Founder Group v Singapore JHC: Winding Up Application Dismissed Over Disputed Debt & Arbitration Agreement
The General Division of the High Court heard a winding up application by Founder Group (Hong Kong) Limited (in liquidation) against Singapore JHC Co Pte Ltd. The claimant sought to wind up the defendant under the Insolvency, Restructuring and Dissolution Act 2018, arguing the defendant was unable to pay its debts or, alternatively, that it was just and equitable to wind it up. The defendant disputed the debt, citing arbitration agreements in the underlying contracts. Justice Vinodh Coomaraswamy dismissed the winding up application with costs, accepting the defendant's submissions that the dispute fell under valid arbitration agreements and there was no abuse of process.
1. Case Overview
1.1 Court
General Division of the High Court1.2 Outcome
Winding up application dismissed with costs.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore High Court dismissed Founder Group's winding up application against Singapore JHC due to a disputed debt subject to an arbitration agreement.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Founder Group (Hong Kong) Limited (in liquidation) | Claimant | Corporation | Application Dismissed | Lost | Sarjit Singh Gill, Daniel Tan, Hoang Linh Trang, Jeremy Chu, Edwin Yang |
| Singapore JHC Co Pte Ltd | Defendant | Corporation | Application Dismissed | Won | Tan Chuan Thye, Sim Kwan Kiat, Mark Cheng, Timothy Ang, Tan Tian Hui |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Vinodh Coomaraswamy | Judge of the High Court | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Sarjit Singh Gill | Shook Lin & Bok LLP |
| Daniel Tan | Shook Lin & Bok LLP |
| Hoang Linh Trang | Shook Lin & Bok LLP |
| Jeremy Chu | Shook Lin & Bok LLP |
| Edwin Yang | Shook Lin & Bok LLP |
| Tan Chuan Thye | Rajah & Tann Singapore LLP |
| Sim Kwan Kiat | Rajah & Tann Singapore LLP |
| Mark Cheng | Rajah & Tann Singapore LLP |
| Timothy Ang | Rajah & Tann Singapore LLP |
| Tan Tian Hui | Rajah & Tann Singapore LLP |
4. Facts
- The claimant, Founder Group (Hong Kong) Limited, is in liquidation.
- The defendant, Singapore JHC Co Pte Ltd, was a wholesale trader in metals.
- The claimant claimed the defendant owed it US$47.43 million.
- The claim was based on contracts for the sale of copper cathodes.
- The contracts contained arbitration agreements.
- The defendant disputed the debt, arguing no copper cathodes were delivered.
- The defendant also argued the contracts were void under PRC law.
- The defendant had issued an audit confirmation acknowledging the debt.
- The defendant's financial statements showed significant liabilities.
- The defendant's auditors raised concerns about its ability to continue as a going concern.
5. Formal Citations
- Founder Group (Hong Kong) Ltd (in liquidation) v Singapore JHC Co Pte Ltd, Companies Winding Up No 121 of 2022, [2023] SGHC 159
6. Timeline
| Date | Event |
|---|---|
| Contracts for sale of copper cathodes signed. | |
| Contracts for sale of copper cathodes signed. | |
| Defendant issued audit confirmation. | |
| Claimant signed and stamped the acknowledgment in the audit confirmation. | |
| Reorganisation proceedings commenced against Peking University Founder Group Company Limited in the PRC. | |
| Peking University Founder Group Company Limited's creditors approved a plan to reorganise its business. | |
| PRC court sanctioned Peking University Founder Group Company Limited's reorganisation plan. | |
| Claimant was placed in liquidation by a winding up order made by the Court of First Instance in Hong Kong. | |
| Liquidators issued a letter of demand to the defendant. | |
| Liquidators issued a second letter of demand to the defendant. | |
| Parties undertook negotiations with a view to resolving the dispute. | |
| Claimant presented winding up application to wind up the defendant. | |
| Hearing date. | |
| Judgment date. |
7. Legal Issues
- Whether the claimant is a creditor of the defendant
- Outcome: The court held that the claimant was precluded from establishing that it is a creditor of the defendant because the debt was subject to an arbitration agreement.
