Although the sum involved was small, the High Court’s decision in One Investment and Consultancy Limited and another v Cham Poh Meng (DBS Bank Ltd, garnishee)  SGHC 208 is one which would have a great impact in the area of enforcement of a judgment debt – A joint account held in the names of a judgment debtor and third parties jointly cannot be subject to attachment under a garnishee order.
This decision, together with the reasons the High Court used to justify it, now casts doubt on whether a bank is able to rely on a common clause found in security documents which allows it to combine any account held by a borrower (whether solely or jointly with a third party) together with the borrower’s liabilities. More importantly, it now advances the possibility of borrowers using joint accounts as a shield against enforcement by banks.
The first plaintiff was a company incorporated in the British Virgin Islands and the second plaintiff was its director. On 8 January 2016, the plaintiffs obtained summary judgment against the defendant for, inter alia, a sum of S$1,472,561.
Pursuant to the summary judgment, the second plaintiff applied for a garnishee order against DBS Bank Ltd (DBS) for, inter alia, a joint account held in the names of the defendant and his wife (the Joint Account), consisting of S$117.34.
At first instance, the learned Assistant Registrar referred to the recent cases of Chan Shwe Ching v Leong Lai Yee  5 SLR 295 and Chan Yat Chun v Sng Jin Chye and another  SGHCR 4. In Chan Shwe Ching, it was held that a defendant’s interest in a property held jointly by him and a third party as joint tenants could be attached and taken in execution to satisfy a judgment debt under a writ of seizure and sale, and in Chan Yat Chun, it was held that a similar approach is also taken where the defendant and the third party hold the property as tenants-in-common instead. Relying on the two cases, it was held that the Joint Account could be subject to attachment under the garnishee order. Although the learned Assistant Registrar acknowledged that the two cases mentioned above relate to a writ of seizure and sale against immovable property rather than the garnishing of money in a joint account, she held that there was no reason to distinguish the two.
DBS subsequently appealed.
The High Court’s ruling
On appeal, Kannan Ramesh JC (the Judge) found for DBS, and in doing so laid out the positions of the various Commonwealth authorities, as well as the policy considerations, justifying his decision.
The Commonwealth authorities
The learned Judge first considered the various Commonwealth authorities, most of which supported the view that joint accounts could not be the subject of a garnishee order:
- The English Position is well-established in the case of Hirschhorn v Evans  3 All ER 491, where the English Court of Appeal held that a joint account cannot be the subject of a garnishee order in respect of the debt of only one of the account holders. This is because to hold otherwise would be to enable a judgment creditor to attach a debt to two persons in order to answer for the debt due to him from the judgment debtor alone, which would be altogether contrary to justice. This position was later considered and confirmed in a White Paper, and as such remains unchanged.
- The Australian Position follows the English Position: the Court of Appeal of New South Wales held in D J Colburt & Sons Pty Ltd v Ansen; Commercial Banking Co of Sydney Ltd (Garnishee)  2 NSWR 289 that the correctness of the English position in Hirschhorn was “so obvious as not to require further attention”. The position was subsequently subject to legislative reform, but the court’s decision still stands where the statute does not apply.
- The positions in Hong Kong (see Gail Stevenson and another v The Chartered Bank  HKLR 556) Northern Ireland (see Belfast Telegraph Newspapers Ltd v Blunden (trading as Impact Initiatives) [1995) NI 351) and India (see Anumati v Punjab National Bank LNIND 2004 SC 1877) all support his view as well.
- The only Commonwealth jurisdiction that has departed from the position in Hirschhorn is Canada: In Smith v Schaffner  NSJ No 294, the Nova Scotia Supreme Court allowed a garnishee order to be made against a joint account, as they found that “there is no reason, based on policy, equity, or logic, that if the interest of the execution debtor in the “property” of a joint account is established, that a creditor should not be entitled to have the sheriff attach the execution debtor’s “interest” in the “property” by garnishee.” However it was held that the burden fell on the judgment creditor to establish the interest of the judgment debtor in the joint account.
As such, the approach taken by the majority of the Commonwealth countries lent great weight in the Judge arriving at the view that joint accounts cannot be subject to a garnishee order.
More importantly, the Judge examined the policy considerations surrounding this case, and categorised into two categories: (1) Prejudice to the banks, and (2) Prejudice to the innocent joint account holders.
The first category of policy considerations is the detriment potentially suffered by the banks.
