Re Lim Lye Hiang, ex parte the Official Assignee

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 11 October 2010
• Neutral Citation: [2010] SGHC 299
• Plaintiff Counsel: Foo Soon Yien (Bernard & Rada Law Corporation)
• Docket Number: Bankruptcy No 2066 of 1997 (Registrar’s Appeal No 600001 of 2010)
• Date: 11 October 2010
• Hearing Date: 19 July 2010
• Subject Matter: Insolvency Law
• Published date: 13 October 2010
• Citation: [2010] SGHC 299
• Defendant Counsel: Lim Yew Jin
• Court: High Court (Singapore)
• Year: 2010

Chan Seng Onn J: Introduction

This is an appeal against the decision of Assistant Registrar Leong Kwang Ian (“assistant registrar”) ordering that a sum of money from the Central Provident Fund (“CPF”) which was paid to the Official Assignee as the trustee in bankruptcy of the appellant, Mdm Lim Lye Hiang (“LLH”), be divisible among and payable to her creditors.

Background Facts

On 9 January 1998, a bankruptcy order was made against LLH. On 18 September 2008, the CPF Board sent a letter to LLH to inform her that she had been nominated to receive the CPF monies and the Singtel discounted shares of her late sister, Mdm Lim Lye Keow (“LLH’s nominated CPF monies”). Mdm Lim Lye Keow had passed away on 14 March 2008. This letter was copied to the Official Assignee, who has no record of having received this letter at that time. It is unclear from the record when Mdm Lim Lye Keow made the nomination. Almost a year later, on 26 June 2009, the CPF Board sent an email to the Official Assignee’s officers, requesting for the Official Assignee’s instruction on the transfer of LLH’s nominated CPF monies. The Official Assignee similarly has no record of having received this email.

On 13 November 2009, LLH was discharged by an order of court made pursuant to s 124 of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (“Bankruptcy Act”). At the time of the application for discharge, because the Official Assignee remained unaware that LLH had become entitled to LLH’s nominated CPF monies, it failed to alert the court to the same. However, due to the objection of a creditor, for reasons which are not relevant to the present appeal, the Official Assignee delayed the distribution of her assets to her creditors and the sending of a notification to LLH of the fact that she had been discharged by the court.

Thereafter, on 14 January 2010, the CPF Board again emailed the Official Assignee referring to its previous letter dated 18 September 2008 and email dated 26 June 2009, and requested for instructions to transfer LLH’s nominated CPF monies to the Official Assignee. The monies amounting to $102,614.84, which included money standing to Mdm Lim Lye Keow’s credit during her lifetime, and the proceeds from the sale of her Singtel discounted shares, were eventually transferred to the Official Assignee on 2 March 2010.

On 12 May 2010, the Official Assignee filed a summons seeking an order, inter alia, in the following terms:

1) That [LLH’s nominated CPF monies] be divisible among her creditors and payable to them as dividends, on the basis that they are property which had devolved on [LLH] on 14 March 2008 (which was the date of her sister’s death and before [LLH]’s discharge from bankruptcy) notwithstanding that the CPF monies were received by the Official Assignee after her discharge.

.....

At the hearing before the assistant registrar on 25 June 2010 the Official Assignee contended and the assistant registrar accepted that pursuant to s 15(5) of the Central Provident Fund Act (Cap 36 2001 Rev Ed) (“CPF Act”), LLH had become entitled to withdraw LLH’s nominated CPF monies upon Mdm Lim Lye Keow’s death on 14 March 2008, which was before LLH’s discharge. Having regard to: (i) Section 78(1) of the Bankruptcy Act, which provides that all property that devolves on the bankrupt before his discharge is divisible; and (ii) the definition of property in s 2 of the Bankruptcy Act, which includes “money, goods, things in action land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of or incidental to property”, the assistant registrar held that the right to withdraw LLH’s nominated CPF monies constituted “property” which devolved on LLH before her discharge and therefore vested in the Official Assignee and became divisible among her creditors. The legal significance of a bankrupt’s discharge on the vesting of assets in the Official Assignee

By way of background, it is useful to first set out the relevant provisions of the Bankruptcy Act. Section 75(a) of the Bankruptcy Act provides that the bankruptcy of a person who has been adjudged bankrupt by a bankruptcy order commences on the day on which the bankruptcy order is made. Section 75(b) provides that bankruptcy terminates upon a bankrupt’s discharge. Sub-sections 76(1)(a) and (b) of the Bankruptcy Act are of particular relevance to the present appeal, and they provide that:

Effect of bankruptcy order

76. —(1) On the making of a bankruptcy order —

(a) the property of the bankrupt shall — (i) vest in the Official Assignee without any further conveyance, assignment or transfer; and (ii) become divisible among his creditors;

(b) the Official Assignee shall be constituted receiver of the bankrupt’s property;

...

