In AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33, Justice Steven Chong, delivering the judgment of the Court, (1) overturned the decision of the High Court which allowed a creditor (VTB Bank) to proceed with its winding up petition against a debtor (AnAn), and (2) upheld the arbitration agreement pursuant to which the dispute underlying the debt should first be resolved.  In doing so, the Court of Appeal reaffirmed Singapore’s pro-arbitration stance while also recognising that special considerations may apply in the context of possible insolvency.

The Court of Appeal removed the “triable issue” standard that ordinarily applies to debtors who challenge a winding up application on the basis of an underlying dispute. The Court of Appeal found that where any such dispute is subject to an arbitration agreement, the standard to be applied should be the lower “prima facie” standard of review. This does not mean, however, that debtors will be permitted to defeat all winding up applications by raising disputes which are subject to arbitration agreements. A debtor must still prove its bona fides in alleging a dispute over the debt. Further, where the creditor has legitimate concerns over the solvency of the debtor company, the ‘triable issue’ standard is reintroduced: if the debtor is unable to prove any triable issues, the winding up application will be stayed, and not dismissed, offering the creditor some security over the management of the company’s assets until the arbitration is concluded. Alternatively, the debtor may be required to provide an undertaking to that effect until the arbitration is concluded.

The facts

VTB and AnAn entered into a ‘global master repurchase agreement’ (GMRA) under which AnAn would sell global depository receipts (GDRs) of certain shares and then repurchase the GDRs later at (higher) pre-agreed rates. The difference between the original sale price and the pre-agreed rates was in essence, interests and costs. Therefore, despite being structured as a sale and repurchase, the GMRA was in substance a loan arrangement between VTB (as lender) and AnAn (as debtor).

VTB alleged multiple events of default under the GMRA. In such circumstances, the GMRA entitled VTB to accelerate the repurchase of the GDRs at a designated value. VTB therefore sent a notice of default to AnAn, exercising this right and stating that a sum of approximately US$170 million was owed by AnAn. VTB then served a statutory demand for the sum (in essence, a demand for payment which, if not complied with, is taken as prima facie evidence of a company’s inability to pay debts, for the purposes of Singapore’s insolvency legislation).  When AnAn failed to pay the demand within the statutory timeline, VTB applied to the Singapore court to wind up AnAn on  the basis of alleged insolvency.

AnAn resisted the winding up application by challenging both the substance and the quantum of the alleged debt. AnAn argued that VTB was not entitled to the accelerated debt and that it was, in any case, not entitled to the quantum of the debt claimed.  For example, AnAn argued that there were genuine disputes including (amongst others) whether VTB had followed the agreed procedure for obtaining bids from appropriate markets before relying on the new value of the GDRs.

In resisting a winding up application, a debtor must ordinarily raise “triable issues” (i.e. the existence of a substantial and bona fide dispute over the debt claimed) in order to obtain a stay or dismissal of the application. This ‘triable issue’ standard is an exacting one: mere assertion of a dispute will not suffice. Put simply, the court must critically consider and be convinced that the debtor has a credible defence to the dispute, such that the matter requires further examination and the winding-up should be stayed or dismissed.

However, AnAn argued that where the (alleged) matters in dispute were subject to an arbitration agreement, a lower standard of review (than that of a triable issue) should be applied: the court should only consider if (i) there exists a dispute over the debt; and (ii) that the dispute falls within the scope of the arbitration agreement.  If the answer to both questions is ‘yes’, the court should stay or dismiss the winding up application in favour of the dispute being determined by arbitration.  AnAn argued that the merit of the debtor’s case on the disputed debt, or indeed, whether there existed any ‘triable issues’ at all, must be determined by the arbitral tribunal in accordance with the parties’ arbitration agreement.


The Court of Appeal’s decision

The High Court rejected AnAn’s arguments. On appeal, however, the Court of Appeal agreed with AnAn and adopted the “prima facie” standard of review in place of the triable issue standard that would otherwise normally apply. The Court of Appeal’s reasons included (amongst others):

(1) Coherence of the law across regimes

The adoption of the prima facie standard of review in this context is consistent with the standard adopted for stay applications for all other court proceedings under Singapore’s arbitration regime: court proceedings are stayed so long as claims with prima facie merit fall within the scope of a valid arbitration agreement.

