Medical Equipment Credit Pte Ltd v Sim Kiok Lan Alice and another appeal

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 03 October 1998
• Neutral Citation: [1998] SGCA 62
• Date: 03 October 1998
• Subject Matter: ss 45, 46, 56, 57, 60, 61, 65, 66, 158 Bankruptcy Act (Cap 20, 1995 Ed),Insolvency Law,Whether bankruptcy petition satisfies requirements of s61 of Bankruptcy Act,Whether failure to comply with voluntary arrangement sufficient for grounds of bankruptcy petition,rr 99, 101, 104, 109, 112 Bankruptcy Rules (1996 Ed),Petition,Bankruptcy
• Docket Number: Civil Appeals Nos 49 and 50
• Published date: 19 September 2003
• Defendant Counsel: Loh Wai Mooi (Bih Li & Lee)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Sarjit Singh Gill SC and Rajiv Nair (Shook Lin & Bok)

Judgment:

LP THEAN JA

Cur Adv Vult

(delivering the judgment of the court): Introduction

1.These two appeals arose from the dismissal of the two bankruptcy petitions filed by Medical Equipment Credit Pte Ltd, the appellants, against Dr Boey Hong Khim (Dr Boey) and his wife, Alice Sim Kiok Lan respectively. The two appeals are based on the same facts and raise the same issues. They have been consolidated by an order of court made on 26 June 1998.

2. The facts

The material facts that gave rise to the appeals are these. Dr Boey is a doctor specialised in radiology. He retired as the Consultant Radiologist/Head, Department of Diagnostic Imaging and Section of Neuro Radiology of Tan Tock Seng Hospital on 30 September 1996. Thereafter, he and his wife set up a company, MD Imaging Pte Ltd (MDI), in August 1994 or thereabouts, which operated a medical imaging clinic. Dr Boey tried to negotiate with interested parties to enter into a joint venture with him and his wife in the business of running the medical imaging clinic, but was unsuccessful. The business of MDI was also not very successful, and eventually they and MDI incurred considerable amounts of debts and liabilities. Dr Boey and his wife (the respondents) own a house, 25B, Cornwall Gardens (the property), and since the end of 1996 they had been trying to sell the property but had not succeeded in selling it, as presumably they were not able to sell it at the price they wanted.

3.In December 1996 the respondents proposed to their creditors a scheme of arrangement of their affairs (the voluntary arrangement) under s 45 of the Bankruptcy Act (Cap 20, 1995 Ed) (the Act), and the terms of the arrangement were that the creditors would withhold taking action against the respondents for a period of four months and during this period they would market and complete the sale of the property, and the proceeds of sale would be used to pay off in full the amounts owing to the creditors. They appointed Mr Chandra Mohan K Nair, an advocate and solicitor, as the nominee (the nominee) under s 46 of the Act to act in relation to the voluntary arrangement for the purpose of supervising its implementation. Following that, they applied for an interim order under s 45 of the Act and on 30 December 1996 an interim order was made.

4.On 13 January 1997 a further order was made directing a meeting of creditors to be held on 3 February 1997. This meeting was duly held on that day and was chaired by the nominee. The creditors did not agree to give the respondents the period of four months, but they agreed that the respondents be given time until 15 April 1997 to market and sell the property and that another creditors` meeting be held on 14 April 1997. Following the agreement, various resolutions were unanimously passed and the material ones are as follows:

(i) that Dr Boey Hong Khim and Madam Alice Sim Kiok Lan be given until 15 April 1997 to market and sell the property known as No 25B, Cornwall Gardens, Singapore 269652;

(ii) that for purposes of the voluntary arrangement Dr Boey Hong Khim recognises and admits in full the claims of the various creditors as at 3 February 1997 as set out in para 4 herein;

(iii)

(iv)

(v) that the interim order dated 30 December 1996 shall be recognised and treated by the creditors as extended till 15 April 1997 and, if necessary, an application to court shall be made for such an order.

The creditors also unanimously agreed that a moratorium should be granted to the respondents until 14 April 1997.

5.The respondents were not successful in selling the property during the period agreed upon. At the second creditors` meeting it was resolved unanimously that another meeting be held on 28 April 1997, that the respondents be required to disclose in the form of an affidavit details of all their assets, both in Singapore and abroad, and that the moratorium be extended to 28 April 1997. At the third creditors` meeting held on 28 April 1997, the respondents were given an extension of further two months to sell the property and if no firm sale and purchase agreement was made by 28 June 1997 there would be a forced sale at a price decreasing at different times within a certain time frame as set out in the resolution passed at the meeting, and the nominee was appointed the trustee of the proceeds of sale. A fourth creditors` meeting was held on 26 May 1997 at which the nominee reminded the solicitors for the respondents to provide all the creditors with details of correspondence relating to the respondents` efforts to sell the property. Apart from that, nothing of importance was transacted at that meeting.

