FamilyMart China Holding Co Ltd v Ting Chuan (Cayman Islands) Holding Corporation (Cayman Islands)
[2023] UKPC 33
Sian Participation Corp (In Liquidation) v Halimeda International Ltd (Virgin Islands)
19 June 2024
[2024] UKPC 16
Privy Council
A company owed a lot of money and didn't pay. The lender wanted to liquidate the company to get their money, but the company said the debt issue should be decided in arbitration first. The judge sided with the lender. The Privy Council agreed with the judge, saying arbitration isn't required if the debt isn't genuinely disputed. It's simpler and faster to just liquidate the company to settle the debt.
Key Facts
- •Sian Participation Corp (in liquidation) owed Halimeda International Ltd (a subsidiary of FESCO) USD 140 million under a loan agreement with a broad arbitration clause.
- •Halimeda applied for Sian's liquidation in the BVI based on non-payment of the debt.
- •Sian argued that the debt dispute should be arbitrated before liquidation.
- •The BVI courts rejected Sian's argument, finding the debt was not genuinely disputed on substantial grounds.
- •Sian appealed to the Privy Council.
Legal Principles
In insolvency proceedings, a debt must be genuinely disputed on substantial grounds to prevent a winding-up petition.
Mann v Goldstein [1968] 1 WLR 1091; Sparkasse Bregenz Bank AG v In the matter of Associated Capital Corporation BVIHCVAP2002/0010 (18 June 2003)
Arbitration agreements should be interpreted expansively and pro-arbitration.
FamilyMart China Holding Co Ltd v Ting Chuan [2023] UKPC 33; Enka Insaat ve Sanayi AS v OOO ‘Insurance Co Chubb’ [2020] UKSC 38
A creditor's winding-up petition is not an 'action' triggering mandatory stay provisions under arbitration legislation.
Salford Estates (No 2) Ltd v Altomart Ltd (No 2) [2014] EWCA Civ 1575
Exclusive jurisdiction clauses should be interpreted similarly to arbitration clauses; a stay should only be granted if the debt is genuinely disputed on substantial grounds.
Donohue v Armco Inc [2001] UKHL 64
Outcomes
The Privy Council dismissed Sian's appeal.
The Privy Council held that Salford Estates was wrongly decided. A creditor's winding-up petition does not trigger mandatory arbitration, and the court's discretion to wind up a company should not be fettered unless the debt is genuinely disputed on substantial grounds.
The Privy Council overturned the Salford Estates decision's application to winding-up petitions.
The Privy Council found that the policy behind arbitration legislation does not extend to prohibiting winding-up proceedings when the debt isn't genuinely disputed. Requiring arbitration adds unnecessary delay and expense.
The Privy Council found that Sian did not have an appeal as of right.
The winding-up order did not directly affect Sian's ownership of the debt; the debt remained unaffected by the liquidation process. The value of the affected right was not above the threshold for a right of appeal.
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