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Singapore
By Sushant Shukla 14 min read

AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2021] SGCA 112

The court's power to award costs under the SCJA does not encompass the power to order a petitioning creditor to bear a liquidator's remuneration and expenses; such power resides in the court's inherent powers, which are exercised only in exceptional circumstances involving fault

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Case Details

  • Citation: [2021] SGCA 112
  • Court: Court of Appeal of the Republic of Singapore
  • Decision Date: 29 November 2021
  • Coram: Andrew Phang Boon Leong JCA; Steven Chong JCA; Quentin Loh JAD
  • Case Number: Civil Appeal No 23 of 2021
  • Hearing Date(s): 14 October 2021
  • Appellant: AnAn Group (Singapore) Pte Ltd
  • Respondent: VTB Bank (Public Joint Stock Company)
  • Counsel for Appellant: Lee Eng Beng SC, Chew Xiang and Cheong Tian Ci, Torsten (Rajah & Tann Singapore LLP)
  • Counsel for Respondent: Shobna Chandran, Yong Manling Jasmine and Muhammad Taufiq bin Suraidi (Tan Rajah & Cheah)
  • Practice Areas: Companies — Winding up; Liquidators’ remuneration; Arbitration — Arbitrability and public policy; Civil Procedure — Inherent powers

Summary

The decision in [2021] SGCA 112 represents a definitive clarification of the Singapore court's jurisdiction to reallocate liquidation expenses following the reversal of a winding-up order. The dispute arose as a sequel to the landmark decision in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] 1 SLR 1158 (“AnAn (CA)”), where the Court of Appeal significantly altered the law by adopting the “prima facie” standard for staying or dismissing winding-up petitions in favor of arbitration. Following that reversal, the appellant, AnAn Group (Singapore) Pte Ltd (“AnAn”), sought to compel the petitioning creditor, VTB Bank (Public Joint Stock Company) (“VTB”), to bear the remuneration and expenses of the liquidators who had been appointed during the interim period of the aborted liquidation.

The central doctrinal contribution of this judgment lies in its rigorous distinction between “costs” as understood in the adjudicatory context of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) (“SCJA”) and the statutory remuneration of liquidators under the Companies Act (Cap 50, 2006 Rev Ed). The Court of Appeal held that the power to award “costs” under s 18(2) of the SCJA, read with paragraph 13 of the First Schedule, does not encompass the power to order a third party (such as a petitioning creditor) to pay a liquidator's fees. Such fees are not “costs of and incidental to” the proceedings in the sense of party-and-party or solicitor-and-client costs; rather, they are a statutory entitlement payable out of the company's assets under the insolvency regime.

Furthermore, the Court addressed the scope of its inherent powers under Order 92 Rules 4 and 5 of the Rules of Court (Cap 322, 2014 Rev Ed) (“ROC”). While affirming that the court possesses an inherent power to make a creditor liable for liquidation expenses to prevent an abuse of process or a miscarriage of justice, it emphasized that this power is exceptional. It is reserved for cases involving “fault” or “unfair conduct” on the part of the petitioner, such as the pursuit of a patently unmeritorious petition or an improper purpose. The Court concluded that VTB's conduct did not meet this high threshold, as it had acted on the basis of the law as it stood prior to the 2020 reversal.

Ultimately, the Court dismissed the appeal, reinforcing the principle that the risk of liquidation expenses generally remains with the company even if the winding-up order is subsequently set aside, unless the petitioner has engaged in abusive conduct. This provides critical guidance for practitioners regarding the financial risks of defending winding-up petitions and the limitations of seeking cost-shifting orders against creditors in the aftermath of a successful appeal.

Timeline of Events

  1. 3 November 2017: AnAn and VTB enter into a global master repurchase agreement (“GMRA”) involving global depository receipts (“GDRs”) in EN+ Group PLC.
  2. 7 November 2017: The parties enter into the first transaction under the GMRA.
  3. 6 April 2018: VTB issues a margin call to AnAn following a decline in the value of the GDRs.
  4. 12 April 2018: VTB issues a notice of default to AnAn, designating 16 April 2018 as the Early Termination Date.
  5. 23 July 2018: VTB serves a statutory demand on AnAn for a sum of approximately US$170m.
  6. 17 August 2018: VTB files CWU 183/2018 seeking a winding-up order against AnAn.
  7. 29 October 2018: The High Court in [2018] SGHC 250 orders the winding up of AnAn and appoints liquidators.
  8. 7 April 2020: The Court of Appeal in AnAn (CA) [2020] 1 SLR 1158 reverses the winding-up order, holding that there was a prima facie dispute subject to arbitration.
  9. 8 May 2020: AnAn files SUM 1827/2020 seeking to stay the winding-up order pending the determination of the dispute by arbitration.
  10. 13 August 2020: The Liquidators file SUM 3569/2020 seeking their discharge and payment of remuneration and expenses from AnAn's assets.
  11. 9 September 2020: AnAn files SUM 3902/2020 seeking an order that VTB bear the Liquidators' fees or indemnify AnAn.
  12. 25 February 2021: The High Court delivers an oral judgment dismissing SUM 3902/2020 and granting the Liquidators' discharge and fees from AnAn's assets.
  13. 14 October 2021: The Court of Appeal hears oral submissions for CA 23/2021 and reserves judgment.
  14. 29 November 2021: The Court of Appeal delivers its judgment in [2021] SGCA 112, dismissing the appeal.

