Re Rasmachayana Sulistyo (alias Chang Whe Ming); ex parte The Hongkong and Shanghai Banking Corp Ltd and Other Appeals

• Jurisdiction: Singapore
• Judge: V K Rajah J
• Judgment Date: 30 December 2004
• Neutral Citation: [2004] SGHC 281
• Docket Number: Bankruptcy Nos 115-117 of 2004
• Date: 30 December 2004
• Year: 2004
• Published date: 04 January 2005
• Plaintiff Counsel: Rodney Keong (Rodyk and Davidson)
• Citation: [2004] SGHC 281
• Defendant Counsel: Andrew Chan and Desmond Ho (Allen and Gledhill)
• Court: High Court (Singapore)
• Subject Matter: Whether method of service exclusively prescribed by Bankruptcy Act and Bankruptcy Rules,When s 11 Bankruptcy Act may be invoked to supplement Bankruptcy Rules,Whether Bankruptcy Rules stipulating how personal service could be effected,Relationship between Bankruptcy Rules and Rules of Court,Whether consensual arrangements for service of process between parties valid,Bankruptcy,Insolvency Law,Words and Phrases,Section 11 Bankruptcy Act (Cap 20, 2000 Rev Ed), O 1 r 2(4), O 62 r 3(2) Rules of Court (Cap 322, R 5, 2004 Rev Ed),Statutory demand,Guarantee executed by parties containing consensual arrangement for service of process in "proceedings",Whether steps in bankruptcy regarded as "proceedings" under guarantee,Construction of phrase "any legal action or proceedings arising out of or in connection with this agreement",Section 11 Bankruptcy Act (Cap 20, 2000 Rev Ed), rr 96, 109(1), 110 Bankruptcy Rules (Cap 20, R 1, 2002 Rev Ed),Service of statutory demand and bankruptcy petition on debtors

30 December 2004 Judgment reserved.

V K Rajah J:

1 The petitioner is an international financial institution. The three judgment debtors (“the debtors”), all whom are foreign nationals, are former directors of Andover Pte Ltd (“the borrower”) to whom the petitioner extended substantial banking facilities. As part of the security arrangements for the facilities, the debtors signed a “Personal Guarantee and Undertaking” dated 2 August 1996 (“the Guarantee”). When the borrower defaulted on repayment of its loan obligations to, inter alia, the petitioner, the latter commenced proceedings against the debtors to recover the outstanding amounts. Judgments were subsequently entered by the petitioner against the debtors. As the terms of the judgments were not complied with the petitioner thereafter initiated the present bankruptcy proceedings. The petitioner asserts that as at 9 January 2004, ie, the date of the filing of these bankruptcy petitions, each of the debtors was severally indebted to it in the aggregate sums of US$58,064,279.35 and US$27,820.08 exclusive of accruing interest.

2 Before filing these bankruptcy petitions, several attempts were made by the petitioner to effect personal service of each of the requisite statutory demands on the debtors at various addresses within the jurisdiction. According to the affidavit of service filed by the petitioner’s process server, three different modes of service were employed to serve the statutory demand: the process server left a copy of the demand at the address of the debtors’ nominated forwarding agent in Singapore; the petitioner also issued an advertisement of the notice of the statutory demand in The Straits Times, an English newspaper circulating in Singapore; and, finally, copies of the statutory demands were left at the last known residential addresses, ie, at 331 River Valley Road, #13-02, and 61 Meyer Road, #15-04. The bankruptcy petitions themselves were, however, only served on the debtors’ nominated forwarding agent. In these proceedings, the petitioner relies principally on a contractual stipulation in the Guarantee to assert that proper service of the relevant bankruptcy documents has in fact been duly effected. The debtors vigorously dispute this.

3 An assistant registrar first heard these petitions on 2 April 2004. When the petitions were heard, the debtors’ counsel launched a root and branch attack on the bankruptcy proceedings; he contended, inter alia, that there was no jurisdictional basis to grant the petitions and that the statutory demands upon which these petitions are predicated had not been effectively served. These contentions were rejected and the petitions for bankruptcy were summarily granted on 10 September 2004: see [2004] SGHC 87. When I heard the appeals against the learned Assistant Registrar’s decision, I dismissed them albeit on altogether different grounds from those relied upon by the learned Assistant Registrar. The debtors now appeal against my decision.

4 When the appeals came up for hearing before me, the debtors’ counsel conceded that the court did indeed have jurisdiction to hear and grant the relevant petitions. Notwithstanding, counsel resolutely maintained the debtors’ position that on the existing factual matrix, no proper service of process had been effected. First of all, he argued that parties could not contractually obviate the provisions of the Bankruptcy Rules (Cap 20, R 1, 2002 Rev Ed) (“BR”) that mandated personal service of the statutory notice of demand as well as the bankruptcy petition. Secondly, he contended that the actual contractual stipulations did not in any event envisage or sanction the service of bankruptcy-related documents on the nominated forwarding agent. The first contention, given that it raises an issue of some importance to both legal practitioners and the financial community, entails a detailed and proper consideration of the relevant provisions of the BR as well as an evaluation of any underpinning policy considerations.

