BP Singapore v Jurong Aromatics: Set-Off Rights & Receivership in Debt Recovery
In BP Singapore Pte Ltd v Jurong Aromatics Corp Pte Ltd, the Singapore Court of Appeal addressed whether BP Singapore and Glencore Singapore could set off debts owed to them by Jurong Aromatics Corp (JAC) before receivership against debts they owed JAC after receivership. The court dismissed the appeals, holding that the appointment of receivers crystallized the floating charge, preventing set-off due to a lack of mutuality of debts. The court also rejected the claim for equitable set-off.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Appeals dismissed with costs.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Singapore Court of Appeal case concerning set-off rights between trading partners and a company in receivership. The court disallowed set-off.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| BP Singapore Pte Ltd | Appellant, Defendant | Corporation | Appeal dismissed | Lost | Davinder Singh |
| Jurong Aromatics Corp Pte Ltd (receivers and managers appointed) | Respondent, Plaintiff | Corporation | Appeal upheld | Won | Lee Eng Beng, Tham Hsu Hsien |
| Cosimo Borrelli | Respondent, Plaintiff | Individual | Appeal upheld | Won | Lee Eng Beng, Tham Hsu Hsien |
| Jason Kardachi | Respondent, Plaintiff | Individual | Appeal upheld | Won | Lee Eng Beng, Tham Hsu Hsien |
| Glencore Singapore Pte Ltd | Appellant, Defendant | Corporation | Appeal dismissed | Lost | Davinder Singh |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Chief Justice | No |
| Andrew Phang Boon Leong | Judge of Appeal | No |
| Judith Prakash | Judge of Appeal | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Davinder Singh | Davinder Singh Chambers LLC |
| Lee Eng Beng | Rajah & Tann Singapore LLP |
| Tham Hsu Hsien | Allen & Gledhill LLP |
4. Facts
- Jurong Aromatics Corp (JAC) obtained loans from Senior Lenders secured by a debenture.
- BP Singapore and Glencore Singapore had trade agreements with JAC.
- Receivers and managers were appointed for JAC due to financial difficulties.
- BP and Glencore sought to wind up JAC.
- A Tolling Agreement was established for BP and Glencore to use JAC's plant.
- BP and Glencore claimed set-off against debts owed to JAC after receivership.
- The Senior Lenders issued letters of undertaking regarding the Tolling Agreement.
5. Formal Citations
- BP Singapore Pte Ltd v Jurong Aromatics Corp Pte Ltd, Civil Appeal No 28 of 2019, [2020] SGCA 09
6. Timeline
| Date | Event |
|---|---|
| Senior Lenders provided loans to JAC. | |
| Debenture entered into between JAC and BNP Paribas. | |
| Operations of the Plant were shut down. | |
| Set-Off Agreement dated. | |
| Receivers and managers of JAC appointed. | |
| Appellants given notice of appointment of Receivers. | |
| Tolling Agreement dated. | |
| ExxonMobil found as purchaser for the Plant. | |
| Transitional Agreement dated. | |
| Transitional Supplemental Agreement dated. | |
| Glencore, with support of BP, instituted winding-up proceedings against JAC. | |
| Appellants paid some US$110m under the Performance Incentive arrangement. | |
| Sale of the Plant to ExxonMobil was completed. | |
| Appellants asserted that the Tolling Fee Debt was subject to insolvency set-off against the JAC indebtedness. | |
| Appellants asserted that the Final Payment Amount was subject to insolvency set-off against the JAC indebtedness. | |
| JAC was ordered to be wound up. | |
| Judgment reserved. | |
| Judgment reserved. |
7. Legal Issues
- Right of Set-Off
- Outcome: The court held that the appellants were not entitled to set off the claimed receivables against the JAC indebtedness.
- Category: Substantive
- Sub-Issues:
- Mutuality of debts
- Decrystallisation of floating charge
- Equitable set-off
- Related Cases:
- [2020] SGCA 09
- [2019] SGHC 61
- [2005] 2 AC 680
- Crystallisation of Floating Charge
- Outcome: The court held that the floating charge had crystallised upon the appointment of the Receivers.