- Category: Substantive
- Sub-Issues:
- Validity of debt
- Effect of audit confirmation
- Existence of arbitration agreement
- Whether the defendant is abusing the process of the court
- Outcome: The court held that the defendant was not abusing the process of the court.
- Category: Procedural
- Sub-Issues:
- Withdrawal of admission in audit confirmation
- Reliance on arbitration agreement
- Whether the defendant is unable to pay its debts
- Outcome: The court found that the defendant was unable to pay its debts.
- Category: Substantive
- Sub-Issues:
- Cash flow test
- Balance sheet insolvency
- Whether it is just and equitable to wind up the defendant
- Outcome: The court held that it was not just and equitable to wind up the defendant.
- Category: Substantive
- Sub-Issues:
- Lack of probity
- Adverse effect on creditor's interests
8. Remedies Sought
- Winding up order
9. Cause of Actions
- Winding up application
10. Practice Areas
- Commercial Litigation
- Insolvency
- Arbitration
11. Industries
- Commodities Trading
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Nuoxi Capital Limited (in liquidation in the British Virgin Islands) v Peking University Founder Group Company Limited | Court of First Instance | Yes | [2022] 2 HKC 1 | Hong Kong | Cited as a case involving Peking University Founder Group Company Limited. |
| Nuoxi Capital Limited (in liquidation in the British Virgin Islands) v Peking University Founder Group Company Limited | Hong Kong Court of Appeal | Yes | [2022] HKCA 1514 | Hong Kong | Cited as a case involving Peking University Founder Group Company Limited. |
| Re A Company (No. 0012209 of 1991) | Not Available | Yes | [1992] 1 WLR 351 | England and Wales | Cited for the principle that a defendant does not dispute a debt bona fide if it is merely seeking to take credit to which it is not entitled and that a defendant does not raise a substantial dispute if the dispute has no rational prospect of success. |
| Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal | Court of Appeal | Yes | [2008] 2 SLR(R) 491 | Singapore | Cited for the principle that the claimant must show that there is no triable issue on the debt, applying the same test that a civil court would apply when considering whether to enter summary judgment against a defendant for the debt. |
| Re A Company (No. 006685 of 1996) | Not Available | Yes | [1997] BCC 830 | England and Wales | Cited for the principle that the claimant must show that there is no triable issue on the debt, applying the same test that a civil court would apply when considering whether to enter summary judgment against a defendant for the debt. |
| Metalform Asia Pte Ltd v Holland Leedon Pte Ltd | Court of Appeal | Yes | [2007] 2 SLR(R) 268 | Singapore | Cited for the principle that it is an abuse of the court’s process for a claimant to attempt to recover a debt that is disputed bona fide and on substantial grounds by presenting a winding up application. |
| Mann v Goldstein | Not Available | Yes | [1968] 1 WLR 1091 | England and Wales | Cited for the principle that it is an abuse of the court’s process for a claimant to attempt to recover a debt that is disputed bona fide and on substantial grounds by presenting a winding up application. |
| Coilcolor Limited v Camtrex Limited | High Court | Yes | [2015] EWHC 3202 (Ch) | England and Wales | Cited for the principle that the process is not apt for the adjudication of such issues, and the inference of inability to pay upon which the remedy is based is unjustified; the threat of winding up should not loom over those whose disputes are in such circumstances more appropriately resolved elsewhere, even if potentially by summary process. |
| Parmalat Capital Finance Ltd v Food Holdings Ltd (in liquidation) | Privy Council | Yes | [2008] BCC 371 | Cayman Islands | Cited for the principle that if a petitioner's debt is bona fide disputed on substantial grounds, the normal practice is for the court to dismiss the petition and leave the creditor first to establish his claim in an action. |
| Brinds Ltd and others v Offshore Oil NL and others | Not Available | Yes | (1986) 2 B.C.C. 98,916 | Australia | Cited for the principle that it is within the discretion of an insolvency court hearing a winding up application to determine for itself, not just the threshold question of whether a defendant disputes a claimant’s debt bona fide and on substantial grounds, but also the substantive legal question of whether the claimant is a creditor of the defendant. |
