Re Aathar Ah Kong Andrew

• Jurisdiction: Singapore
• Judge: Ang Cheng Hock JC
• Judgment Date: 19 October 2018
• Neutral Citation: [2018] SGHC 227
• Date: 19 October 2018
• Docket Number: Originating Summons (Bankruptcy) No 59 of 2017 (Registrar’s Appeal No 151 of 2018)
• Published date: 30 March 2019
• Plaintiff Counsel: Michael Moey Chin Woon (Moey & Yuen)
• Defendant Counsel: Phyllis Lim (Fabian & Khoo),Ho Seng Giap and Adly Rizal (Tito Isaac & Co LLP),Danitza Hon (Rajah & Tann Singapore LLP)
• Court: High Court (Singapore)
• Hearing Date: 25 June 2018
• Subject Matter: Bankruptcy,Voluntary scheme of arrangement,Insolvency Law

Ang Cheng Hock JC: Introduction

This was an appeal against the decision of an Assistant Registrar who dismissed the applicant’s application for an extension of an interim order that had been granted under s 45(1) of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (the “Act”) (“the Registrar’s Appeal”). After hearing arguments, I dismissed the Registrar’s Appeal. The applicant has appealed against my decision. I now set out the grounds of my decision.

Facts Background to the application

The background to this matter has been extensively set out in Re Aathar Ah Kong Andrew [2018] SGHC 124, a decision by Valerie Thean J where the approval which the creditors of the applicant had given to a voluntary arrangement proposed by the applicant was revoked. I will only set out the facts insofar as they are relevant to the Registrar’s Appeal that was heard by me.

The applicant described himself as an investor in several businesses and markets over many years. His primary investments were in private equity, bonds and listed stocks in sectors such as commodities and healthcare in Singapore and Indonesia.¹ He has been deep in debt since 2015, if not earlier, because of the decline in worldwide commodity prices and a plunge that year in the share prices of listed healthcare equities in which he had invested. Financial institutions from which he had obtained financing and to which he had provided guarantees pulled their lines of credit and called on him to fulfil his obligations. One of them, Citibank Singapore Limited (“Citibank”), filed a bankruptcy application against him in February 2016.

In May 2016, the applicant made an application under s 45(1) of the Bankruptcy Act for an interim order in connection with a proposal he wanted to make to his creditors for a voluntary arrangement which would have the effect of a compromise in satisfaction of debts amounting to approximately S$191m. He proposed to pay these creditors a total amount of S$1.5m in three tranches over 26 months. He had secured an interest free loan from a business associate to fund the payment.

The interim order was granted on 24 May 2016. The effect of an interim order is set out in s 45(3) of the Act, which provides that: (3) An interim order shall have the effect that, during the period for which it is in force – (a) where the interim order is in respect of an individual debtor – (i) no bankruptcy application may be made or proceeded with against the debtor; and (ii) no other proceedings, execution or other legal process may be commenced or continued against the person or property of the debtor without the leave of the court …

The Act requires that proposals for voluntary arrangement include the appointment of a person called a “nominee”, who has certain statutory duties such as to prepare a report on the debtor’s proposal for submission to the court. The nominee for the applicant’s voluntary arrangement was an accountant. He duly submitted his report on the applicant’s proposal as required under the Act. The court permitted a creditors’ meeting to be called. The creditors’ meeting was chaired by the nominee but the applicant did not attend. This resulted in an another meeting where the applicant was asked to attend so that he could address issues raised by some creditors. At this adjourned creditors’ meeting, the voluntary arrangement was approved by the requisite majority of the creditors.

Several creditors who had voted against the approval of the voluntary arrangement then applied to court for the approval to be set aside. Their applications were granted by an Assistant Registrar on 8 March 2017. His grounds of decision are reported in Re Aathar Ah Kong Andrew [2017] SGHCR 4.

The applicant appealed against this decision, but withdrew his appeal on the date scheduled for the hearing of the appeal. He then filed an application on 21 June 2017 for another interim order under s 45(1) of the Act on the basis that he was making a new proposal to his creditors for a voluntary arrangement. Under this new proposal, the applicant would now pay a total of S$3m, which he would borrow, to his creditors in five tranches over 50 months. This proposal now covered creditors to whom the applicant owed a total amount of approximately S$317m. For this second proposal, the applicant appointed a senior lawyer as his nominee.

