Astrata (Singapore) Pte Ltd v Portcullis Escrow Pte Ltd and another and other matters

Chan Sek Keong CJ (delivering the judgment of the court):

[1] There are before us two appeals and an application for leave to appeal by Astrata (Singapore) Pte Ltd (“Astrata”) against the decisions of the Judge (“the Judge”) in, respectively, Originating Summons No 171 of 2010 (“the Injunction Application”), Originating Summons No 690 of 2010 (“the Declaration Application”) and Summons No 3264 of 2010 (“the Stay Application”).

[2] The respondents in the proceedings before us are Tridex Technologies Pte Ltd (“Tridex”) and Portcullis Escrow Pte Ltd (“PEPL”). The judgment in respect of the two appeals is reported in Astrata (Singapore) Pte Ltd v Tridex Technologies Pte Ltd and another and other matters [2011] 1 SLR 449 (“the Judgment”). The judgment from which the application for leave to appeal is made in Originating Summons No 1082 of 2010 (“the Leave Application”) is reported in Portcullis Escrow Pte Ltd v Astrata (Singapore) Pte Ltd and another [2010] SGHC 302.

[3] Astrata is a company incorporated in Singapore and is part of the Astrata group of companies, of which the ultimate holding company is Astrata Group Incorporated (“AGI”), a company incorporated in Nevada, USA. Astrata is in the business of designing and developing advanced location-based information technology services and solutions that combine global positioning systems, wireless communication (satellite or terrestrial) and geographical information technology. These solutions enable businesses, institutions and governments to monitor, trace and control the movement and status of machinery vehicles, personnel or other assets.

[4] In a Supply Agreement dated 10 April 2007 (“the Supply Agreement”), Astrata agreed to develop and supply an electronic plate system to Tridex. The Supply Agreement was defined as comprising the Supply Agreement itself and any Points of Agreement (“PoA”) between Astrata and Tridex, of which 12 were eventually executed. The Supply Agreement provided for arbitration with respect to any disputes between the parties.

[5] Pursuant to PoA #7 dated 10 October 2007, Astrata, Tridex and PEPL entered into a tripartite Escrow Agreement (“the Escrow Agreement”) on 23 October 2007. The Escrow Agreement designated PEPL as the Escrow Agent to hold in escrow the Comprehensive Source Code and the Comprehensive Engineering Diagrams (collectively “the Escrow Property”) which Astrata was required to deliver to Tridex under the Supply Agreement. The Escrow Agreement also stipulated in cll 7(i)(c) and 7(ii)(b) a list of events on the occurrence of any of which PEPL was obliged to release the Escrow Property to Tridex (the “triggering events” or a “triggering event”, as the case may be). We will refer to these contractual arrangements in more detail later.

[6] Disagreements developed between Astrata and Tridex under the Supply Agreement and the Escrow Agreement. The dispute surfaced after AGI sought Chapter 11 reorganisation under the United States Bankruptcy Code on 6 August 2009, after a failed voluntary restructuring proposal. Its final Reorganisation Plan (“the Reorganisation Plan”) was confirmed by the competent United States court on 15 December 2009 and became effective on 4 January 2010 (“AGI’s Chapter 11”). AGI’s Chapter 11 resulted in a change of shareholder control of AGI and is now controlled by a new shareholder called Fame Trading Ltd holding 94.5% of the shares in AGI.

[7] On 5 February 2010, Tridex purported to terminate the Supply Agreement on the ground that Astrata had breached its obligations under the Supply Agreement. On the same day, Tridex wrote to PEPL stating that it was invoking its rights under the Escrow Agreement on the ground that a triggering event in cl 7(i)(c) had occurred, viz, AGI’s Chapter 11 which in Tridex’s view constituted an arrangement for the benefit of AGI’s creditors. Tridex further notified PEPL that it would call for the delivery of the Comprehensive Source Code at the appropriate time.

[8] Astrata objected to Tridex’s claim that AGI’s Chapter 11 was a triggering event, and in a letter dated 9 February 2010, instructed PEPL not to release the Escrow Property as AGI’s scheme of arrangement was “for the purpose of a genuine amalgamation or reconstruction” (as per the language in cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement: see also [11] below). In this judgment, we shall refer to this dispute as “the Bilateral Dispute”. In the same letter, Astrata also sought confirmation from PEPL that it had not delivered the Escrow Property to Tridex. When Astrata did not receive any response from PEPL, Astrata filed the Injunction Application to restrain (a) Tridex from requiring PEPL to deliver the Escrow Property, and (b) PEPL from delivering the Escrow Property, pending the determination of the Bilateral Dispute by an arbitral tribunal under the Supply Agreement.

[9] PEPL responded by filing an interpleader summons which it later withdrew in order to file the Declaration Application (which also included interpleader relief). The declaration sought was whether “the conditions in cl 7(i)(c) and cl 7(ii)(b) had been satisfied”, ie, any triggering event had occurred, thereby entitling PEPL to release the Escrow Property to Tridex. In response to the filing of the Declaration Application, Astrata filed the Stay Application pursuant to s 11A of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) to stay the hearing of the Declaration Application until the Bilateral Dispute has been determined by an arbitral tribunal to be appointed under the Supply Agreement.