| Re QBS Pty Ltd | Supreme Court of Queensland | Yes | [1967] Qd R 218 | Australia | Cited 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. |
| Bateman Television Ltd v Coleridge Finance Co. Ltd. | Not Available | Yes | [1971] NZLR 929 | New Zealand | Cited for the principle that it is a matter for the discretion of the judge whether a winding up order should be made on a disputed debt, and it is also a matter of discretion whether he decides the substantive question of debt or no debt. |
| Re Welsh Brick Industries Ltd | Not Available | Yes | [1946] 2 All ER 197 | England and Wales | Cited for the principle that if a defendant has been granted unconditional leave to defend by the civil court in an ordinary action, that does not prevent the insolvency court from considering afresh for itself, if it considers it appropriate, whether the defendant disputes the debt bona fide and on substantial grounds. |
| AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) | Court of Appeal | Yes | [2020] 1 SLR 1158 | Singapore | Cited for the approach that an insolvency court takes in a winding up application involving a dispute over a debt or a cross claim that is subject to an arbitration agreement. |
| BCY v BCZ | Court of Appeal | Yes | [2017] 3 SLR 357 | Singapore | Cited for the doctrine of separability, which holds that the validity of an arbitration agreement is separable from the validity of the contract containing it. |
| Marty Ltd v Hualon Corp (Malaysia) Sdn Bhd (receiver and manager appointed) | High Court | Yes | [2018] 2 SLR 1207 | Singapore | Cited by the claimant as authority for the proposition that separability does not shield an arbitration clause from a challenge that affects the underlying contract, but the court rejected this submission. |
| Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd | Court of Appeal | Yes | [2018] 2 SLR 1271 | Singapore | Cited for the principle that the cases in which a defendant is abusing the process of the court “will be few and far between”. |
| Camillo Tank SS Co Ltd v Alexandria Engineering Works | Not Available | Yes | (1921) 38 TLR 134 | England and Wales | Cited for the principle that an audit confirmation is an out of court admission of a debt. |
| Capital Realty Pte Ltd v Chip Thye Enterprises (Pte) Ltd | High Court | Yes | [2000] 3 SLR(R) 419 | Singapore | Cited for the principle that an audit confirmation is, as a matter of the law of evidence, an out of court admission of a debt. |
| Fustar Chemicals Ltd (Hong Kong) v Liquidator of Fustar Chemicals Pte Ltd | High Court | Yes | [2009] 4 SLR(R) 458 | Singapore | Cited for the principle that a liquidator considering a proof of debt lodged by a creditor is not bound by an audit confirmation which the company may have issued to the creditor and is entitled independently to determine whether the debt exists. |
| Stonegate Securities Ltd v Gregory | Court of Appeal | Yes | [1980] 3 WLR 168 | England and Wales | Cited for the principle that no person has standing to present a winding up application unless that person is within one of the categories of persons conferred standing to do so by s 124(1) of the Act. |
| Quartz Hill Consolidated Gold Mining Co v Eyre | Court of Appeal | Yes | (1883) 11 QBD 674 | England and Wales | Cited for the principle that every winding up application must be advertised. |
| Re Bayoil SA | Not Available | Yes | [1999] 1 WLR 147 | England and Wales | Cited for the principle that it is an abuse of process to present a winding up application for the purpose of putting improper pressure on a defendant to pay a debt to which it has a bona fide and substantial defence or against which it can set up a genuine and substantial set off or other crossclaim. |
| Bryanston Finance Ltd v De Vries (No. 2) | Not Available | Yes | [1976] 2 WLR 41 | England and Wales | Cited for the principle that the court has jurisdiction to enjoin a person from presenting a winding up application that is an abuse of process or which is doomed to fail. |
