Pathfinder Strategic Credit LP v Empire Capital Resources: Scheme of Arrangement & Disclosure
The Court of Appeal heard cross-appeals by Pathfinder Strategic Credit LP and Empire Capital Resources Pte Ltd concerning a proposed scheme of arrangement. Pathfinder Strategic Credit LP opposed the leave application for a creditors’ meeting, while Empire Capital Resources Pte Ltd appealed the decision to separate creditors into two classes. The court, led by Sundaresh Menon CJ, addressed issues including disclosure obligations, third-party liability, creditor classification, and abuse of process. The court allowed the appeal by Pathfinder Strategic Credit LP and set aside the order granting leave for Empire Capital to proceed with the creditors’ meeting.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeal allowed. The order granting leave for Empire Capital to proceed with the creditors’ meeting was set aside.
1.3 Case Type
Insolvency
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Cross-appeals regarding a proposed scheme of arrangement. The court addressed disclosure obligations, third-party liability, creditor classification, and abuse of process.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Pathfinder Strategic Credit LP | Appellant, Respondent | Limited Liability Partnership | Appeal allowed | Won | Philip Jeyaretnam, Chan Chee Yin Andrew, Yeo Alexander Lawrence Han Tiong, Tay Yu Xi, Chew Jing Wei |
| BC Investment LLC | Appellant, Respondent | Limited Liability Partnership | Appeal allowed | Won | Philip Jeyaretnam, Chan Chee Yin Andrew, Yeo Alexander Lawrence Han Tiong, Tay Yu Xi, Chew Jing Wei |
| Empire Capital Resources Pte Ltd | Respondent, Appellant, Applicant | Corporation | Appeal dismissed | Lost | Nair Suresh Sukumaran, Foo Li-Jen Nicole, Tan Tse Hsien Bryan |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | Yes |
| Judith Prakash | Judge of Appeal | No |
| Steven Chong | Judge of Appeal | No |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Philip Jeyaretnam | Dentons Rodyk & Davidson LLP |
| Chan Chee Yin Andrew | Allen & Gledhill LLP |
| Yeo Alexander Lawrence Han Tiong | Allen & Gledhill LLP |
| Tay Yu Xi | Allen & Gledhill LLP |
| Chew Jing Wei | Allen & Gledhill LLP |
| Nair Suresh Sukumaran | Nair & Co LLC |
| Foo Li-Jen Nicole | Nair & Co LLC |
| Tan Tse Hsien Bryan | Nair & Co LLC |
4. Facts
- Empire Capital sought leave to convene a creditors’ meeting for a proposed scheme of arrangement.
- The Minority Creditors opposed the leave application, citing inadequate disclosure and abuse of process.
- The Proposed Scheme sought to compromise two sets of notes issued by BCR and BCE.
- The Berau Group faced financial difficulties due to a crash in global coal prices.
- The Berau Group had commenced multiple restructuring proceedings in Singapore.
- The financial disclosure made by Empire Capital was limited to information up to 2014.
- The Minority Creditors claimed that funds were wrongfully diverted from CAMA accounts.
5. Formal Citations
- Pathfinder Strategic Credit LP and another v Empire Capital Resources Pte Ltd, Civil Appeal Nos 99 and 100 of 2018, [2019] SGCA 29
- Re Empire Capital Resources Pte Ltd, , [2018] SGHC 36
6. Timeline
| Date | Event |
|---|---|
| Empire Capital Resources Pte Ltd incorporated in Singapore | |
| BCR issued guaranteed senior secured notes | |
| Berau Capital Resources Pte Ltd incorporated in Singapore | |
| BCE issued guaranteed senior secured notes | |
| Audited consolidated accounts of the Berau Group released | |
| Berau Group faced severe financial difficulties | |
| BCR commenced HC/OS 630/2015 seeking a moratorium | |
| BCR applied for an extension of the moratorium | |
| Extension application dismissed | |
| BCR applied to be placed under judicial management | |
| BCE applied for a moratorium | |
| BCR and BCE withdrew HC/OS 550/2016 and HC/OS551/2016 | |
| BCR and BCE commenced HC/OS 1175/2016 and HC/OS 1180/2016 | |
| Empire Capital filed application under s 210 of the CA | |
| Judge delivered decision in Re Empire Capital Resources Pte Ltd [2018] SGHC 36 | |
| Parties heard on appeal | |
| Case management conference held | |
| Empire Capital filed an affidavit disclosing financial information | |
| Parties heard again on appeal | |
| Judgment reserved |
7. Legal Issues
- Disclosure Obligations
- Outcome: The court held that Empire Capital failed to provide the scheme creditors with the minimal level of financial disclosure reasonably necessary to satisfy the court that fair conduct of the creditors’ meeting is possible.
- Category: Procedural
- Sub-Issues:
- Inadequate financial information
- Failure to disclose material information
- Third Party Releases
- Outcome: The court provisionally viewed that the Proposed Scheme would appear to fall within the scope of s 210(1) of the CA since the release of the debt owed by other members of the Berau Group to the 2015 and the 2017 Noteholders is evidently closely related to the creditor-debtor relationship between these noteholders and Empire Capital.
