Lakshmanan Shanmuganathan (alias L Shanmuganathan) v L Manimuthu and others

• Jurisdiction: Singapore
• Judge: Tan Siong Thye J
• Judgment Date: 01 December 2020
• Neutral Citation: [2020] SGHC 263
• Court: High Court (Singapore)
• Hearing Date: 01 December 2020
• Docket Number: Originating Summons (Bankruptcy) No 31 of 2020 (Registrar’s Appeal No 279 of 2020)
• Plaintiff Counsel: A Rajandran (A Rajandran) (instructed) and Naidu Mohan Das (Mohan Das Naidu & Partners)
• Defendant Counsel: Palaniappan Sundararaj (K&L Gates Straits Law LLC)
• Subject Matter: Insolvency Law,Bankruptcy,Statutory demand
• Published date: 04 December 2020

Tan Siong Thye J (delivering the judgment of the court ex tempore): Introduction

The plaintiff, Lakshmanan Shanmuganathan, and the defendants, L Manimuthu, L Vengatesan, L Siva Subramanian and L Mohanasundram, are brothers. On 3 March 2020, the plaintiff filed an application for the court to set aside a statutory demand dated 14 February 2020 issued by the defendants to the plaintiff (“the SD”). On 11 November 2020, the learned assistant registrar Navin Anand (“AR Anand”) dismissed the plaintiff’s application. On 12 November 2020, the plaintiff filed a notice of appeal against AR Anand’s decision.

Brief background facts

The background facts leading up to the plaintiff’s application to set aside the SD are pertinent to appreciating the arguments made by the parties. Therefore, I shall set out the relevant facts in brief.

The Compromise Agreement

The parties’ late father owned, inter alia, several properties in India as well as a moneylending business and a share in a property in Singapore. After their late father’s death, the parties reached a compromise agreement (“the Compromise Agreement”), which was executed on 29 December 2010.¹ The relevant terms of the Compromise Agreement were as follows:² Seven out of the 27 properties in India would be allocated to the plaintiff, while the rest were allocated to the defendants. Specific valuations were attributed to each of the 27 properties. The share in the property in Singapore would be sold. The plaintiff would keep 20% of the sale proceeds whereas the remaining 80% would be paid by the plaintiff to the defendants. The plaintiff was to pay to each of the defendants the sum of $262,500, amounting to $1,050,000 in total within 12 months following the execution of the Compromise Agreement.

Subsequently, the share in the property in Singapore was sold and the total sale proceeds amounted to slightly less than $100,000, which was held by the plaintiff. The plaintiff also failed to pay the sum of $1,050,000 to the defendants.³

The court proceedings on the Compromise Agreement

In 2012, the defendants commenced an action in the Singapore High Court against the plaintiff to claim for the sum of $1,050,000 and their share of the sale proceeds of the share in the property in Singapore. The plaintiff resisted the defendants’ claim and instituted a counterclaim. On 25 May 2016, the High Court found that the Compromise Agreement was valid and allowed the defendants’ claim, ordering the plaintiff to pay to the defendants the sum of $1,050,000 and 80% of the sale proceeds of the share in the Singapore property as claimed, as well as interest of 5.33% per annum from 25 May 2012 (“the Judgment Sum”) (see L Manimuthu and others v L Shanmuganathan [2016] 5 SLR 719 at [31]). The High Court also allowed the plaintiff’s counterclaim, ordering the defendants to transfer to the plaintiff six out of the seven properties allocated under the Compromise Agreement (“the Six Properties”). For the remaining property that had been sold by the defendants (“the Seventh Property”), the High Court ordered the defendants to return to the plaintiff the relevant documents and the sale proceeds amounting to $10,000. On appeal, the Court of Appeal upheld the High Court’s decision.⁴

Following the High Court’s decision, the defendants provided the plaintiff with the documentation regarding the sale of the Seventh Property. The defendants also offered to transfer the Six Properties to the plaintiff as well as pay the plaintiff the sale proceeds of the Seventh Property amounting to $10,000. The defendants also demanded that the plaintiff pay them the Judgment Sum, which amounted to more than $2m because of the accumulated interest accrued. However, the plaintiff failed to do so.⁵

The First SD

As a result, the defendants served a statutory demand on the plaintiff (“the First SD”) on 23 May 2018 in respect of the Judgment Sum. On 6 September 2018, the defendants subsequently commenced bankruptcy proceedings against the plaintiff. On 12 November 2018 the plaintiff applied in HC/B 2074/2018 to set aside the First SD on three main grounds:⁶ the defendants had failed to disclose in the First SD the Six Properties, which they held in their names or in their parents’ names; the defendants failed to disclose in the First SD that they had been ordered by the High Court to pay to the plaintiff the sale proceeds of the Seventh Property; and the Six Properties that had been allocated to the plaintiff were valued at more than $2m, therefore, the plaintiff could not be said to be indebted to the defendants.

