The petitions were opposed by a creditor (Cosco), which was owed English law governed liabilities. Under the schemes it was proposed that Cosco’s liability be converted into equity.
The case required consideration of the famed ruled in Gibbs (1890) QB 399. This rule is to the effect that an English court will not give effect to a discharge under a foreign insolvency law of an English law governed debt unless the creditor has proved for its debt in the foreign insolvency procedure. The rule also applied in Scotland.
This rule was recently applied by the English Court of Appeal in OJSC [2019] Bus LR 1130. In OJSC the court held that the rule in Gibbs could not be circumvented by means of the stay mechanism available under Article 20 of the CBIR.
The court reasoned as follows:
- The difficulty in the petitions lay not in the recognition of the Singaporean moratoria but in the further relief seeking an administration type moratorium in England.
- The Singaporean moratoria were not capable of being separated from the schemes of arrangement particularly given the fact that under the law of Singapore, a moratorium can only be granted if the company proposes, or intends to propose, a compromise or an arrangement such as the schemes in this case.
- As far as English law is concerned, given the law in Gibbs, the Singaporean schemes could not swap Cosco's debt for equity nor extinguish Cosco's rights without Cosco’s consent.
- The liabilities to Cosco therefore stood outside the Sigaporean scheme process of which the moratoria were an integral part and, as such, Cosco had to be carved out from the additional administration type moratorium being sought in the petitions.
The court was minded to grant the recognition and administration moratorium relief with a carve out for Cosco but given a submission from counsel for the petitioners to the effect that, if the court was with Cosco, the petitions should be refused, the court refused the recognition orders and any additional relief.
Chang Chin Fen v Cosco Shipping (Qidong) Offshore Ltd, Outer House, Court of Session 24 September 2021