Re Andrla, Dominic and another matter

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 19 March 2019
• Neutral Citation: [2019] SGHC 77
• Court: High Court (Singapore)
• Docket Number: Originating Summons (Bankruptcy) No 4 of 2018 (Registrar’s Appeal No 18 of 2018, Summons No 889, 954 and 2149 of 2018, Bankruptcy No 824 of 2017 (Registrar’s Appeal No 19 of 2018, Summons No 840 and 2150 of 2018)
• Year: 2019
• Published date: 31 May 2019
• Hearing Date: 31 May 2018,25 June 2018,17 May 2018
• Plaintiff Counsel: Melissa Peh (Yeo-Leong & Peh LLC)
• Defendant Counsel: Nandwani Manoj Prakash (Gabriel Law Corporation)
• Subject Matter: Insolvency Law,Bankruptcy,Interim Order
• Citation: [2019] SGHC 77

Lee Seiu Kin J: Introduction

In registrar’s appeal no 18 of 2018, the appellant appealed against the decision of assistant registrar Scott Tan (“AR Tan”) on 23 January 2018 dismissing his application in Originating Summons (Bankruptcy) No 4 of 2018 for an interim order under s 45(1) of the Bankruptcy Act (Cap 20, 2009 Rev Ed)(“the Act”). In registrar’s appeal no 19 of 2019, the appellant appealed against the decision of assistant registrar Bryan Fang (“AR Fang”) on 25 January 2018 in making a bankruptcy order against him in bankruptcy no 824 of 2017.

After hearing arguments, I dismissed both appeals. The appellant filed a notice of appeal on 20 December 2018 and I now give my written grounds of decision.

Facts

The appellant is a British Citizen, and has been a Permanent Resident of Singapore for the last 19 years. ¹ To date, he has accumulated debts of almost $8m of which the three top creditors are Nair (in the sum of about $3.1m), Hartnoll (about $2.2m) and Guy Neville (“Neville”) (about $1.3m).² The remaining sum of about $1.4m is owed to various financial institutions and miscellaneous entities. The appellant also disclosed that there were two claims in the District Courts against him totalling about $400,000.

A bankruptcy petition was filed by one of the creditors, American Express International Inc (“AMEX”) on 20 April 2017. ³ AMEX’s bankruptcy application against the appellant was granted by AR Fang on 25 January 2018.⁴

On 11 January 2018, the appellant filed an application for an interim order under s 45(1) of the Act.⁵ Under his initial proposal, the appellant would be given between six to nine months to sell his 33 Lotus Avenue Property (“the Singapore Property”) and repay all debts out of the proceeds of its sale.⁶ His proposed nominee was a lawyer.⁷ The application was subsequently dismissed by AR Tan on 23 January 2018.⁸ The appellant later sought to have the bankruptcy application dismissed on 25 January 2018 before AR Fang.

Decision below

Two creditors, AMEX and Neville objected to the appellant’s application for an interim order. In their view, there was no point sanctioning a voluntary arrangement when it was “doomed to fail”.⁹ Secondly, they argued that the proposal put forth by the appellant was not a serious and viable one, as required by law.

The appellant argued that the court should not pre-judge the matter until it had seen the nominee’s report, and added that the proposal was a serious one.

AR Tan agreed substantially with the creditors and accordingly dismissed the application for the interim order. He was of the view that, taking into account that Neville would object to whatever proposal put forward by the appellant, there was “no chance” that the scheme would be approved.¹⁰

In the application before AR Fang, the appellant sought to dismiss the ongoing bankruptcy application against him by arguing that he had made fresh offers to his creditors and that they had been “unreasonably refused”, pursuant to s 65(2)(d) of the Act.¹¹

The main thrust of the “offer” made to the creditors involved the Singapore Property. Another aspect of his offer was the proposed assignment of loans from the appellant to the creditors. AR Fang took the view that the offer was not “unreasonably refused” as there was no “certainty” around the proposed sale of the Singapore Property, and the creditors had already extended a degree of time and indulgence to the appellant. Accordingly, AR Fang determined that s 65(2)(d) of the Act was not satisfied and made the bankruptcy order.

Registrar’s Appeal

Being dissatisfied with the decisions of the two assistant registrars, the appellant appealed. These formed the subject of registrar’s appeal no 18 of 2018 and registrar’s appeal no 19 of 2018.

The proceedings were heard over the course of three days: 17 May, 31 May, and 25 June 2018.

