SINGAPORE'S BANKRUPTCY JURISDICTION AND THE ABSCONDING DEBTOR

• Published date: 01 December 2016
• Author: TAY Yong Seng MA (Oxford), BCL (Oxford); Partner, Allen & Gledhill LLP. Jonathan CHAN Tuan San JD (Singapore Management University); Associate, Allen & Gledhill LLP.
• Date: 01 December 2016

When businesses fail, it is not unheard of for businesspersons to abscond from the jurisdiction or to hide behind corporate vehicles, leaving debts unsatisfied. This article is concerned with the reach of Singapore's bankruptcy courts over the “absconding debtor”, a person who deliberately keeps out of Singapore to avoid his creditors. The Singapore bankruptcy courts have not had much opportunity to deal with the absconding debtor. On the other hand, the English, Hong Kong, and Australian courts have interpreted their own bankruptcy jurisdiction provisions widely to address the mischief of the absconding debtors. This article will argue that their approach is consistent with our own bankruptcy legislation and may be considered by the Singapore courts in dealing with the absconding debtor.

I. Introduction

1 When businesses fail, it is not uncommon for businesspersons to abscond from the jurisdiction or to hide behind corporate vehicles, leaving debts unsatisfied. This problem has become more acute in recent decades with the rise of affordable air travel and the influx of foreign businesses. This article is concerned with the reach of Singapore's bankruptcy courts over the “absconding debtor”. The absconding debtor is usually a foreign national with a domicile outside Singapore. He is someone who may spend significant periods outside Singapore (and have homes overseas), but returns to Singapore for settled purposes such as business, employment or family. He may have incorporated a number of corporate vehicles, of which he is the directing mind and will, to conduct his business here. Through his corporate vehicles, the absconding debtor enters into various transactions in Singapore. When he is unable to meet those obligations, the absconding debtor keeps out of Singapore to avoid his creditors. Proceedings against the corporate vehicles yield a worthless paper judgment. Should the creditor be left without an effective remedy?

2 It is submitted that the absconding debtor should properly be within the reach of Singapore's bankruptcy jurisdiction. He should not be allowed to flee the jurisdiction to avoid bankruptcy when his business fails. England, Hong Kong, and Australia have all dealt with the absconding debtor and interpreted their own bankruptcy jurisdiction provisions to address the mischief brought by him. The Singapore bankruptcy courts have not had much opportunity to consider the approach taken by the England, Hong Kong, and Australian decisions in relation to the absconding debtor. It is submitted that such an approach is consistent with our own bankruptcy legislation and should be adopted.

II. The bankruptcy jurisdiction of the Singapore courts

3 Singapore's bankruptcy jurisdiction is set out in s 60 of the Bankruptcy Act1 which provides, inter alia, that no bankruptcy application shall be made against an individual debtor unless the debtor:2

(a) is domiciled in Singapore;

(b) has property in Singapore; or

(c) has, at any time within the period of one year immediately preceding the date of the making of the application —

(i) been ordinarily resident or has had a place of residence in Singapore; or

(ii) carried on business in Singapore.

[emphasis added]

There is little controversy over the jurisdiction requirements of domicile3 or property.4 Those two requirements are tolerably clear as there have been a number of local decisions on them.5 However, the absconding debtor often neither is domiciled nor possesses significant property in Singapore. Often, the creditor will be left with having to prove the other two threshold requirements against the absconding debtor: that he is “ordinarily resident” or “carried on business” in

Singapore. However, there does not appear to be any reported decision dealing with the scope of either requirement in the specific context of bankruptcy. It is submitted that these two requirements are capable of being, and should be, read widely to catch the mischief of the absconding debtor, having regard to English, Australian, and Hong Kong jurisprudence.

III. “Ordinarily resident”

4 If the absconding debtor travels into Singapore on a regular basis, but does not otherwise keep a permanent home in Singapore, can jurisdiction be founded on the basis that he is “ordinarily resident” in Singapore under s 60(1)(c)(i) of the Bankruptcy Act?

A. Singapore

(1) “Settled purpose”

5 The Singapore High Court decision of Tjong Very Sumito v Chan Sing En6 (“Tjong”) interpreted the term “ordinarily resident” in the context of a security for costs application under O 23 of the Rules of Court.7 In Tjong, the term “ordinarily resident” was construed to mean a place which a person has adopted voluntarily for a “settled purpose” such as education, business or profession, whether for a short or long duration.

