Thu Aung Zaw v Norb Creative Studio

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 15 April 2014
• Neutral Citation: [2014] SGHC 67
• Court: High Court (Singapore)
• Hearing Date: 14 January 2014
• Docket Number: Originating Summons (Bankruptcy) No 91 of 2013 (Registrar’s Appeal No 427 of 2013)
• Plaintiff Counsel: Alagappan s/o Arunasalam (A Alagappan Law Corporation)
• Defendant Counsel: Adrian Tan Wen Cheng (Camford Law Corporation)
• Subject Matter: Insolvency Law,Bankruptcy,Statutory demand,Setting aside of statutory demand
• Published date: 07 May 2014

Lee Seiu Kin J :

This is an appeal against the decision of the assistant registrar (“AR”) dismissing the application of the appellant (“Zaw”) to set aside the statutory demand (“SD”) issued against him by the respondent (“Norb”). On 14 January 2014, after hearing counsel for the parties, I allowed the appeal with costs. Norb filed a notice of appeal on 12 February 2014 and I now give my grounds of decision.

Norb had issued a SD upon a guarantee given by Zaw on a third party debt. The issue in this appeal is whether there is a substantial dispute on the debt, which would justify setting aside the SD. A major contention between parties lies with whether or not consideration was provided for the guarantee. Zaw argued that there was no consideration provided by Norb and therefore the guarantee was null and void. Norb argued that consideration was provided for Zaw’s guarantee.

Background facts

Ku Swee Boon (“Ku”) is the sole proprietor of Norb, which is in the business of providing printing services. Sometime in October 2011, Zaw and his partner, one Huang Ziting (“Huang”), approached Ku for the printing of a large quantity of booklets of discount dining vouchers (“Booklets”). Ku understood from Zaw and Huang that they intended to sell the Booklets to members of the public through a limited liability partnership, Adlogic Asia LLP (“Adlogic”), of which they are partners.

In October 2011, Norb and Adlogic entered into an oral agreement¹ for 100,000 pieces of the Booklets for the price of $80,000. On 29 November 2011, Ku received the first payment of $4,000 from Adlogic for the Booklets.

The Booklets were delivered to Adlogic in two batches; one in mid-December 2011, and the other in end-December 2011.² Sale of the Booklets was poor and Adlogic had difficulties paying Norb.³ Parties came to an arrangement under which Adlogic would make the payment out of its daily takings from the sale of the Booklets to Norb.⁴ Various payments of sums ranging from $330 to $1,000 were then made by Adlogic during the period from 9 January 2012 to 27 January 2012.⁵ In February 2012, Action for Aids, the charity under which the Booklets were sold, stopped Adlogic from selling the Booklets.⁶

Signing of guarantee

Sometime either in early December 2011 or in the third week of February 2012, Zaw and Huang signed a document guaranteeing all sums due and payable from Adlogic to Norb. The date that the guarantee was signed is disputed.

According to Zaw, the signing took place in the third week of February 2012. Ku had arrived at Adlogic’s office at #05-01 Prosper Industrial Building to ask when Adlogic would settle its debt to Norb.⁷ Ku told Zaw and Huang that he “did not feel secure” because the licence from Action for Aids to Adlogic to sell Booklets expired in February 2012, and Adlogic was not able to pay Nord.⁸ Ku said that he wanted the guarantee from Zaw and Huang so that he felt “secure”.⁹ Although the guarantee was dated 1 December 2011, it did not represent the true date on which parties signed the document. Zaw said that the guarantee was backdated by Ku.

According to Ku, however, the guarantee was signed in or around mid-December 2011. Ku explained that the guarantee was dated 1 December 2011 because that was approximately when Ku requested Zaw and Huang to provide the guarantee and that was the date the guarantee was prepared. Ku felt that it would be prudent to obtain a guarantee from Zaw and Huang because he was keenly aware of the size and total price of the order placed by Adlogic and the fact that Adlogic is a limited liability partnership.¹⁰

Supply of namecards

The existence of a further supply of namecards from Norb to Adlogic is another factual dispute of this case. Norb alleged that Adlogic had, sometime in February 2012, ordered 500 pieces of namecards costing $50.¹¹ Zaw denied having ordered namecards from Norb. Zaw also disputed the invoice for the namecards.¹²

The decision below

The bankruptcy application against Zaw was first heard before an AR who found that Zaw had failed to meet the threshold for setting aside the SD. The AR disagreed with Zaw that the guarantee was null and void for lack of consideration. Because it was a “continuing guarantee”, it appeared that valid consideration was provided by Norb in the form of a promise to continue to supply. Therefore, it also did not matter whether subsequent services were actually provided, as that was an issue which went towards performance of the contract and not the validity of consideration.¹³

The respondent’s case

Before me, Norb sought to oppose Zaw’s application, arguing that: Zaw’s application to set aside the SD was out of time and no order for an extension of time had been obtained by him; and there are no valid grounds for Zaw to dispute the debt, ie, Zaw would not be able to show, in accordance with r 98(2)(b) of the Bankruptcy Rules (Cap 20, R1, 2006 Rev Ed), that the debt is disputed on grounds which appear to the court to be substantial. I shall address each issue in turn.

Can the procedural irregularity of Zaw’s application be waived?

Rule 97(1)(a) of the Bankruptcy Rules provides that the application is to be filed within 14 days from the service of the statutory demand. Rule 97(3) empowers a court to extend the period upon the application of the debtor. While it is true that Zaw’s application was made more than four months after the service of the SD, instead of within 14 days as stipulated by r 97(1)(a), and no separate application was made for an extension of time, this does not bar the court from hearing the present case. The question is, whether the court, in its discretion, should waive the procedural irregularity and permit Zaw’s application. This depends on whether the court is satisfied that the other party, ie, Norb, will not suffer substantial injustice or prejudice as a result of Zaw’s non-compliance with the Bankruptcy Rules.

In my view, the court’s discretion ought to be exercised in favour of allowing the application. In this case, Zaw raised important objections (see [18]-[19] below) to the validity of the guarantee to show why the SD ought to be set aside. The same arguments can be raised by Zaw in the bankruptcy proceedings, and they will have to be countered by Norb there and then, if not done so at this stage. As such, it could not be said that Norb would be prejudiced as a consequence of the irregularity. I therefore dispensed with the application for an extension of time and proceeded to hear the application.

Is the debt is disputed on substantial grounds? The applicable standard of proof

The standard for setting aside a statutory demand is the same as that for resisting an application for summary judgment under O 14 of the Rules of Court (Cap 322, R5, 2006 Rev Ed). If there are, in the words of the court in Tan Eng Joo v United Overseas Bank Ltd [2010] 2 SLR 703 at [3], “triable issues to go to trial”, the statutory demand should be set aside. The role of the court has been clearly defined in Wong Kwei Cheong v ABN-AMRO Bank NV [2002] 2 SLR(R) 31 at [3]:

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