[10] In this judgment, instead of discussing the Judge’s decisions and his reasoning with reference to the Injunction Application, the Stay Application or the Declaration Application, we shall only consider the two material issues that have arisen from the facts of this case. The first (under Civil Appeal No 158 of 2010) is whether the Bilateral Dispute is subject to cl 29.1 (the arbitration clause) in the Supply Agreement (“the Jurisdiction Issue”). If the Bilateral Dispute is referable to arbitration, the second issue (under Civil Appeal No 159 of 2010) will not arise and the proceedings in this case will be stayed pending the outcome of the arbitration which Astrata has already initiated under cl 29.1 of the Supply Agreement. If the Bilateral Dispute is not referable to arbitration, however, the second issue arises as to whether AGI’s Chapter 11 is a triggering event under cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement (“the Substantive Issue”). If the Substantive Issue is decided against Astrata, Tridex would be entitled to call for delivery of the Escrow Property from PEPL. Conversely, if the Substantive Issue is decided in Astrata’s favour, Tridex would not be entitled to delivery of the Escrow Property. Accordingly, the disposition of Astrata’s application in Originating Summons No 1082 of 2010, for leave to appeal against the Judge’s declaration in the Judgment that cll 7(i)(c) and 7(ii)(b) had been satisfied on the facts (viz, the Leave Application), would hinge on the outcome of the Substantive Issue.

[11] With respect to the Jurisdictional Issue, the Judge held that the Bilateral Dispute was not referable to arbitration under the Supply Agreement, and accordingly dismissed both the Injunction Application and the Stay Application. With respect to the Substantive Issue, the Judge proceeded on the basis that AGI’s Chapter 11 was an arrangement for the benefit of creditors and held that it constituted a triggering event under cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement because (a) the saving clause “save for the purpose of a genuine amalgamation or reconstruction” (“the Saving Clause”) did not apply to that triggering event, but that even if it did, (b) AGI’s Chapter 11 was not a “reconstruction” for the purposes of the Saving Clause. We shall examine first the Jurisdictional Issue as it is logically prior to the Substantive Issue.

[12] The material provisions pertaining to the Jurisdictional Issue are found in cll 21.1 and 29.1 of the Supply Agreement, PoA #7 and cll 7, 18 and 20(c) of the Escrow Agreement.

[13] Clause 21.1 of the Supply Agreement (which contains the entire agreement clause) provides as follows:

[14] Clause 29.1 (which contains the arbitration agreement between Astrata and Tridex) provides as follows:

[15] PoA #7 contains the parties’ agreement to put the Escrow Property into escrow, to be released to Tridex upon the occurrence of any of the triggering events. Clause 1(v)(c) of PoA #7 provides that the Comprehensive Source Code kept by (the nominated escrow agent):

The Escrow Agreement was executed by Astrata and Tridex pursuant to PoA #7, with PEPL ultimately appointed as the escrow agent.

[16] Clauses 7(i)(c) and 7(ii)(b) of the Escrow Agreement both prescribe the same triggering events upon the occurrence of any of which Tridex would be entitled to the delivery of the Comprehensive Source Code and the Comprehensive Engineering Diagrams respectively. For present purposes, we need only to refer to cl 7(i)(c), the text of which is reproduced below.

[17] Clause 11 of the Escrow Agreement contains the entire agreement clause as follows:

It may be noted that the words in parenthesis “(but not Tridex and Astrata alone)” make clear that the Escrow Agreement does not constitute the entire agreement between Tridex and Astrata as the Supply Agreement also constitutes the entire agreement between them with respect to the matters under the Supply Agreement.

[18] Clause 18 of the Escrow Agreement provides a dispute resolution mechanism and also, specifically, for submission to the non-exclusive jurisdiction of the “court of Singapore” in relation to any Dispute (as defined therein). The clause reads as follows:

[19] In addition to cl 18(b), the Escrow Agreement also provides a general submission to the non-exclusive jurisdiction of the Singapore court in cl 20(c) as follows:

[20] PEPL is not involved in the Bilateral Dispute as the Singapore court has granted an order to PEPL to interplead and to place the Escrow Property in the control of the Singapore court under the Declaration Application. Accordingly, there is no trilateral dispute under the Escrow Agreement in these proceedings. In our view, since the Bilateral Dispute arises out of the Escrow Agreement, it would, prima facie, fall to be resolved under the dispute resolution mechanism in the Escrow Agreement unless it has been displaced by the arbitration agreement between Astrata and Tridex in the Supply Agreement pursuant to which the Escrow Agreement was executed (ie, specifically PoA #7). As PEPL has been allowed to interplead, it is therefore not involved in the Jurisdictional Issue.

