Lynette Lim

The Singapore Court of Appeal (“SGCA”) delivered a landmark judgment [Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] SGCA 10] which clarified the nature of the “creditor duty” in Singapore. A director's duty to consider the creditors' interests in certain circumstances is an integral part of, and not separate from, his duty to act in the company's best interests. It is not the case that creditors’ interests only become relevant when the creditor duty is engaged. Rather, when a company is financially healthy, directors can justifiably treat the shareholders’ interests as a proxy for the company’s interests. More accurately, upon approaching insolvency, the shift in the company’s main economic stakeholder underpins the creditor duty.   The SGCA established a two-stage framework to analyse the creditor duty. First, the court would objectively ascertain the company’s financial state according to the three categories: Category One: when the company is solvent. Category Two: when the company is imminently likely to be unable to discharge its debts. This encompasses cases where a director ought reasonably to apprehend that the contemplated transaction is going to render the company imminently likely unable to discharge its debts. The court would assume the vantage point of the director and consider, amongst other factors, geopolitical developments which may have an impact on the company’s business. Category Three: when corporate insolvency proceedings are inevitable. Second the court would examine the director’s subjective intentions and determine if he had acted in what he considered to be the company’s best interests: Category One: a director typically need not do anything more than act in the shareholders’ best interests. Category Two: the court will scrutinise the subjective bona fides of the director with reference to the transaction’s potential benefits and risks to the company. The court will be slow to second-guess honest, good faith commercial decisions by a director. If he considers in good faith that he can and should take action to promote the company’s continued viability, and that there is a way out of the company’s financial difficulties which will benefit shareholders and creditors, he is not obliged to treat creditors’ interests exclusively or primarily in determining the company’s next steps. Conversely, transactions undertaken which appear to exclusively benefit shareholders or directors will attract heightened scrutiny. Category Three: creditors are now the company’s main economic stakeholders because the company’s assets would be insufficient to satisfy their claims. Upon liquidation, shareholders as residual claimants will recover little or nothing. Consequently, directors are prohibited from authorising corporate transactions which would exclusively benefit shareholders or themselves at the creditors’ expense.   Read more: https://lnkd.in/gYTGn5Yv #insolvency #restructuring

24

"Cross-Border Restructuring and Insolvency Between Singapore and Malaysia", by Lee Shih (Managing Partner at Lim Chee Wee Partnership) and Ashok Kumar (Director at BlackOak LLC). Check out this new article published on the Singapore Global Restructuring Initiative (SGRI) Blog! #insolvency #restructuring #crossborder #cooperation #Singapore #Malaysia https://lnkd.in/eE_BTGZb

31

In this In The Act issue, read about all these and more: ➡️ A cartel involving two companies bid-rigging interior fit-out construction services for non-residential properties in Singapore ➡️ Water filtration company Purexygen's false and misleading claims ➡️ How CCCS ensured the market for online food ordering and delivery services remained open and contestable. Read the issue: https://lnkd.in/gxhPva6W

12

The Limitation Act 1953 (“Act”) is often discussed regarding the time limit imposed for civil claims to commence. In our previous article, we discussed the Federal Court decision of Julian Chong Sook Keok & Anor v Lee Kim Noor & Anor [Civil Appeal] (No. 02(f)-63-10/2021(P)). Recently, the Court of Appeal had occasion to consider a different aspect of the computation of the limitation period in Bongsor Bina Sdn Bhd v SH Builders & Marketing Sdn Bhd [Civil Appeal] (No. W-02(C)(A)-2315-12/2022). This article shall discuss the decision of the Court of Appeal in determining whether the computation of the limitation period is stopped at the point when an action is first filed at Court but is stayed under Section 10 of the Arbitration Act 2005 (“AA 2005”) or shall the limitation clock only be stopped when the required arbitration proceedings are subsequently commenced. #LAWLens #court #arbitration Read more: https://lnkd.in/dbqPpRtU