What Were the Facts of This Case?

The dispute originated from a sophisticated financial transaction between AnAn Group (Singapore) Pte Ltd (“AnAn”) and VTB Bank (Public Joint Stock Company) (“VTB”). On 3 November 2017, the parties executed a Global Master Repurchase Agreement (“GMRA”). Under this agreement, AnAn sold VTB global depository receipts (“GDRs”) representing shares in EN+ Group PLC, with a simultaneous agreement for AnAn to repurchase the GDRs at a later date at a pre-determined price. In economic substance, the arrangement functioned as a secured loan of approximately US$170m from VTB to AnAn, with the GDRs serving as collateral.

The GMRA contained a comprehensive arbitration clause at Clause 9, which stipulated that “Any dispute arising out of or in connection with this Agreement, including any question regarding its subject matter, existence, negotiation, validity, termination or enforceability... shall be referred to arbitration” under the SIAC Rules. This clause became the pivot upon which the subsequent litigation turned.

In April 2018, the value of the GDRs fell significantly. VTB issued a margin call on 6 April 2018, which AnAn failed to satisfy. Consequently, VTB issued a notice of default on 12 April 2018 and accelerated the debt. When AnAn failed to pay the US$170m claimed, VTB served a statutory demand on 23 July 2018. AnAn did not satisfy the demand, leading VTB to file a winding-up petition (CWU 183/2018) on 17 August 2018. AnAn resisted the petition, arguing that the debt was bona fide disputed on substantial grounds and that the dispute should be referred to arbitration pursuant to the GMRA.

At the first instance, the High Court applied the traditional “triable issue” standard and found that AnAn had failed to show a bona fide dispute on substantial grounds. The court ordered the winding up of AnAn on 29 October 2018 and appointed liquidators from a major accounting firm. AnAn appealed this decision. While the appeal was pending, the liquidators commenced their work, incurring significant remuneration and expenses (the “Liquidators' fees”).

On 7 April 2020, the Court of Appeal delivered its judgment in AnAn (CA). The Court reversed the winding-up order, holding that in the context of an arbitration agreement, the court should apply a lower “prima facie” standard. Since there was a prima facie dispute falling within the scope of the arbitration clause, the winding-up proceedings should have been stayed or dismissed. The Court of Appeal accordingly dismissed CWU 183/2018. This left the company in a state of “aborted liquidation”—it was no longer in winding up, but the liquidators had already incurred substantial costs during their tenure.

The liquidators subsequently applied in SUM 3569/2020 for their discharge and for an order that their remuneration and expenses (totaling approximately S$1.5m) be paid out of AnAn's assets. AnAn responded by filing SUM 3902/2020, seeking an order that VTB, as the unsuccessful petitioning creditor, should bear these fees or indemnify AnAn for them. AnAn's primary contention was that it was unfair for the company to bear the costs of a liquidation that should never have been initiated, especially since the Court of Appeal had ultimately found in its favor regarding the arbitration stay. The High Court dismissed AnAn's application, leading to the present appeal in CA 23/2021.

The appeal raised three primary legal questions concerning the court's jurisdiction and the exercise of its discretion in the aftermath of a reversed winding-up order:

  • The Statutory Issue: Whether the court's power to order “costs” under s 18(2) of the SCJA, read with paragraph 13 of the First Schedule and Order 59 of the ROC, encompasses the power to make orders requiring a petitioning creditor to bear the liquidators' remuneration and expenses. This required an analysis of whether liquidators' fees constitute “costs” in the legal sense.
  • The Inherent Power Issue: Whether the court possesses an inherent power, independent of statute, to order a petitioning creditor to pay the liquidators' fees, and if so, what the threshold for exercising such power is. This involved examining the distinction between the court's adjudicatory and supervisory jurisdictions.
  • The Merits and Fault Issue: Even if such a power exists, whether VTB's conduct in filing and pursuing the winding-up petition amounted to an abuse of process or “fault” sufficient to justify shifting the burden of the Liquidators' fees from the company to the creditor. This included an assessment of whether VTB's breach of the arbitration clause (as characterized by AnAn) was a sufficient basis for the order.

