TAN KAH ENG. v. TAN ENG KHIAM

HCA9640/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9640 OF 1999

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RULING

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1.  On 13 August 2010, I determined the defendant’s application, to strike out the plaintiff’s claim and to dismiss the action, in favour of the plaintiff. However, I also concluded that I was unable to re-grant leave to serve out of the jurisdiction unless the plaintiff was prepared to make disclosure of the special resolution resulting in the issue of the certificate of annulment on 18 February 2000 and to satisfy me that there was no fraud committed, within the meaning of section 95A(6) of the Bankruptcy Act of Singapore (“BA”), when the certificate of annulment was issued or otherwise satisfy me that the certificate of annulment cannot or can no longer be set aside. My reason for so doing was that, if the certificate of annulment were to be set aside, the original bankruptcy order would be reinstated with the result that, under Singapore law, the plaintiff would lack capacity to commence and maintain these proceedings thereby rendering these proceedings a nullity once again. I directed the parties to address me further on these matters on 16 August 2010.

2.  On 16 August 2010, I heard the parties and stood down the matter to 4:30 p.m. on that day in order to receive written proposals for the further conduct of the plaintiff’s application to me to re-grant leave to serve out of the jurisdiction.  Having received those proposals, I directed on 17 August 2010 that the application for re-grant of leave be adjourned to 10 a.m. on 23 August 2010 and I gave further directions in connection with that hearing, including a direction for the parties to exchange expert reports on the relevant Singapore law on the issue of setting aside a certificate of annulment.

3.  After consultation with counsel, I also directed that, in the event I re-granted leave to serve out of the jurisdiction, the trial of the action was to commence on 21 September 2010.

4.  On 23 August 2010, I further adjourned the matter for mention to 3 September 2010 at the behest of the plaintiff.  Mr James Sherry informed me on that day that the plaintiff intended to satisfy in full the claims of the Singapore creditors and that a meeting had been set up with the Official Assignee (“OA”) in Singapore on 25 August 2010 to facilitate the payment of the outstanding amounts to the creditors and that the plaintiff had sufficient funds available to do so.  After making payment, the plaintiff would ask the OA to confirm that the claims of the creditors have been fully satisfied and, on that basis, that there would be no application by the creditors, or by the OA, to set aside the certificate of annulment.  I granted the adjournment, notwithstanding opposition from the defendant, as I was of the view that the plaintiff ought to be given an opportunity to take such steps, within a reasonable time, as would ensure that the certificate of annulment would not be set aside.

5.  There have been a number of developments since then.  The plaintiff’s meeting with the OA took place on 25 August 2010.  His Singaporean lawyer, Mr Irving Choh, was in attendance at that meeting, as was Mr Dennis Lim, the lawyer acting for the defendant in Singapore.  Consequent upon that meeting, the OA wrote by e-mail on 27 August 2010 to Mr Choh and Mr Lim in these terms :

“Mr Tan Kah Eng had made an offer of composition of 20% to the creditors in 2000 which was accepted by the creditors. At that time, it was not known that Mr Tan had assets which he did not disclose to the [OA] and his creditors. Mr Tan has now proposed to make the remaining 80% settlement to his creditors i.e. to pay his debts in full.

In view of the above, the [OA] will revoke the Certificate of Annulment obtained under section 95A of the [BA] on the grounds of fraud i.e. being his failure to inform the [OA] and the creditors of his assets.  This will require the [OA] to make an application to the High Court.  The costs and expenses of this application is to be borne by Mr Tan.  Upon Mr Tan making the settlement with the creditors, Mr Tan will be required to apply for a full discharge or an annulment under section 123 or 124 of the [BA].  This will be by way of the originating summons. Mr Tan is required to meet the costs of this application also.”

6.  Subsequent to that e-mail, the OA clarified that the OA would not object to the plaintiff’s application for annulment and that the entire process would take no less than 12 weeks.  However, the OA reserved his right to pursue prosecution action.

7.  Mr Choh and Mr Lim reported on what transpired at the meeting with the OA to the parties’ Hong Kong solicitors by letters dated 2 September 2010, which they despatched by e-mail.  The only matter of disagreement between them turns on the discussion at that meeting of the right of the defendant to appear and to be heard on the plaintiff’s application for an annulment.  That disagreement is not sufficiently relevant to my present considerations as to require a resolution because, whether or not the defendant is entitled to appear and be heard by the Singapore court, it is clear, as was conceded by Mr Choh in his e-mail to the OA dated 27 August 2010, that the final decision, whether or not to grant an annulment, must lie with the Singapore court, notwithstanding that the OA does not object to the application.

8.  When the parties returned to me on 3 September 2010, the disclosure of the special resolution resulting in the issue of the certificate of annulment on 18 February 2000 was no longer in issue and the remaining issue on the plaintiff’s application to re-grant leave to serve out of the jurisdiction was no longer whether or not the original certificate of annulment was liable to be set aside (clearly, it was going to be set aside), but whether or not the plaintiff could obtain an order of annulment from the Singapore court and be restored, once again, to full capacity to maintain these proceedings.  That depended on the outcome of the Singapore proceedings, an outcome which would be known in about 12 weeks’ time.

9.  Another development that occurred by 3 September 2010 was that the September trial dates were no longer available and that the trial of the action could only commence on 17 February 2011, even if leave to serve out of the jurisdiction was re-granted.

10.  In the light of these developments, Mr Sherry submitted to me that I should not second guess what the Singapore court might or might not do on the plaintiff’s application for an order of annulment and that I should adjourn the present proceedings until such time as the outcome of the Singapore proceedings become known, which was likely to occur before the end of this year, and well before the time when the trial of this action can take place.

