that decision they all stand on the same footing.
Ex parte Good; In re ArmitageCourt of AppealYes(1876) 5 Ch D 46England and WalesCited for the principle that if the joint-debtor who has not been released is sued, he has a right to enforce contribution from the other joint-debtor and if that right remains, then the release of the joint-debtor is not complete.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Arbitration Act (Cap 10, 2002 Rev Ed) s 45(2)(a)Singapore
Partnership Act s 9Singapore
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Companies Act s 210Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Scheme of Arrangement
  • Joint Liability
  • Accord and Satisfaction
  • Operation of Law
  • Partnership Liability
  • Judicial Management
  • Creditors
  • Release
  • Joint Venture Agreement

15.2 Keywords

  • Scheme of Arrangement
  • Joint Liability
  • Partnership
  • Arbitration
  • Construction
  • Singapore
  • Insolvency

17. Areas of Law

Area NameRelevance Score
Arbitration75
Bankruptcy60
Contract Law50
Company Law40
Joint Venture30

16. Subjects

  • Insolvency
  • Schemes of Arrangement
  • Partnership Law
  • Contract Law
  • Arbitration