Ang Tin Gee v Pang Teck Guan

Belinda Ang Saw Ean J:

[1] Summons No 6145 of 2014 (“SUM 6145/2014”) was the plaintiff’s application for payment out of a sum of $545,277.42 (“the stake money”) that was held by a firm of lawyers as a stakeholder pursuant to an Order of Court dated 14 August 2012 (“the Stakeholder Order”). The defendant objected to the payment out application on the ground that the stake money was not ring-fenced to pay his judgment debt in favour of the plaintiff. Rather, the stake money formed part of the defendant’s estate to be administered and distributed by the Official Assignee.

[2] The defendant’s objection was inspired by Bankruptcy No 2279 of 2014, a bankruptcy application filed by his wife on 6 November 2014, nine days after he agreed to a Consent Order made in Registrar’s Appeal Nos 383 and 384, both of 2013 (“the Appeals”). This Consent Order, made on 28 October 2014, was in respect of the defendant’s Appeals against the orders made by Assistant Registrar Justin Yeo (“AR Yeo”) on 7 November 2013 and 19 November 2013 respectively. These decisions are collectively referred to hereafter as “AR Yeo’s 2013 decisions”.

[3] No adjudication order has been made against the defendant. The plaintiff is separately contesting the veracity and credibility of the bankruptcy application which she saw as nothing more than tactical manoeuvring by the defendant and his wife to stymie her right to the stake money as the defendant’s judgment creditor in this action, Suit No 697 of 2010/A (“Suit 697/2010”).

[5] The defendant has appealed against my Order of 21 May 2015. I now publish the reasons for my decision.

[6] Suit 697/2010 was a partnership dispute that was concluded in favour of the plaintiff in 2011 after a nine-day trial. The facts and disputes are detailed in my written Judgment (Ang Tin Gee v Pang Teck Guan [2011] SGHC 259) handed down on 2 December 2011 (“the 2011 Judgment”).

[7] Pursuant to the 2011 Judgment, a series of pre-trial conferences in relation to the taking of accounts of the partnership were held between 7 February 2012 and 27 November 2012. Eventually an Account and Enquiry was heard before AR Yeo over an intermittent period of 11 days commencing on 17 January 2013 after which AR Yeo rendered his decisions on 7 November 2013 and 19 November 2013 respectively.

[8] I now come to the two relevant interlocutory applications, namely Summons No 2481 of 2012 (“SUM 2481/2012”) and Summons No 6231 of 2013 (“SUM 6231/2013”).

[9] Whilst the parties were preparing for the taking of accounts (see [7]), the plaintiff learned that the defendant was selling his flat (“the Kemaman Property”) which she believed to be his “only substantial asset”. On 21 May 2012, the plaintiff filed Summons No 2481/2012 for the following orders:

(a) An injunction preventing the defendant from dealing with or diminishing the net sale proceeds of the Kemaman Property.

(b) The net sale proceeds are to be held by a neutral stakeholder “to secure the rights and interests of the [p]laintiff pursuant to the [2011 Judgment]”.

(c) To facilitate items (a) and (b), the defendant furnishes an account of the sale proceeds from the disposal of the Kemaman Property within seven days from the date of order or such time as the court deems fit to impose.

[10] The defendant did not object to the application in SUM 2481/2012. His counsel, Mr Leslie Yeo (“Mr Yeo”), merely pointed out that, logically speaking, the defendant should only be required to provide an account of the sale proceeds two weeks before completion of the sale, and not from the date sought in item (c) above. I agreed with the defendant’s counsel, Mr Yeo, on that point. I allowed the plaintiff’s application in amended terms. For present purposes, I set out the order made in relation to prayer (b) which is known here as the Stakeholder Order:

[11] As stated, the defendant did not oppose SUM 2481/2012 and, naturally, there was no appeal against the Stakeholder Order.

(a) $200,000 (section 1 costs);

(b) $2,000 (section 2 costs); and

(c) $51,567.80 (section 3 costs).

[14] Following AR Yeo’s 2013 decisions and taxation of BC 186 on 26 November 2013 (see [13] above), the plaintiff’s counsel, Mr Lai Kwok Seng (“Mr Lai”), called upon the stakeholder to release the stake money (ie, $545,277.42). That prompted the defendant to file his application for stay of execution pending appeal on 2 December 2013 (ie, SUM 6231/2013).

[16] AR Lim’s order set out in [15] above is significant. I will elaborate of this specific order later in this written decision. In the meantime, I propose to set out extracts of AR Lim’s Notes of Evidence to show the parties’ stance before AR Lim.

[17] Before AR Lim, counsel for the defendant, Mr Yeo, accepted that the plaintiff’s “fruits of the litigation” were secured by the stake money held by the stakeholders pursuant to the Stakeholder Order. In this important way, the Stakeholder Order and the Stay of Execution Order are intertwined.

