In an application by Win-Win Aluminium Systems Pte Ltd (the Company) pursuant to section 210 of the Companies Act, the Company sought an order to convene a meeting of creditors for the purposes of approving a scheme of arrangement. The Company also sought a consequential order that any actions or proceedings against it be restrained or stayed save with the leave of court. A creditor of the Company, Tavica Design Pte Ltd (Tavica), had earlier commenced winding up proceedings against the Company. The court directed the application by the Company to be heard with the winding up proceedings, and such direction was given with a condition imposed.

By way of background, the Company had commenced arbitration proceedings in 2001 against Tavica to recover some S$1.813 million. In the arbitration, an interim award on some issues of fact had been made in favour of Tavica and Tavica had issued a statutory demand to the Company for S$240,650.95; the cost awarded in its favour in respect of that interim award. When the Company failed to pay this amount, Tavica commenced winding up proceedings against the Company. Tavica also claimed against the Company in the arbitration an amount in excess of S$1.8 million.

In its section 210 application, the Company indicated that it wished to pursue its claim against Tavica in the arbitration proceedings, which it believed to be meritorious, and argued that it had already provided security for costs of S$100,000 for the arbitration and a former director had also agreed to lend the company up to S$115,000 to pay for the costs of arbitration, should the scheme of arrangement be approved. The directors of the Company believed that carrying out the scheme of arrangement and pursuing the arbitration was more viable for its creditors than a compulsory liquidation where the creditors are likely to receive no returns.

The Company, however, in its proposed scheme of arrangement listed Tavica as a creditor for only S$240,650.95 and Tavica was not listed as a contingent creditor for its substantive claim in the arbitration. Notably, if Tavica's substantive claim was included as a contingent debt, it is not likely that the votes in favour of the proposed scheme of arrangement would reach the three-fourths in value necessary for it to become binding on the creditors. Furthermore, Tavica maintained that the significant creditors listed by the Company in the proposed scheme were related to the Company and had not responded to queries as to how their alleged debts arose.

The court directed the section 210 application to be heard with the winding up proceedings and imposed the condition that the prayers in the application would not be granted unless the Company provided some security to the satisfaction of Tavica or paid Tavica the amount in issuing the winding up proceedings. The court was of the view that if the Company intended to pursue the arbitration with Tavica, it should pay up whatever costs had been ordered in those proceedings. If the section 210 application was granted without such a condition imposed, the company would have effectively obtained a stay of the costs order, as all proceedings against the Company, including the winding up proceedings, would be stayed unless leave of court was obtained to proceed.