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Singapore – Banking And Insolvency: Chimbusco International Petroleum (Singapore) Pte Ltd v Jalalludin bin Abdullah And Other Matters [2013] 2 SLR 801.

12 March, 2014

 

Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

 

High Court outlines approach to applications to stay bankruptcy and insolvency proceedings when faced with disputed debts: the debtor need only raise triable issues in order to obtain a stay.

 
This matter involved both insolvency and bankruptcy proceedings, and required the High Court to consider when it would grant a stay of such proceedings. These proceedings were the result of a debt owed to the Plaintiff, which was guaranteed by the defendant companies and individuals. The debtor defaulted on payment of the debt, and the Defendants then failed to satisfy the guarantees. The Plaintiff thus brought insolvency and bankruptcy proceedings against the Defendants.

 
Before the Assistant Registrar, the Defendants obtained a stay of the proceedings on the condition that they provide security for the full amount of debt claimed against them. However, they failed to furnish such security before the deadline, and the Plaintiff accordingly applied to the High Court for insolvency and bankruptcy orders.

 
The High Court accepted the Plaintiff’s application and granted the insolvency and bankruptcy orders. With regard to insolvency proceedings, the High Court held that the applicable standard for determining whether corporate insolvency proceedings should continue in the absence of an adjudication of the initiating party’s rights is whether the plaintiff can show that there are no triable issues. The High Court also held that the position is identical when it comes to personal insolvency because it “cannot be the case that a creditor or a debtor gains an advantage or suffers a disadvantage on the legal test to be satisfied … simply because of the nature of the proceedings in which that question is raised or based on whether it is a natural person or a company.

 
The Court has a power, but not an obligation, to stay bankruptcy and insolvency proceedings where the underlying debt is disputed.

 
The Court found that the Defendant guarantors’ defences were shadowy at best. As such, the Assistant Registrar was correct to grant a conditional stay of proceedings. Having failed to make use of the opportunity to furnish security, the Defendants should not have the benefit of the stay of proceedings without fulfilling the condition.

 
The case went on appeal, but in Mohd Zain bin Abdullah v Chimbusco International Petroleum (Singapore) Pte Ltd and another appeal [2014] SGCA 8, the Court of Appeal upheld the High Court’s decision. The Court of Appeal’s decision, having been released in January 2014, will be duly covered in a subsequent update.

 

Rajah & Tann

 

For further information, please contact:

 

Francis Xavier SC, Partner, Rajah & Tann
francis.xavier@rajahtann.com


Lai Yew Fei, Partner, Rajah & Tann

yew.fei.lai@rajahtann.com

 

Rajah & Tann Dispute Resolution Practice Profile in Singapore

 

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