Re Aathar Ah Kong Andrew

• Jurisdiction: Singapore
• Judge: Audrey Lim J
• Judgment Date: 17 August 2020
• Neutral Citation: [2020] SGHC 173
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 8 of 2019 (Registrar’s Appeal No 310 of 2019)
• Published date: 21 August 2020
• Year: 2020
• Hearing Date: 14 January 2020,18 June 2020,21 February 2020,19 June 2020
• Plaintiff Counsel: Goh Kok Leong and Ng Wei Ting (Ang & Partners)
• Defendant Counsel: Jansen Chow and Sasha Gonsalves (Rajah & Tann Singapore LLP),Andre Arul and Adrian Kho (Arul Chew & Partners)
• Subject Matter: Insolvency Law,Bankruptcy,Voluntary arrangement,Whether voluntary arrangement should be revoked,Whether materials adduced after a creditors' meeting may be used to justify the nominee's adjudication of claims for the purposes of the creditors' meeting,Whether a creditor's quantum of claim for purposes of voting can be recalculated after voting at creditors' meeting
• Citation: [2020] SGHC 173

Audrey Lim J: Introduction

This is the appeal of Aathar Ah Kong Andrew (“Aathar”) against the decision of an assistant registrar (“AR”) to revoke his proposed third voluntary arrangement (“3rd VA”) under s 54(1) of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (“BA”). The creditor opposing the proposed 3rd VA is OUE Lippo Healthcare Limited (“OUELH”). The nominee is Mr Andre Arul, a lawyer from Arul Chew & Partners (“the Nominee”). This appeal concerns whether the Nominee had rightly admitted and adjudicated the claims of three Indonesian creditors (“the Indon Entities”) and the evidence that can be relied on for this purpose.

In 2016, Aathar applied for the first voluntary arrangement (“1st VA”). The 1st VA was approved at a creditors’ meeting, but it was revoked by an AR on the application of various creditors who were dissatisfied with the outcome of the meeting. The AR found no evidence of the huge debts that were purportedly owed to the creditors and found material irregularities arising from Aathar’s lack of candour in his statement of affairs and the nominee’s failure to scrutinise it. The AR then decided that no further meeting should be sanctioned.

Aathar then filed a second application for voluntary arrangement (“VA”) in September 2017 (“2nd VA”). Again, the approval for the 2nd VA was revoked by the High Court for material irregularities. In relation to the Indon Entities, namely “Berkah”, “Fajar” and “Entete”, the court found as follows. The manner of review of their claims by the nominee left much to be desired. The supporting documents which the nominee claimed were given to him for these claims were neither explained nor exhibited in any affidavit, and the nominee had reviewed the supporting documents cursorily. Also, in light of the large sums claimed by the Indon Entities, and the circumstances surrounding the previous proposal for a VA, the nominee should have scrutinised the claims more closely in his independent and quasi-judicial role. Aathar’s appeal to the Court of Appeal on the 2nd VA was dismissed (see Aathar Ah Kong Andrew v CIMB Securities (Singapore) Pte Ltd and other appeals and another matter [2019] 2 SLR 164 (“Aathar CA”)).

Before the Court of Appeal heard Aathar’s appeal on the 2nd VA, Aathar filed his third VA application on 24 January 2019 (“3rd VA”) and proposed that some $2.5 million, funded by one PT Cahaya, be distributed among his purported liabilities of over $596 million.¹ This was substantially the same proposal as the 1st and 2nd VAs.

Essentially, the matter before the AR concerned: (a) various Indonesian creditors including the Indon Entities; (b) Golden Cliff International Ltd (“Golden Cliff”); (c) the “Crest Entities” (comprising Crest Capital Asia Pte Ltd, Crest Capital Asia Fund Management Ltd, The Enterprise Fund III Ltd, VMF3 Ltd and Value Monetization III Ltd), OUELH and Low See Cheng (“Litigation Claims”); and (d) the Enterprise Fund II. The dispute in the present appeal concerns whether the Indon Entities’ claims, premised on Share Charge and Guarantee Deeds (“SCG Deeds”), were rightly admitted and adjudicated by the Nominee.

Share Charge and Guarantee Deeds

Aathar and Real Empire International Limited (“REL”), a company wholly-owned by Aathar, entered into three separate SCG Deeds with Berkah dated 28 March 2014; Fajar dated 19 February 2014; and Entete dated 10 March 2014.² The contents of the SCG Deeds are, save for the identity of the respective Indon Entities and limit on the guaranteed amount, essentially the same, and they are governed by Singapore law. They stipulate that REL will provide guarantees to the creditors of the Indon Entities in respect of the Indon Entities’ liabilities to their creditors, and that Aathar would guarantee to the Indon Entities the performance of REL in accordance with the SCG Deeds.

Yet Kum Meng, the CEO of OUELH, claims that the Indon Entities share the same address.³ Ade Darmawan (“Darmawan”), Fajar’s director, rebuts this and states that Fajar’s postal address was different, and that Fajar was not related to Berkah or Entete.⁴ The SCG Deeds show that Fajar has a different address from Berkah and Entete (the latter two having the same building address albeit on different floors).

