Cross border insolvency – Singapore states its case in Re Opti-Medix Ltd (in Liquidation)

The ability and scope of courts to assist foreign insolvency office holders in global insolvency proceedings has been a hot topic in recent years.  With the combined effect of high profile judgments in Cambridge Gas, Rubin, Singularis and African Minerals settling the law on these issues for the moment, one potentially key area – recognition of foreign insolvency office holders appointed by jurisdictions other than the company's place of incorporation – remains unclear. 

Cross border insolvency – Singapore states its case in Re Opti-Medix Ltd (in Liquidation)

The court relied upon a common law application of COMI principles to grant recognition.  This is the first time that a Singapore Court has recognised the concept of COMI, and is one of the  first cases to apply the COMI concept as a matter of common law on a question of recognition (although Hong Kong's Court of Final Appeal arguably moved in the direction of COMI in its recent decision in Yung Kee)

A recent Singapore case seeks to address this issue confirming the availability of recognition in Singapore and setting a benchmark beyond other jurisdictions for common law recognition based on centre of main interest ("COMI").

 

Summary

 

By its written judgment handed down on 3 June 2016 in Re Opti-Medix Ltd (in liquidation) and another matter the Singapore High Court granted recognition of Bankruptcy Orders and the appointment of a bankruptcy trustee made by the Tokyo District Court, thereby vesting in the trustee assets and records held in Singapore, notwithstanding that the companies in question were incorporated in the British Virgin Islands ("BVI"). 

The decision is significant in two material respects:

1. The court relied upon a common law application of COMI principles to grant recognition.  This is the first time that a Singapore Court has recognised the concept of COMI, and is one of the  first cases to apply the COMI concept as a matter of common law on a question of recognition; and 

2. The decision arguably fills a gap left open by the recent decisions of Rubin and African Minerals Ltd (in administration) v Madison Pacific Trust Ltd and Shandong Steel Hong Kong Zengli Limited (a 2015 case heard before the Hong Kong High Court of First Instance in which we assisted the Security Trustee in successfully defending an application for recognition by UK administrators of a Bermuda company) in particular, by finding that there is a basis for courts to recognise insolvency office holders appointed in a jurisdiction other than the place of incorporation

 

Analysis

 

In reaching its judgment the Court observed that:

— The general movement in cross border insolvency towards cooperation between jurisdictions, as well as Singapore's proposed adoption of the UNCITRAL Model Law on Cross-Border Insolvency (30 May 1997) (“Model Law”), were indicators that Singapore is warming to Universalist notions in its insolvency regime;

— whilst there was a natural tendency to recognize a liquidator appointed in the jurisdiction in which the company was incorporated as having legal legitimacy, the place of incorporation may, in reality, have little connection with the actual business operations of the company and therefore the Model Law concept of COMI had much to commend it in such circumstances.  As Japan was where the bulk of the business and transactions of the companies in question occurred, Japan was the only possible COMI for the companies;

— notwithstanding comments made by Lord Collins in Rubin doubting the ability of the courts to introduce new common law bases of recognition in insolvency proceedings, the Court was satisfied that there was sufficient basis for the development a broader common law test based on the concept of COMI; and

— given that Japan was essentially the sole place where business was conducted, the limited nature of the companies' presence in Singapore and the absence of likelihood of competing applications (given that the companies had no operations in the BVI and no liquidation had been instituted there), it was appropriate to grant the recognition orders.

 

Conclusion

  

While this was an uncontested application based on a fact pattern highly receptive to a COMI analysis, this is an important development.  It represents the first decision in Singapore (and quite possibly anywhere in the common law world) where an insolvency appointment has been recognised on the basis of the common law application of COMI principles.

This, coupled with the observation that courts should lean towards recognition so long as the interests of the forum are not adversely affected, accords with recent statements from the Singapore Government in relation to developing its role as a global insolvency and restructuring hub. Time will tell whether other jurisdictions such as Hong Kong which rely on common law recognition will follow Singapore's bold lead.

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