[21] Astrata’s case is that cl 29.1 of the Supply Agreement applies to any dispute between Astrata and Tridex in relation to the Escrow Property and therefore applies to the Bilateral Dispute even though the Bilateral Dispute arose under the Escrow Agreement. Astrata argues as follows:

(a) the Supply Agreement (including PoA #7) constitutes the entire agreement between Astrata and Tridex (see cl 21.1 of the Supply Agreement) and the triggering events in PoA #7 are identical to those in the Escrow Agreement;

(b) the Escrow Agreement constitutes the entire agreement between Astrata, Tridex and PEPL, “but not Tridex and Astrata alone” (see cl 11 of the Escrow Agreement): these words are consistent with the Escrow Agreement being applicable to trilateral disputes and the Supply Agreement continuing to apply to bilateral disputes between Astrata and Tridex, and accordingly there is no conflict between the dispute resolution mechanism in the two agreements;

(c) any apparent conflict between them can be reconciled, and resolved by restricting the non-exclusive jurisdiction clause in the Escrow Agreement to seeking curial assistance from the Singapore courts, eg, interim orders, as was the approach of the English courts in the Paul Smith line of cases (see [30] below). Alternatively, the Supply Agreement prevails over the Escrow Agreement as it is the commercial centre of the transaction: see the approach of the court in UBS AG & Anor v HSH Nordbank AG [2010] 1 ALL ER (Comm) 727;

(d) the decisions in Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp [2010] 2 SLR 821 at [21] (“Transocean”) and L & M Concrete Specialists Pte Ltd v United Eng Contractors Pte Ltd [2000] 2 SLR(R) 852 are distinguishable on the facts.

[22] Tridex’s case is that the Bilateral Dispute is not subject to arbitration under cl 29.1 of the Supply Agreement. Tridex argues as follows:

(a) Astrata and Tridex have intentionally carved out the escrow matters from the Supply Agreement and put them into the Escrow Agreement to be dealt with exclusively under that agreement;

(b) clause 11 of the Escrow Agreement provides that the Escrow Agreement constitutes the entire agreement between the three parties in relation to the subject matter covered by the Escrow Agreement, and supersedes all prior agreements between the parties;

(c) under cl 18(b) of the Escrow Agreement, the parties have agreed to submit to the non-exclusive jurisdiction of the Singapore court on any disputes relating to any claim or controversy in connection with the Escrow Agreement, ie, any dispute that arises between and/or among the three parties, or any of them, in relation to the matters connected to the Escrow Agreement;

(d) further, under cl 20(c) of the Escrow Agreement, the three parties have also agreed to submit to the non-exclusive jurisdiction of the court of Singapore generally, ie, on all matters under the Escrow Agreement;

(e) clear and specific words are required to incorporate an arbitration agreement which are absent from the Escrow Agreement: see Transocean at [18];

(f) PoA #7 did not constitute an agreement to arbitrate the escrow issues: it merely provided that an escrow agreement be signed to incorporate the parties’ agreements on the disposal of the Escrow Property;

(g) clause 4(a) of the Escrow Agreement also confirms the parties’ intention not to refer escrow matters to arbitration by providing that the Escrow Property “shall be transferred to Tridex notwithstanding any provisions otherwise in the earlier agreement(s), entered into between Tridex and Astrata” if the conditions in the Escrow Agreement are satisfied;

(h) in contrast with the Supply Agreement, the parties’ choice of Singapore law as the governing law of the Escrow Agreement also reinforces the parties’ intention to refer any dispute arising thereunder to court adjudication;

(i) Transocean is indistinguishable from the present case. Furthermore, the case of DLA Piper Hong Kong v China Property Development (Holdings) Ltd [2010] HKLRD 903 (“DLA Piper”) is analogous to the facts of the present case and the reasoning of the Hong Kong Court of Appeal is applicable to the present case.

[23] The Jurisdictional Issue has arisen because, contrary to the views of the Judge that “these complex agreements have been painstakingly drafted, advised and negotiated with the assistance of lawyers” (see the Judgment at [60]), the parties’ legal advisers, if any, have singularly failed to express clearly and explicitly whether any dispute between Astrata and Tridex in relation to the Escrow Property is subject to arbitration under cl 29.1 of the Supply Agreement in drafting PoA #7 and also the Escrow Agreement. It was a simple step that should have been taken. This omission has led to serious disagreement between the parties and a not inconsiderable expenditure of intellectual effort by the Judge to determine their intention by their words, or lack of them. As we shall see, this is not an isolated failure in the present case. There is also disagreement on the meaning and effect of the triggering events in cll 7(i)(c) and 7(ii)(b), because the draftsman appears to have simply incorporated (what the Judge recognises as) boilerplate clauses, drafted for use in the context of an English model of companies insolvency legislation, into a commercial agreement to which a US company is a party.

[24] In this appeal, neither Astrata nor Tridex is proceeding on the basis that there is a conflict between the Supply Agreement and the Escrow Agreement. Astrata’s case is that the two agreements can be read together (as was intended by the parties) to separate trilateral disputes from bilateral disputes affecting the Escrow Property: the Supply Agreement, being the primary entire agreement between the parties, applies to all disputes between them. Tridex’s case is that the parties intended the Escrow Agreement to be a self-contained agreement on all matters relating to the Escrow Property, and that any dispute, whether trilateral or bilateral, relating to the Escrow Property ought to be resolved under the dispute resolution mechanism as set out under the Escrow Agreement. What the true answer is turns on the proper construction of the terms of the Escrow Agreement.

