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Nature of Matter

Arbitration Agreement; 

Winding Up Proceedings – Standing

Case Summary

1. The Claimant, Founder Group (Hong Kong) Limited ("Founder”) was a Hong Kong based company contracted to sell and deliver copper cathodes to the Defendant Singapore JHC Co Pte Ltd (“JHC”), a Singaporean wholesale trader dealing primarily in metals and metal products.
2. The parties’ agreement for the sale of copper cathodes was governed by three contracts that each contained an arbitration clause, obliging the parties to submit any controversy or claim to the China International Economic and Trade Arbitration Commission, Beijing (“CIETAC”) for arbitration which shall be conducted in Beijing.

3. In liquidation, the liquidators of Founder took the view that JHC owed Founder US$47.43 million due to three contracts and the invoices issued to JHC under them, for the sale and purchase of copper cathodes. The sum of US$47.43 million was also consistently reflected in audited financial statements over the years 2016 to 2020. JHC disputed this debt - the liquidators of Foundersent two letters of demand to JHC which were not complied with.  

4. Despite the arbitration clauses, Founder did not institute arbitral proceedings and instead made a winding up application in the Singapore courts.

5. The Singapore High Court had to decide whether Founder had the standing of a creditor to pursue the winding up. 

The Singapore High Court dismissed Founder’s winding up application for lack of standing.

1. Where a debt is alleged to arise from a contract containing an arbitration clause, the approach to be taken in insolvency proceedings is that prescribed in the Court of Appeal case of AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158 (“AnAn”).
2. On the AnAn approach, the Court deems the Claimant to lack standing and will not order a winding up but instead, order a stay or dismiss the application if (Anan at [40]):
   1. There is an arbitration agreement that is prima facie valid;

   2. There is a dispute or cross claim by the debtor company that prima facie falls within the scope of the arbitration agreement; and

   3. Upon consideration of factors extraneous to the merits of the dispute in respect of the debt and any counterclaim, there has been no abuse of process by the debtor such as where the debtor had previously admitted both liability and quantum of the debt but disputes it for no reason other than the inability to pay. 

3. Where all three requirements above are met, the Court will ordinarily dismiss the winding up application unless a stay is warranted.
4. Nevertheless, the Court will stay instead of dismissing the application if (Anan at [111]):

   1. there are legitimate concerns to the solvency of the debtor company; and

   2. the debtor company has not raised any triable issues. 

5. Applying the AnAn approach, the Singapore High Court dismissed Founder’s winding up application.