Manharlal Trikamdas Mody E Anor v Sumikin Bussan International (HK) Limited [2014] SGHC 123

The Singapore High Court in the case of Manharlal Trikamdas Mody E Anor v Sumikin Bussan International (HK) Limited [2014] SGHC 123 decided a number of important issues in the fields of bankruptcy, assignment and ex parte applications.

Most notably, the High Court held that the rights created under statutory bankruptcy provisions which provide for a stay of proceedings against a bankrupt or his property are personal to the Official Assignee or the appointed private trustee, and are not capable of assignment to any other party. The High Court also noted (without deciding) that an assignment of the bare right to bring a claim in respect of property, without an assignment of the underlying property itself, may not be a valid assignment. In this regard, the High Court cited English decisions to the effect that an assignment must relate to the property of a chose in action, "something capable of being turned into money". By this reasoning, a bare right to bring proceedings may not fall within the  scope of matters which are capable of assignment.

Facts

In this case, the judgment creditor of an individual attempted to enforce its Hong Kong judgment against the individual in India, by obtaining attachment orders from the Indian courts against landed property of the individual. More than a year after the attachment of the property, the individual and his wife were placed into bankruptcy in Singapore.

The bankrupt individuals spent almost 10 years commencing various proceedings in India, in an attempt to resist the completion of the sale of the landed property in India. Among the various proceedings commenced by the individuals was an application brought by the judgment debtor to stay the enforcement proceedings in India, on the basis that Singapore bankruptcy laws provided for a stay of proceedings against him or his property. The Division Bench of the High Court of Bombay dismissed the bankrupt individual's application.

The bankrupt individuals then applied to the Singapore courts by way of originating summons ("OS") seeking a stay of all proceedings (including the Indian enforcement proceedings) against the bankrupt individuals, on the similar basis of statutory provisions under Singapore bankruptcy laws providing for a stay of proceedings against them or  their property. As the judgment creditor had no presence in Singapore, the bankrupt individuals also obtained an ex parte order from the Singapore courts for leave to serve the Singapore OS on the judgment creditor out of jurisdiction.

The judgment creditor then applied to the Singapore courts to set aside the Singapore OS as well as the order for leave to serve the Singapore OS out of jurisdiction. The judgment creditor also applied for an order that the Singapore court had no jurisdiction to hear the OS.

Judgment

The High Court of Singapore agreed with the judgment creditor and set aside the bankrupt individuals' OS. The court further set aside the order for leave for service out of   jurisdiction.

In so deciding, the court made a number of useful holdings on the law of assignment, cross-border insolvency and service out of jurisdiction, some of which the Singapore courts are commenting on for the first time:

  • The court decided that the bankrupt individuals did not have the legal standing to bring an OS to enforce sections 76(1)(c) and 105 of the Singapore Bankruptcy Act, which are statutory provisions under the Singapore bankruptcy laws which provide for a stay of proceedings against the person or property of a bankrupt. Although the bankrupt individuals argued that they had obtained a deed of assignment which assigned the right to bring such an application, the court held that the rights under sections 76(1)(c) and 105 of the Bankruptcy Act are personal to the Singapore Official Assignee, and are not assignable at law.
  • The court decided that the order granting leave for service out of jurisdiction should be set aside on the basis of failure to make full and frank disclosure. In reaching this decision, the court noted that the bankrupt individuals had filed a substantive affidavit in support of their OS, and an affidavit in support of their application for leave for service out of jurisdiction. The latter affidavit was relatively short, and expressly referred to the substantive affidavit. The court held that it is not enough for the affidavit for leave for service out of jurisdiction to merely refer to the substantive affidavit, but should at the very least highlight the areas of the substantive affidavit which are of especial importance. The court further held that the level of disclosure even in the substantive affidavit was inadequate.
  • In this case, attachment orders had already been granted by the Indian courts against the judgment debtor's landed property one year prior to the individuals' bankruptcy. The court decided that Singapore bankruptcy orders would not affect pre-existing foreign attachments of a bankrupt's property, and cited authorities to the effect that under principles of private international law, a trustee in bankruptcy takes foreign property subject to equities, including any valid and subsisting claims arising from the property or any security rights previously effected in relation to it.
  • The court decided that, in any event, Singapore was not the proper forum to hear the issues arising under the OS. In particular, the court noted that the judgment debtor had already applied to the Indian courts to determine similar issues. Further, a proper determination of the OS would involve complex questions of Indian law and may extend to questions concerning the constitutionality of certain Gazette notifications of the Indian government.
  • Finally, the court decided that the Singapore OS should be set aside on the basis of res judicata. Even though one of the bankrupt individuals (the wife of the judgment debtor) had not been a party to many of the Indian proceedings, the court held that her application to be joined as a party to the Indian proceedings had been struck out for want of prosecution. Accordingly, the addition of one of the bankrupt individuals to the Singapore proceedings did not affect the issue of res judicata. Further, even if the proceedings in India may not be concerned with precisely the same issues as the Singapore OS, at the core of both sets of proceedings, the issues and relief sought are the same: whether the enforcement proceedings in India should be stayed on the ground that the individuals have been made bankrupt in Singapore. In any event, the court also held that there was a good case that the Singapore OS summons was an abuse of process, in light of (among other things) the similarities between the Indian proceedings and the Singapore OS.

Comment

This decision has important ramifications on insolvency law in particular, and should be especially noted by parties who are intending to buy or sell causes of action arising in relation to an insolvent company or an individual. One particular controversy in the field of insolvency law is whether rights arising under insolvency legislation (as opposed to causes of action belonging to the company or individual before insolvency proceedings commenced) are assignable to third parties. In this regard, the courts in Australia and England have taken divergent approaches. Australia has taken a more permissive approach, while English courts have held that such rights are not assignable on the basis that these rights are privileges and liberties conferred upon liquidators and trustees in bankruptcy who are officers of the court and act under the court's direction. This decision has made clearer that Singapore may be more likely to follow the English approach and hold that rights created under insolvency legislation cannot be assigned.