Lakshmanan Shanmuganathan v L Manimuthu

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JCA,Belinda Ang Saw Ean JAD,Chao Hick Tin SJ
• Judgment Date: 07 October 2021
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 213 of 2020

Lakshmanan Shanmuganathan (also known as L Shanmuganathan)

and

L Manimuthu and others

[2021] SGCA 95

Tay Yong Kwang JCA, Belinda Ang Saw Ean JAD and Chao Hick Tin SJ

Civil Appeal No 213 of 2020

Court of Appeal

Insolvency Law — Bankruptcy — Statutory demand — Court ordering creditors to transfer properties due to debtor under compromise agreement — Debtor not taking possession of properties — Creditors serving statutory demand on debtor — Statutory demand stating properties held on debtor's behalf and values agreed under compromise agreement — Whether statutory demand should have stated current values of properties — Rules 94(5) and 98(2)(c) Bankruptcy Rules (2002 Rev Ed)

Insolvency Law — Bankruptcy — Statutory demand — Court ordering creditors to transfer properties due to debtor under compromise agreement — Debtor not taking possession of properties — Creditors serving statutory demand on debtor — Whether debtor's properties amounting to valid counterclaim exceeding debt claimed — Rule 98(2)(a) Bankruptcy Rules (2002 Rev Ed)

Held, dismissing the appeal:

(1) Although a creditor was obliged under r 94(5) to disclose the value of any property of the debtor that he held, such value had to be that which he was entitled to deduct from the debt claimed in a statutory demand: at [31] and [32].

(2) The respondents were bound by the judgment in Suit 141 to transfer the Six Properties to the appellant. Since the respondents were not entitled to realise the value of the Six Properties and to apply those values towards payment of the debt claimed, they did not need to state the current values of those properties in the Second SD. Disclosure of the values of the Six Properties was ultimately immaterial: at [29], [31] to [33] and [36].

(3) In so far as the decision in RA 7 might have been concerned with full and frank disclosure, the respondents had complied amply with that duty in the Second SD by explaining how the Six Properties came to be in their control, the values as agreed in the Compromise Agreement, that they had been ordered by the judgment in Suit 141 to transfer those properties to the appellant and that their numerous attempts to do so had failed due to the appellant's lack of co-operation: at [36].

(4) The respondents were not obliged to apply to vary the judgment in Suit 141 to set off the debt owed by the appellant against the current values of the Six Properties. By issuing the Second SD, the respondents had made clear their intention to comply with the terms of the judgment in Suit 141. Since the respondents were not seeking to apply the Six Properties in diminution or in satisfaction of the debt claimed against the appellant, there was no reason for them to state the current values of those properties in the Second SD: at [38] and [39].

(5) The appellant was clearly responsible for the impasse in the transfer of the Six Properties. Consistent with his conduct in Suit 141, where he had challenged unsuccessfully the validity of the Compromise Agreement on the ground of duress, he remained reluctant to abide by the terms of that agreement. This, however, could not afford him any basis to demand that the respondents apply to vary the judgment in Suit 141 or that all parties agree not to abide by that judgment: at [39] and [40].

(6) Accordingly, the court held that the Second SD complied with r 94(5) and declined to set it aside under r 98(2)(c): at [41].

(7) The appellant's counterclaim was not bona fide and was thus not a “valid” counterclaim that warranted the setting aside of the Second SD under r 98(2)(a). It was ironic that he should insist that he had a valid counterclaim to the Six Properties when the intransigence in the transfer of those properties was due entirely to him: at [42], [44], [46] and [50].

(8) There was also no evidence that the current values of the Six Properties exceeded the amount of the debt claimed in the Second SD: at [47] and [48].

(9) The court therefore dismissed the appeal. The court further ordered that if the respondents wished to proceed with the bankruptcy proceedings, they would have to file a bankruptcy application within three weeks from the dismissal of the appeal: at [4], [51] and [52].

Case(s) referred to

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

iTronic Holdings Pte Ltd v Tan Swee Leon [2018] 4 SLR 359 (folld)

L Manimuthu v L Shanmuganathan [2016] 5 SLR 719 (refd)

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

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

Facts

The appellant and the respondents were brothers. They entered into a compromise agreement (“the Compromise Agreement”) to settle the distribution of their late parents' assets, the key terms of which were as follows:

• (a) Seven of their father's 26 properties in India were allocated to the appellant while the remaining properties were allocated to the respondents. Each of the 26 properties was valued in the Compromise Agreement.