In s 2 of the Bankruptcy Act, “property” is defined non-exhaustively to include things in action, and also every description of interest, whether present or future or vested or contingent, arising out of or incidental to property. Reading the definition of “property” in s 2 with s 76(1)(a) of the Bankruptcy Act, anything which falls within the definition of “property” in s 2 belonging to a bankrupt on the date of the making of a bankruptcy order will vest in the Official Assignee and become available for distribution among his creditors.

Sub-sections 76(1)(a) and (b) should also be read together with s 78(1) of the Bankruptcy Act, which describes the property which is divisible among a bankrupt’s creditors, subject to certain exceptions listed in s 78(2) of the Bankruptcy Act (which are irrelevant to the present appeal). Section 78 of the Bankruptcy Act provides as follows:

Description of bankrupt’s property divisible amongst creditors 78. —(1) The property of the bankrupt divisible among his creditors (referred to in this Act as the bankrupt’s estate) shall comprise —

(a) all such property as belongs to or is vested in the bankrupt at the commencement of his bankruptcy or is acquired by or devolves on him before his discharge; and

(b) the capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have been exercised by the bankrupt for his own benefit at the commencement of his bankruptcy or before his discharge.

(2) Subsection (1) shall not apply to —

(a) property held by the bankrupt on trust for any other person;

(b) the tools, if any, of his trade;

(c) such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his family; and

(d) property of the bankrupt which is excluded under any other written law.

[emphasis added]

The effect of ss 76(1)(a) and 78(1)(a) is that property which (a) belongs to the bankrupt at the commencement of bankruptcy (which, according to s 75(a) of the Bankruptcy Act, is the date of the bankruptcy order) and which vests in the Official Assignee upon the court making a bankruptcy order as a result of the operation of s 76(1)(a)(i); or (b) is acquired by or devolves upon the bankrupt before his or her discharge will be divisible among the bankrupt’s creditors. Section 78(1)(b) clarifies that things in action form part of the property of the bankrupt which are divisible in bankruptcy among creditors.

Subject to certain exceptions (which are not applicable here), a discharge from bankruptcy has the effect of releasing the bankrupt from all debts provable in bankruptcy, but does not have the effect of rendering the Official Assignee’s functions spent. Section 127(1) of the Bankruptcy Act provides that:

Effect of discharge

127. —(1) Subject to this section and any condition imposed by the court under section 124 or 126, where a bankrupt is discharged, the discharge shall release him from all his debts provable in the bankruptcy but shall have no effect —

(a) on the functions (so far as they remain to be carried out) of the Official Assignee; or

(b) on the operation, for the purposes of the carrying out of those functions, of the provisions of this Act.

Thus, even after the bankrupt’s discharge, the Official Assignee remains duty-bound to continue to collect all the assets of the bankrupt which are divisible among creditors (as set out in ss 76(1)(a) and 78(1)(a) and (b)) and to distribute the proceeds from the realisation of such property to creditors who have proved their debts. The law imposes a legal obligation on the bankrupt to assist in the fulfilment of the Official Assignee’s functions even after his discharge on pain of a fine or revocation of his discharge. The discharged bankrupt’s obligation is provided for in s 128 of the Bankruptcy Act, which provides that:

Discharged bankrupt to give assistance

128. —(1) A discharged bankrupt shall, notwithstanding his discharge, give assistance as the Official Assignee requires in the realisation and distribution of such of his property as is vested in the Official Assignee.

(2) If the discharged bankrupt fails to give assistance to the Official Assignee under subsection (1) —

(a) he shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000; and

(b) the court may, if it thinks fit, revoke his discharge, but without prejudice to the validity of any sale, disposition or payment duly made, or thing duly done subsequent to the discharge, but before its revocation.

[emphasis added]

The parties’ arguments

LLH’s main argument in this appeal is that LLH’s nominated CPF monies did not devolve upon LLH immediately upon the death of Mdm Lim Lye Keow. Counsel for LLH submits that in the absence of authorisation from the CPF Board for the withdrawal of the monies prior to LLH’s discharge, LLH’s nominated CPF monies were not payable to LLH, and therefore did not amount to property...