[19] The plaintiff did not appeal against the Stay of Execution Order.

[20] I will briefly touch on the defendant’s interpleader application (Summons No 53 of 2015) that was filed on 5 January 2015, two days before the date listed for the hearing of SUM 6145/2014. In particular, the defendant’s supporting affidavit is relevant for present purposes. The defendant quite categorically stated on affidavit that he claimed no interest in the stake money. The interpleader summons was dismissed by Assistant Registrar Nicholas Poon (“AR Poon”) because the defendant was not the proper party to bring the application. AR Poon commented in passing that the application is questionable in that: (a) the defendant’s wife’s target was the stake money alone and nothing else; and (b) the defendant and his wife were still living together as a married couple and yet the wife had taken out proceedings to bankrupt the defendant.

Whether the stake money was ring-fenced to secure or satisfy the plaintiff’s judgment by the Stakeholder Order and/or the Stay of Execution Order

[21] Mr Lai explained in his written submissions that SUM 6145/2014 was taken out by the plaintiff as judgment creditor and in light of the Stakeholder Order that secured and guaranteed the plaintiff’s interests in the stake money and the terms of the Stay of Execution Order. He suggested there that the Stay of Execution Order “expired” upon final disposal of the Appeals and the stake money ought to be released to the plaintiff accordingly. Although Mr Lai’s use of the word “expired” was inapt, Mr Lai was not wrong in his view that the stake money in the hands of the stakeholder was to await the occurrence of the event as between the two parties, and in this case, the triggering event was the outcome of the Appeals. What was required of the plaintiff following the Consent Order in her favour was to obtain a further order to “release” the stake money. In essence, Mr Lai’s contention was that the stake money held by the stakeholder was ring-fenced to secure the interest of the plaintiff. As such, the stake money was not subject to other third party claims.

[22] In contrast, Mr Yeo argued that the wording of the Stakeholder Order merely prevented the defendant from receiving the net sale proceeds; it did not ring-fence the stake money to the exclusion of other creditors like the defendant’s wife. Furthermore, the plaintiff was not a secured creditor within the meaning of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (“the Bankruptcy Act”). Hence, the stake money formed part of the defendant’s estate to be administered and distributed by the Official Assignee.

[23] As I alluded to earlier, it is necessary to examine both the Stakeholder Order and the Stay of Execution Order. A determination of SUM 6145/2014 would be incomplete if one were to consider the scope and effect of the Stakeholder Order alone. However, whilst related, the Stakeholder Order and the Stay of Execution Order are nonetheless freestanding orders. For practical purposes, as the same stakeholder held the stake money, payment out of the same may be made under either order.

[24] At first blush, there is some attractiveness in Mr Yeo’s argument that the wording of the Stakeholder Order had the limited effect of preventing the defendant from receiving the net sale proceeds. But there is ex post facto reasoning in his argument. I accept that the Stakeholder Order was the other part of an injunction order made in SUM 2481/2012 that restrained the defendant from dealing with or diminishing his share of the net sale proceeds pending, amongst other things, the taking of accounts. However, over and above that restraining order, the defendant’s share of net sale proceeds were ordered to be held by De Souza & Goh LLP, the solicitors representing the defendant in the sale, as stakeholder to secure the rights and interests of the plaintiff pursuant to the 2011 Judgment. Moving forward, it is important to see what Mr Yeo had to say to AR Lim in 2014 where he openly agreed that the plaintiff’s “fruits” of the litigation were secured by the stake money that was held by the stakeholders pursuant to the Stakeholder Order. In my view, any shortcoming, ambiguity or doubt that impinged on the meaning of the Stakeholder Order was separately and independently redressed and taken care of by the Stay of Execution Order.

[26] I now turn to examine whether money held by a stakeholder pursuant to a court order is safe from third party claims against the defendant, and is equally protected from contingencies like the defendant’s subsequent bankruptcy. In my view, the character of the money ordered to be paid to a stakeholder account as a convenient alternative to payment into court should by and large have the same effect as a payment into court. The authorities discussed below support the view that where a party has paid money into court or into a stakeholder account, whether voluntarily or by order of court, which is intended to preserve the money for the benefit of the other party’s claim, the other party is considered a secured creditor to the extent of the sum paid into court or into the stakeholder account, and he or she is allowed to retain the benefit of that security despite the payee’s subsequent bankruptcy.