- Category: Jurisdictional
- Sub-Issues:
- Nexus between company's debt and third party's debt
- Necessity of release for compromise
- Classification of Creditors
- Outcome: The court provisionally viewed that the 2015 and the 2017 Noteholders could properly have been classed together for the purposes of considering and voting on the Proposed Scheme.
- Category: Procedural
- Sub-Issues:
- Commonality of interest
- Difference in rights or returns
- Abuse of Process
- Outcome: The court held that there was insufficient evidence in the present circumstances to warrant a finding that Empire Capital’s present leave application amounts to an abuse of process.
- Category: Procedural
- Sub-Issues:
- Delay of legitimate enforcement
- Multiple restructuring proceedings
8. Remedies Sought
- Leave to convene creditors' meeting
- Dismissal of leave application
9. Cause of Actions
- Breach of contract
- Inadequate disclosure
10. Practice Areas
- Restructuring
- Commercial Litigation
11. Industries
- Coal Mining
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal | Court of Appeal | Yes | [2012] 2 SLR 213 | Singapore | Cited for principles regarding the court's jurisdiction and the company's duty of disclosure at the leave stage of a scheme of arrangement. |
| Re T&N Ltd and others (No 3) | N/A | Yes | [2007] 1 BCLC 563 | United Kingdom | Cited for the principle that matters that will lead the court to subsequently refuse to sanction a scheme should be brought to the court’s attention at the leave stage. |
| Re Punj Lloyd Pte Ltd and another matter | High Court | Yes | [2015] SGHC 321 | Singapore | Cited for the principle that an order under s 210(1) would be refused if it is shown that the application amounts to an abuse of process. |
| SK Engineering & Construction Co Ltd v Conchubar Aromatics Ltd and another appeal | Court of Appeal | Yes | [2017] 2 SLR 898 | Singapore | Cited for the principle that the company must demonstrate that it has disclosed, by the time of the creditors’ meeting, sufficient information to ensure that the creditors are able to exercise their voting rights meaningfully. |
| Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte Ltd | N/A | Yes | [2003] 3 SLR(R) 629 | Singapore | Cited for the principle that the company must demonstrate that it has disclosed, by the time of the creditors’ meeting, sufficient information to ensure that the creditors are able to exercise their voting rights meaningfully. |
| The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT international Ltd and another appeal | Court of Appeal | Yes | [2012] 4 SLR 1182 | Singapore | Cited for the principle that the company must demonstrate that it has disclosed, by the time of the creditors’ meeting, sufficient information to ensure that the creditors are able to exercise their voting rights meaningfully. |
| Re Attilan Group Ltd | High Court | Yes | [2018] 3 SLR 898 | Singapore | Cited for the principle that two distinct standards of disclosure exist and should not be confused. |
| Re Indah Kiat International Finance Company BV | N/A | Yes | [2016] EWHC 246 (Ch) | England and Wales | Cited for the principle that the scheme jurisdiction can only work properly and command respect internationally if parties invoking the jurisdiction exhibit the utmost candour with the court. |
| Re Opes Prime Stockbroking Ltd | Federal Court of Australia | Yes | [2009] FCA 813 | Australia | Cited for the principle that provided there is a sufficient nexus between a release and the relationship between the creditor and the scheme company, the scheme can validly incorporate the release. |
| Daewoo Singapore Pte Ltd v CEL Tractors Pte Ltd | N/A | Yes | [2001] 2 SLR(R) 791 | Singapore | Discussed in relation to the release of claims against third parties in a scheme of arrangement. |
| Re Kuala Lumpur Industries Bhd | N/A | Yes | [1990] 2 MLJ 180 | Malaysia | Cited for the principle that at the leave stage, the company should present a restructuring proposal with sufficient particulars to enable the court to assess that it is feasible and merits due consideration by the creditors. |
| Fowler v Lindholm, Re Opes Prime Stockbroking Ltd | N/A | Yes | [2009] 259 ALR 298 | Australia | Cited as a later decision of the Australian courts that followed the case of Re Opes Prime Stockbroking Ltd. |
| Lehman Brothers Australia Ltd, in the matter of Lehman Brothers Australia Ltd (in liq) (No 2) | N/A | Yes | [2013] FCA 965 | Australia | Cited as a later decision of the Australian courts that followed the case of Re Opes Prime Stockbroking Ltd. |
| In re Dorman, Long and Company, Limited | N/A | Yes | [1934] Ch 635 | England and Wales | Cited for the principle that the explanatory statement must be perfectly fair and, as far as possible, give all the information reasonably necessary to enable the recipients to determine how to vote. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Scheme of arrangement
- Creditors' meeting
- Disclosure obligations
- Third party releases
- Classification of creditors
- Abuse of process
- 2015 Notes
- 2017 Notes
- CAMA accounts
- Berau Group
- Insolvent liquidation
- Guarantor
15.2 Keywords
- Scheme of arrangement
- Disclosure
- Creditors
- Insolvency
- Restructuring
- Singapore
- Berau Group
16. Subjects
- Insolvency
- Restructuring
- Corporate Law
17. Areas of Law
- Insolvency Law
- Companies Law
- Schemes of Arrangement
- Civil Procedure