| Re Ascentra Holdings, Inc (in official liquidation) and others (SPGK Pte Ltd, non-party) | High Court | Yes | [2023] SGHC 82 | Singapore | Cited for the principle that the only statutory test of inability to pay debts which is of general application is found in s 125(2)(c) of the Act. |
| BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL plc and others | Supreme Court | Yes | [2013] 1 WLR 1408 | United Kingdom | Cited for the principle that the only statutory test of inability to pay debts which is of general application is found in s 125(2)(c) of the Act. |
| Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd) | Court of Appeal | Yes | [2021] 2 SLR 478 | Singapore | Cited for the principle that the only test for determining whether a company is insolvent for the purposes of s 125(2)(c) of the Act is the cash flow test. |
| Grimmett, Andrew and others v HTL International Holdings Pte Ltd (under judicial management) (Phua Yong Tat and others, non-parties) | Court of Appeal | Yes | [2022] 5 SLR 991 | Singapore | Cited for the principle that Section 124(1)(c) permits a creditor to present a winding up application on any ground set out in s 125(1). |
| Sim Yong Kim v Evenstar Investments Pte Ltd | High Court | Yes | [2006] 3 SLR(R) 827 | Singapore | Cited for the principle that the just and equitable ground is fault-based when invoked by a shareholder, requiring establishing unfairness, lack of probity, etc. |
| Ma Wai Fong Kathryn v Trillion Investment Pte Ltd and others and another appeal | Court of Appeal | Yes | [2019] 1 SLR 1046 | Singapore | Cited for the principle that the just and equitable ground is fault-based when invoked by a shareholder, requiring establishing unfairness, lack of probity, etc. |
| Re Vangory Holdings Pty Ltd | Supreme Court of New South Wales | Yes | [2015] NSWSC 1809 | Australia | Cited for the principle that a creditor has no legal interest protected by law in how a solvent company is managed internally. |
| Chow Kwok Chuen v Chow Kwok Chi and another | Court of Appeal | Yes | [2008] 4 SLR(R) 362 | Singapore | Cited for the principle that the words “just and equitable” are of the “widest significance”. |
| In re Blériot Manufacturing Aircraft Company (Limited) | Not Available | Yes | (1916) 32 TLR 253 | England and Wales | Cited for the principle that the words “just and equitable” are of the “widest significance”. |
| Phua Kiah Mai v The Kheng Chiu Tin Hou Kong and Burial Ground | High Court | Yes | [2022] SGHC 36 | Singapore | Cited for the principle that although the notion of “unfairness” is broad, it “does not give the court a license for capriciousness, and its powers should be exercised with caution”. |
| Re Ah Yee Contractors (Pte) Ltd | High Court | Yes | [1987] SLR(R) 396 | Singapore | Cited by the claimant for the proposition that a creditor with a tangible interest in the winding up of a company may secure a winding up on the just and equitable ground on the same grounds that a shareholder can rely on, but the court distinguished this case. |
| RCMA Asia Pte Ltd v Sun Electric Power Pte Ltd | High Court | Yes | [2020] SGHC 205 | Singapore | Cited by the claimant as a case in which a creditor secured a winding up order on the just and equitable ground, but the court stated that the proposition that the claimant relies on in this authority is merely dicta. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Insolvency, Restructuring and Dissolution Act 2018 | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 s 124(1)(c) | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 s 125(1)(e) | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 s 125(1)(i) | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 s 125(2)(a) | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 s 125(2)(c) | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 s 130 | Singapore |
| Companies Act 1967 (2020 Rev Ed) ss 216 or 216A | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Winding up application
- Arbitration agreement
- Audit confirmation
- Disputed debt
- Insolvency
- Liquidation
- Copper cathodes
- Bona fide
- Substantial grounds
- Abuse of process
- Doctrine of separability
- Standing
15.2 Keywords
- Winding up
- Arbitration
- Insolvency
- Disputed debt
- Singapore
16. Subjects
- Insolvency
- Arbitration
- Commercial Law
17. Areas of Law
- Insolvency Law
- Winding up
- Arbitration Law