3rd VA application and Creditors’ Meeting

On 26 February 2019, Aathar was granted an interim voluntary arrangement by an AR. After the creditors submitted their notices of claim, the Nominee recommended that a creditors’ meeting be called to consider Aathar’s proposed 3rd VA. The Nominee had adjudicated OUELH’s claim at one third of its claimed sum ($19.3 million instead of $58 million).⁵ OUELH’s claim against Aathar was a contingent claim based on its suit (Suit 441/2016) against, among others, Aathar for loss and damages relating to a Standby Facility extended by investment funds (the Crest Entities).

In April 2019, the AR allowed the creditors’ meeting to be called. On 8 May 2019, the Nominee issued a notice of creditors’ meeting – to be held on 29 May 2019 (“Creditors’ Meeting”) – and requested that parties to the intended meeting give notice of any issues they wished to raise to the chairman ahead of the meeting.⁶ On 9 May 2019, OUELH’s lawyers provided an updated notice of claim to the Nominee of about S$64.339 million in respect of its claim against Aathar in Suit 441/2016. On 24 May 2019, they informed the Nominee of OUELH’s concerns on the veracity of Golden Cliff’s and the Indonesian creditors’ claims. In particular, they stated that: (a) the material irregularities raised by the courts in the previous two proposed VAs needed to be fully and adequately addressed; (b) Golden Cliff’s claim should be excluded in full; and (c) the Indonesian creditors’ claims should be excluded as the Indonesian creditors’ bona fides had been seriously questioned by the courts in the previous decisions.⁷

On 28 May 2019, a day before the Creditors’ Meeting, the Nominee sent OUELH’s counsel an excel spreadsheet setting out the final adjudication of all claims (“Final Adjudication”), which included the following. The Nominee reduced the interest component under the Standby Facility to 15% per annum as the Standby Facility contractual interest of 3.5% per month with default interest of 2.0% per month was too high. He adjudicated the total amount claimable by OUELH at $28.76 million, before discounting OUELH’s claim to 10% of its adjudicated value, or $2.876 million. He also marked OUELH’s claim as “objected to”.⁸ The Nominee adjudicated claims by over 20 Indonesian creditors – the same creditors involved in the previous two VAs – at over $159 million, which comprised about 65% of Aathar’s overall adjudicated liabilities of around $245 million. Of this $159 million, around $113 million of the claims belonged to Fajar ($51.5 million), Berkah ($36.8 million) and Entete ($25 million).⁹

The Nominee stated in his Chairman’s Report dated 12 June 2019 of the Creditors’ Meeting (“Chairman’s Report”) that he “ha[d] not seen clear evidence” that third party creditors had triggered the Indon Entities’ liabilities under their respective SCG Deeds. Nevertheless, he admitted the Indon Entities’ claims on an “objected to” basis and set the value of their respective claims at the maximum limit specified in the SCG Deeds (ie, $20 million each for Fajar and Berkah, and $25 million for Entete).¹⁰

Aathar’s proposed 3rd VA was approved by a majority in numbers at 74.36% (ie, 29 out of 39 creditors present) and a majority in value of 81.07% of the creditors present and voting.¹¹ The Indon Entities and Golden Cliff had voted in support of the proposed 3rd VA, whilst OUELH had voted against it.

Decision below

OUELH applied to revoke the 3rd VA pursuant to s 54(1) of the BA on the basis that there were material irregularities which occurred at or in relation to the Creditors’ Meeting. The AR found that the Nominee’s inclusion of the Indon Entities’ claims under the SCG Deeds of $65 million on an “objected to” basis was a material irregularity. The Nominee had relied on documents adduced after the Creditors’ Meeting to justify his admission and adjudication of the Indon Entities’ claims. There was insufficient evidence, whether before or after the Creditors’ Meeting, for these claims to be included in the adjudication. This is because REL’s guarantee obligation under the SCG Deeds was a secondary liability, in that, if an Indon Entity defaulted on the primary obligation to its creditor (“Creditor” or “Creditors” as the case may be), REL may be called upon to pay the sum. While the documents subsequently disclosed showed that liabilities were incurred and paid by the Indon Entities, there were no documents to show that a Creditor had called upon the guarantees given by REL. Since exclusion of the Indon Entities’ claims would reduce support for the proposed 3rd VA to about 74%, inclusion of these claims was a material irregularity.

However, the AR found no material irregularities in relation to the Nominee’s inclusion of Golden Cliff’s claim; the Nominee applying a 90% discount to the Litigation Claims; and the Nominee including one-third, instead of the full, claim by Enterprise Fund II.

The AR thus revoked the approval given at the Creditors’ Meeting as the votes pertaining to the $65 million should not have been counted. Aathar appealed against the AR’s decision pertaining to the Indon Entities’ claims.

Appellant’s (Aathar’s) submissions

Aathar submits that the inclusion of the Indon Entities’ claims was not an irregularity because they were genuine claims against him which were supported by evidence, and the Nominee’s decision to include these claims could not be said to be one which no reasonable insolvency practitioner could have come to.

The Nominee had some evidence of the liabilities under the SCG Deeds and had acted properly in ascribing estimated values to the Indon Entities’ claims whilst marking...