Re Lim Kim Guan

• Jurisdiction: Singapore
• Judgment Date: 21 October 1990
• Date: 21 October 1990
• Docket Number: Bankruptcy Nos 3713 of 1989 and 3714 of 1989,Bankruptcy Nos 3390 and 3391 of 1988
• Court: High Court (Singapore)

Re Lim Kim Guan, ex parte Four Seas Communications Bank Ltd and another suit

[1989] SGHC 94

L P Thean J

Bankruptcy Nos 3390 and 3391 of 1988

High Court

Insolvency Law–Bankruptcy–Bank issuing bankruptcy notices which failed to state total amount of interest payable–Whether bankruptcy notices valid–Whether statutory requirements complied with–Section 3 (1) (i) Bankruptcy Act (Cap 20, 1985 Rev Ed)

The petitioner bank obtained final judgment against two debtors. The debtors failed to comply with the requirements of the bankruptcy notices served on them and the bank presented bankruptcy petitions against them. The debtors objected to the bankruptcy notices on the ground that they were invalid because they did not specify the precise amount of interest which each debtor was required to pay. In each of the two bankruptcy notices, the subject of payment, ie the judgment debt or sum, consisted of three components: (a) the principal of $201,479.41; (b) interest from 1 June 1988 to the date of judgment at the rate of 3.75% pa above the petitioner's prime lending rate on the basis of a 365-day year with monthly rests; and (c) costs of $700.

Held, setting aside the bankruptcy notices and dismissing the bankruptcy petitions:

(1) The requirements under s 3 (1) (i) of the Bankruptcy Act (Cap 20, 1985 Rev Ed) were twofold. Firstly, the debtor was to pay the “judgment debt or sum” and secondly, the debtor was to pay such debt or sum “in accordance with the terms of the judgment”. The first requirement related to the subject of payment - the judgment debt or sum. In most cases, merely setting out the judgment debt or sum would suffice and this did not give rise to any contention. The second requirement related to the judgment creditor, such as his name and capacity in which he was to receive the payment, and to the time and manner of payment - which had to be in accordance with the judgment. The serious consequences attached to a bankruptcy notice meant that a bankruptcy order would be strictly construed. The test was whether a debtor could be misled, embarrassed or perplexed as to what amount or how much he was required to pay to the judgment creditor. The bankruptcy notice should therefore specify precisely what the debtor was required to pay in order to avoid the act of bankruptcy: at [15], [21] and [29].

(2) The “formula or other means” of ascertaining the precise amount of interest ought to be apparent on the face of the bankruptcy notice so that on that basis the debtor could calculate and ascertain the precise amount of interest he had to pay to avoid an act of bankruptcy. While the debtor could obtain the precise amount from the judgment creditor, it was not the obligation of the debtor to enquire from the judgment creditor the precise amount he had to pay. If the interest was not quantified in a specific sum in a bankruptcy notice, the specific rate of interest had to be specified so that on the face of the notice the amount of interest was capable of being ascertained: at [30] and [31].

(3) In the present case, it was by no means explicit and clear on the face of the bankruptcy notice how much the debtor had to pay in terms of the amount of interest. The petitioner's prime lending rate applicable was not specified in the notice, nor was the formula for or the manner of computing or calculating the interest “with monthly rests” set out. Each of these bankruptcy notices was therefore fatally flawed: at [30] and [35].

Arkell, Re (1889) 61 LT 90 (refd)

Debtor, In reA [1908] 2 KB 684 (refd)

Debtor, In reA [1911] 2 KB 718 (refd)

Debtor, In reA [1912] 1 KB 53 (refd)

Ghazali bin Mat Noor v Southern Bank Bhd [1989] 2 MLJ 142 (not folld)

HB, In re [1904] 1 KB 94 (refd)

Howes, In re;ex parte Hughes [1892] 2 QB 628 (refd)

Judgment Debtor, In re A [1908] 2 KB 474 (refd)

Lehmann, Re (1890) 62 LT 941 (folld)

Lim Annie, Re [1985-1986] SLR (R) 1123 (refd)

Low Mun v Chung Khiaw Bank Ltd [1988] 1 MLJ 263 (distd)

O'Keefe, Re (1963) 19 ABC 101 (not folld)

Thomas E Davis, Re (1963) 19 ABC 100 (not folld)

Bankruptcy Act (Cap 20,1985Rev Ed)s 3 (1) (i) (consd)

Bankruptcy Act1924-1965 (Cth)ss 52 and 53

Bankruptcy Act1967 (M'sia)s 3 (1) (i)

Raja Chelva Ratnam (Tan Rajah & Cheah) for the petitioning creditor

Timonthy Ong Kian Wei (Kang & Ong Associates) for the debtors

Hamidah bte Ibrahim (Official Assignee) for the Official Assignee.