(2) Party autonomy in selecting arbitration as the dispute resolution mechanism

The lower prima facie standard of review also avoids the risk of claimant creditors exercising a tactical choice to bypass their arbitration agreements.  If the higher ‘triable issue’ standard applied in the context of winding up applications, a claimant creditor would have the option of pursuing a winding up application over a disputed debt that it should properly have pursued in arbitration, pressuring the debtor to prove the existence of substantive defences according to a higher standard (or to settle the claim) in order to avoid summary liquidation and reputational damage.

Further, as the Court of Appeal noted, arbitration could have been preferred by the parties for a multitude of reasons, including finality and confidentiality, even in determining debt claims. That agreement to arbitrate should be respected regardless of the merits of the dispute i.e. regardless of whether the debtor’s case appears weak, as long as it met the prima facie standard. The fact that the ‘triable issue’ standard would require the court to critically consider the merits of the company’s defences would itself be contrary to the parties’ arbitration agreement: only the arbitral tribunal should assess the merits of any dispute arising under the contract.

Under the lower prima facie standard of review, the court is merely required to determine whether it appears, on a prima facie basis, that (i) there is an arbitration agreement; and (ii) the dispute of the debt is caught by the arbitration agreement. If so, the court must not undertake a review of the merits of the dispute; a stay or dismissal of the winding up application should be granted in favour of such arbitration.[1] A winding up application should only follow once the arbitration determines the debt to be owing and unpaid.

Grounds for refusal of a stay: avoiding debtor’s abuse of process

As an important safeguard, however, the Court of Appeal also held that the lower standard of review does not entitle the debtor to an automatic stay once it alleges the prima facie existence of a dispute: the bona fides of the debtor in raising the dispute remains a relevant factor to avoid any abuse of process. Various jurisdictions have adopted different ‘tests’ for ensuring that a debtor does not raise an entirely meritless dispute over the debt in order to buy time under a process of arbitration and avoid liquidation.

For example, the English courts, which also adopt the lower prima facie standard of review, require “wholly exceptional circumstances” to be proven before refusing a stay in favour of arbitration: such circumstances have been stated to be so rare as to be “difficult to envisage”. The result, as the English courts have described, is to place a “very heavy obstacle in the way of a party who presents a petition claiming sums due under an agreement that contains an arbitration clause … where there is an arbitration clause, it is sufficient to show that the debt is ‘disputed’ and for that it is sufficient to show that the debt is not admitted”.

The position in Singapore diverges here in favour of the creditor’s interests: the Court of Appeal held the standard of “wholly exceptional circumstances” is pitched too high, leading at times (as seen in some English cases) to situations where a debtor is able to stay a winding up proceeding to pursue arbitration even though it had previously admitted liability to the debt, although denying such liability at the winding up application.

In Singapore, as decided in AnAn v VTB, stays or dismissals of insolvency proceedings in favour of arbitration will be granted unless there is an ‘abuse of process’. Examples of when this “high threshold” is met include:

  • where the debt is admitted on both liability and quantum;
  • where the debtor has waived or may be estopped from asserting his rights to insist on arbitration, such as where the parties have subsequently agreed that the dispute may be resolved by litigation; or
  • where there exist substantiated concerns which justify the invocation of the insolvency regime: for example, where the assets of the debtor company have gone missing or where there is a proper basis to conclude that there had been fraudulent preferences.

This test therefore reserves to the Singapore courts the flexibility to determine each application in its context. The Court of Appeal has stressed, however, that the ‘abuse of process’ control is not an avenue for creditors to introduce arguments challenging the merits of the underlying dispute. Consequently, an argument that there has been an abuse of process because the dispute alleged by the debtor is “so obviously lacking in merit” will not succeed on that ground alone.

Recognising creditors’ interests: avoiding an abuse of process by choosing to stay and not dismissing the winding-up application

Ordinarily, the court should dismiss the entire winding up application in favour of arbitration, given that the stay of a winding up application itself carries severe reputational consequences for the company.