How Did the Court Analyse the Issues?

The Court of Appeal, in a judgment delivered by Steven Chong JCA, conducted a comprehensive analysis of the jurisdictional boundaries between the SCJA and the Companies Act.

1. The Scope of the Statutory Power to Award Costs

AnAn argued that the term “costs” in s 18(2) of the SCJA should be interpreted broadly to include liquidators' remuneration. The Court rejected this, emphasizing the distinction between “legal costs” and “statutory remuneration.” The Court noted at [57] that “costs” in the context of the SCJA and Order 59 of the ROC refers to party-and-party or solicitor-and-client costs incurred in the conduct of litigation. In contrast, a liquidator's remuneration is a statutory right derived from the Companies Act, specifically s 268(3)(c), which provides that a liquidator is entitled to receive such salary or remuneration as is determined by the court or the committee of inspection.

The Court relied on the “exclusionary rule” found in Order 1 Rule 2(2) of the ROC, which states that the Rules of Court do not apply to “winding up of companies” where there are specific rules in place. The Court observed that the Companies Act and the Companies (Winding Up) Rules provide a self-contained regime for liquidators' remuneration. As stated at [61]:

“Section 311 of the Companies Act supports this: it refers to a liquidator’s remuneration as part of ‘[a]ll proper costs, charges and expenses of and incidental to the winding up’. Likewise, s 328(1)(a) of the Companies Act refers to ‘the costs and expenses of the winding up including the taxed costs of a petitioner... the remuneration of the liquidator’.”

The Court concluded that while the Companies Act uses the word “costs” in a broad sense to include liquidators' fees, the SCJA uses it in a narrow, adjudicatory sense. Therefore, the SCJA does not provide the statutory basis to shift liquidators' fees to a creditor.

2. The Comparison with Foreign Jurisdictions

AnAn relied heavily on the Australian decision in Complete Investing Pty Ltd v Chief Commissioner of State Revenue (No 2) [2013] NSWSC 1788, where the New South Wales Supreme Court used its costs power to make a petitioner liable for liquidators' fees. However, the Court of Appeal distinguished this by pointing out that the New South Wales Civil Procedure Act 2005 contains a specific provision (s 4) that prevents the rules from being excluded by other specialized regimes, unlike Singapore's O 1 r 2(2) ROC. The Court noted at [83] that this distinction was “of utmost importance” and rendered the Australian position inapplicable to the Singapore statutory framework.

3. The Court's Inherent Power

The Court then turned to whether it could exercise its inherent power under O 92 r 4 of the ROC to achieve the result sought by AnAn. The Court affirmed that it does have such a power, but it is not a “blank cheque.” The Court distinguished between its “supervisory jurisdiction” (over the liquidator as an officer of the court) and its “adjudicatory jurisdiction” (to determine liabilities between parties). The power to order a creditor to pay a liquidator's fees falls under the court's inherent power to prevent an abuse of process.

The Court set a high threshold for the exercise of this power. It held that the “default position” is that liquidators' fees are borne by the company's assets. To depart from this, there must be “exceptional circumstances” involving fault on the part of the petitioner. The Court identified three non-exhaustive categories of such fault at [126]:

  1. Where the petition was an abuse of process (e.g., filed for an improper purpose).
  2. Where the petitioner acted in bad faith or with procedural unfairness (e.g., failing to disclose material facts).
  3. Where the petition was “patently unmeritorious” from the outset.

4. Application to the Facts: Was VTB at Fault?

AnAn argued that VTB was at fault because it had filed the petition in breach of the arbitration clause and because the petition was ultimately dismissed. The Court rejected this. It noted that at the time VTB filed the petition in 2018, the law in Singapore (as per BDG v BDH [2016] 5 SLR 977) required the “triable issue” standard. VTB was entitled to rely on the law as it then stood. The fact that the Court of Appeal subsequently changed the law in AnAn (CA) did not retroactively make VTB's conduct “abusive” or “at fault.”

The Court also addressed the “breach of arbitration clause” argument. It held that filing a winding-up petition is not a per se breach of an arbitration clause because a winding-up petition is not a “claim” for the debt but a request for a collective insolvency remedy. As stated at [131], “the threshold for abusive conduct is very high,” and VTB's pursuit of its perceived legal rights did not cross it.

What Was the Outcome?

The Court of Appeal dismissed the appeal in its entirety. The Court held that there was no statutory basis under the SCJA to order VTB to pay the Liquidators' fees, and there were no exceptional circumstances or evidence of fault to justify the exercise of the court's inherent power to shift those costs.