6.At the fifth meeting on 27 June 1997, some details were given by Dr Boey regarding the efforts made to market the property. He asked that more time be allowed to carry out the sale and he agreed with the creditors that if a sale of the property did not take place within two weeks, there would be a forced sale at a reserve price decreasing at different times within a certain time frame as previously agreed upon and the mominee was again appointed the trustee of the proceeds of sale.

7.There was a sixth creditors` meeting held on 8 August 1997, which was the final meeting. Ms Alina Sim, the solicitor for the respondents, was present at the meeting; the respondents, however, were absent. Ms Sim informed the creditors of Dr Boey`s instructions that he did not agree with the resolution previously passed and time frame set by the creditors for selling the property and that he did not necessarily admit the debts which he had previously admitted. The solicitor further said that Dr Boey would make a proposal to pay all the creditors whether in full or partially and the proposal would be made by early September 1997. The respondents would either negotiate with each creditor or would make a proposal for settlement with all the creditors. No resolution was passed at this meeting. But the creditors agreed that the nominee should apply for the interim order (which had lapsed on 27 July 1997) to be extended to 19 September 1997 and for leave of court to be granted for the sale of the property to take place. It did not appear that this was agreed to by Ms Sim on behalf of the respondents.

8.On 8 September 1997, two applications in OS No 73 of 1996 came on for hearing before the Deputy Registrar: one was an application by the nominee for the interim order to be extended to 19 September 1997 and the nominee be given the power to sell the respondents` property, and the other was an application by the appellants to discharge the interim order. The Deputy Registrar made no order on the nominee`s application, but granted the appellants an order in terms of their application. The respondents appealed against the second order, and on appeal Judith Prakash J set aside the order made by the Deputy Registrar on the appellants` application on the ground that the appellants were not entitled to make the application. As there was no appeal against the Deputy Registrar`s decision on the nominee`s application to extend the interim order, that interim order, which had lapsed, was not extended.

9.Immediately after the discharge of the interim order by the Deputy Registrar, the appellants on 10 September 1997 filed the bankruptcy petitions against the respondents. The petitions were not served on the respondents; however, Dr Boey filed an affidavit on behalf of himself and his wife and they were represented by counsel who opposed the making of the bankruptcy orders. At first instance before the assistant registrar, the petitions were dismissed. The appellants appealed and their appeals were dismissed by Warren LH Khoo J.

10. The decision below

Warren LH Khoo J held that the bankruptcy petitions were deficient or defective. He found that r 104 of the Bankruptcy Rules (the Rules) had not been complied with in that the appellants had not shown how ss 60 and 61 of the Act were satisfied. He said at [para ] 9:

It is clear on the face of the petition that the petitioning creditors have merely reproduced word for word the conditions for the presentation of a petition set out in s 60 (relating to domicile and place of business) and s 61 (relating to the debt and the debtor`s inability to pay the debt) and stated that the conditions have been satisfied. No effort has been made to relate these general statutory provisions to the facts of the case. The most glaring example is in relation to the amount of the debt. The amount alleged to be owing is not stated, let alone the other details required by r 101

Furthermore, he held that the appellants had not shown that the debtors were unable to pay the debts in respect of which the petitions were presented and the inability to pay the debts is an underlying and fundamental condition for the presentation of a bankruptcy petition due to the exclusive language used in s 61. The learned judge said at [para ] 11-12:

11 One of the important requirements in s 61 is to show that the debtor is unable to pay the debt in respect of which the petition is presented. Inability to pay debts is, indeed, the underlying condition for the presentation of a bankruptcy petition; it is a fundamental requirement. Indeed, the exclusive language of s 61 (no petition to be presented `unless `) leads me to conclude that inability to pay a debt or debts in a liquidated sum or sums of or totalling more than $2,000 is the only ground available for the presentation of a bankruptcy petition. This applies to creditors` petitions as well as a debtor`s own petition (as to the latter see s 67). This requirement to show inability to pay debts is complemented by s 65(2), which provides that the court may dismiss the petition if it is satisfied that the debtor is able to pay all his debts.

12 It is incumbent on the creditor in a creditor`s petition to support his allegation that the debtor is unable to pay his debts. Inability to pay debts may be proved by reference to the...