However, in certain scenarios, if the winding up application is dismissed, that too could lead to an unfair result. As examples, the Court of Appeal suggested:

  • a company which does not appear to be immediately insolvent; but
  • if faced with a substantial claim, would become insolvent; and
  • which has been able to raise a prima facie dispute but not triable issues over the debt.

If the winding up application is dismissed in favour of arbitration, that company would continue to trade (without restraint) until the conclusion of the arbitration. Having then been unable to raise triable issues in relation to the dispute, the arbitration may be resolved in favour of the creditor, but by that time the assets of the company have been further depleted. Similar situations arise where a company faces multiple debt claims, each arbitrable and each independently capable of bankrupting the company. Dismissal of the winding up applications in favour of arbitration in these scenarios adds to the risk of recovery for the otherwise innocent creditor.

Singapore has chosen to adopt a middle ground: any dismissal of a winding up application would require the prompt resolution of the dispute which is to be referred to arbitration, to militate against any undue delay or risk of recovery of a legitimate debt. In this regard, the Court endorsed the approach considered in Hong Kong i.e. to only dismiss an application where the debtor company shows that it had taken steps to commence arbitration in relation to the disputed debt. Further, a debtor who has not satisfied the court that there are triable issues in its dispute over the debt can only expect a short adjournment to commence the arbitration; if sufficient evidence to establish a genuine dispute is still absent, it should expect to have to give an undertaking to proceed with the arbitration. Such orders are to be made on a case by case basis by the court hearing the winding up application.

Therefore, even in applying the prima facie standard of review, where an applicant creditor is able to demonstrate legitimate concerns about the solvency of the debtor company, and that no triable issues have been raised by the debtor, the court offers a control mechanism by ordering a stay instead of a dismissal of the winding up proceedings. The creditor will have the liberty to apply to the court to proceed with the winding up if it is shown that the debtor company has no genuine desire to arbitrate, is taking active steps to stifle or delay the arbitration, or is paying off other creditors to the detriment of the claimant.


The Singapore Court of Appeal’s approach is potentially complex in that it may sometimes require the court to apply multiple standards to the issues before it; for example (as discussed above), whether the issues raised by the debtor satisfy a prima facie test but fail to amount to triable issues.  Nevertheless, it is a measured approach which aims to balance competing interests by ensuring that the creditor’s interest in enforcing its rights to payment is protected, while also reaffirming Singapore’s stance of minimal curial intervention where parties have agreed to arbitrate their disputes. The safeguards that have been introduced (unlike other jurisdictions) also provide certainty to both creditors and debtors as to the limits of their case even under the lower prima facie standard of review.

In light of this decision:

  • Claimants should carefully consider whether there are strategic advantages in pursuing a winding up application rather than an arbitration where the claim, is in substance, a debt claim, given the low standard of proof required in order to enforce the arbitration agreement.
  • Debtor companies should similarly be aware of their rights to insist on arbitration rather than litigate their disputes through insolvency proceedings, as well as the consequence of admitting liability or quantum of a debt.
  • A debtor presented with a winding up application would also do well in considering the need to argue both the prima facie and triable issue standards in order to have the application dismissed, rather than stayed.
  • Importantly, all parties should carefully consider their arbitration agreements and whether to include any carve outs for debt recovery and/or insolvency proceedings relating to specific obligations under the contract.

For more information, please contact Alistair Henderson, Partner, Gitta Satryani, Of Counsel, Daniel Waldek, Of Counsel, Reshma Nair, Associate, or your usual Herbert Smith Freehills contact.

Alastair Henderson
Alastair Henderson
+65 68688058

Gitta Satryani
Gitta Satryani
Of Counsel
+65 68688067

Daniel Waldek
Daniel Waldek
Of Counsel
+65 686 88068

Reshma Nair
Reshma Nair
+65 68688002

[1] Indeed, the Court of Appeal described the arbitration of any disputed debt as a “necessary precondition” to engaging the insolvency regime: the presentation of an unsatisfied statutory demand only leads to the presumption of insolvency; where that presumption is disputed, the debt is only established to be due and owing to the creditor by way of arbitration (and cannot be determined by the court) – an important characterisation at law that further supports the need for a lower standard of review.


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