Agritrade Resources Ltd

JurisdictionBermuda
CourtSupreme Court (Bermuda)
JudgeChief Justice Narinder Hargun
Judgment Date17 June 2020
Docket NumberCIVIL JURISDICTION COMMERCIAL COURT 2020: No. 150
Date17 June 2020

[2020] SC (Bda) 28 Com

In The Supreme Court of Bermuda

Before:

Hon. Chief Justice Narinder Hargun

CIVIL JURISDICTION

COMPANIES (WINDING UP)

COMMERCIAL COURT

2020: No. 150

In the Matter of Agritrade Resources Limited
And in the Matter of the Companies Act 1981
Appearances:

Kevin Taylor and Benjamin McCosker, Walkers (Bermuda) Limited Limited, for the Petitioners, TA Genco Limited and TA Private Debt III Limited

Lilla Zuill, Zuill & Co, for the Petitioner, Golden Equator Capital Pte. Ltd

Christian Luthi and Rhys Williams, Conyers Dill & Pearman Limited, for Agritrade Resources Limited

RULING
1

These proceedings concern the affairs of Agritrade Resources Limited (the “Company”), a company incorporated in Bermuda on 27 January 1997 and listed on the Main Board of the Stock Exchange of Hong Kong Limited. Winding up proceedings have been commenced against the Company by three creditors in this Court and in the High Court of the Hong Kong Special Administrative Region. TA Genco Limited ( “TAG”) and TA Private Debt III Limited ( “TAPD”) (collectively, the “TA Entities”) have presented separate Petitions seeking the winding up of the Company and have issued summonses seeking the immediate appointment of joint provisional liquidators (the “JPLs”). Golden Equator Capital Pte. Ltd ( “GE”) has also presented separate Petitions for the winding up of the Company both in this Court and in the High Court of Hong Kong.

2

The Company accepts that it is insolvent on a cash flow basis and accepts that JPLs should be appointed for the purposes of considering and implementing a restructuring of the Company. Indeed, all parties agree that the Company should be given the opportunity to explore whether it is feasible to restructure its financial affairs, and for that purpose they have also agreed that there should be an immediate appointment of JPLs to assist in that exercise. However, there is a dispute as to whether the JPLs appointed by this Court should have full powers and replace the existing Board of Directors, or whether their appointment should be on a “light touch” basis to supervise the management of the Company by the Board of Directors and assist in the formulation and implementation of any scheme of arrangement. There is also a dispute between the parties as to the identity of the JPLs.

3

On 1 June 2020, I heard arguments from Counsel in relation to these issues and the following day ordered that Ng Kian Kiat of RSM Corporate Advisory Pte Ltd in Singapore, Oon Su Sun of RSM Corporate Advisory Pte Ltd in Singapore and E. Alexander Whitaker of R&H Services Limited in Bermuda, be appointed as JPLs of the Company with immediate effect. I also ordered that the appointment of the JPLs was for restructuring purposes only and that their powers were limited to those powers typically provided in “soft touch” appointments. In accordance with the agreed position of the parties, I also ordered that Letters of Request be issued to the High Court of the Hong Kong Special Administrative Region and the Supreme Court of the Republic of Singapore, to enable the JPLs to be recognised in those jurisdictions and to have the assistance of those Courts in the course of the proposed restructuring. I now give reasons for the decisions communicated to the parties on 2 June 2020.

The background
4

The material background facts appear to be uncontroversial and are taken from the First Affidavit of Sim Mingqing filed on behalf of the Company. The Company is an investment holding company, with substantial investments internationally in the coal mining, energy and shipping industries, which it holds through various subsidiaries. The Company has substantial valuable assets estimated at US$ 1,376,787,000 which is more than double that of its total liabilities estimated at US$ 533,129,103. However, the Company's finances have been heavily and adversely impacted by the serious financial difficulties of its major shareholder, Agritrade (International) Pte. Ltd ( “AIPL”), because of the interconnectedness of the financial obligations between the companies in the Agritrade Group. AIPL's defaults had caused the share price of the Company to plunge, and also triggered a series of cross-defaults on the part of the Company, imposing a severe financial strain on the Company's finances and cash flow. The Company's short-term cash flow is insufficient to meet the cascade of cross-defaults.

