Chan Siew Lee Jannie v Australia and New Zealand Banking Group Ltd

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu SJ
• Judgment Date: 15 June 2015
• Neutral Citation: [2015] SGHC 157
• Court: High Court (Singapore)
• Docket Number: Originating Summons (Bankruptcy) No 2 of 2015
• Year: 2015
• Published date: 08 April 2016
• Hearing Date: 13 February 2015
• Plaintiff Counsel: Eugene Thuraisingam and Jerrie Tan (Eugene Thuraisingam LLP)
• Defendant Counsel: Chou Sean Yu, Aw Wen Ni and Liang Hanting (WongPartnership LLP)
• Subject Matter: Insolvency Law,Bankruptcy,Statutory Demand,Civil Procedure,Extension of Time
• Citation: [2015] SGHC 157

Kan Ting Chiu SJ: Background

The Plaintiff, Jannie Chan Siew Lee (“the Plaintiff”), is a debtor to the Defendant, Australia and New Zealand Banking Corporation Group Limited (“the Defendant”). The Defendant is a bank incorporated in Australia. The Defendant had, in the course of its business, made a loan (“the loan’) to Timor Global LDA (“TGL”), a company incorporated in Timor-Leste. Pursuant to the terms of the loan, TGL pledged its assets to the Defendant. The Plaintiff is a shareholder and director of TGL and she executed a personal guarantee with the other directors of TGL in favour of the Defendant.

TGL defaulted on the loan and the Defendant commenced legal action against the guarantors and obtained judgment against the Plaintiff. When the Plaintiff did not satisfy the judgment, the Defendant served a Statutory Demand (“SD”) issued under r 94 of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) (“BR”) on the Plaintiff on 15 October 2014. On 8 January 2015, the Plaintiff instituted these proceedings against the Defendant to obtain an extension in time for her to apply to set aside the SD under r 97 of the BR and to set aside the SD under r 98 of the BR. I dismissed both applications.

The grounds for the application

The Plaintiff’s case was that the SD should be set aside as it was defective because the security offered by TGL was not listed in the SD. Her explanation for not filing the application to set aside the SD on time was that she had been negotiating with the Defendant through her solicitors for the Defendant to forebear from presenting a bankruptcy petition against her. However, the negotiations broke down on 7 January 2015, and she filed the application on the following day. As the main focus of the submissions from the parties was whether the SD should be set aside, I dealt with this issue first.

Setting aside the SD

The application is grounded on rr 94(5) and 98(2) of the BR. They read as follows: 94(5) If the creditor holds any property of the debtor or any security for the debt, there shall be specified in the demand —

(a) the full amount of the debt; and

(b) the nature and value of the security or the assets.

…

98(2) The court shall set aside the statutory demand if —

…

(c) it appears that the creditor holds assets of the debtor or security in respect of the debt claimed by the demand, and either rule 94(5) has not been complied with, or the court is satisfied that the value of the assets or security is equivalent to or exceeds the full amount of the debt …

[emphasis added]

Mr Thuraisingam, counsel for the Plaintiff, contended that the word “security” in the phrases in italics refers to all security held by the creditor in relation to the debt (“the all-security construction”). The Defendant took the position that the word “security” refers only to security provided by the debtor to whom the SD was issued (“the debtor’s-security construction”). This issue arose because the assets pledged by TGL were not specified in the SD.

The proper meaning of “security” in rr 94(5) and 98(2) had been dealt with and settled in two cases, namely, Re Loh Lee Keow and another, ex parte Keppel TatLee Bank Ltd [2000] 3 SLR(R) 283 (“Re Low Lee Keow”) and Sia Leng Yuen v HKR Properties Ltd [2001] 3 SLR(R) 587 (“Sia Leng Yuen”). In Re Loh Lee Keow, Woo Bih Li JC (as he then was) undertook a careful analysis of rr 94(5), 98(2)(c), 101(2), and Form 2 of the BR, and ss 63(1) and (2) of the Bankruptcy Act (Cap 20, 2000 Rev Ed) (“BA”). His conclusion was that the word “security” in rr 94(5) and 98(2) means security on the property of the debtor in the bankruptcy proceedings. He explained (at [33]) that:

It does not make sense that while the creditor’s petition does not have to mention a security on the property of a third party, the court should be obliged to take the third party’s security into account in deciding whether to make a bankruptcy order on hearing the petition.

In Sia Leng Yuen, Lee Seiu Kin JC (as he then was) was urged to find that Re Loh Lee Keow was wrongly decided and that the security offered by parties other than the debtor who was the subject of the bankruptcy proceedings had to be disclosed and taken into account in an SD. Lee JC declined to do that, and agreed with Woo JC’s construction because “in a very tightly-argued judgment, the judge had demonstrated that the view which he held was the only one possible.”

Rule 98(2)(c) is not unique to Singapore. It is virtually identical to r 6.5(4)(c) of the Insolvency Rules 1986 (SI 1986 No 1925) (UK), which provides that a court may set a statutory demand aside if:

[I]t appears that the creditor holds some security in respect of the debt claimed by the demand, and either Rule 6.1(5) is not complied with in respect of it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt …

In White v Davenham Trust Ltd [2011] EWCA Civ 747 (“White v Davenham”), the English Court of Appeal held that the security contemplated by r 6.5(4)(c) was the security provided by the debtor. Lloyd LJ, in delivering the judgment of the Court, explained at [35] that:

… If… the security which the creditor holds is given not by the particular debtor but by a third party, whoever that third party may be, that security is not over an asset which can have any effect on the bankrupt estate of the particular debtor and it is accordingly irrelevant for the purposes of...