STANDARD CHARTERED BANK, SINGAPORE BRANCH V CHUA SENG KIAT (LIM PENG LIANG DAVID LLEWELLYN, INTERVENER) [2019] SGHC 240
In the recent decision of Standard Chartered Bank, Singapore Branch v Chua Seng Kiat (Lim Peng Liang David Llewellyn, intervener) [2019] SGHC 240 (“SCB v CSK”) the High Court dismissed an appeal against the Assistant Registrar’s decision to annul a bankruptcy order made against the Respondent, before all the debts in the bankruptcy had been proven.
I. Background
The facts of this case were uncommon. The Plaintiff, Standard Chartered Bank, Singapore Branch, commenced a bankruptcy application against the Respondent and a bankruptcy order was made against the Respondent ([2] SCB v CSK).
Subsequently, an order for a stay of the execution of the bankruptcy order against the Respondent was made pending the outcome of an appeal filed by the Respondent against the decision to grant the bankruptcy application ([3] SCB v CSK).
The Appellant, Mr. Lim Peng Liang David Llewellyn, an alleged creditor of the Respondent, filed two proofs of debts against the Respondent (“Alleged Debts”) for the sums of S$283,087.02 and US$125,901.37. These Alleged Debts were disputed by the Respondent ([4] and [6] SCB v CSK).
Subsequently, the Respondent settled all the respective debts with his creditors, other than the Alleged Debts ([6] SCB v CSK).
However, the Respondent also secured the Alleged Debts by furnishing the sum of the Alleged Debts to his solicitors ([7] SCB v CSK). In turn, the Respondent’s solicitors provided an undertaking to pay the Alleged Debts to the Appellant in the event that a court decided that the Alleged Debts were due and payable to the Appellant ([7] SCB v CSK).
The Respondent then filed an application to annul the bankruptcy order by reason that he had met the requirements under s 123(1)(b) of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (the “BA”). Only the Appellant objected to the annulment ([6] read with [7] SCB v CSK).
II. The Decision of the Assistant Registrar
The Assistant Registrar granted the Respondent’s application to annul the bankruptcy order ([8] SCB v CSK). In doing so, the Assistant Registrar noted that:
a. The requirements to annul a bankruptcy order are provided in s 123(1)(b) BA ([8] SCB v CSK).
b. The extent to which such debts and expenses are to be paid or secured for the purposes of s 123(1)(b) BA, and the manner in which the security is to be given, is set out in r 237A of the Bankruptcy Rules (Cap 20, 2006 Rev Ed) (“BR”) ([9] SCB v CSK).
c. R 237A(5) BR permits a solicitor’s undertaking to secure the Appellant’s debt under the bankruptcy regime ([9] SCB v CSK).
d. Where security had been given in relation to a debt which had yet to be proven, r 237A(3) BR was applicable ([10] SCB v CSK).
e. The Alleged Debts fell into the category of disputed debts in r 237A(3) BR, and therefore an annulment order was allowed, once the requirement of security had been satisfied ([11] SCB v CSK).
III. The Decision of the High Court
The High Court agreed with the Assistant Registrar’s interpretation of r 237A(3) BR ([16] SCB v CSK).
The High Court held that r 237A(3) BR applies to a disputed debt, regardless of whether it has been proved in the bankruptcy ([16] SCB v CSK).
Read together with s 123(1)(b) BA, the court “only needs to be satisfied that the debts, proved or not, have all either been paid or secured for to the satisfaction of the court”, and this was satisfied by the Respondent by securing the Alleged Debts by way of a solicitor’s undertaking and settling the respective debts with his other creditors ([17] SCB v CSK).
The High Court also agreed with the Assistant Registrar that the ambit of r 197 BR is “not so wide such that no bankruptcy can ever be annulled until the adjudication of all proofs of debt have been completed. It is inconceivable that the annulment of any bankruptcy order must be conditional upon the adjudication of all proofs of debts by an Official Assignee or trustee.” ([18] SCB v CSK; emphasis in original).
This is because, “the golden thread that runs through bankruptcy proceedings [is that] the court does not endeavour to maintain a bankruptcy order when the bankrupt has paid or secured all debts of the bankruptcy”, an “annulment of a bankruptcy order should be allowed as long as such debts, whether proved or not, have all been paid or secured.” ([19] SCB v CSK).
IV. Observations of SCB v CSK
As the High Court had stated at [21] SCB v CSK, as the Respondent had the money to secure the Alleged Debts and pay his creditors, the Respondent has the autonomy to decide which debts he wishes to dispute (but still secure by way of a solicitor’s undertaking) and which debts he wishes to settle.
While the facts of SCB v CSK are rare, it is worth noting as it makes clear that if a debtor is able to settle and secure all his debts (including by way of a solicitor’s undertaking), then the creditor(s) would not be able to object to an annulment of the bankruptcy order.
In this regard, the High Court has stated that if a debt is secured by way of a solicitor’s undertaking, the creditor would then be “elevated” to a secured creditor, and the “… only foreseeable prejudice suffered… would be … having to sue the [debtor] under the civil regime instead of proving the debt under the bankruptcy regime” ([21] SCB v CSK).
Tags: Bankruptcy Act; Bankruptcy Rules; Bankruptcy Application; Bankruptcy Order; Annulment of Bankruptcy Order; Bankruptcy Regime; Disputed Debt
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