[25] We do not agree with Astrata’s argument that since the Escrow Agreement is a trilateral agreement, the dispute resolution mechanism in cl 18 of the Escrow Agreement applies only to trilateral disputes between Astrata, Tridex and PEPL, and not to any dispute between Tridex and Astrata “alone”. This argument is not borne out by cl 18(a) of the Escrow Agreement which, as drafted, has a much wider scope in that it provides, inter alia, that if there is a dispute relating to any claim or controversy arising out of, or in connection with this Escrow Agreement, then PEPL may interplead and place the Escrow Property with the Singapore court pending the outcome of the dispute between Tridex and Astrata. The italicised words above are not qualified in any way by reference to the identities of the disputants and, in our view, are broad enough to refer to a dispute relating to any claim or controversy arising out of the Escrow Agreement between (a) Astrata and Tridex; (b) Astrata and PEPL; (c) PEPL and Tridex; and (d) Astrata, Tridex and PEPL. There is no reason to cut down their meaning and restrict their application only to trilateral disputes. All disputes arising out of the Escrow Agreement are prima facie subject to the non-exclusive jurisdiction of the court of Singapore as provided under cl 18(b) of the Escrow Agreement. The crucial issue is whether the presumptive exclusion of cl 29.1 of the Supply Agreement by cl 18(a) of the Escrow Agreement has been displaced by other provisions or words in the Escrow Agreement.

[26] In this regard, Astrata relies on the parenthetical words “(but not to Tridex and Astrata alone)” in the Entire Agreement clause of the Escrow Agreement (cl 11) to argue that those words were intended to carve out disputes between Astrata and Tridex in relation to the Escrow Property from cl 18 of the Escrow Agreement. In our view, those words do no more than to recognise that there is another separate entire agreement between Astrata and Tridex. If a carving out were intended, it would surely have been done in cl 18 itself and not in cl 11. Those words do not evince an intention that the arbitration agreement in the Supply Agreement should apply to disputes arising from the Escrow Agreement. The two agreements are consistent with each other, as each was intended to apply in their respective spheres, subject to their respective dispute resolution mechanisms.

[27] Astrata has also argued that the words “pending the outcome of the dispute between Tridex and Astrata” in cl 18(a) of the Escrow Agreement refer to the outcome of the dispute between Tridex and Astrata by arbitration. We are unable to accept this argument for two reasons. First, there is no basis to read a reference to arbitration into those words as they are equally capable of referring to the outcome of court proceedings. Indeed, utilising the exact same terminology that was used to define a “Dispute” in cl 29.1 of the Supply Agreement, cl 18(a) of the Escrow Agreement goes on to provide that a “Dispute” under the Escrow Agreement is one that relates to “any claim or controversy arising out of, or in connection, with [the] Escrow Agreement, including any question regarding its formation, existence, validity, enforceability, performance, interpretation, breach, or termination”. Accordingly, the phrase cited at the start of this paragraph appears to be one capable of referring to a bilateral dispute between Astrata and Tridex relating to any claim or controversy arising out of, or in connection with this Escrow Agreement (see also above at [25]). At best, these words are neutral since they say nothing about the nature of the dispute resolution mechanism that will produce the outcome of the Bilateral Dispute.

[28] Secondly, we see no rational basis in Astrata’s argument that these words have the effect of displacing the presumptive effect of the jurisdiction clause, albeit a non-exclusive one. We earlier mentioned that cl 18(a) applies to both bilateral and trilateral disputes. We can test the rationale with the following hypothesis. A dispute in category (b) or (c) (see [25] above) would arise if, for example, PEPL agrees or disagrees with Tridex that a triggering event has occurred under, say, cl 7(i)(c) and decides to act accordingly. In the first case, Astrata may dispute PEPL’s decision, and in the second case, Tridex may dispute PEPL’s decision. Assuming that it is the first case, Astrata would have to commence proceedings against PEPL for injunctive relief to restrain PEPL from delivering the Escrow Property to Tridex. This was what Astrata had to do in the present case when it did not receive confirmation from PEPL that PEPL would not deliver the Escrow Property to Tridex.

[30] Astrata has further contended that the non-exclusive jurisdiction clauses (cll 18(b) and 20(c)) of the Escrow Agreement are limited to curial assistance in support of arbitration. We are also unable to accept this argument. Such a construction may be attractive in cases where there are arbitration as well as non-exclusive jurisdiction clauses in the same contract or, perhaps, in related contracts between the same parties, eg, as in the Paul Smith line of cases (Paul Smith Ltd v H & S International Holding Inc [1991] 2 Lloyd’s Rep 127 QBD (Comm) discussed in AXA Re v Ace Global Markets Ltd [2006] 1 Lloyd’s Rep IR 683 QBD (Comm)) but it has no application in the present case.

[31] In the circumstances, we would give the non-exclusive jurisdiction clauses their ordinary meaning. They have not been displaced by any provision or words in the Escrow Agreement or the Supply Agreement. So construed, and as recognised in case law (see, for instance, Transocean at [16] and Bambang Sutrisno v Bali International Finance Ltd and others [1999] 2 SLR(R) 632 at [11]), the non-exclusive jurisdiction clauses presumptively exclude other means of dispute resolution in favour of the non-exclusive forum.