The operative conclusion of the Court was as follows:

“We dismiss CA 23 and decline to exercise our inherent powers to make VTB liable for the Liquidators’ fees. AnAn is to bear the costs of the appeal, fixed at S$35,000 (all-in).” (at [147])

The result of the decision was that the Liquidators' remuneration and expenses, totaling approximately S$1.5m, remained a liability of AnAn, to be paid out of its assets. The Court also ordered AnAn to pay VTB's costs for the appeal, which were fixed at S$35,000 inclusive of disbursements. This outcome affirmed the High Court's earlier orders in HC/ORC 2238/2021 and the dismissal of SUM 3902/2020.

Why Does This Case Matter?

This case is of paramount importance to insolvency practitioners and commercial litigators for several reasons. First, it fills a significant “remedial gap” in Singapore law. Prior to this decision, it was unclear whether a company that successfully set aside a winding-up order could recover the costs of the “interim” liquidation from the creditor who started the process. The Court of Appeal has now clarified that the risk of these costs generally lies with the company, not the creditor. This reinforces the “indemnity” nature of a liquidator's right to remuneration from the assets they administer, regardless of the ultimate success of the winding-up petition.

Second, the judgment provides a necessary check on the “prima facie” standard established in AnAn (CA). By refusing to shift the liquidators' costs to VTB, the Court signaled that while it has made it easier for companies to stay winding-up petitions in favor of arbitration, it will not automatically penalize creditors who seek to invoke the court's insolvency jurisdiction in good faith. This balances the protection of arbitration agreements with the rights of creditors to seek winding-up orders where they believe a debt is due.

Third, the case clarifies the limits of the court's “costs” jurisdiction. By distinguishing between the adjudicatory power to award litigation costs and the supervisory power to manage liquidation expenses, the Court has prevented the SCJA from being used as a “backdoor” to circumvent the specific statutory priorities and regimes set out in the Companies Act (and now the Insolvency, Restructuring and Dissolution Act 2018). This maintains the structural integrity of Singapore's insolvency legislation.

Finally, the decision sets a very high bar for “fault-based” cost shifting. Practitioners now know that to make a creditor pay for an aborted liquidation, they must prove something akin to an abuse of process or bad faith. Merely being “wrong” on the law or losing the appeal is insufficient. This provides certainty to creditors and their advisors when deciding whether to file for winding up in the face of a potential arbitration defense.

Practice Pointers

  • Risk Assessment for Debtors: When a company decides to appeal a winding-up order rather than seeking an immediate stay, it must be advised that it will likely bear the liquidators' fees incurred during the appeal process, even if the appeal is successful.
  • Creditor Strategy: Creditors can take comfort that filing a winding-up petition based on a reasonably arguable debt will not expose them to the liquidators' fees if the petition is later stayed for arbitration, provided they have not acted with an improper purpose or in bad faith.
  • Arbitration Clauses: The case confirms that a broad arbitration clause does not automatically make a winding-up filing “abusive.” However, creditors should carefully evaluate the “prima facie” dispute standard before filing to avoid allegations of pursuing a “patently unmeritorious” petition.
  • Evidence of Fault: To succeed in a cost-shifting application, a debtor must provide clear evidence of the creditor's improper purpose or material non-disclosure. Mere breach of a contractual stay (like an arbitration clause) is generally insufficient.
  • Interim Measures: Debtors should consider seeking an immediate stay of the winding-up order (and the liquidators' powers) pending appeal to minimize the accrual of liquidators' fees, rather than waiting for the final determination of the appeal.
  • Statutory Basis: Practitioners should avoid relying solely on the SCJA for liquidator fee disputes; the proper framework is the court's inherent power to prevent abuse of process within its supervisory jurisdiction over the liquidation.

Subsequent Treatment

The principles in [2021] SGCA 112 have been recognized as a necessary corollary to the shift in the law regarding arbitration and insolvency. In Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd [2021] 2 SLR 510, the court acknowledged that the AnAn (CA) decision had “significantly altered the law” regarding the standard of proof for disputes in winding-up petitions. This 2021 decision ensures that the financial consequences of that legal shift are managed through a fault-based inherent power rather than an expansive interpretation of statutory costs.

Legislation Referenced

  • Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed), s 18(1), s 18(2), and First Schedule para 13
  • Companies Act (Cap 50, 2006 Rev Ed), s 268(3), s 276(4), s 311, s 328(1)(a)
  • Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018), s 78, s 183, s 526(1)(f), s 526(2)(a)
  • Rules of Court (Cap 322, 2014 Rev Ed), Order 1 Rule 2(2), Order 59 Rule 1(1), Order 59 Rule 2(2), Order 92 Rule 4, Order 92 Rule 5
  • Civil Procedure Act 2005 (New South Wales), s 3, s 4, s 98(1)
  • Civil Procedure Act 2010 (Victoria), s 29(1)(a)

Cases Cited

Source Documents

Written by Sushant Shukla
Topics
Singapore SLW Case Law Singapore Court of Appeal Companies Winding up Arbitration
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