Issues to be determined

Before me, the appellant argued that:¹² It would be appropriate for the court to make an interim order for the purpose of facilitating the consideration and implementation of the debtor’s proposal. The bankruptcy order on 25 January 2018 ought not to have been made as there were other “sufficient cause[s]” not to make such an order.

I shall address each issue in turn.

Would it be appropriate for the court to make an interim order?

Pursuant to s 45(1) of the Act, an insolvent debtor who intends to make a proposal to his creditors for a voluntary arrangement may apply to the court for an interim order. The effect of an interim order would be that, during the period in which it is in force, no bankruptcy application may be made or proceeded against the debtor; and no other proceedings may be commenced or continued against the debtor without the leave of court: s 45(3)(a)(i) and s 45(3)(a)(ii) of the Act.

The court may make an interim order if it thinks that it would be “appropriate to do so for the purpose of facilitating the consideration and implementation of the debtor’s proposal” as stipulated by s 48(2) of the Act.

In Re Lim Wee Beng Eddie [2001] SGHC 103 at [56], reproducing Muir Hunter on Personal Insolvency (1987) at pp 3018 – 3019, the court shed some light as to what constitutes “appropriateness”:

In determining the “appropriateness” or otherwise of making an interim order, the court will consider whether the debtor’s proposal for voluntary arrangement is serious and viable. “If, in a particular case, the judge before whom the application for an interim order concludes that the proposal is not one which can be described as serious and viable, it would be expected that as a matter of discretion, the judge would refuse to make an interim order. Judges must, I think, be careful not to allow applications for interim orders simply to become a means of postponing the making of bankruptcy orders, in circumstances where there is no apparent likelihood of benefit to the creditors from such a postponement”: see Hook v Jewson [1997] 1 SLR B.C.L.C 664, Scott, V-C, following Re A Debtor (Cooper v Fearnley) (1 of 1994) [1997] B.P.I.R. 20 Aldous J.

[Emphasis Added]

The appellant’s proposal rests on two pillars: Sale of the Singapore Property;¹³ and Loan repayments from Straits Advisors Group Limited (“SAGL”).

I will address each aspect of the appellant’s proposal, considered against the sums owed by the appellant to his creditors.

The appellant’s main asset is the Singapore Property. The estimated value of the Singapore Property is $11m.¹⁴ The outstanding mortgage and CPF charge on the Singapore property is $7,786,884. I note that the mortgagee, OCBC, had at the time of the proceedings, already issued a notice for the appellant to vacate the Singapore property.¹⁵ The possibility of a forced sale could therefore not be discounted. The forced sale value of the Singapore property is $9.35m.¹⁶ After deducting the outstanding mortgage on the property, the appellant would be left with $3.2m, or $1.55m if it is a forced sale.

The second aspect of the appellant’s proposal hinges on repayments by SAGL of a debt owed to him. The appellant is the managing director of SAGL, a company he formed in 1998 to provide financial consultancy services.¹⁷ In 1999, SAGL entered into a sub-contracting arrangement with Straits Advisors Private Limited (“SAPL”).¹⁸ SAPL had a client that defaulted on payments of approximately US$2m in shares and fees in 2010. SAPL then attempted to recover the debt by way of court litigation but was unsuccessful. However, that attempt had cost SAPL about $1m in legal fees and other costs. SAPL was also unable to pay third party costs awarded against it and was wound up in 2015. The appellant explained that SAPL was funded by SAGL and this in turn was funded by him personally.¹⁹ The total debt owed to him by SAGL is thus about $5.2m. ²⁰ The appellant stated that SAGL had, since 2015, started to make a profit and had made repayments of the loan to him.²¹ The appellant stated that SAGL had generated a profit of about $790,000 in 2017 and had repaid that sum to him²² which reduced the loan from $6m to $5.2m.

The appellant also claimed that he has other assets although he did not include them in his proposal. Upon an examination of those assets, it is clear why he did not do so. The first is a property in the United Kingdom which he had tried to sell but had “withdrawn from the market in light of a lack of interest”.²³ The appellant stated that the likelihood of a sale remained low. In any event, even if he could sell it at what he felt was the market value, the net proceeds after repayment of the mortgage amounted to only GBP12,000.²⁴ The second is a pair of villas in Batam, Indonesia over which he had purchased lease agreements. After payment of some $839,000 out of a total of $1.217m, the Lessor terminated the lease.²⁵ The appellant said that he had filed a claim for the equivalent of $1.34m in the Indonesian courts in 2017. However, he noted that he was unfamiliar with...