On 4 January 2019, the learned assistant registrar Wong Baochen (“AR Wong”) granted the plaintiff’s application to set aside the First SD. AR Wong found that the defendants had failed to disclose that they held certain assets belonging to the plaintiff, including the Six Properties and the sale proceeds of the Seventh Property. Furthermore, the plaintiff had raised a triable issue that the Six Properties were worth more than $2m such that he could rely on this to assert that he had a valid counterclaim exceeding the amount specified in the First SD. On 17 October 2019, I dismissed the defendants’ appeal against AR Wong’s decision.⁷

The present SD

On 14 February 2020, the defendants served on the plaintiff a fresh SD in respect of the Judgment Sum which is the subject matter of the present application.⁸ On 3 March 2020, the plaintiff applied to set aside the SD. The basis for the plaintiff’s application included: (a) issue estoppel arose such that the value ascribed to the Six Properties should be the current value and not the value reflected in the Compromise Agreement; (b) the defendants failed to comply with r 94(5) of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) (“the Bankruptcy Rules”) by failing to disclose the current value of the Six Properties and the fact that the Indian court had declared the plaintiff entitled to one-fifth of their late father’s estate; and (c) the plaintiff had a valid counterclaim against the defendants by virtue of his entitlement to the Six Properties.

On 11 November 2020, AR Anand dismissed the plaintiff’s application. I shall now consider the plaintiff’s appeal against AR Anand’s decision.

My decision The issues

The following issues arise for determination: Whether issue estoppel applies such that the value to be ascribed to the Six Properties for the purpose of the SD should be their current value rather than the value reflected in the Compromise Agreement. Whether the defendants failed to comply with r 94(5) of the Bankruptcy Rules because the SD was based on the value of the Six Properties reflected in the Compromise Agreement and/or the SD failed to disclose a judgment of the Indian court dated 9 April 2018. Whether the plaintiff has a valid counterclaim which exceeds or is equivalent to the debt specified in the SD.

Whether issue estoppel arises

The first issue is whether issue estoppel arises regarding the value to be ascribed to the Six Properties for the purposes of the SD. The plaintiff relies on the decision of AR Wong to submit that this issue had already been determined by the court. In delivering oral judgment, AR Wong had held as follows:⁹

… Further, the [plaintiff] has adduced evidence that these assets have been valued, as at June 2018, at around S$2,250,000. The [defendants] however dispute the valuation on the basis that the value of the assets had already been agreed to by the parties previously. In my view, the [plaintiff] is also entitled to rely on an actual valuation of the properties for the purpose of asserting that he has a valid counterclaim, set-off or cross demand which is equivalent to or exceeds the amount of the debts specified in the Statutory Demand, pursuant to r 98(2)(a) BR, under which all that the [plaintiff] needs to show is a triable issue. … [emphasis added]

It is trite that in order for issue estoppel to arise, the following requirements must be satisfied (see Wing Joo Loong Ginseng Hong (Singapore) Co Pte Ltd v Qinghai Xinyuan Foreign Trade Co Ltd and another and another appeal [2009] 2 SLR(R) 814 at [165], citing Lee Tat Development Pte Ltd v MCST Plan No 301 [2005] 3 SLR(R) 157 at [14]–[15]): there must be a final and conclusive judgment on the merits of the issue which is said to be the subject of an estoppel; that judgment must be by a court of competent jurisdiction; the parties in the two actions that are being compared must be identical; and there must be identity of subject matter in those two actions.

In relation to the final requirement at [13(d)] above, it was explained by Sundaresh Menon JC (as he then was) in Goh Nellie v Goh Lian Teck and others [2007] 1 SLR(R) 453 at [34] that “the issues must be identical in the sense that the prior decision must traverse the same ground as the subsequent proceeding”.

Having regard to these principles, I do not find that the passage from AR Wong’s decision supports the plaintiff’s argument that issue estoppel arises in this case. This is for two reasons. First, there is no identity between AR Wong’s decision in the passage cited above and the present issue regarding which valuation the defendants should have stated in the SD. It is clear from the passage cited above that although AR Wong was considering the actual valuation of the Six Properties produced by the plaintiff, she was doing so in relation to the issue of whether the plaintiff could assert that he had a valid counterclaim. It was not in relation to the defendants’ failure to disclose relevant information. On that issue, AR Wong only held that it was “apparent on the face of the [First SD] that the [defendants] have not disclosed that they hold certain assets on the [plaintiff’s] behalf”.¹⁰ AR Wong made no finding in relation to whether, in disclosing their holding of the Six Properties, the defendants should have referred to the Six...