Wong Kwei Cheong v ABN-AMRO Bank NV

• Judge: S Rajendran J
• Judgment Date: 22 May 2002
• Neutral Citation: [2002] SGHC 111
• Citation: [2002] SGHC 111
• Defendant Counsel: George Lim and Kalyani Rajendran (Wee Tay & Lim)
• Published date: 19 September 2003
• Plaintiff Counsel: Chua Eu Jin and Melissa Lee (Rajah & Tann)
• Date: 22 May 2002
• Docket Number: Originating Summons Bankruptcy (Registrar's Appeal No 600019 of 2002)
• Court: High Court (Singapore)
• Subject Matter: Advertising notice of statutory demand in newspaper,Substituted service,Statutory demand,Whether disputes substantial,Insolvency Law,s 62(a)(i) Bankruptcy Act (Cap 20, 2000 Ed),Function of court when hearing application to set aside statutory demand,Bankruptcy,Improper service,Whether reasonable steps taken to bring statutory demand to debtor's notice,Whether creditor can rely on r 96(4)(c) of Bankruptcy Rules (Cap 20, R 1, 1996 Ed) to effect service,Whether court bound to dismiss defective statutory demand,rr 96(1), 96(4)(a), 96(4)(b) & 96(4)(c) Bankruptcy Rules (Cap 20, R 1, 1996 Ed),Creditor aware of debtor's last known place of residence,ss 62(a)(i) & 158(1) Bankruptcy Act (Cap 20, 2000 Ed),Whether statutory presumption of inability to pay arises,Non-compliance with r 96 of Bankruptcy Rules (Cap 20, R 1, 1996 Ed),r 98(2)(b) Bankruptcy Rules (Cap 20, R 1, 1996 Ed),Words and Phrases,Setting aside,rr 96, 108(6) & 127(c) Bankruptcy Rules (Cap 20, R 1, 1996 Ed),'In the prescribed manner',Disputes as to statutory demand,Whether non-compliance mere irregularity or formal defect curable under s 158(1) of Bankruptcy Act (Cap 20, 2000 Ed)

Judgment

GROUNDS OF DECISION

1. On 20 July 2001, ABN-AMRO Bank N.V. ("the Bank") issued a Statutory Demand under s 62 of the Bankruptcy Act 1995 against Wong Kwei Cheong ("Wong") for certain sums of monies allegedly due to the Bank from Wong under a personal guarantee executed by Wong in respect of banking facilities extended by the Bank to a company called "Dtron Singapore Pte Ltd" ("Dtron"). The Bank did not serve the Statutory Demand personally on Wong. Instead, the Bank advertised a notice of that demand in the Straits Times of 23 July 2001. The notice read

BANKRUPTCY ACT
(CHAPTER 20)
BANKRUPTCY RULES

NOTICE OF ADVERTISEMENT OF
STATUTORY DEMAND

To:	WONG KWEI CHEONG
	(NRIC No. 0226068/I)

Address:	Lately of 16A Dunlop Street
	Singapore 209345.

TAKE NOTICE that a Statutory Demand has been issued by the Creditor, ABN-AMRO Bank N.V. (RC No. F00005N) of 63 Chulia Street, Singapore 049514.

The Creditor demands payment of US$807,600.16 being the total amount due as at 30^th June 2001 from the Debtor pursuant to the Personal Guarantee dated 23^rd September 1996.

The Statutory Demand is an important document and is deemed to have been served on you on the date of the first appearance of this advertisement. You must deal with this demand within 21 days of the service on you or you could be made bankrupt and your property and goods taken away from you. If you are in any doubt about your petition, you should seek advice immediately from a solicitor or, if you qualify for Legal Aid, from the Director of Legal Aid.

The Statutory Demand can be obtained or is available for inspection and collection from:

Name:	Mr Chua Eu Jin / Ms Melissa Lee
Address:	No. 4 Battery Road, #15-01
	Bank of China Building,
	Singapore 049908.

…

You have only 21 days from the date of the first appearance of this advertisement before the Creditor may present a Bankruptcy Petition.