[32] We would also agree with Tridex’s argument that this conclusion is reinforced by the choice of Singapore law in cl 17 of the Escrow Agreement. When contrasted to the choice of English law in the Supply Agreement, the choice of Singapore law in the Escrow Agreement, which deals only with the Escrow Property, fortifies the presumption in favour of Singapore as the non-exclusive forum in respect of disputes relating only to the Escrow Property. It follows that s 11A of the IAA has no application to the Bilateral Dispute, and it is therefore unnecessary for us to decide whether or not to refer the Bilateral Dispute to arbitration.

[33] The Substantive Issue is whether any condition in cl 7(i)(c) has been triggered so as to entitle Tridex to delivery of the Escrow Property.

[34] As mentioned earlier at [11], the Judge held that AGI’s Chapter 11 constituted a triggering event under cl 7(i)(c) (and also cl 7(ii)(b)) of the Escrow Agreement on the ground that it was an arrangement for the benefit of its creditors and that this condition did not come within the terms of the Saving Clause. The Judge also held that in any case AGI’s Chapter 11 was not a reconstruction for the purposes of the Saving Clause. Before we discuss the Judge’s analyses of these issues, it is necessary that we provide the background to the reasons for AGI seeking Chapter 11 reorganisation as it is, in our view, material to the question whether AGI “has made any arrangement for the benefit of its creditors” under cl 7(i)(c) of the Escrow Agreement.

[35] In 2009, AGI experienced financial difficulties and proposed an out-of-court restructuring plan (“the Out-of-Court Plan”) for approval by its creditors and shareholders. Almost all creditors voted in favour of the Out-of-Court Plan. However, one Jed Frost, a shareholder and unsecured creditor, and the Vision group (comprising Vision Opportunity China Fund Limited, Vision Capital Advantage Fund LP and Vision Opportunity Master Fund Ltd, collectively “Vision”), a shareholder and purported unsecured creditor, voted against the Out-of-Court Plan. As a result, AGI could not effectuate the Out-of-Court Plan. Following some failed negotiations, AGI applied for bankruptcy protection under Chapter 11 in order to preserve AGI’s ability to restructure its debts, to preserve AGI’s business operations, and to preserve AGI’s assets for the benefit of its creditors.

[36] As mentioned earlier (see [6] above), AGI’s Chapter 11 took effect from 4 January 2010 resulting in 94.5% of AGI’s shares being held by Fame Trading Ltd, a white knight who had provided interim financing of US$8.5 million to AGI. The remaining 5.5% of AGI’s shares were issued to a Litigation Trust established pursuant to the Reorganisation Plan. The material provisions of the Reorganisation Plan relating to the Litigation Trustee are as follows:

[37] With regard to the purpose of a Chapter 11 reorganisation, there was evidence adduced before the Judge in the form of an opinion from AGI’s US attorneys which stated that (see the Judgment at [38]):

[38] The Substantive Issue concerns the meaning of two of the triggering events in cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement and whether AGI’s Chapter 11 constitutes either of them. As both clauses are substantially the same, we only need to discuss cl 7(i)(c) which provides as follows:

[39] The issues we have to decide in this appeal are as follows:

(a) whether “a receiver, administrator or similar officer has been appointed over all or any part of AGI’s assets or undertaking”;

(b) whether AGI “has made any arrangement for the benefit of its creditors”;

(c) whether the Saving Clause (“save for the purpose of a genuine amalgamation or reconstruction”) applies to the making of “any arrangement for the benefit of its creditors”;

(d) whether AGI’s Chapter 11 is a “reconstruction” for the purposes of the Saving Clause.

[40] Before we examine these issues, it is desirable that we consider first the general approach adopted by the Judge in interpreting the purpose and scope of the triggering events in cl 7(i)(c). In this regard, the Judge held (at [26]–[32] of the Judgment) as follows:

[41] Our approach is as follows. While we can agree with all of what the Judge has said in the passages above – such as the business objectives of these boilerplate clauses, and that since the Escrow Agreement is governed by Singapore law, it has to be construed in accordance with Singapore law, that commonly used clauses should be given their commonly understood meanings, and that the same words used in an agreement should ordinarily be given the same meaning – the flaw in the Judge’s interpretational approach is that, as we shall see, he has conflated the meaning of words in the Escrow Agreement with their meaning under Singapore law, specifically in the context of company law. Thus, he held that the word “reconstruction” had the meaning which it bears when used in the reconstruction of a company under the Companies Act (see [63] below).

[42] In our view, this approach to contextual interpretation is incorrect because the word “reconstruction” in cl 7(i)(c) of the Escrow Agreement is not necessarily used in the context of a company reconstruction under the Singapore Companies Act, but in the very different context of a commercial agreement between a US corporate group (which included a Singapore subsidiary, Astrata) and Tridex (a Singapore company). The Judge himself recognised that the word “reconstruction”, and also the word “amalgamation” are not terms of art (see below at [64]). These words must therefore mean what the parties intended them to mean. Although the Escrow Agreement is governed by Singapore law, that law does not dictate that the words used in the Escrow Agreement must bear the meanings they have in a Singapore company law context but rather in a business context. Under Singapore law, the basic principle of documentary interpretation is that words used by the parties in an agreement mean what the parties intend them to mean. The parties here may or may not have had the Singapore company law meanings in mind; regardless, even if they did have Singapore company law meanings in mind, it does not necessarily follow that these meanings are apt to cover any corporate restructuring of AGI under US law.