4

Court dismisses former employee’s claims for discretionary bonus and unvested bonus awards In Yang Zhizhong v Nomura International (Hong Kong) Limited [2024] HKCFI 2192, the Court of First Instance dismissed the claims by a former employee for discretionary bonus award, annual base salary and loss of unvested bonus awards. The Plaintiff was employed by the Defendant bank as a senior investment banker. During an on-site inspection, the SFC identified a “three-way meeting” held amongst the Plaintiff, a potential IPO applicant, and the bank’s research analyst, during the final stage of the bank’s pitching for the IPO transaction, and without notifying the bank’s control room. This gave rise to a potential conflict of interest between the bank’s investment banking division and its independent research division, and a risk that the latter would be perceived as helping to solicit IBD business. After conducting an internal investigation and a disciplinary committee review, the Defendant considered that the Plaintiff did not take sufficient steps to manage any perceived conflicts of interest, and issued a written warning to the Plaintiff. The Defendant also decided to grant the Plaintiff a zero discretionary bonus for the performance year 2016/17, and exercised its contractual right to terminate the Plaintiff’s employment on the ground of redundancy in May 2017. The Plaintiff brought claims against the Defendant for breach of the employment contract in issuing him the written warning, in failing to grant a discretionary bonus award, and in terminating his employment on the ground of redundancy. Cheng J dismissed the Plaintiff’s claims, holding (amongst other things) that: ·      The implied duty of mutual trust and confidence cannot apply to the termination of employment relationship, and cannot be used to water down the employer’s contractual right to terminate employment without cause. The only qualification to the employer’s right of termination is that it cannot be exercised in order to avoid the employee becoming eligible for or receiving a bonus award.   ·      On the facts, the Defendant’s issuance of the written warning was for reasonable and proper cause, and not calculated to destroy or seriously damage the relationship of trust and confidence. ·      The Defendant’s decision to grant a zero bonus award was not irrational or in breach of contract. ·      Although the Court held that the employment was not terminated by reason of redundancy, it was terminated in exercise of the Defendant’s contractual right by giving three months’ notice, and it was not for the purpose of avoiding payment of a bonus award to the Plaintiff. The full judgment can be viewed here: https://lnkd.in/gmc_23JC Eva Sit SC and Sheena Wong were instructed by and acted for the Defendant. Bernard Man SC also acted for the Defendant during earlier stages of the proceedings. 

79

Two to tango? Court of Appeal considers whether #declaration of non-liability in arbitral award should be set aside due to lack of “dispute”   In CMBICDHAW Investments Limited v CDH Fund V Limited Partnership & Ors [2024] HKCA 516, the plaintiff had commenced a High Court action (“HCA”) against individuals who were agents of the 1st and 2nd defendants, alleging that two individuals had by fraudulent misrepresentation induced the plaintiff to enter into a co-investment agreement (“Agreement”) with the 1st and 2nd defendants. The Agreement contained an arbitration clause. The 1st and 2nd defendants (together with another corporate entity, and the two individuals) commenced arbitration proceedings against the plaintiff, seeking inter alia a declaration of non-liability in respect of the allegations made in the HCA.   The Court of Appeal had to determine de novo whether, in the above circumstances, there existed a “dispute” between the contracting parties, falling within the scope of the arbitration clause, such as to engage the arbitrator’s jurisdiction.   Coleman J, giving the Judgment of the Court, reviewed the relevant principles in determining this issue. He noted that in the #arbitration context, the term “dispute” should be construed inclusively and not overly legalistically. It is unnecessary for there to be a “claim” in the sense of a legal claim / cause of action, as long as there was an assertion by one party which was not accepted by the other. The time for determining when a “dispute” has arisen is at the commencement of the arbitration.    While the Court did not rule out the possibility that there could be a “dispute” even where non-contractual claims or assertions are made against a third party who is a stranger to the arbitration agreement, each case would turn on its own facts. On the circumstances of the present case, where the plaintiff had not made claims or assertions of wrongdoing against the 1st and 2nd defendants, the Court held that there was no relevant “dispute” to engage arbitral jurisdiction.   The full judgment can be viewed here: https://shorturl.at/OTYsf   Benjamin Yu SC, Sara Tong SC and Keith Chan, instructed by Guantao and Chow Solicitors and Notaries, acted for the Defendants.

58