Singapore Court of Appeal clarifies treatment of disputed debts in winding up applications involving arbitration agreements

13 May 2026

The Singapore Court of Appeal in Singapore Commodities Group Co., Pte. Ltd. v Founder Group (Hong Kong) Ltd (in liquidation) [2026] SGCA 24 has reaffirmed the principles governing winding up applications founded on disputed debts that are subject to arbitration agreements. The Court of Appeal also provided important guidance on the scope of the “abuse of process” exception recognised by it in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158 (“AnAn”), and when indemnity costs would be ordered against a petitioning creditor.

Allen & Gledhill Partners William Ong and Benjamin Koh acted for Singapore Commodities Group Co., Pte. Ltd. (“Company”) which successfully resisted the winding up proceedings.

Background

In 2022, Founder Group (Hong Kong) Limited (“FGHK”) commenced winding up proceedings against the Company on the basis of an alleged debt (“Alleged Debt”) arising from a contract for the sale of copper cathodes (“Contract”). The Company disputed the debt, contending among other things that the Contract was a sham and that no goods had in fact been delivered.

The Company commenced arbitration pursuant to an arbitration agreement in the Contract, seeking a negative declaration that the Alleged Debt did not exist. The parties agreed to a stay of the winding up proceedings upon the Company’s payment of a sum equivalent to the Alleged Debt (“Sum”) into court as security, pending the outcome of the arbitral proceedings and the winding up proceedings.

The arbitral tribunal in its award ultimately declined to grant the Company’s application for a negative declaration that no debt was owed, but also expressly declined to find that the Alleged Debt existed, noting evidential difficulties with FGHK’s case that there was delivery of goods and the fact that FGHK (as respondent) did not bring a counterclaim for the Alleged Debt.

In an earlier appeal (concerning the treatment of the Sum paid into court by the Company as security in the light of the arbitral tribunal’s decision), the Court of Appeal in Singapore Commodities Group Co., Pte. Ltd. v Founder Group (Hong Kong) Ltd [2025] SGCA 35 held that FGHK had not established the existence of the Alleged Debt in the arbitration given the findings of the arbitral tribunal and had failed to establish that it was entitled to be paid the said Sum. The Court of Appeal remitted the winding up application to the General Division of the High Court (“High Court”) for determination in accordance with the principles in AnAn and Founder Group (Hong Kong) Ltd v Singapore JHC Co Pte Ltd [2023] 2 SLR 554 (“Founder Group (CA)”).

On remittal, the High Court ordered that the Company be wound up, applying the principles in AnAn and holding that the Company had acted in abuse of process by resiling from what the court viewed as earlier admissions of the Alleged Debt. The Company appealed against the winding up order.

Decision of the Court of Appeal

The Court of Appeal outlined the legal framework in winding up applications when a claimant (“C”) brings a winding up application against a defendant (“D”), where three conditions must be met for the courts to make a winding up order on the application:

• First, C must have standing as a person with a statutory right to apply for the winding up under section 124(1) of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”);
• Second, C must establish one or more of the grounds for winding up under section 125(1) of the IRDA;
• Third, there must be no reason for the court to exercise its discretion to decline to make a winding up order notwithstanding that a ground for winding up has been established.

When the dispute is not subject to a valid arbitration agreement

Where the dispute is not subject to a valid arbitration agreement, the court will consider if D is disputing the debt claimed by C on bona fide and substantial grounds. In practice, what this means is that the court will consider if D’s defence to C’s claim for the debt raises a triable issue that would have resulted in the court giving D leave to defend if C had brought an application for summary judgment for the debt.

If the court finds that D has raised a triable issue on the debt, the starting point is that C will have no standing to apply as a creditor to wind up D, unless the court decides the dispute in the winding up proceedings and does so in C’s favour. In this regard, the general rule is that the court will not decide such a dispute in a winding up application, as the winding up proceedings is generally ill-suited for determining disputes of fact and the court is keen to guard against the risk of the threat or pendency of winding up proceedings being abused as a means of exerting improper pressure against a company that genuinely disputes the debt. This means that, in most cases, the winding up application will be dismissed on the ground that C has no standing to apply as a creditor of D.

When the dispute is subject to a valid arbitration agreement

Where there is a valid arbitration agreement between C and D, this circumscribes the discretion of the court to exercise its general civil jurisdiction to decide the dispute in the winding up proceedings, as to do so would be contrary to the parties’ agreement as to their choice of forum to resolve their differences.