[43] In the present case, it is all the more necessary to consider what the parties had in mind when they drafted the triggering events in cl 7(i)(c) to apply to a US corporation which can only effect a corporate restructuring or reconstruction in accordance with US law and not Singapore law. A reconstruction of a company under Singapore law may not find an exact counterpart in US law and vice versa, and similarly, with the phrase “any arrangement for the benefit of its creditors”. More generally, it is not clear to us that the purpose of cl 7(i)(c) (which is, as the Judge found, to protect Tridex’s vested rights in the Escrow Property (for whose development they had paid upfront to Astrata) against the effects of corporate insolvency events affecting AGI) is adequately served by superimposing Singapore company law concepts on a US company to which such concepts may be alien, and vice versa. It seems to us that whoever drafted cl 7(i)(c) of the Escrow Agreement had copied the boilerplate clauses applicable only to business transactions between Singapore and/or UK incorporated companies without much thought as to whether the triggering events countenanced therein would have been appropriate for AGI and non-Singapore corporate bodies.

[44] For these reasons, we think that in construing the meaning of the triggering events in cl 7(i)(c), it is preferable to give more weight to the underlying commercial purpose of cl 7(i)(c), ie, to protect Tridex’s vested interest in the Escrow Property in the event that Astrata and/or AGI finds itself/themselves unable to carry on its/their business, thereby jeopardising Tridex’s rights to the Escrow Property. This is provided, of course, that giving effect to the parties’ purpose is permitted by the words used in cl 7(i)(c). In this connection, we repeat, and would elaborate below, that some of the terms under consideration are not terms of art in the context of Singapore and English company law.

[45] We now turn to the specific questions set out at [39] above.

Issue (a): Whether a receiver, administrator or similar officer has been appointed over all or any part of AGI’s assets or undertaking

[46] This issue was argued before the Judge but he did not rule on it. Tridex argues that the appointment of the Litigation Trustee pursuant to the Reorganisation Plan is equivalent or similar to the appointment of a receiver under Singapore law, and the relevant triggering event has occurred. In support of this argument, counsel referred to the commentary in Law and Practice of Corporate Insolvency (Andrew Chan Chee Yin gen ed) (LexisNexis, 2005) Ch V, paras 853–900 (pp V-109–V-110).

[47] We do not agree that the commentary referred to is relevant to Tridex’s case as it is concerned with the functions of a receiver and manager appointed by a debenture holder, and not a receiver appointed by a court. Such a receiver and manager is a different creature from a receiver appointed by a court under O 30 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed). A court-appointed receiver is merely a passive and neutral custodian of the property entrusted to him, pending the resolution of the dispute between the claimants to the property. In contrast, a receiver and manager appointed under a debenture has many more functions and duties. He has a duty to bring in the assets subject to the debenture under which he was appointed, and to realise those assets for the benefit of the debenture holder. If those assets include choses-in-action he can bring actions to enforce them.

[48] The Litigation Trustee certainly bears no resemblance to a court-appointed receiver, although there is some similarity between that office and that of a receiver and manager. A litigation trustee under a Chapter 11 reorganisation is under a duty to enforce and pursue the company’s rights and interests for the benefit of creditors. However, such a comparison fails to consider the different context in which each officer is appointed. In Martin R Pollner & Brian R Socolow, “The Litigation Trustee: A Major New Tool for Creditors’ Committees” American Bankruptcy Institute Journal (March 2001) (20-2 ABIJ 14), the authors state the following:

[49] As can be seen from the above commentary, the litigation trust is established as part of a Chapter 11 reorganisation, the primary purpose of which is to sustain the company as a going concern – AGI’s US attorneys described it as “more like a financing transaction, rather than a bankruptcy” (see above at [37]). In contrast, the receiver appointed by the court or a receiver and manager appointed by a debenture holder, in performing his respective functions is not concerned with the continued viability of the company as a going concern. In the light of the purpose of cl 7(i)(c), which is to protect Tridex’s interest in the continuing functioning of Astrata and/or AGI, this distinction is critical. Functionally, a litigation trustee in a Chapter 11 reorganisation is not analogous to a receiver contemplated by cl 7(i)(c). Nor is the expression “receiver” apt to refer to a litigation trustee in the US Bankruptcy Code. Accordingly, we would hold that the Litigation Trustee appointed pursuant to the terms of the Reorganisation Plan is not a receiver contemplated by cl 7(i)(c) of the Escrow Agreement.

[50] Both here and below, the parties and the Judge have proceeded on the assumption that AGI’s Chapter 11 was an arrangement for the benefit of its creditors, and also that AGI had made such an arrangement by undergoing the Chapter 11 reorganisation. We had our doubts about the correctness of these two assumptions. After we reserved judgment in this appeal, we invited further submissions on these two issues in the form of a composite question as expressed in issue (b) above. However, we did not find the submissions helpful. Having raised the composite question, we will now address it.

