Swiber Holdings Ltd v Swiber Offshore Construction: Judicial Management & Secured Creditors

The High Court of Singapore addressed applications by the judicial managers of Swiber Holdings Ltd (SHL) and Swiber Offshore Construction Pte Ltd (SOC) regarding the definition of 'secured creditor' under reg 74 of the Companies Regulations, specifically concerning creditors holding third-party securities. The court clarified whether such creditors can vote for the full value of their claims in meetings and schemes of arrangement, and how realizing security after lodging proof of debt affects the analysis. The court provided directions to the judicial managers.

1. Case Overview

1.1 Court

High Court of Singapore

1.2 Outcome

Directions given to the judicial managers.

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court clarifies the definition of 'secured creditor' in judicial management, focusing on third-party securities and voting rights.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
United Overseas Bank LtdOtherCorporationNeutralNeutral
DBS BankOtherCorporationNeutralNeutral
Swiber Holdings LtdApplicantCorporationDirections givenNeutral
ICBCOtherCorporationNeutralNeutral
Swiber Offshore Construction Pte LtdApplicantCorporationDirections givenNeutral
SUKUK HoldersOtherOtherNeutralNeutral
Siam Commercial Bank Public Company Limited, Singapore branchOtherCorporationNeutralNeutral
Offshore Engineering Pioneer Services Pte LtdOtherCorporationNeutralNeutral

3. Judges

Judge NameTitleDelivered Judgment
Kannan RameshJudgeYes

4. Counsels

Counsel NameOrganization
Keith TneeTan Kok Quan Partnership
Wong Pei TingAllen & Gledhill LLP
Kenneth LimAllen & Gledhill LLP
Pang Hui MinTan Kok Quan Partnership
Siaw HuiTan Kok Quan Partnership
Geraint KangTan Kok Quan Partnership
Probin DassShook Lin & Bok LLP
Charles LimShook Lin & Bok LLP
Sim Kwan KiatRajah & Tann Singapore LLP
Wilson ZhuRajah & Tann Singapore LLP
Quek Teck LiangRajah & Tann Singapore LLP
Mabel TanVirtus Law LLP
Andrew TeoAllen & Gledhill LLP
Muzhaffar OmarWong & Leow LLC
Sonia ChanJLC Advisors LLP

4. Facts

  1. SHL and SOC are under judicial management.
  2. SHL provided corporate guarantees to financial institutions for banking facilities extended to its subsidiaries.
  3. The facilities were secured against assets owned by the subsidiaries, not by SHL or SOC.
  4. The Group's financial situation deteriorated due to a downturn in the oil and gas industry.
  5. The Judicial Managers sought directions on whether creditors holding third-party securities should be considered secured creditors under reg 74.
  6. Creditors had parallel claims against the Companies based on corporate guarantees issued in respect of the subsidiaries’ indebtedness.

5. Formal Citations

  1. Re Swiber Holdings Ltd and another matter, , [2018] SGHC 180
  2. Swiber Holdings Ltd, Originating Summons No 767 of 2016, Originating Summons No 767 of 2016
  3. Swiber Offshore Construction Pte Ltd, Originating Summons No 768 of 2016, Originating Summons No 768 of 2016

6. Timeline

DateEvent
SHL and SOC applied to be placed under judicial management.
Applications to be placed under judicial management granted.
Judicial Managers applied for directions on issues related to secured creditors.
Court gave relevant directions and delivered brief grounds of decision.
Full grounds of decision delivered.

