ITronic Holdings Pte Ltd v Tan Swee Leon

• Jurisdiction: Singapore
• Judge: George Wei J
• Judgment Date: 25 October 2017
• Court: High Court (Singapore)
• Docket Number: Bankruptcy No 2618 of 2016 (Registrar's Appeal No 125 of 2017)
• Date: 25 October 2017

iTronic Holdings Pte Ltd

and

Tan Swee Leon

[2017] SGHC 264

George Wei J

Bankruptcy No 2618 of 2016 (Registrar's Appeal No 125 of 2017)

High Court

Insolvency Law — Bankruptcy — Counterclaim, set-off or cross demand — Pending claim against creditor — Whether pending action disclosed valid counterclaim, set-off or cross demand — Rule 98(2)(a) Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed)

Insolvency Law — Bankruptcy — Statutory demand — Statutory demand not disclosing shares seized under writ of seizure and sale — Whether statutory demand defective for procedural non-compliance — Rules 94(5) and 101(2) Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed)

Insolvency Law — Bankruptcy — Stay of proceedings — Defendant's actions amounting to abuse of process and bad faith — Whether stay of proceedings warranted — Whether defendant's right of appeal fettered if stay denied

Res Judicata — Abuse of process — Commencement of new action relating to issues that should have been brought in previous action — Whether claims amounted to collateral attack on previous decision and abuse of process

Held, dismissing the appeal and allowing the bankruptcy application:

(1) It was not necessary for the Creditor to have disclosed the seized shares in its statutory demand under rr 94(5) or 101(2) of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed). The execution of the writ of seizure and sale had not been completed at the time of the statutory demand. When such a writ was issued against specific property, the interest in the property continued to reside in the judgment debtor pending sale. These shares were also not held by the plaintiff, but by the Sheriff. Moreover, it was uncertain as to whether the Creditor would have been entitled to apply the shares or their sale proceeds towards the payment of the debt, and the amount by which the debt might be set off was still unknown: at [70] to [73].

(2) The defendant did not appear to have a valid counterclaim, set-off or cross demand under r 28(2)(a) of the Bankruptcy Rules. The defendant's claims in the Later Action based on mistake, conspiracy and lack of consideration were barred on the basis of the extended doctrine of res judicata. The defence of abuse of process allowed the court to bar an action from proceeding even if the issues raised therein had not been litigated, but ought to have been raised in the prior litigation. Although the issues therein were not identical, both the Initial and Later Actions involved the exact same matrix of facts. The defendant should have made these assertions in the Initial Action instead of only raising them in fresh litigation after the Court of Appeal's dismissal of his appeal. The claims in the Later Action thus amounted to a collateral attack upon the court's decision in the Initial Action, and no fresh evidence, bona fide reasons or other special circumstances justified litigating these claims. The defendant's multiple amendments and inconsistent stance as to the nature of the payments further indicated that his case in the Later Action was shadowy: at [88], [92] to [94], [96], [97], [99], [101] and [102].

[Observation: Even if the Creditor was required to disclose the seized shares in its statutory demand or in the affidavit supporting its bankruptcy application, such procedural non-compliance would have been a mere irregularity or formal defect under s 158(1) of the Bankruptcy Act (Cap 20, 2009 Rev Ed) which would not have warranted the dismissal of the application. Furthermore, no substantial or irremediable prejudice had been caused to the defendant. The value of the shares was still unknown and not likely to have been much more than 3% of the debt owing. The defendant was fully aware that the shares had been seized and there was no risk that he was being misled as to the amount of the debt owed: at [74], [77], [79], [80], [82] and [83].

A stay of the bankruptcy order pending the appeal of the court's decision was not warranted, nor was an interim stay for the defendant to file a formal stay application. His claims in the Later Action amounted to an abuse of process and evidenced a lack of good faith. His right of appeal was not fettered, as it was still open to him to pursue an appeal as long as he had the consent of his private trustees in bankruptcy. Any arguments in favour of a stay had to be balanced against the potential prejudice to the Creditor, who had already contended with years of litigation and whose judgment debt and costs orders remained unpaid: at [110] and [111] to [114].]

Case(s) referred to

Ching Mun Fong v Liu Cho Chit [2000] 1 SLR(R) 53; [2000] 1 SLR 517 (folld)

Debtor, Re A [1908] KB 2 684 (distd)

Debtor (No 1 of 1987), Re A [1989] 1 WLR 271 (refd)

Denmark Skibstekniske Konsulenter A/S I Likvidation v Ultrapolis 3000 Investments Ltd [2011] 4 SLR 997 (refd)

Goh Chin Soon v Oversea-Chinese Banking Corp Ltd [2001] SGHC 17 (refd)

Goh Nellie v Goh Lian Teck [2007] 1 SLR(R) 453; [2007] 1 SLR 453 (folld)

Henderson v Henderson (1843) 3 Hare 100; 67 ER 313; [1843–1860] All ER Rep 378 (refd)

