Tan Eng Joo v United Overseas Bank Ltd

• Jurisdiction: Singapore
• Judge: Philip Pillai JC
• Judgment Date: 05 February 2010
• Neutral Citation: [2010] SGHC 42
• Plaintiff Counsel: Ranvir Kumar Singh (Instructed Counsel) (Surian & Partners)
• Docket Number: Originating Summons Bankruptcy No 39 of 2009 (Registrar’s Appeal No 435 of 2009)
• Date: 05 February 2010
• Hearing Date: 04 January 2010
• Subject Matter: Insolvency Law
• Published date: 11 February 2010
• Citation: [2010] SGHC 42
• Defendant Counsel: Hri Kumar Nair SC and Tham Feei Sy (Drew & Napier LLC)
• Court: High Court (Singapore)
• Year: 2010

Philip Pillai JC:

This was an appeal against the Assistant Registrar’s dismissal of the plaintiff’s application to set aside the defendant’s statutory demand of USD 10,309,708.87 and grant of leave to the defendant to file a bankruptcy application against the plaintiff after the day of that order.

The appeal was based on rr 98(2)(b) and (e) of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) (“Bankruptcy Rules”) viz that the statutory demand is disputed on grounds which appear to the court to be substantial or that the court is satisfied on other grounds that the demand ought to be set aside, respectively.

It was common ground that the test to be applied by the court in this determination is the same as the test to be applied for the grant of summary judgment pursuant to Order 14 of the Rules of Court (Cap 322, R 5, Rev Ed), ie whether or not there are triable issues to go to trial.

Is there a triable issue that the guarantee has been discharged by reason of impairment caused by the defendant?

The plaintiff argued that he was discharged from the joint and several continuing guarantee or that at least there was a genuine triable issue on whether or not he had been discharged.

The threshold for this court is helpfully set out by the Court of Appeal in Wee Soon Kim Anthony v Lim Chor Pee CA [2006] 2 SLR(R) at [19] that there is “some real doubt about the question, thus a triable issue, upon which further evidence or arguments [are] required.” In Manjit Kaur Monica v Standard Chartered Bank [2000] SGHC 205, Woo Bih Li JC (as he then was) adopted the formulation in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787-788 by McLelland CJ in the following terms:

It is, however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in [s 459H of the Corporations Law]. In my opinion that expression connotes a plausible contention requiring investigations, and raises much the same sort of consideration as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavits “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be “sufficient prima facie plaudibility to merit further investigation as to [its] truth” (cf Eng Mee Yong v Letchumann [1980] AC 331 at 341), or “a patently feeble legal argument or an assertion of acts unsupported by evidence”: cf South Australia v Wall (1980) 24 SASR 189 at 194.

With respect to valid counterclaims, set-off or cross demands, Goh Chin Soon v Overseas-Chinese Banking Corporation Ltd [2001] SGHC 17, per Lee Seiu Kin JC (as he then was) is also germane:

Rule 98(2)(a) provides that the court shall set aside the [Statutory Demand (the “SD”)] if the debtor appears to have a valid counterclaim, set-off or cross demand which exceeds the amount of the debts in the SD. The word “valid” is placed there for good reason. It requires the court to examine the alleged counterclaim, set-off or cross demand to see if the debtor has a bona fide claim against the creditor that, if successful, would enable him to pay the debt the subject of the statutory demand. If all that rule 98(2)(a) requires were the mere existence of such a claim, no matter how spurious, then it will be only too easy for a debtor to make such a claim in order to stave off bankruptcy proceedings. … [emphasis in original]

The plaintiff cited Bank of Montreal v Wilder [1986] 2 S.C.R. 551 for the proposition that a guarantee is discharged where the creditor impairs the security, increases risk or causes default. The plaintiff referred to the following sequence of events in support of his position that the guarantee had been discharged by impairment caused by the defendant.

The defendant granted credit facilities to EP Carriers Pte Ltd on 11 March 2008. In December 2008 following restructuring discussions it was agreed that the credit facilities would be novated to Linford Pte Ltd whilst the security given to support credit facilities, including a mortgage on the vessel “Eagle...