7. Legal Issues

  1. Definition of 'Secured Creditor' under reg 74 of the Companies Regulations
    • Outcome: The court held that a creditor whose claim against the debtor company is secured by a third-party security is not a 'secured creditor' for the purpose of reg 74 of the Regulations.
    • Category: Substantive
    • Sub-Issues:
      • Interpretation of 'security' in the context of third-party securities
      • Voting rights of creditors holding third-party securities
  2. Voting Rights in Schemes of Arrangement
    • Outcome: The court held that reg 74 does not apply to a vote in a creditors’ meeting called for the approval of a scheme of arrangement under s 210 read with s 227X of the Act.
    • Category: Substantive
    • Sub-Issues:
      • Applicability of reg 74 to meetings for scheme approval
      • Deduction of third-party security value for voting purposes
  3. Impact of Security Realization After Lodging Proof of Debt
    • Outcome: The court held that the creditor must update its proof to reflect the reduced value of the principal debt until the day before the date of payment of dividends (if any), by the time on the cut-off date set by the liquidator or judicial manager.
    • Category: Substantive
    • Sub-Issues:
      • Requirement to update proof of debt after realizing security
      • Cut-off date for updating proof of debt

8. Remedies Sought

  1. Directions from the Court

9. Cause of Actions

  • Application for Judicial Management
  • Corporate Guarantees

10. Practice Areas

  • Commercial Litigation
  • Insolvency
  • Banking
  • Corporate Restructuring

11. Industries

  • Oil and Gas
  • Construction
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Chan Siew Lee Jannie v Australia and New Zealand Banking Group LtdHigh CourtYes[2016] 3 SLR 239SingaporeCited for the meaning of surrendering security in the context of bankruptcy.
In re Turner, ex parte West Riding Union Banking CompanyN/AYes(1881) 19 Ch D 105United KingdomCited for the meaning of surrendering security in the context of bankruptcy.
Re Olympia & York Developments LtdOntario Court of JusticeYes[1997] 143 DLR (4th) 536CanadaCited for the principle that a creditor does not have to reduce its claim against a debtor company to account for the value of security granted by the debtor's subsidiary.
Re MalletN/ANo[1996] NBJ No 565CanadaCriticized for ignoring the separation of entities when dealing with guarantees and proofs of debt.
Barclays Bank Ltd and Others v TOSG Trust Fund Ltd and OthersHouse of LordsYes[1984] 1 AC 626United KingdomCited for the general rule that a creditor is entitled to maintain proof for the full sum due at the commencement of winding-up and the rule against double proof.
In re Kaupthing Singer & Friedlander Ltd (in administration) (No 2)N/AYes[2012] 1 AC 804United KingdomCited for the rule against double proof, which states that there may only be one proof for the same debt in one insolvent estate.
In re Sass, ex parte National Provincial Bank of England, LtdN/AYes[1896] 2 QB 12United KingdomCited for the principle that a guarantee for the whole of the principal debt means the surety may not file a proof if it has only paid part of the debt due.
Stotter v Equiticorp Australia Ltd (In Liquidation)High Court of AucklandNo[2002] 2 NZLR 686New ZealandCited for the principle that the creditor must reduce its proof to reflect sums received before the onset of liquidation, but noted as criticized.
In re Amalgamated Investment and Property Co LtdN/ANo[1985] 1 Ch 349United KingdomCited for the principle that a creditor is only required to give credit in the proof for the value of security realized before, but not after, the proof is filed, but the court did not find this position compelling.

13. Applicable Rules

Rule Name
Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed)

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap. 50)Singapore
Bankruptcy Act (Cap 20, 2009 Rev Ed)Singapore
Bankruptcy Act 1869 (c 71) (UK)United Kingdom
Bankruptcy Ordinance 1870 (SS Ord No 21 of 1870)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Judicial Management
  • Secured Creditor
  • Third-Party Security
  • Scheme of Arrangement
  • Proof of Debt
  • Corporate Guarantee
  • Creditors' Meeting
  • Statement of Proposals
  • Subsidiary
  • Guarantor

15.2 Keywords

  • Judicial Management
  • Secured Creditor
  • Third-Party Security
  • Singapore
  • Insolvency
  • Companies Act
  • Voting Rights
  • Scheme of Arrangement

17. Areas of Law

Area NameRelevance Score
Judicial Management90
Insolvency Law80
Schemes of Arrangement75
Company Law70
Bankruptcy60
Corporate Guarantees50
Fiduciary Duties30
Contract Law20
Trust Law10
Arbitration10

16. Subjects

  • Insolvency
  • Company Law
  • Banking
  • Finance