[51] Is AGI’s Chapter 11 an “arrangement” for the benefit of “creditors”? The word “arrangement” is not defined in the Escrow Agreement or in the Companies Act. A different point arises with the word “creditors”. Does it mean all the creditors of AGI or only some of them, and if so, how many of them? Suppose AGI had made an arrangement for the benefit of only a minority of secured creditors – would this be an arrangement for the benefit of creditors as contemplated by cl 7(i)(c)? Many different permutations can be posited. None of these interpretative problems have been raised by Astrata, and yet they must be material to whether or not the relevant triggering event has occurred.

[52] In our view, the word “arrangement” must take its meaning from the context of the Escrow Agreement and its commercial objective, as recognised by the Judge. In the case of In re British Basic Slag Ltd’s Application [1963] 1 WLR 727 (“British Basic Slag”), the court was concerned to interpret the meaning of the word “arrangement” in the UK Restrictive Practices Act. Wilmer LJ said at 739–740:

At 746–747, Diplock LJ said:

[53] In In re N.F.U. Development Trust Ltd [1972] 1 WLR 1548 (“Re NFU”), the company petitioned the court to sanction a scheme of arrangement under s 206(2) of the Companies Act 1948 (“the UK Companies Act 1948”) whereby all existing members of the company except the N.F.U. Development Co. would cease to be members. Six persons, five of whom were already directors, were to be the sole individual members. All other existing members were to be deprived of their membership and forfeited all their rights, and on a winding up the surplus assets were to be distributed to another body or company to be determined by the company (and in default of such determination, to charity). The object of the scheme was to reduce administrative expenses. At a meeting directed by the court in May 1972, 85% of the members voted in favour of the scheme. On a petition seeking the court's approval, the scheme was opposed by five persons. It was held that although a majority of three-fourths in value of members in favour of the scheme as required by s 206(2) of the UK Companies Act 1948 had been obtained, nevertheless the section dealt with a “compromise” or “arrangement” between a company and its members which implied accommodation on both sides and could not apply to the present scheme whereby members rights were totally surrendered without compensation. Accordingly, since the scheme was one which no member voting in the interests of members as a whole could reasonably approve, the petition would be dismissed.

[54] Re NFU is an English authority for the meaning of “arrangement” under s 206(2) of the UK Companies Act 1948 which corresponds to s 210 of our Companies Act. On that authority, an “arrangement” in which members are deprived of their rights without compensation is not an arrangement but a confiscation of their rights. There is no element of “give and take” in such an arrangement.

[55] Consistent with our own approach that the meaning of the words in cl 7(i)(c) should be interpreted to mean what the parties intend, British Basic Slag is helpful because it adopted the popular meaning of the word “arrangement” which requires a meeting of minds as to their mutual rights and obligations (whether the arrangement is intended to be enforceable or not). Re NFU is, however, not as helpful as the decision was concerned with the interpretation of “arrangement” in the context of a “scheme of arrangement” under the UK Companies Act 1948.

[56] In our view, the essence of an arrangement with creditors under cl 7(i)(c) must involve a meeting of minds of the parties to the arrangement. This is reinforced by the actual words of the condition – that AGI “has made any arrangement with ...”. AGI cannot make an arrangement with its creditors if they do not accept the arrangement or agree with it. On the facts of this case, AGI had, quite simply, not made an arrangement with its creditors. It tried to do so when it proposed the Out-of-Court Plan, but the proposal was rejected by a small minority of its creditors, viz, Jed Frost and Vision. Because of this, AGI had to apply to the US Bankruptcy Court to sanction a Chapter 11 reorganisation under a modified plan. The Reorganisation Plan, first mentioned at [6] earlier, provided inter alia that creditors whose claims were scheduled as disputed, contingent or liquidated and who did not file a proof of claim timeously were not to be treated as creditors for the purposes of voting or distribution. By contrasting these two events, it is apparent that (a) AGI had failed to make an arrangement with its creditors through the Out-of-Court Plan, and (b) AGI’s Chapter 11 was neither made by AGI, nor with its creditors – it was sanctioned by the US Bankruptcy Court and imposed on all creditors. In our view, AGI did not make an arrangement for the benefit of its creditors as contemplated by cl 7(i)(c).

[57] In the result, it would not be necessary for us to address issues (c) and (d), but since they were fully argued before us, we shall discuss them as well.

[58] The Judge answered this question in the negative. He rejected Astrata’s construction that cl 7(i)(c) applies to only three categories of triggering events (see the Judgment at [23]) as follows:

The Judge held (at [25] of the Judgment) that there are four categories of triggering events, as follows:

The dispute was on where to put the punctuation.