Judgment reserved.

L P Thean J

1 These are two bankruptcy petitions before me, and they both raise the same issue of law. The facts are not in dispute and are as follows.

2 The petitioner on 30 September 1988 obtained a final judgment in Suit No 1262 of 1988 in the High Court against the two debtors, Lim Kim Guan and Ng Sew Eng, in the following terms:

It is this day adjudged that the second and third defendants (Lim Kim Guan and Ng Sew Eng) do pay the plaintiffs the sum of $201,479.41 plus interest thereon from 1 June 1988 to date of judgment at the rate of 3.75% p.a. above the plaintiffs' prime lending rate on the basis of a 365-day year with monthly rests and $700 costs.

3 Both the debtors failed to satisfy the judgment. On 6 December 1988, the petitioner took out two bankruptcy notices against them respectively. The material portion of each of the bankruptcy notices is as follows:

Take notice that within seven (7) days after service of this notice on you, excluding the day of such service, you must pay to Four Seas Communications Bank Ltd of 19-25, Cecil Street, Singapore 0104, the sum of $201,479.41 plus interest thereon from 1 June 1988 to date of judgment at the rate of 3.75% pa above the plaintiffs' prime lending rate on the basis of a 365-day year with monthly rests and $700 costs as being the amount due on the judgment dated 30 September 1988 obtained by them against you in the High Court of the Republic of Singapore in Suit No 1262 of 1988 whereon execution has not been stayed, or you must secure or compound for the said sum to their satisfaction or the satisfaction of this court, or you must satisfy this court that you have a counterclaim, set-off or cross-demand against the said Four Seas Communications Bank Ltd which equals or exceeds the said sum claimed by them and which you could not set up in the action in which the judgment or order was obtained.

4 Both the debtors failed to comply with the requirements of the respective bankruptcy notices, and following that, the petitioner on 3 February 1989 presented these two bankruptcy petitions against them respectively; each of the bankruptcy petitions is founded on the failure by the debtor concerned to comply with the requirements of the bankruptcy notice served on him or her, as the case may be.

5 The debtors now contest the petitions, and the objection raised by their counsel is that the bankruptcy notice in each case is invalid in that it has not specified the precise amount of interest which the debtor is required to pay. In other words, the petitioner has not quantified the interest in a specific sum in the respective bankruptcy notices. In support, counsel relied on the two recent decisions of the Supreme Court in Malaysia, namely, Low Mun v Chung Khiaw Bank Ltd [1988] 1 MLJ 263 and Ghazali bin Mat Noor v Southern Bank Bhd [1989] 2 MLJ 142. In Low Mun the bankruptcy notice served on the debtor required payment to the petitioning creditor of a principal sum of $2,325,000 “together with interest thereon at a rate of 3% above the judgment creditors' base rate of interest per annum with monthly rests in respect of the sum of $2,100,000 and yearly rests in respect of the sum of $200,000 from 27 February 1983 until payment thereof and costs to be taxed claimed by them”. At the date of the issue of the bankruptcy notice the base lending rate of the judgment creditor was not available and the costs of the proceedings had not been taxed. It was only after the issue of the bankruptcy notice, when the bankruptcy petition was presented, that the creditor was able to ascertain and determine the base lending rate at 10.25% pa and to quantify the costs at $9,880.50 which had by then been taxed. The Supreme Court held that the bankruptcy notice was bad as it demanded payment of the whole judgment debt when parts of the debt had not been or could not be quantified. Mohamed Azmi SCJ in delivering the judgment of the court said, at 265:

Clearly, the bankruptcy notice was bad in law as it contained demand for payment of the whole judgment debt within seven days when parts of the whole debt had not been or could not be quantified, and as such were incapable of being made the subject of execution, and consequently incapable of being complied with. Non-compliance with the demand to pay such unascertained sums cannot constitute an act of bankruptcy. The demand for payment in the notice must not only be quantified but must also be the correct sum owing as at the date of the notice.

6 In Ghazali ( [5]supra) there were five appeals before the Supreme Court, and they raised the same question touching on the five bankruptcy notices respectively which were the subject of the appeals. Each of the bankruptcy notices required payment of a principal sum together with interest at a specified rate from a certain date to the date of “realization” or “settlement”. It was held that for a bankruptcy notice to be valid it should state the exact amount due as at the date of the bankruptcy notice and that the judgment debtor must know the exact amount he had to pay to avoid bankruptcy. As the interests payable had not been quantified in all the five cases, the court held that all the bankruptcy notices were invalid and consequently all subsequent proceedings were a nullity. Harun SCJ arrived at this conclusion relying on the judgment of Mohamed Azmi SCJ in Low Mun ( [5]supra).

7 The Bankruptcy Act 1967 of Malaysia, on the basis of which Low Mun and Ghazaliwere decided, is in pari materia with...