The Court of Appeal held in AnAn that in assessing if there is a valid arbitration agreement between C and D and whether the dispute raised by D falls within the scope of the arbitration agreement, the court should adopt a prima facie standard of review. If the parties have agreed to resolve disputes over the debt in arbitration, it would be inappropriate for the court to review the merits of the dispute because this would be inconsistent with the parties’ agreed mode of dispute resolution. The Court of Appeal in AnAn also held that the prima facie standard of review should be subject to an “overarching restriction” that the court will not stay or dismiss the winding up application where to do so would amount to an abuse of the process of the court. Such a safety valve was necessary to check against abuses of the prima facie standard of review as it may be all too convenient for D to assert a dispute that appears prima facie to be subject to a valid arbitration agreement between C and D. One example of an abuse of process was where D raises a dispute to the debt in the face of an earlier admission of it as regards both liability and quantum.

The general approach as settled in AnAn was therefore that, rather than applying the general approach of assessing if the debt is disputed by D on bona fide and substantial grounds and potentially going on to decide that dispute, the court will ordinarily dismiss or, in exceptional cases, stay, a winding up application brought by C if:

• there is prima facie a valid arbitration agreement between C and D;
• D has raised a dispute in relation to the debt claimed by C which prima facie falls within the scope of the arbitration agreement; and
• D has not raised the dispute in relation to the debt in circumstances constituting an abuse of the process of the court.

The courts of other jurisdictions have taken a different view on the effects of an arbitration agreement on the treatment of disputed debts in winding up applications from the approach described above. This Court of Appeal decision is therefore significant in showcasing the divergence between Singapore’s approach to disputed debts in winding up applications involving an arbitration agreement and the approaches recently adopted by the English courts and Malaysian courts.

English and BVI approach: Sian Participation

The Privy Council adopted a different approach in Sian Participation Corp v Halimeda International Ltd [2025] AC 1321 (“Sian Participation”), hearing an appeal from the Eastern Caribbean Court of Appeal. The Board held that the existence of an arbitration agreement does not displace the general triable issue standard of review in winding up applications.

The Board reasoned that a court hearing a winding up application “does not seek to, and does not, resolve or determine anything about the petitioner’s claim to be owed money by the company”. On this analysis, a dispute over the debt arising in the context of winding up proceedings does not fall within the scope of the parties’ arbitration agreement: the negative obligation imposed by an arbitration agreement - not to have disputes resolved in any forum other than arbitration - is not breached by the commencement of winding up proceedings. The proposition that a winding up application does not involve the adjudication of C’s claim to be a creditor either as to liability or quantum was supported by how a winding up order does not give rise to a res judicata between C and D as to the debt, and that a liquidator of D remains free to reject a proof of debt even if the debt claimed by C was the debt upon which the winding up order was founded.

Malaysian approach: Swissray

The Federal Court of Malaysia in V Medical Services M Sdn Bhd v Swissray Asia Healthcare Co Ltd [2025] 2 MLJ 744 (“Swissray”) similarly held that the general triable issue standard should apply even where the disputed debt is subject to an arbitration agreement.

Instead of focusing on how the winding up application did not decide a dispute over the debt like the Board did in Sian Participation, the Federal Court preferred to emphasise two other points. First, it emphasised the need to maintain a clean separation between the spheres of operation of the arbitration and insolvency regimes, given their different underlying policies, concluding that there should be no alignment of the approach to disputed debts in winding up applications with the approach in stay applications (when a party seeks a stay of court proceedings in view of an arbitration agreement). Second, the collectivist nature of winding up proceedings involves the determination of whether D was insolvent in the interests of D’s creditors, which distinguishes a dispute over the debt in a winding up application from a simple bilateral dispute between C and D over the debt.

Singapore Court of Appeal’s approach

The Court of Appeal declined to revisit AnAn and Founder Group (CA) in the present case as FGHK confirmed it was not seeking to challenge the prevailing Singapore position. However, the court identified two examples of areas where the reasoning in Sian Participation and Swissray were fundamentally inconsistent with the prevailing Singapore position.

First, the Board’s approach in Sian Participation appears to be based on interpreting the obligation imposed by an arbitration agreement as an obligation of a more limited scope that prevents the parties from obtaining a final adjudication on the merits of their dispute in a forum other than arbitration. On this view, it would not be inconsistent with the parties’ agreement to arbitrate for the court to assess if the debt is disputed on bona fide and substantial grounds. However, the approach in AnAn adopts the opposing perspective and considers that the court should not engage in any form of merits review as that is a matter which the parties have reserved to the arbitral tribunal by agreement. This underlies the rejection of the triable issue standard where there is an arbitration agreement between the parties in AnAn.

Second, the decisions in Sian Participation and Swissray do not appear to have considered the anterior question of whether a dispute over the debt will affect C’s standing to apply for the winding up of D as a creditor of D. As the arbitration agreement would also generally prevent the court from exercising any discretion pursuant to its general civil jurisdiction to decide the dispute in the winding up application, C will be required to establish its standing by obtaining a resolution of the dispute in arbitration as the parties’ agreed forum.