Dated this 23^rd day of July 2001.
MESSRS RAJAH & TANN
SOLICITORS FOR THE CREDITOR.

2. Wong, on 14 January 2002, applied, under rr 97(1) and 97(3) of the Bankruptcy Rules (by way of OSB No. 600005/02) to have the Statutory Demand set aside and, as Wong was out of time within which to make this application, for an extension of the time within which to do. That originating summons was heard by the Assistant Registrar Mrs Wang Wei Chi ("AR") on 28 February 2002. The AR granted the extension of time. The AR also found that there were "genuine triable issues" and set aside the Statutory Demand. Her power to set aside the Statutory Demand was derived from r 98(2)(b) of the Bankruptcy Rules which reads as follows:

"The court shall set aside the Statutory Demand if –

(b) the debt is disputed on grounds which appear to the court to be substantial."

The Bank, dissatisfied with the AR’s decision to set aside the Statutory Demand, appealed against that ruling. I upheld the AR’s decision. Against that ruling the Bank again appealed and I now give my grounds.

3. On a plain reading of r 98(2)(b) of the Bankruptcy Rules, if the debtor disputes the claim in the Statutory Demand and that dispute appears to the court to be substantial, the bankruptcy court is obliged to set aside the Statutory Demand. It is not the function of the bankruptcy court, at the hearing of an application to set aside a Statutory Demand, to conduct a full hearing of the dispute and adjudicate on the merits of the creditor’s claim. That would be the function of the court in its non-bankruptcy jurisdiction should the creditor institute proceedings against the debtor to obtain judgment on the claim contained in the Statutory Demand.

4. The personal guarantee in favour of the Bank that Wong had executed was an "all monies" guarantee. Mr George Lim, who appeared for Wong, submitted that although Wong had executed an "all monies" guarantee, the intention of the parties was for Wong to execute a guarantee under which he would be liable for only 35% of the debts of Dtron. To the extent that the personal guarantee purported to be an "all monies" guarantee, it did not reflect what the parties had in fact intended. Mr Lim submitted that until that mistake in the personal guarantee was rectified, the personal guarantee was void and/or unenforceable; and, as the Statutory Demand that was made was made pursuant to a void/unenforceable guarantee, that demand too was ineffective. He submitted that in view of the mistake in the personal guarantee Wong had a complete defence to any action against him based on the "all monies" guarantee.

5. Mr Lim further submitted that even if the Bank applied for rectification of the terms of the "all monies" guarantee, there would be a dispute as to how the 35% was to be computed. The Bank’s practice had been to apply contributions made by Wong to reduce the overall debt of Dtron. It had also been the Bank’s practice to charge interest on the total outstanding sum. Mr Lim submitted that Wong’s liability under the personal guarantee ought to be on the basis that two separate accounts had been maintained and payments made by Wong ought to have been used to reduce his 35% liability. He submitted that, so treated, in the light of the fact that between November 1998 and March 1999 Wong had made substantial payments (in excess of US$200,000) to the Bank, there would be a considerable reduction in the principal amount (and interest) payable to the Bank by Wong.

6. As indicated above, I did not, in these proceedings, have to decide whether Wong would be able to successfully resist the Bank’s claim against him should the Bank institute proceedings against Wong for the recovery of the amounts claimed in the Statutory Demand. What I had to consider was whether the disputes that Wong raised to the Bank’s claim under the Statutory Demand appeared to be substantial disputes. If so, then the Statutory Demand ought to be set aside. The disputes raised by Wong, as highlighted to me by Mr Lim, appeared to me to be substantial. I therefore upheld the AR’s decision to set aside the Statutory Demand and dismissed the Bank’s appeal with costs.

7. The AR – as appears from the Notes of Argument that she kept – set aside the Statutory Demand on the grounds that Wong had raised "genuine triable issues". In using that formulation, the AR appeared to be guided by paragraph 66(3) of the Supreme Court Practice Directions which states:

"When the debtor … disputes the debt (not being a debt subject to a judgment or order), the Court will normally set aside the statutory demand if, in its opinion, on the evidence there is a genuine triable issue."
(Emphasis added.)

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