United Drug (UK) Holdings Ltd v Bilcare Singapore Pte Ltd & Anor

When deciding whether to lift a stay imposed in respect of an insolvent company, the court has a broad discretion to do what is right and fair in the circumstances. The court should balance the legitimate objectives of the applicant against the burden which continued proceedings would impose on the office holders and the insolvent estate. Relevant considerations include the likely complexity and cost of the proceedings, the availability of another solvent party to conduct the defence, the preservation of the estate’s assets, and the likely duration of the stay. A short expected period of delay does not require the stay to continue where the burden of proceedings is unsupported by evidence and the applicant has compelling reasons to proceed.

Bilcare Singapore Pte Ltd was subject to an insolvency process in Singapore, and its interim judicial managers were recognised in England as foreign representatives in foreign main proceedings under the Cross-Border Insolvency Regulations 2006. A stay consequently applied to proceedings concerning Bilcare Singapore.

United Drug sought to continue ICC arbitration proceedings against Bilcare Singapore and Bilcare Limited concerning alleged warranty and guarantee liabilities. The proposed order accepted that any award against Bilcare Singapore would not be enforced in England and Wales without the court’s permission. The issue was whether, and when, the stay should be modified or lifted.

1. The application to modify the stay was granted. The stay was lifted in accordance with the draft order, with effect from noon on 23 December 2013.

2. The applicable approach was that under section 130 of the Insolvency Act 1986 the court has a free hand to do what is right and fair according to the circumstances of each case. That approach applied equally to the stay arising under article 20 of the UNCITRAL Model Law.

3. The court balanced United Drug’s legitimate and substantial reasons for progressing the arbitration against the burden on the office holders. The material did not permit any reliable assessment that defending the arbitration would impose a significant burden. No defence had been identified, and it was possible that the defence could be conducted principally by Bilcare Limited, the solvent co-respondent, with the office holders taking a limited role.

4. The possibility that the Singapore proceedings might be resolved at a hearing listed for 7 February 2014 did not justify maintaining the stay. That date might be adjourned, and the delay would materially hinder United Drug’s ability to proceed against Bilcare Limited and determine its rights and obligations.

5. The stay was not lifted immediately. A short interval was allowed so that the office holders could communicate with the ICC secretariat and avoid any possible procedural consequence arising from an immediate lifting of the stay.

On 29 November 2013, Mr Murray, sitting as a Deputy Judge of the Chancery Division, recognised the Singapore insolvency proceedings as foreign main proceedings and directed that proceedings concerning Bilcare Singapore be stayed. The present court modified that order by lifting the stay from noon on 23 December 2013.