The Management Corporation Strata Title Plan No 4450 v Zhang Fan (Khursheed Ahmed, garnishee)

• Jurisdiction: Singapore
• Judge: Lewis Tan
• Judgment Date: 16 March 2021
• Neutral Citation: [2021] SGMC 12
• Court: Magistrates' Court (Singapore)
• Docket Number: Magistrate Suit No 17435 of 2018 (Summons No 6151 of 2020)
• Year: 2021
• Published date: 20 March 2021
• Hearing Date: 10 March 2021
• Plaintiff Counsel: Lee Shu Xian (Infinitus Law Corporation)
• Defendant Counsel: The defendant/judgment debtor absent and unrepresented,The garnishee in person.
• Subject Matter: Garnishee Orders,Future rent,Whether future rent can be attached under a garnishee order
• Citation: [2021] SGMC 12

Deputy Registrar Lewis Tan: Introduction

The judgment creditor (“the MCST”) was owed management and sinking funds by the judgment debtor (“the Landlord”), who is the registered proprietor of a unit under the MCST’s charge. To recover the sums due, the MCST sought and obtained a judgment in default of appearance against the Landlord. The sum due under the default judgment remaining unsatisfied, and having discovered that the subject unit had been tenanted to one Mr Khursheed Ahmed (“the Tenant”), the MCST then took out the somewhat unorthodox application of attaching any rent payable by the Tenant to the Landlord to satisfy the judgment debt.

At the ex parte stage, the MCST was successful in obtaining a garnishee order to show cause against the Tenant, and to attach rent payable by the Tenant at a future date to answer the default judgment.

At the show cause hearing, however, the Tenant appeared to resist the attachment, arguing that there was in fact no debt due and accruing from himself to the Landlord. In considering whether to finalise the garnishee order, an issue that arose for my consideration was whether future rent could be attached under a garnishee order. Given the lack of jurisprudence in Singapore on this issue, and having considered the matter fully, I set out my detailed reasons in these written grounds.

Whether future rent is attachable under a garnishee order

A useful starting point in this regard is the Rules of Court (Cap 322, R 5, 2014 Ed) (“the Rules”), which provides at O 49 r 1(1) that where a judgment debtor is indebted to a judgment creditor, and where “any other person within the jurisdiction (referred to in this Order as the garnishee) is indebted to the judgment debtor, the Court may … order the garnishee to pay the judgment creditor the amount of any debt due or accruing due to the judgment debtor from the garnishee” [emphasis added].

The question, therefore, is whether future rent falls within the ambit of “any debt due or accruing due”. Being rent that is only due at a future date, such rent would logically not amount to “debt due”. The focal point of my analysis therefore centres on whether future rent can amount to “debt … accruing due”, so that it may be attached under a garnishee order.

Debt accruing due

I begin with the Court of Appeal’s decision in Vintage Bullion DMCC (in its own capacity and as representative of the customers of MF Global Singapore Pte Ltd (in creditors’ voluntary liquidation)) v Chay Fook Yuen (in his capacity as joint and several liquidator of MF Global Singapore Pte Ltd (in creditors’ voluntary liquidation)) and others and other appeals [2016] 4 SLR 1248 (“MF Global CA”). In that case, the respondent company was a commodity broker and holder of a capital markets services licence. The appellants were the respondent’s customers who had utilised its services to trade in currencies and commodities in a bid to profit from fluctuations in exchange rates or the price of commodities. During the lifespan of each trade, each customer would start with an “open position”, and for as long as his position remained open, the customer would be speculating and be exposed to movements in the market. If the movement of the underlying currency favoured the customer, the customer would have “Unrealised Profits”. The customer could stop speculating by closing his position, and at that point in time, his profits or losses would be crystallised, and if there was a profit, this would give rise to a sum known as the “Forward Value”, which was a fixed sum no longer subject to variation, and which would be credited into the customer’s ledger balance on a “Value Date”. This “Value Date” was generally two days after the closing of the customer’s position. The customer could then withdraw the “Forward Value” from his ledger balance.

The respondent company was wound up. In the winding up proceedings, the appellants argued that the profits in their accounts with the respondent were held on statutory trust for them because, amongst others, regulation 21(1)(a) of the Commodity Trading Regulations 2001 (s 578/2001) (“the Regulations”) required the respondent to: … treat and deal with all money, securities or property received by him from a customer to margin, guarantee or secure contracts in commodity trading or spot commodity trading, or accruing to a customer as a result of such trading, as belonging to that customer … [emphasis added in bold italics]

In determining whether the alleged profits were “accrued to” the appellants, the Court of Appeal drew a distinction between the “Unrealised Profits” and “Forward Value”. According to the court, the “Unrealised Profits” were merely notional figures that would become actual figures or profits only upon the closure of the underlying transaction. As such profits had not been crystallised or finalised, the “Unrealised Profits” had not “accrued to” the appellants, and were not subject to the statutory trust under the Regulations. On the other hand, the “Forward Value” had in fact crystallised or been finalised, with the only qualification being that the appellants had no right of withdrawal of the “Forward Value” until the Value Date had arrived. In other words, the appellants were already legally entitled to the “Forward Value”, notwithstanding that they could only be withdrawn at a later date. Accordingly, the “Forward Value” had accrued to the appellants, which sum thereunder could be withdrawn after the Value Date (MF Global CA at [45]–[48]).

Hence, in determining whether a debt is “due or accruing due”, the fundamental query is whether the creditor is legally entitled to the debt. If the answer to this is in the affirmative, it does not matter that such a debt is only payable in the future, since such debt would have “accrued to” the creditor, and may accordingly be attached under a garnishee order (see MF Global CA at [40]–[42]). It has therefore been observed that a debt that is presently existing but payable in the future comes within the ambit of a debt that is “accruing due” (Lim Boon Kwee (trading as B K Lim & Co) v Impexital SRL (Sembawang Multiplex Joint Venture, garnishee) [1998] 1 SLR(R) 757 at [16]).

This focus on legal entitlement, rather than on whether and when payment is due, is also consistent with the English decision of Tapp v Jones; Pooley, Garnishee (1875) LR 10 QB 591 (“Tapp”). In that case, the plaintiff obtained judgment against the defendant for the sum of 590l. At that time, an agreement was in force between the garnishee and the defendant, under which the garnishee was bound to pay the defendant a monthly instalment of 10l. Notwithstanding that the future instalments had not yet become payable, the English court granted a final garnishee order, with Blackburn J observing that “there is power to make an order against the garnishee for payment of his debts as and when they become payable, instead of making a fresh order as each falls due” (Tapp at 593). As such, once a judgment debtor’s entitlement to payment is undisputed, a garnishee order may attach to the debt, notwithstanding that payment has not yet fallen due.

To further illustrate this point, reference may be made to the decision in Globalpoint Far East Pte Ltd v Wah Cheng Pte Ltd (Prelim Construction Pte...