- Category: Substantive
- Related Cases:
- [2020] SGCA 09
- [1992] 3 SLR(R) 307
8. Remedies Sought
- Declarations that the appellants were not entitled to set-off the Tolling Fee Debt and the Final Payment Amount against any debts owed by JAC.
9. Cause of Actions
- Debt
- Recovery of Debt
10. Practice Areas
- Commercial Litigation
- Insolvency
- Receivership
11. Industries
- Commodities Trading
- Manufacturing
- Petrochemicals
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Malayan Banking Bhd v ASL Shipyard Pte Ltd and others | High Court | Yes | [2019] SGHC 61 | Singapore | Cited for the principle that the appointment of receivers is a form of intervention by the chargee to take control of the charged assets. |
| In re Spectrum Plus Ltd (in liquidation) | House of Lords | Yes | [2005] 2 AC 680 | England and Wales | Cited for the ways by which a charge over book debts attains the character of a fixed charge. |
| Dresdner Bank AG and others v Ho Mun-Tuke Don and another | Court of Appeal | Yes | [1992] 3 SLR(R) 307 | Singapore | Cited for the principle that a floating charge becomes a fixed charge upon crystallisation. |
| In re Emmadart Ltd | Chancery Division | Yes | [1979] 1 Ch 540 | England and Wales | Cited for the principle that the appointment of a receiver suspends the powers of the directors over the assets. |
| N W Robbie & Co Ltd v Witney Warehouse Co Ltd | Court of Appeal of England and Wales | Yes | [1963] 1 WLR 1324 | England and Wales | Cited for the proposition that a trade creditor ought not to be lightly deprived of rights of set-off to which it would have been entitled if the business were being carried on by the company on its own account. |
| Business Computers Ltd v Anglo-African Leasing Ltd | High Court | Yes | [1977] 1 WLR 578 | England and Wales | Cited for the proposition that a debtor cannot after notice of an assignment of his debt by his creditor improve his position as regards set off by acquiring debts incurred by the assignor creditor to a third party. |
| Abdul Salam Asanaru Pillai (trading as South Kerala Cashew Exporters) v Nomanbhoy & Sons Pte Ltd | High Court | Yes | [2007] 2 SLR(R) 856 | Singapore | Cited for the principle that equitable set-off is available only where there is a close and inseparable relationship between the dealings and the transactions which give rise to the respective claims. |
| Koh Lin Yee v Terrestrial Pte Ltd and another appeal | Court of Appeal | Yes | [2015] 2 SLR 497 | Singapore | Cited for the principle that parties can agree to contract out of the right of set-off, including the right to assert equitable set-off. |
| Diablo Fortune Inc v Duncan, Cameron Lindsay and another | Court of Appeal | Yes | [2018] 2 SLR 129 | Singapore | Cited for the characteristics of assets subject to a floating charge. |
| Jurong Aromatics Corp Pte Ltd (receivers and managers appointed) and others v BP Singapore Pte Ltd and another matter | High Court | Yes | [2018] SGHC 215 | Singapore | The decision below, which was upheld on appeal. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| No applicable statutes | |
15. Key Terms and Keywords
15.1 Key Terms
- Set-off
- Receivership
- Floating charge
- Crystallisation
- Decrystallisation
- Tolling Agreement
- Debenture
- Mutuality of debts
- Equitable set-off
- Receivables
15.2 Keywords
- set-off
- receivership
- floating charge
- crystallisation
- Jurong Aromatics Corp
- BP Singapore
- Glencore Singapore
- Singapore Court of Appeal
16. Subjects
- Insolvency
- Commercial Law
- Debt and Recovery
- Credit and Security
17. Areas of Law
- Insolvency Law
- Debt Recovery
- Bankruptcy Law
- Credit and Security Law
- Commercial Law