Mohd Zain bin Abdullah v Chimbusco International Petroleum (Singapore) Pte Ltd [2014] 2 SLR 446 (folld)

N Rengasamy Pillai v Comptroller of Income Tax [1978] 2 WLR 1053 (folld)

Oversea-Chinese Banking Corp Ltd v Ravichandran s/o Suppiah [2015] SGHC 1 (refd)

Ramesh Mohandas Nagrani v United Overseas Bank Ltd [2016] 1 SLR 174 (folld)

Rasmachayana Sulistyo, Re [2005] 1 SLR(R) 483; [2005] 1 SLR 483 (refd)

United Overseas Bank Ltd v Chia Kin Tuck [2006] 3 SLR(R) 322; [2006] 3 SLR 322 (folld)

Wee Soon Kim Anthony v Lim Chor Pee [2006] 2 SLR(R) 370; [2006] 2 SLR 370 (refd)

Wong Kwei Cheong v ABN-AMRO Bank NV [2002] 2 SLR(R) 31; [2002] 3 SLR 594 (distd)

Zhang Run Zi v Koh Kim Seng [2015] SGHC 175 (folld)

Facts

In an earlier consolidated action (“the Initial Action”), the parties entered into convertible loan agreements under which the plaintiffs extended loans to the defendant to assist the latter's bid to list his company (“the Company”), in exchange for the option to convert the value of the loans to shares in the Company after it was listed. In the event that the listing did not take place by the stipulated date, the defendant was to repay the loans together with certain compensation sums. The listing did not take place and the plaintiffs commenced proceedings to seek repayment. The High Court allowed the plaintiffs' claims and rejected the defendant's assertions that he had secretly repaid the loans in cash and that these loans were part of an elaborate sham to make the Company more attractive for listing. The High Court's decision was affirmed on appeal.

The defendant then commenced a new action (“the Later Action”) against the plaintiffs and their directors for the repayment of sums that had allegedly been paid to them pursuant to a mistake of fact, as a result of their conspiracy to defraud him, and/or for a lack of consideration. These payments were the same as the alleged repayments that formed the subject matter of the defence in the Initial Action, except that the defendant no longer contended that these sums were loan repayments.

Shortly afterwards, one of the plaintiffs in the Initial Action (“the Creditor”) filed the present application for the defendant to be adjudged a bankrupt on the ground that he had not attempted to satisfy or set aside the statutory demand which was based on the outstanding judgment debt. The defendant attempted to resist the bankruptcy application on the basis that he possessed a valid counterclaim, set-off or cross demand in light of the pending action he had commenced. He also argued that the statutory demand was defective and should be set aside because it failed to disclose shares which the Creditor had seized by way of a writ of seizure and sale. The assistant registrar below rejected these arguments, noting that the Later Action was an abuse of process based on the extended doctrine of res judicata, and granted the bankruptcy order. The defendant appealed.

Legislation referred to

Bankruptcy Act (Cap 20, 2009 Rev Ed) ss 61, 62, 62(a), 62(b), 62(1), 65(2)(e), 105, 106, 158(1)

Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) rr 42(b), 94, 94(5), 94(6), 97, 97(1), 98(2), 98(2)(a), 98(2)(c), 98(2)(d), 98(2)(e), 101(2), 127, 127(b)

Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 18 r 15

Bankruptcy Act 1914 (c 59) (UK) s 147(1)

Sim Chong (Sim Chong LLC) for the plaintiff;

Philip Ling and Ho Wei Li (Wong Tan & Molly Lim LLC) for the defendant.

25 October 2017

George Wei J:

Introduction

1 This was an application brought by the plaintiff, iTronic Holdings Pte Ltd (“the Plaintiff”), for a bankruptcy order to be made against the defendant, Tan Swee Leon (“the Defendant”). The present bankruptcy application was premised upon the Defendant's failure to satisfy its judgment debt from Suit No 982 of 2012 (“Suit 982”), in which this court allowed the Plaintiff's claims against the Defendant after a trial.

2 On 8 May 2017, the learned Assistant Registrar Wong Baochen (“the AR”) granted the bankruptcy order against the Defendant. The Defendant brought a registrar's appeal in respect of the AR's decision. I heard and dismissed the appeal on 10 July 2017. The Defendant has further appealed against my decision, and I shall now give my reasons.

Background facts

3 The factual background surrounding the dispute between the parties is set out at length in my earlier judgment, iTronic Holdings Pte Ltd v Tan Swee Leon[2016] 3 SLR 663 (“iTronic”). Here, I will only summarise the key facts in the dispute that are pertinent to the present application.

4 The Plaintiff was a Singapore-incorporated company. It was represented by its directors, Poh Eng Kok (also known as Eric Poh) (“Eric”) and Phua Chee Meng (also known as Derek Phua) (“Derek”) (iTronic at [2]).

5 Tronic International Pte Ltd (“TIPL”) was a...