[59] It is possible to argue that the Judge’s interpretation as set out in the passage above does not appear to accord with its grammatical structure, because the word “has” is missing from the fourth category. Without that word, Astrata’s construction of that clause as having three categories is not unreasonable. However, we agree with the result of the Judge’s construction, not for the reason given by him, but because that was the intention of the parties as evinced in the formulation in PoA #7 and also cl 7(ii)(b) of the Escrow Agreement. The relevant clause in PoA #7 listed four categories, providing as follows:

[60] In our view, the repetition of the word “ASAG” with reference to its liquidation has the effect of creating a fourth triggering event that includes and is qualified by the Saving Clause. This delineation is repeated in cl 7(ii)(b) which provides for the release of the Comprehensive Engineering Diagrams in similar terms:

[61] At [24] of the Judgment, the Judge rejected Astrata’s submissions, and said, as follows:

[62] We do not agree with this approach in a case, as here, where a clause in an agreement is ambiguous and where two clauses applying to the same subject matter are arguably inconsistent. In such a case, the court is entitled to and should examine the history and source of these clauses to determine the intention of the parties. In the present case, the triggering clauses originated from PoA #7 which required them to be incorporated into the Escrow Agreement, with the specific instruction that the Escrow Agreement must give effect, inter alia, to those clauses.

[63] The Judge held that AGI’s Chapter 11 was not a reconstruction as contemplated by cl 7(i)(c) because under Singapore law, a reconstruction must not result in the shareholding of the reconstructed company being substantially different from that of the original company. It may be recalled (see [36] above) that, under the Reorganisation Plan, 94.5% of AGI’s equity is now held by Fame Trading Ltd, a new shareholder who injected US$8.5 million into AGI, with the remaining 5.5% held by the Litigation Trust. In so holding, the Judge followed the English authorities on the meaning of “reconstruction” under English company law. He relied on the following passage in Buckley J’s judgment in In re South African Supply and Cold Storage Company, Wild v Same Company [1904] 2 Ch 268 (“South African Supply”) at 286:

[64] It will be noticed that Buckley J acknowledged that “reconstruction”, by itself, is not a term of art (at 281–282):

[65] We have earlier stated that the company law meaning of “reconstruction” (assuming it is the same as its meaning under English and Australian case law) may not be the same as its popular meaning or the meaning intended in cl 7(i)(c) in its application to a US company (if it is capable of being reorganised or “reconstructed” under the US Bankruptcy Code in a different way). It is not necessary for us to decide in this appeal (a) whether the meaning of “reconstruction” given by English or Australian case law (see, for example, In re Mytravel Group plc [2005] 1 WLR 2365 and Re Opes Prime Stockbrocking Ltd (recs and mgrs apptd) (in liq) and ors [2009] 258 ALR 362) should be followed by our courts; (b) how substantial the corporate changes should be before a reorganisation ceases to be a reconstruction; or (c) whether the meaning of “reconstruction” intended by the parties is the same as the meaning given in the case law.

[66] The English and Australian cases are not necessarily determinative of the meaning of the word “reconstruction” under Singapore law. At least, before the decision of the Judge in the present case, there has been no local decision on the point. The problem with the English position – that “the essential character of corporate reconstruction is that substantially the same business is carried on and substantially the same persons continue to carry it on” (per Millett J citing South African Supply in In re Courage Group’s Pension Schemes Ryan and Others v Imperial Brewing & Leisure Ltd. And Others [1987] 1 WLR 495 at 509) – is that a company which has lost all its capital and which needs an injection of new capital from new investors can never be reconstructed unless the existing shareholders whose shares are worthless shares have to be given new (funded) shares to enable them to retain a substantial shareholding in the reconstructed company. For now, it is only necessary to observe that the Saving Clause in cl 7(i)(c) is not intended to apply to a company undergoing a Chapter 11 reorganisation as that clause is premised on a company being liquidated. A Chapter 11 reorganisation does not involve the liquidation of the corporation that is being reorganised or reconstructed. Of course, if the Saving Clause were applicable to Astrata or AGI making any arrangement for the benefit of its creditors, then it would not be inconceivable that AGI’s Chapter 11 might well have been contemplated by the parties as a form of reconstruction.

[67] In view of our conclusions above, it is not necessary for us to decide Astrata’s argument that Tridex has by its conduct waived its right to invoke the triggering events under cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement.

[68] In respect of the Jurisdictional Issue, we hold that the parties have submitted to the jurisdiction of the Singapore court with respect to the Bilateral Dispute by reason of the non-exclusive jurisdiction clause in favour of Singapore.

[69] In respect of the Substantive Issue, we hold that Tridex is not entitled to delivery of the Escrow Property as neither of the two relevant triggering events in cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement it has relied on has occurred. We find that :

(a) the Litigation Trustee is not a “receiver” or “similar officer appointed over all or any part of its assets or undertaking” as contemplated by cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement;

(b) AGI’s Chapter 11 is not an “arrangement for the benefit of its creditors”, nor has AGI “made any arrangement with its creditors” as contemplated by cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement.

[70] For the above reasons, we

(a) grant Astrata’s application for leave to appeal in Originating Summons No 1082 of 2010 and declare that Tridex is not entitled to delivery of the Escrow Property; and

(b) dismiss Astrata’s appeals in Civil Appeal No 158 of 2010 and Civil Appeal No 159 of 2010.

Astrata and Tridex shall bear their own costs both here and below. PEPL shall be paid its costs here and below on an indemnity basis to be borne equally by Astrata and Tridex. The usual consequential orders shall apply.