11.  Mr Leo Remedios, for the defendant, opposed the plaintiff’s application for a further adjournment and submitted that, on the evidence available before me, the Singaporean court was most unlikely to grant an order of annulment to the plaintiff.  He submitted that, as the original certificate of annulment was going to be set aside, with the result that these proceedings would be rendered a nullity, I should dismiss the application to re-grant leave to serve out of the jurisdiction and dismiss the action.

12.  Mr Leo Remedios based this submission on 2 distinct matters.  The first matter he raised was that, even assuming that the plaintiff could persuade the Singapore court to grant an order of annulment, there would be a period of time between the setting aside of the original certificate of annulment and the possible grant of the new order of annulment when he would revert back to the status of a bankrupt with the result that these proceedings would once more be rendered a nullity for that period of time.  When I decided in my ruling on 13 August 2010 that I would be prepared to re-grant leave to serve out of the jurisdiction if satisfied that the original certificate of annulment could not or could no longer be set aside, I reached that decision notwithstanding the fact that the plaintiff lacked capacity to commence and bring these proceedings for a number of months from the time when he issued the writ in these proceedings up to the time the original certificate of annulment was granted on 18 February 2000.  I reached this conclusion based on my finding that, under Singapore law, the annulment operated retrospectively to restore a capacity to the bankrupt to bring proceedings.  The grant of a new order of annulment would also operate retrospectively in the same way.  Whilst this is a matter that I can be asked to consider on the plaintiff’s application to re-grant leave to serve out of the jurisdiction assuming, of course, that he obtains a new order of annulment, this matter does not lead me to exercise my discretion against the plaintiff on his application for adjournment.

13.  Mr Remedios was on stronger ground when he submitted that the Singapore court was most unlikely to grant a new order of annulment to the plaintiff.  He referred me to section 123(2) of the BA which provided that the court may annul a bankruptcy order whether or not the bankrupt has been discharged from the bankruptcy.  The court clearly has a discretion whether or not to grant an annulment.  Mr Remedios also referred me to section 124(4) and (5)(h) of the BA which provided that the Singapore court shall refuse to discharge the bankrupt from bankruptcy, or may only do so on a conditional basis, or upon payment of a dividend to his creditors of not less than 25%, in the event that the bankrupt has been guilty of any fraud or guilty of dishonest or fraudulent concealment.  He submitted that the plaintiff’s failure to disclose his assets to the OA amounted to dishonest or fraudulent concealment such as would impact on the court’s discretion to discharge the bankrupt from bankruptcy.  A fortiori, it must impact on the court’s discretion to grant an order of annulment to the plaintiff.  If, given the plaintiff’s conduct, the Singapore court is prevented from granting an order to discharge him from bankruptcy and can only grant a conditional order of discharge, it must follow that the Singapore court will not grant him an order of annulment.  Mr Remedios submitted that as the plaintiff did not enjoy any realistic prospect of obtaining an order of annulment, I should bring these proceedings to a close here and now instead of granting the plaintiff’s application for adjournment.  Whilst Mr Remedios has made a cogent submission to me on this point, I must resist the temptation of predicting how the Singapore court will deal with the plaintiff’s application for the grant of a new certificate of annulment.  As Mr Sherry submitted to me, and which I accept, this particular legal drama must be played out in the Singapore court.

14.  Finally, Mr Remedios submitted that, even if the plaintiff were to obtain an order of annulment from the Singapore court, it would be a wrongful exercise of discretion for the court to re-grant leave to the plaintiff to serve out of the jurisdiction, given his fraudulent nondisclosure of his assets to the OA.  He submitted that, as the plaintiff cannot succeed in obtaining a re-grant of leave to serve out of the jurisdiction from the court, I should exercise my discretion against granting the present application for adjournment.  I cannot accept this submission as I am not convinced that the plaintiff’s nondisclosure of his assets to the OA is a matter that is relevant to the exercise of the court’s discretion whether or not to re-grant leave.  It is arguable, on a narrow view, given my ruling on this issue on 13 August 2010, that the only relevant consideration on the application for re-grant of leave is whether or not the plaintiff has, or has been restored to, capacity to commence and maintain these proceedings and that the plaintiff’s conduct in failing to make disclosure of his assets to the OA is a matter for the Singapore court, and only the Singapore court, to consider and deal with.  It is also arguable that the plaintiff’s conduct, if relevant at all, is only of peripheral relevance to the exercise of the court’s discretion whether or not to re-grant leave to serve out of the jurisdiction.

15.  I conclude, for the reasons advanced by Mr Sherry which I accept, that I ought to grant the plaintiff an adjournment to enable him to obtain the grant of an order of annulment from the Singapore court so that he may be restored to full capacity, once again, to maintain these proceedings.  If the Singapore court refuses to grant an order of annulment, and only grants an order of discharge to the plaintiff, that would be the end of the matter (save for the question of costs) since an order of discharge would not operate retrospectively to restore capacity to the plaintiff to commence and maintain these proceedings.  If the Singapore court grants an order of annulment, then the plaintiff can proceed with his application before me for re-grant of leave to serve out of the jurisdiction at which point in time the defendant can raise before me, as matters I should have regard to in the exercise of my discretion whether or not to re-grant leave to serve out of the jurisdiction, all the matters raised in opposition to the plaintiff’s application for adjournment.

16.  I adjourn the plaintiff’s application for re-grant of leave to serve out of the jurisdiction to 10 a.m. on 19 January 2011, with liberty to apply.  I reserve the question of costs.  Even if the Singapore court does not grant an order of annulment, the parties will have to come back on 19 January 2011 to deal with costs.  The plaintiff’s solicitors should inform the court as soon as the outcome of the application to the Singapore court, for the grant of an order of annulment, is known.