• (b) Their father's share in a property in Singapore (“the Singapore Property”) would be sold. The appellant would keep 20% of the sale proceeds and pay the remaining 80% to the respondents within a year of the execution of the Compromise Agreement.

• (c) The appellant would pay each of the four respondents $262,500 (totalling $1,050,000) within 12 months of the execution of the Compromise Agreement.

Contrary to the Compromise Agreement, the appellant retained the total sale proceeds of the share in the Singapore Property and failed to pay the sum of $1,050,000 to the respondents. The respondents then commenced HC/S 141/2012 (“Suit 141”) against the appellant to claim the sum of $1,050,000 as well as their 80% share of the sale proceeds of the share in the Singapore Property. The appellant made a counterclaim for, among other things, his share of his parents' estates due to him under the Compromise Agreement.

The High Court found that the Compromise Agreement was valid and enforceable. Accordingly, the court ordered the appellant to pay the respondents the sum of $1,050,000 plus interest and 80% of the sale proceeds of the share in the Singapore Property. The court also allowed the appellant's counterclaim in part and ordered the respondents to transfer to the appellant six of the properties in India that had been allocated to him under the Compromise Agreement (“the Six Properties”). As the respondents had sold the seventh property allocated to the appellant under the Compromise Agreement (“the Seventh Property”), they were ordered to return the entire sale proceeds of the Seventh Property and all documents relating to that sale to the appellant.

Following the court's decision in Suit 141, the respondents transferred the documents pertaining to the sale of the Seventh Property to the appellant. The respondents also offered to pay the appellant the sale proceeds of the Seventh Property and to transfer the Six Properties to him. However, the appellant did not show any meaningful interest in proceeding with the transfer and failed to pay the judgment sum to the respondents.

The respondents then served a statutory demand on the appellant (“the First SD”), claiming a debt of $2,104,440.80. The appellant successfully applied to set aside the First SD. An assistant registrar (“AR Wong”) held that the First SD ought to have disclosed that the respondents held the Six Properties and the sale proceeds of the Seventh Property on the appellant's behalf. She also held that the appellant had raised a triable issue that he had a valid counterclaim, set-off or cross demand exceeding the debt claimed as there was some evidence that the Six Properties were worth about $2,250,000 as at June 2018. The respondents' appeal against AR Wong's decision was dismissed by a High Court judge (“the Judge”) in HC/RA 7/2019 (“RA 7”).

The respondents subsequently served another statutory demand on the appellant (“the Second SD”), claiming a debt of $2,084,013.55. The Second SD stated that the respondents held the Six Properties on the appellant's behalf and that those properties had to be transferred to him, pursuant to the court's order in Suit 141. The Second SD also listed the values of the Six Properties as agreed in the Compromise Agreement.

The appellant applied to set aside the Second SD. He submitted that the respondents' failure to state the current values of the Six Properties meant that the Second SD did not comply with r 94(5) and ought to be set aside under r 98(2)(c) of the Bankruptcy Rules (2002 Rev Ed) (“BR”). He also asserted that by virtue of his entitlement to the Six Properties, he had a valid counterclaim exceeding the debt claimed, such that the Second SD ought to be set aside under r 98(2)(a) of the BR.

The application was dismissed by an assistant registrar (“the AR”). The appellant's appeal against the AR's decision was dismissed by the Judge. The appellant appealed against the Judge's decision.

Legislation referred to

Bankruptcy Rules (2002 Rev Ed) rr 94(5), 94(5)(b) (consd); rr 94, 94(6), 98, 98(2), 98(2)(a), 98(2)(c), 98(2)(d), 98(3)

A Rajandran (A Rajandran) (instructed) andMohan Das Naidu (Mohan Das Naidu & Partners) for the appellant;

Palaniappan Sundararaj (K&L Gates Straits Law LLC) for the respondents.

7 October 2021

Tay Yong Kwang JCA (delivering the grounds of decision of the court):

Introduction

1 This appeal arose from an application by the appellant to set aside a statutory demand (“the Second SD”) served on him by the respondents, who are his brothers. The backdrop to the Second SD was a compromise agreement among the brothers pertaining to their late father's assets which included properties in India (“the Compromise Agreement”). In 2012, the respondents commenced HC/S 141/2012 (“Suit 141”) against the appellant...