6 In coming to this meaning of “ordinarily resident”, the High Court applied the following dicta of the House of Lords in R v Barnet London Borough Council, ex parte Nilish Shah8 (“Shah”):9

…‘ordinarily resident’ refers to a man's abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration.

… The purpose may be one; or there may be several. It may be specific or general. All that the law requires is that there is a settled purpose. This is not to say that the ‘propositus’ intends to stay where he is indefinitely; indeed his purpose, while settled, may be for a limited period. Education, business or profession, employment, health, family, or merely love of the place spring to mind …

It is the settled purpose that would be determinative. Once this purpose is established, temporary absence from a place does not per se alter the fact that a company or an individual is still ordinarily resident there.

[emphasis added]

The High Court decision in Tjong was upheld on appeal to the Court of Appeal.10

7 Shah was a case dealing with the meaning of “ordinarily resident” for the purposes of tax legislation. In the context of tax, there is a similar policy imperative to dealing with the absconding tax payer who is domiciled overseas.11 The Singapore High Court in Tjong held that the Shah meaning of “ordinarily resident” could be adopted for more general purposes:12

While these authorities did not concern applications for security for costs, I concur with Lindsay J's view in In re Little Olympian Each Ways Ltd[1995] 1 WLR 560… at 566 that ‘so far as concerns individuals the test applied in tax cases have without any awkwardness or consciousness of injustice been adopted for other more general purposes’ and ‘one need not be especially shy in this area about adopting the conclusion of tax cases to cases outside tax’.

(2) A debtor can be ordinarily resident in more than one jurisdiction

8 In upholding the High Court decision in Tjong, the Court of Appeal noted that:13

… it is now becoming more common for individuals to have multiple homes and places of business across the globe, more than one of which they might possibly have adopted as their ordinary residence.

It also unequivocally stated that “[i]t seems to us that as a matter of principle, we cannot see any reason why a person cannot be ordinarily resident in more than one jurisdiction”.14

9 In Lee Mei-Chih v Chang Kuo-Yuan,15 the High Court applied the Shah meaning of “ordinarily resident” even further, to the Women's

Charter.16 It concluded that the Shah meaning of “ordinarily resident” was in fact of “general application”:17

[T]he construction of the phrase ‘ordinarily resident’… [is] of general application and apply across the wide statutory field in which the phrases appear.

Notwithstanding the above, there has been no reported Singapore decision that has construed the meaning of the phrase “ordinarily resident” in the specific context of bankruptcy. Other jurisdictions have, however, examined that requirement in bankruptcy. The key principles developed in the leading cases will be examined.

B. England

(1) “Settled purposes”— Not a closed list

10 In Shah, the range of “settled purposes” for ordinary residence included education, business or profession, employment, health, family, or “merely love of the place”. It is clear that this was not intended to be a closed list.

11 In In re Charles Bright18 (“Charles Bright”) (a bankruptcy case), it was held that a debtor can be ordinarily resident in a jurisdiction if he was there for the settled purpose of conducting litigation. In that case, an American citizen had gone to England for the purposes of conducting litigation there. During this period, he stayed in various English hotels and periodically left England to visit continental Europe. On those facts, the Court of Appeal found that he was ordinarily resident in England:19

[H]e was in London for a definite purpose which made it necessary, or, at any rate, convenient, that he should be there, and though he made occasional excursions to the Continent the central place of his dwelling was in London, where he was mainly engaged in the useful work of litigation, and other purposes which could not be so conveniently served by any one who was not in London. [emphasis added]

(2) Absence of an identifiable residential address not determinative

12 Charles Bright was subsequently cited with approval in the English Court of Appeal decision in

In re Brauch, ex parte Britannic Securities and Investments Ltd20 (“Brauch”). In Brauch, the debtor spent the majority of his time in the Channel Islands, a group of selfgoverning territories outside the UK.21 The debtor was engaged in the business of property speculation in England. He prospected for properties, arranged for valuations to be done on those properties and made the financial arrangements for the acquisition of those properties by corporate vehicles under his control. When conducting business in England, the...