On 11 July 2017, the court granted the interim order. This was the interim order in question which the applicant was applying to extend in the Registrar’s Appeal before me. But before I come to that application, it is important to recount what transpired in relation to this second proposal for a voluntary arrangement.

The nominee submitted his report in September 2017. The first creditors’ meeting was held on 5 October 2017. This meeting was adjourned after questions were raised by creditors on various issues. The creditors voted on the proposal at the adjourned creditors’ meeting on 19 October 2017. On 20 and 25 October 2017, the nominee wrote to the creditors to inform them that the voluntary arrangement had been approved by the requisite majority of creditors. In the process of ascertaining whether the threshold had been crossed, the nominee accorded no value to certain litigation claims and he admitted a creditor’s claim of approximately S$20m which he had previously adjudicated as being unsupported by documents.

Four creditors, who had objected to the voluntary arrangement, then filed applications under s 54 of the Act to set aside the creditors’ approval of the voluntary arrangement. These were (i) CIMB Securities (Singapore) Pte Ltd (“CIMB”); (ii) Citibank; (iii) KGI Securities (Singapore) Pte Ltd (“KGI”); and (iv) OUE Lippo Healthcare Limited (“OUELH”), formerly known as International Healthway Corporation Ltd.

The applications were heard in the first instance by Valerie Thean J on 14 March 2018. After hearing parties, Thean J held that s 54(1)(b) of the Act was satisfied in that there were material irregularities in the conduct of the creditors’ meeting, arising from the nominee’s decisions and the applicant’s lack of disclosure. The judge accordingly set aside the approval for the voluntary arrangement at the hearing and directed that no further creditors’ meetings be held. As mentioned earlier, the grounds of Thean J’s decision are in Re Aathar Ah Kong Andrew [2018] SGHC 124.

The applicant appealed against Thean J’s decision. He felt it necessary to file a total of four appeals – Civil Appeal Nos 60 to 63 of 2018 – because each of the creditors named at [11] above had filed a separate application to set aside the creditors’ approval, all of which had been allowed. Following this, the applicant then filed the application seeking an extension of the interim order made on 11 July 2017 until the determination of his four appeals by the Court of Appeal. The extension sought was pursuant to s 45(4) of the Act.

The parties’ cases The hearing below

The application for an extension of the interim order was heard on 5 June 2018 by an Assistant Registrar. Before the Assistant Registrar, the applicant argued that his appeals to the Court of Appeal against the decision of Thean J would be rendered nugatory if the interim order was not extended. This was because he might be made a bankrupt before the appeals were heard. If so, the applicant would have to seek the leave of the Official Assignee (the “OA”) before he could proceed with the appeals, and leave might not be forthcoming because the claims against him exceeded S$300m. Even if leave were granted by the OA, this might cause delays to the hearing of the appeals because it was submitted by counsel for the applicant that “the OA does not work very fast”. The applicant also argued that he would have to put up more security than the S$80,000 (S$20,000 for each appeal) he had already provided. This is because he would have to provide security for his counsel’s costs as well. Finally, it was argued that the applicant might not be able to fully utilise his expertise in finance and his work experience if he were made a bankrupt as he would lose his credibility and might not be granted permission to leave Singapore for work.

CIMB and OUELH objected to the application, while Citibank and KGI took no position on the matter. The objecting creditors argued that the applicant had not shown any special circumstances for the court to grant an extension of the interim order. It was pointed out that there was no evidence to suggest that the OA would not grant leave for the applicant to proceed with his appeals if he were to be made bankrupt before the appeals were heard. It was also argued that there would be prejudice to the creditors if an extension of the interim order were granted because it had been more than two years since Citibank’s bankruptcy application was filed, but the applicant had still not been made a bankrupt and his debts continued to increase. Worse, the applicant had been allowed to cause his creditors to incur more legal costs while at the same time refusing to pay all the outstanding costs orders arising from the two failed voluntary arrangements.

The Assistant Registrar dismissed the application for extension of the interim order. He was of the view that the applicant had not shown good reasons to justify its extension, and that the appeals would not be rendered nugatory if the applicant was made bankrupt. The Assistant Registrar also rejected the argument that the applicant would not be able to utilise his expertise in finance and his work experience because the OA could grant the applicant permission to travel for his work.

As for prejudice to the creditors, the Assistant Registrar accepted that such prejudice was real given that there had been a long delay since bankruptcy proceedings were first commenced against the applicant. Further, the applicant was refusing to satisfy the outstanding costs orders against...