Re Loh Lee Keow and Another

• Judge: Woo Bih Li JC
• Judgment Date: 26 September 2000
• Neutral Citation: [2000] SGHC 196
• Citation: [2000] SGHC 196
• Defendant Counsel: Andrew Chan and Desmond Ho (Allen & Gledhill)
• Published date: 19 September 2003
• Plaintiff Counsel: Lisa Chong (Lisa Chong & Partners)
• Date: 26 September 2000
• Docket Number: Bankruptcy Nos 314 and 315 of 2000
• Court: High Court (Singapore)
• Subject Matter: Bankruptcy Rules (Cap 20, R 1, 1996 Ed) r 94(5),r 98(2),r 101(2), Form 2,Words and Phrases,s 63(1), (2) Bankruptcy Act (Cap 20, 2000 Ed),"Security"

: In the appeals in the two bankruptcy proceedings before me, Keppel TatLee Bank Ltd (`the Bank`) granted a facility to Hanley Pte Ltd (`the Borrower`). The facility was secured by a mortgage over a property which was owned by the Borrower.

The debtors which are the subject of the bankruptcy proceedings were guarantors (`the Guarantors`) of the liability of the Borrower.

It was not in dispute that the Guarantors were owing moneys to the Bank.

However, the statutory demand issued against each of the Guarantors did not mention the mortgage and it appeared that the value of the mortgaged property which had still not been sold at the time of the hearing before me might be equivalent to or exceed the debt.

Accordingly two questions arose:

(a) Whether each of the statutory demands against the respective Guarantors ought to be set aside because it did not mention the mortgage or because the value of the mortgaged property might be equivalent to or exceed the debt.

(b) Whether, aside from the statutory demand, the court ought not to have made a bankruptcy order against each of the Guarantors in view of the mortgage.

The questions arose because of certain provisions in the Bankruptcy Rules (Cap 20, R 1, 1996 Ed) (`the Rules`) and Bankruptcy Act (Cap 20, 2000 Ed) (`the Act`).

Rule 94(5) states:

(5) If the creditor holds any property of the debtor or any security for the debt, there shall be specified in the demand -

(a) the full amount of the debt; and

(b) the nature and value of the security or the assets. [Emphasis is added.]

Rule 98(2)(c) states:

(2) The court shall set aside the statutory demand if -

(c) it appears that the creditor holds assets of the debtor or security in respect of the debt claimed by the demand, and either rule 94(5) has not been complied with, or the court is satisfied that the value of the assets or security is equivalent to or exceeds the full amount of the debt; [Emphasis is added.]

These provisions gave rise to the first question since at first blush it appeared that the statutory demand should have stated the nature and value of the mortgaged property. Also, if its value might be equivalent to or exceed the debt, then it seemed that the court ought to set aside the statutory demand under r 98(2)(c).

Furthermore, s 65(1)(a) states:

(1) The court hearing a creditor`s petition shall not make a bankruptcy order thereon unless it is satisfied that -

(a) the debt or any one of the debts in respect of which the petition is presented is a debt which, having been payable at the date of the petition, has neither been paid nor secured or compounded for; ... [Emphasis is added.]

Again this appeared at first blush to suggest that since the debt was secured by the mortgage, then the court ought not to have made the bankruptcy orders. This gave rise to the second question.

In the interpretation provision of the Act, ie s 2, there is no definition of `security` or `security for the debt` or `security in respect of the debt` (which are found in rr 94(5) and 98(2)(c). There is also no definition of `secured` (which is found in s 65(1)(a)).

However, there is a definition of `secured creditor` in s 2. It states that:

"Secured creditor", in relation to a debtor, means a person holding a mortgage, pledge, charge or lien on or against the property of the debtor or any part thereof as security for a debt due to him from the debtor. [Emphasis is added.]

It was not disputed that as the definition of `secured creditor` vis-.-vis a debtor is restricted to a person holding security on or against the property of that debtor, it does not apply to the Bank vis-.-vis the Guarantors as the mortgage was not on or against the property of the Guarantors, but on the property of the Borrower.

However, the phrase `secured creditor` is not found in rr 94(5) and 98(2)(c) or s 65(1)(a).

Therefore I had to consider other provisions in the Act and the Rules for assistance.

Section 63(1) and (2) state:

(1) Where the petitioner is a secured creditor of the debtor, he shall in his petition -

(a) state that he is willing, in the event of a bankruptcy order being made, to give up his...