5

. Since in or around February 2020, the TA Entities, who together are presently the Company's largest direct creditor; GE, who is presently the Company's second largest direct creditor, and a consortium of a white knight investors led by HC Holdings Limited, had been actively working together with the participation of the Company's Board, to agree on terms for the restructuring of AIPL's debts, which contemplates the injection of funds into the Company with a view towards, amongst other outcomes, sustaining the Company's business and operations and allowing the Company to work towards resolving its outstanding liabilities.

6

The negotiations culminated in a nonbinding term sheet dated 25 March 2020, which captured the broad agreed terms of the proposed restructuring, and under which the parties to the restructuring had agreed to use best endeavors to reach a definitive agreement by a mutually extended deadline of 14 May 2020. In the weeks leading up to 14 May 2020, the parties to the restructuring were in the process of agreeing to an extension of the deadline. However, on 14 May 2020, the TA Entities, without any notice to any other party or the Company, filed winding up Petitions and sought the immediate appointment of JPLs with light touch powers with the aim of restructuring the Company. In the Petitions, TAPD claimed it was a creditor of the Company under a facility agreement dated 30 September 2019 in the amount of US $152,466,697. TAG claimed that it was a creditor of the Company under a facility agreement dated 25 February 2019 in the amount of US $50,773,327.

7

On 19 May 2020, GE filed winding up Petitions in the Supreme Court of Bermuda and the High Court of the Hong Kong Special Administrative Region in materially identical terms. GE also sought immediate appointment of JPLs with full powers and not for the purposes of any restructuring exercise. In the Petition filed in this Court, GE claimed that it was a creditor of the Company under a facility agreement in the amount of US $62,559,174.

8

The application by the TA Entities for the appointment of JPLs first came before the court on 15 May 2020. I was advised by Counsel for the TA Entities that notice of the application had been given to the Company's directors and the Company's secretary by way of email delivered at 4:47 PM, Singapore time, on 15 May 2020, approximately 5 hours before the scheduled hearing. Given the momentous nature of the application, I decided to adjourn the hearing to 20 May 2020 in order to allow the TA Entities to properly notify the Company in Singapore and in Bermuda of the impending application to appoint JPLs.

9

At the hearing on 20 May 2020, Counsel for the Company sought a further adjournment on the ground that the Company required further time to consider its position in relation to the proposed JPLs and to file any evidence in relation to that issue. Counsel also argued that in any event there was no obvious urgency for the immediate appointment of the JPLs. In order to allow the Company to consider its position and to file any relevant evidence, I adjourned the hearing to 1 June 2020.

10

At the hearing on 20 May 2020, Counsel for the Company advised the Court that the Company was surprised that the TA Entities had decided to present winding up petitions to this Court as the Company had expected that the deadline for agreeing a definitive agreement by 14 May 2020 would be extended. Counsel advised the Court that in a bid to preserve the possibility of the restructuring, on 20 May 2020, the Company filed an application in the Singapore High Court for a moratorium under section 211B of the Singapore Companies Act so as to provide the Company with sufficient time to propose and formulate a scheme of arrangement under section 210 of the Singapore Companies Act as a part of the proposed restructuring. Section 211B provides for an automatic 30 day moratorium on proceedings against the applicant pending a hearing of the application and thus provided the Company with immediate albeit temporary relief from further creditor action in Singapore.

Appointment of JPLs: Light touch vs full powers
11

I summarised the legal regime in Bermuda for the appointment of provisional liquidators generally in my Ruling in Deepak Raswant v Centaur Ventures Ltd [2019] SC (Bda) 55 Com (26 August 2019) in paragraphs 7–11:

  • “7. The statutory basis for the appointment of provisional liquidators is to be found in section 170(2) of the Act and rule 23(1) of the Companies (Winding-Up) Rules 1982.

  • 8. Section 170(2) provides that:

    “The Court may on the presentation of a winding-up petition or at any time thereafter and before the first appointment of a liquidator appoint a provisional liquidator who may be the Official Receiver or any other fit person.”

  • 9. Rule 23(1) of the Companies (Winding-Up) Rules 1982 provides that:

    “After the presentation of a petition for the winding-up of a company by the Court, upon the application of a creditor, or of a contributory, or of the company, and upon proof by affidavit of sufficient ground for the appointment of a provisional liquidator, the Court, if it thinks fit and upon such terms as in the opinion of the Court shall be just and necessary, may make the appointment.”

  • 10. The appointment of provisional liquidators is an exercise of judicial discretion. In exercising that discretion, the courts in Bermuda ( Re CTRAK Ltd [1994] Bda LR 37 (Ground J); Discover Reinsurance Co v PEG...

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