Clarification of the abuse of process exception

Eventually, the Court of Appeal allowed the Company’s appeal and set aside the winding up order, on two main bases:

• Lack of standing: FGHK lacked standing as a creditor because the Alleged Debt remained disputed and subject to a valid arbitration agreement. It was notable that FGHK did not commence a fresh arbitration to establish the Alleged Debt. The overwhelming impression was that FGHK had chosen to press on with the winding up proceedings instead of commencing a fresh arbitration to establish the Alleged Debt because it was concerned that it would not succeed in any such arbitration, especially in light of the deficiencies in its evidential case which the arbitral tribunal had flagged in its award.
• No abuse of process: The High Court had erred in finding that the Company acted in abuse of process.

In respect of costs, the Court of Appeal made an exceptional order for FGHK to pay costs of the winding up application and the appeal on an indemnity basis. The court also ordered that the costs of the liquidation of the Company up to the Court of Appeal’s decision were to be borne by FGHK. The court also ordered that the Sum was to be returned to the Company. 

The Court of Appeal clarified that the abuse of process exception recognised in AnAn is narrow in scope. In particular, where abuse is alleged on the basis that a debtor has resiled from an earlier admission of debt, the inquiry involves two stages:

• First, there must have been a clear and unequivocaladmission by the defendant as to liability and quantum for the claimed debt; and
• Second, the defendant must have resiled from the admission without a clear and convincing reason for its change in position.

In relation to the first stage, the court stressed that where there is dispute or uncertainty over whether there was an admission of the debt, the winding up application should be dismissed (or, in exceptional circumstances, stayed) in favour of arbitration. A dispute over whether the defendant has indeed admitted the claim is itself a dispute that an arbitral tribunal has jurisdiction over and, therefore, it is important for the court to tread carefully.

In relation to the second stage, the court emphasised that it will not and should not evaluate the merits of the defence. Thus, the winding up application would be dismissed if the debtor provided an explanation for its change of position that would satisfy the court that it is not disputing the debt for the sole purpose of staving off winding up.

On the facts, the court found that:

• the alleged admissions relied upon by FGHK, including audit confirmation letters and accounting records, did not amount to clear and unequivocal admissions of liability. The arbitral tribunal’s findings in the award that the audit confirmation letters did not evidence the Alleged Debt under the law of the People’s Republic of China which governed the Contract was fatal to FGHK’s case that the audit confirmation letters were admissions that the Company had resiled from; and
• in any event, the Company had a clear and convincing reason for disputing the Alleged Debt, particularly given the arbitral tribunal’s express refusal to find that the Alleged Debt existed.

The court also considered it significant that the Company had proactively pursued arbitration before the commencement of the winding up proceedings and proactively applied to pay the Sum into court as security pending resolution of the dispute in the arbitration. In contrast, the court found that FGHK’s continued prosecution of the winding up application after the arbitration was clearly abusive and smacked of bad faith. The court considered the case to be a paradigm example of the winding up application being abused as an instrument of coercion to pressure a defendant into paying a debt that is genuinely disputed.

Significance of the decision

The decision reinforces Singapore’s pro-arbitration approach in the insolvency context. The court will not engage in any form of merits review on a disputed debt as that is a matter which the parties have reserved to the arbitral tribunal. It underscores that C should not attempt to circumvent an arbitration agreement entered into with D through the use of a winding up application to pressure D into paying a disputed debt.

The judgment is also notable for clarifying:

• the relationship between creditor standing and disputed debts in winding up applications;
• the limited scope of the abuse of process exception in AnAn;
• the circumstances in which indemnity costs would be ordered against an unsuccessful petitioner for winding up.

More broadly, when an alleged debt falls within the scope of an arbitration agreement, the Court of Appeal’s decision confirms that C may face substantial difficulties establishing standing to pursue winding up proceedings where an arbitral tribunal has not yet determined that the disputed debt exists, subject to the “safety valve” or exception where D had raised the dispute in relation to the debt in circumstances constituting an abuse of process of the court.

Practical takeaways

Parties seeking to commence winding up proceedings where the underlying debt is subject to an arbitration agreement should carefully assess:

• whether the debt is disputed and whether there are any admissions of the debt (as to both liability and quantum);
• whether any alleged admissions of that debt are sufficiently clear and unequivocal;
• whether there is a proper basis to invoke the narrow abuse of process exception under AnAn;
• whether parties should resolve any dispute over the debt in arbitration instead (and if the putative creditor is confident of the merits of its claim, whether applications analogous to summary judgment applications in court could be made use of in the arbitral proceedings); and
• whether a decision to commence winding up proceedings despite the existence of an arbitration agreement could itself be construed as creditor abuse of process.

Conversely, debtors disputing a debt should ensure that their conduct remains consistent with a genuine intention to resolve the dispute through the agreed arbitral process.

Reference materials

The judgment is available on the Singapore Courts website www.judiciary.gov.sg.