The main issue the Judge considered is the current lack of a framework for determining each joint holder’s contribution to the joint account. As it was held that there is no basis in law or fact for a presumption of the contributions of the joint account holders to be equal, such a determination would involve a “fairly involved process that is typically resolved by a full factual investigation at trial, something that banks are not equipped to conduct and that enforcement processes are ill-suited for”. Furthermore, to require the banks to make such assessments could expose them to liability to the innocent joint account holders.
Even if such a framework is to be adopted, this would result in the increased operational and legal costs of compliance: in order to ensure that the innocent joint account holders are properly treated and their complaints are properly addressed, the banks would have to incur costs in notifying them and responding to their complaints. The Australian Parliament has laid down a lengthy framework for issuing garnishee orders against joint accounts, and if Singapore was to adopt this framework, this would impose a significant financial and administrative burden on the banks. Such increased costs would ultimately be borne by the judgment creditors and debtors, thereby imposing a barrier to justice.
The second category of policy considerations is the detriment potentially suffered by the innocent joint account holders.
The first issue that arises in this category is the lack of a framework for a joint account holder to assert his share in the joint account: There is currently no requirement that an innocent joint account holder be notified, nor is there any mechanism for the innocent joint account holder to seek determination of the judgment debtor’s interest in the joint account under the Rules of Court. This means that the garnishee order could be made final and the sum specified therein deducted even before the innocent joint account holder is made aware. Even if the innocent joint account holder was notified by the bank, he has no recourse save to register his objection with the bank or to incur substantial costs by seeking to participate in the formal garnishee process before the court.
Even if the Singapore courts allow the approach in Smith where the burden falls upon the judgment creditor to establish the interest of the judgment debtor in the joint, the result is that the decision of the court would be based on the partisan evidence of the judgment creditor – an apparent breach of natural justice.
The second issue that arises is determining what percentage of the joint account to freeze in the period between the service of the order to show cause and the garnishee order being made final. Even if the decision to freeze half of the account was rightfully made, the order would not have prevented a judgment debtor from withdrawing the remaining money in a joint account, and this would have resulted in the innocent joint account holder shouldering the whole of the judgement debtor’s debt since all that would be left in the joint account would be the frozen money, a result which would run counter to the aim of garnishee proceeds.
Based on the reasons mentioned above, the learned Judge allowed the appeal. It is important to note that in the course of his judgment, he acknowledged the fact that his holding would allow a debtor to deliberately channel his funds into joint accounts to shield them from garnishee orders. However, in the learned Judge’s view, the benefits of introducing a policy to attach joint accounts under garnishee orders would be disproportionate to the range of operation, cost and policy difficulties which would impact on debtors, creditors and third parties alike.
The dictum of the case is narrowly restricted to the issue of garnishee proceedings in relation to joint accounts. However it seems that the reasons adopted by the learned Judge, especially the policy considerations, are equally applicable to cases beyond the scope of garnishee proceedings. One such area of law relates to cases where the bank itself is the creditor – would borrowers be able to shield their liquid assets from the bank by channelling them into joint accounts?
A standard clause in most security documents nowadays provides for banks to have the option to combine or consolidate all or any of the accounts of a borrower, regardless of whether such accounts are held by that borrower alone or jointly with another person, with the liabilities of the borrower. As such, a standard remedy available to banks would be to set-off any liabilities of a borrower with any account with the borrower’s name on it.
In light of the above case, it would seem that the enforceability of this standard clause is now cast in doubt: the policy considerations applied by the High Court to garnishee proceedings may equally apply to situations where the bank itself is the creditor seeking redress from joint accounts held jointly by a borrower and an innocent third party. This is because an innocent joint account holder will likely suffer the same prejudice he would have suffered if a garnishee order were made against the same joint account. Similarly, to introduce a framework to establish the contributions of each individual joint account holder would incur significant costs for the borrower and the innocent joint account holder, as well as operational and administrative costs for the bank.
As such, it seems that there is now doubt on whether such a remedy is available to banks in the case of a default by a borrower. As noted by the Judge in the case, it would seem that a borrower could easily ring-fence his assets from a bank by transferring funds into a joint account with a third party.
Whether or not such an extension will be adopted by the Singapore courts remains to be seen. In any case, as the learned Judge held in obiter, a possible alternative would be for a judgment creditor to apply for a receiver to be appointed over the joint account. However anything more than that was held to be best left for legislative reform.