5 Prior to addressing the main issues in the present proceedings, I should, however, refer to one of the grounds relied on by the learned assistant registrar. She had held that though the express terms of O 1 r 2(4) of the Rules of Court (Cap 322, R 5, 2004 Rev Ed) (“RC”) ex facie precluded its general application to bankruptcy proceedings, O 62 r 3(2) of the RC which expressly sanctions the service of court process “in such other manner as may be agreed” between the parties, could nevertheless be relied upon by the petitioner ([3] supra, at [5]):

I disagree … that O 62 r 3 is irrelevant to bankruptcy proceedings. Section 11 of the Bankruptcy Act reads “[i]n any matter of practice or procedure for which no specific provision has been made in the Act or the Bankruptcy Rules, the practice or procedure of the Supreme Court shall be followed and adopted as nearly as may be”. The Rules are silent as to how personal service may be effected and whether this includes service in a manner as may be agreed between the parties. Therefore, by s 11 of the Bankruptcy Act (“the Act”), the practice of the Supreme Court in this regard that is embodied in O 62 r 3 of the Rules of Court should be followed. In any case, O 1 r 2(4) is qualified by O 1 r 2(5) of the Rules of Court which provides that O 1 r 2(4) shall not be taken as affecting any provision by which the Rules of Court are applied. Applying O 1 r 2(5) to the instant case, O 1 r 2(4) does not affect s 11 of the Act pursuant to which O 62 r 3 of the Rules of Court may be applied to bankruptcy proceedings. [emphasis added]

In my view, the learned assistant registrar fell into error by importing wholesale the provisions of the RC into this aspect of bankruptcy procedure. Contrary to what she has suggested, specific provision has indeed been made in the BR to address the issue of service of the various bankruptcy processes: rr 96 and 109 of the BR expressly and specifically deal with the issue of service of statutory demands and bankruptcy petitions. Indeed, r 109(1) of the BR encapsulates not just the concept of personal service but states precisely how such personal service is to be effected:

Subject to rule 110, a creditor’s petition shall be served personally on the debtor by an officer of the court, or by the petitioning creditor or his solicitor, or by a person in their employment, and service shall be effected by delivering a sealed copy of the petition to the debtor. [emphasis added]

With all due respect, the learned assistant registrar is incorrect in asserting that the BR “is silent as to how personal service may be effected”.

6 Section 11(1) of the Bankruptcy Act (Cap 20, 2000 Rev Ed) (“BA”) should only be resorted to in instances where lacunae in procedural issues exist, ie, where no specific provision has been made. This is decidedly not such an instance, in light of the express and fairly comprehensive regime addressing the modalities for service enacted in the BR. The express reference to “any matter of practice or procedure for which no specific provision has been made by this Act or the rules” in s 11(1) of the BA is not to be interpreted as a statutory charter to whimsically fill in any perceived gaps or supposed interstices existing in the BR; rather it should be construed as a safety net to address issues of general procedure/and or schematic issues. There is a patent and critical difference between “no specific provision” which really means the absence of any relevant provision(s), as opposed to any perception of incomplete or inadequate provisions dealing with a particular aspect of procedure. The BR, while specifically stating that personal service of process is to be employed in serving bankruptcy petitions, has, in addition, stipulated in no uncertain terms how such service is to be effected. If the learned assistant registrar’s approach were correct, then virtually the entire RC could be invoked to supplement the provisions of the BR. Such a startling proposition would be tantamount to driving a coach and fours right through the BR by superimposing the RC on it.

7 Having dealt with the main thrust of the learned Assistant Registrar’s decision, it now remains for me to explain my conclusion on why contractual service of the relevant bankruptcy documents is permissible in the present bankruptcy proceedings. In my view, the crux of the issue is not whether the RC applies or not but whether parties could properly contract out of, waive or modify the relevant provisions of the BR dealing with service of process. In dealing with the issues at hand it will be helpful to first consider the actual contractual stipulations.

The contractual stipulations

8 Sub-clause 14(F)(1) of the Guarantee states:

The Borrower and each of the Personal Guarantors irrevocably appoint Forward Investment Pte Ltd (now of 3rd Storey, Crown Prince Hotel, 270 Orchard Road, Singapore 238857) to receive, for the Borrower or, as the case may be, [the] Personal Guarantor and on its or his behalf, service of process in any Proceedings in Singapore. Such service shall be deemed completed on delivery to the process agent (whether or not it is forwarded to and received by the Borrower or the relevant Personal Guarantor). [emphasis added]

9 The issue of whether or not bankruptcy petitions constitute “proceedings” for the purposes of sub-cl 14(F)(1) in turn depends on the scope of that term. Sub-clause 14(B) of the Guarantee reads:

For the benefit of the Secured Parties, the parties irrevocably agree that in relation to any dispute which may arise out of or in connection with this Agreement, such dispute shall at the sole discretion of the Secured Parties be referred to and resolved (1) by the courts of Singapore or (2) by arbitration at the Singapore International Arbitration Centre in accordance with the rules of UNCITRAL and that, accordingly, any legal action or proceedings arising out of or in connection with this agreem...