Rafat Ali Rizvi v Ing Bank NV Hong Kong Branch

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 09 May 2011
• Neutral Citation: [2011] SGHC 114
• Court: High Court (Singapore)
• Docket Number: OSB No. 28 of 2009/D (Registrar’s Appeal No.393 of 2009/W)
• Published date: 12 May 2011
• Year: 2011
• Hearing Date: 01 February 2010,29 June 2010
• Plaintiff Counsel: Philip Ling (Wong Tan & Molly Lim LLC)
• Defendant Counsel: Rebecca Chew, Paul Ng and Goh Su Sian (Rajah & Tann LLP)
• Citation: [2011] SGHC 114

Kan Ting Chiu J: Background

The plaintiff, Rafat Ali Rizvi, was served with a statutory demand issued by the defendant, Ing Bank NV Hong Kong Branch. The plaintiff disputed the validity of the statutory demand and sought to set it aside. However, as he was out of time, he had to apply for an order to extend time as well as order to set aside the statutory demand. When the applications came before an Assistant Registrar (“AR”), both were dismissed and the plaintiff is appealing against those orders.

The plaintiff, a British citizen and a Singapore Employment Pass holder, is the sole shareholder and ultimate beneficial owner of Arlington Assets Investments Ltd (“AAIL”), a company incorporated in the British Virgin Islands (“BVI”). The defendant is the Hong Kong branch of Ing Bank, NV AAIL is a customer of the defendant. The defendant had granted credit facilities to AAIL up to a maximum limit of US$180 million. The plaintiff had executed a continuing personal guarantee in favour of the defendant to secure the facilities.

The statutory demand

The defendant issued a statutory demand dated 25 May 2009 on the plaintiff under s 62 of the Bankruptcy Act (Cap 20. 2009 Rev Ed) (“BA”) for the sums of US$117,143,874, €2,528,234.96, S$16,117,571.11 and ¥1,976,752,632 owing under the facilities granted by the defendant to AAIL (All references to sections refer to the BA.)

The application for extension of time

Under r 97(1)(a) of the Bankruptcy Rules (Cap 20, R1, 2006 Rev Ed) (“BR”), the plaintiff had to apply to set aside the statutory demand within 14 days from the service of the statutory demand on him. (All references to rules refer to the BR.) When the plaintiff filed his application on 6 July 2009, he was eight days out of time. However, r 97(3) provides that:

The court may, upon the application of the debtor, allow the debtor an extension of time to make his application to set aside the statutory demand.

In support of his application to extend time, the plaintiff stated that he was not in Singapore when the statutory demand was served by being posted on the main door of his Singapore residence. He claimed that he was in the United Kingdom between 27 May 2009 and 26 June 2009. He explained that he was unable to return to Singapore as he had to consult his English solicitors on the statutory demand served on him and other statutory demands that were served on AAIL, and he also had to attend to his aged father who was undergoing treatment in the United Kingdom.

The defendant’s response was that the plaintiff did not deserve an extension of time because he did not produce evidence of his being in the United Kingdom, and that in any event, he was, by his account, back in Singapore three days before the dateline for filing the application to set aside the statutory demand.

The application to set aside the statutory demand

In the appeal, the plaintiff did not pursue all the arguments he made before the AR and submitted that the statutory demand should be set aside on the grounds that¹: (a) that the defendant had not satisfied the requirements of s 61(1) of the BA; (b) the debt is disputed on substantial grounds; (c) the debtor has a valid counterclaim and set-off which is equivalent to or exceeds the amount of the debt. I shall refer to these grounds as grounds (a), (b) and (c) and consider each in turn.

Ground (a) – non-satisfaction of s 61(1) of the BA

The plaintiff directed his submissions to the requirements of s 61(1)(d):

61. —(1) No bankruptcy application shall be made to the court in respect of any debt or debts unless at the time the application is made — ... (d) where the debt or each of the debts is incurred outside Singapore, such debt is payable by the debtor to the applicant creditor by virtue of a judgment or an award which is enforceable by execution in Singapore.

The plaintiff’s argument was that as the debt was incurred outside Singapore, and that no judgment or award obtained on the debt which is enforceable by execution in Singapore, the statutory demand should be set aside.

Section 61(1)(d) was enacted for a specific purpose. Its introduction into s 61(1) was recounted by the Court of Appeal in AmBank (M) Bhd v Yong Kim Yoong Raymond [2009] 2 SLR(R) 659 (“AmBank v Yong”) and I will not repeat the complete narration of its gestation. To put it very briefly, it started at the proceedings of the Select Committee on the Bankruptcy Bill. The Select Committee received a submission from an associate professor of law who expressed concern over the extra-territorial application of the criminal provisions in the BA. The Select Committee agreed with the concern and revised the proposed provisions to exclude debts incurred outside Singapore unless they are incorporated in judgments or awards which are enforceable in Singapore.

The Court of Appeal concluded at [24]:

[T]he objective of s 61(1)(d) was to give some added measure of protection, in the light of the far-reaching amendments to the bankruptcy regime brought about by the enactment of BA 1995, to persons with property in Singapore against bankruptcy proceedings based on debts incurred outside Singapore. A preliminary requirement that such debts have a nexus with Singapore through "a judgment or award which is enforceable by execution in Singapore" must first and foremost be satisfied. It is also abundantly clear that s 61(1)(d) has purely local roots and has neither been adopted nor adapted from the UK Insolvency Act.

As s 61(1)(d) is unique to the BA, special care should be taken in construing it. The provision refers specifically to the place where a debt is incurred, and separates them into two categories, debts incurred in Singapore and debts incurred outside Singapore. The starting point is the existence of a debt. That is an amount owing by one party to another, whether or not it is repayable immediately. In other words, the debt is a chose in action, but not necessarily a cause of action. The place where the debt is incurred is the place at which the debt came into existence. In the present case where the defendant bank granted credit facilities to AAIL, it would be the place of AAIL’s account. Each time AAIL operated the account on credit, a debt was incurred. If the account was in Hong Kong, the debts were incurred in Hong Kong, and if the account was in Singapore, the debts are incurred in Singapore. Other issues which relate to a debt, such as the court/s with jurisdiction to hear disputes relating to the debt, the law governing the debt, the place where the demand for repayment is to be made, the place where the debt is to be repaid, the place where a debt can be recovered, do not determine or change the place where the debt is incurred.

Section 61(1)(d) does more than control the operation of the criminal provisions of our bankruptcy law on foreign debts. It also narrows the exposure of Singapore property to claims based on debts incurred outside Singapore.

In AmBank v Yong, the Court of Appeal gave valuable guidance to the implementation of the provision when it declared at [27] that “whether a debt is incurred outside Singapore under s 61(1)(d) is, in the final analysis, a question of fact, not law.” While it did not (probably because it could not) set out fact-finding criteria which can be applied in all cases, its finding on the facts of that case is instructive.

Some significant and material facts are referred to in the Court’s judgment. AmBank is a Malaysian bank. The bank granted loans to two Malaysian companies. Yong, a Singaporean, stood guarantor for the two companies. When the two companies defaulted on repayment, the bank obtained judgment against Yong in Malaysia. The bank registered the judgment in Singapore under the Reciprocal...