[29] In re Gordon, ex parte Navalchand [1897] 2 QB 516 (“In re Gordon”) was a case cited in Cheng Lip Kwong. The facts in that case concerned the voluntary payment of money into court under the equivalent of O 22 in the English Rules of the Supreme Court (UK) by the defendant. The defendant was subsequently made bankrupt, and Vaughan Williams J held that the plaintiff was a secured creditor to the extent that his proof of debt was admitted by the trustee in bankruptcy. The rationale behind Williams J’s decision is as follows (at 520):

[30] In Re Ford, ex parte The Trustee [1900] 2 QB 211, another case cited in Cheng Lip Kwong, related to whether money paid into court as a condition of leave to defend amounted to security for the plaintiff. Wright J’s stated his rationale for holding that the money was the plaintiff’s security as follows (at 213):

[31] Although the authorities referred to by the Court of Appeal in Cheng Lip Kwong dealt with payment of money into court, the character of the money ordered to be paid to a stakeholder account as a convenient alternative to payment into court should by and large have the same effect.

[32] In Halvanon Insurance Co Ltd v Central Reinsurance Corporation and another [1988] 1 WLR 1122 (“Halvanon”), the defendants were given leave to defend on the condition that the whole sum claimed by the plaintiff be paid into a joint account in the names of parties’ solicitors. The plaintiff subsequently changed its solicitors, and both the plaintiff and defendants applied for the money in the joint account to be released for placement in a separate joint account in the names of the new solicitors. The plaintiff’s former solicitors contested the application on the basis that to make the order would deprive them of their lien for legal fees. Hobhouse J referred to the authorities on the payment of money into court, and stated (at 1128):

[33] Sir Donald Nicholls VC’s decision in Re Mordant, Mordant v Halls [1996] BPIR 302 (“Re Mordant”) is also instructive. This case related to ancillary relief proceedings in the divorce of Mr and Mrs Mordant. In the proceedings, a substantial lump sum would have to be paid by Mr Mordant to Mrs Mordant: Mr Mordant had suggested £250,000 while Mrs Mordant had asked for £450,000.

[34] Along the way, a motion to commit Mr Mordant to prison for breaching an undertaking not to sell a matrimonial property was filed. Mr Mordant apologised for his contempt, and Rattee J ordered that a sum equivalent to the selling price of the property be paid into a bank account in the joint names of Mr Mordant and his solicitors (“the stakeholder account”) so that the sum could be available to meet Mrs Mordant’s claims for ancillary relief. It also emerged later that Mr Mordant had further sums standing to his credit in another bank account. Rattee J ordered that these sums be paid into the stakeholder account. Pending Rattee J’s final judgment, a creditor of Mr Mordant, the building society – which had also intervened in the divorce proceedings – commenced bankruptcy proceedings against Mr Mordant. Rattee J was informed of the pending bankruptcy before he delivered his judgment. In his judgment, he awarded £385,000 to Mrs Mordant. Rattee J also observed that Mr Mordant was dishonest about his financial position, and that the bankruptcy proceedings against him were within his control as he had the means to pay off the building society had he wanted to. In other words, Mr Mordant was using the non-payment of his debt to the building society to delay or defeat payment to Mrs Mordant.

[35] Mr Mordant was subsequently made a bankrupt, and the sum in the stakeholder account was paid to the interim receiver. Mrs Mordant then applied under s 284(1) of the Insolvency Act 1986 (UK) (“Insolvency Act”) for the court’s approval of £385,000 to be disposed to her in full. Section 284 of the Insolvency Act is in pari materia to s 77(1) of the Bankruptcy Act. For ease of reference, I set out s 77(1) of the Bankruptcy Act:

[36] The question before Nicholls VC was whether the sum in the stakeholder account when the bankruptcy petition was first presented was still Mr Mordant’s “property” for the purposes of s 284(1) of the Insolvency Act. Nicholls VC held that the money, once paid into the stakeholder account, no longer formed part of Mr Mordant’s assets and explained (at 309):

[38] The principles outlined above are squarely applicable to the present case. The effect of the Stakeholder Order and the Stay of Execution Order are directly analogous to a payment of money into court under O 14 r 4, O 22 and O 57 r 3(3) of the Rules of Court: such payments are meant to be security for the plaintiff’s claims; title to the stake money is conditional on the outcome of trial or appeal; the stake money is protected from contingencies like the defendant’s subsequent bankruptcy. On the present facts, although the payment was not made into court, the fact that the moneys are held by stakeholders instead of having been paid into court should make no material difference. Borrowing the words of Hobhouse J in Halvanon (see [32] above), this difference is merely a ministerial one.

[39] In my view, the plaintiff was a secured creditor to the extent of the stake money. The Stakeholder Order followed by the Stay of Execution Order ring-fenced the stake money in favour of the plaintiff pending the outcome of the Appeals. I would go further to add that the effect of the Stay of Execution Order that directed the stakeholder to hold the stake money pending the outcome of the Appeals was a conditional payment to the plaintiff. The triggering event had occurred – the stake money was to be the money of the plaintiff if she succeeded in the Appeals. It was therefore appropriate to allow the stake money to be paid out to the plaintiff’s solicitors.

[40] Having concluded that the stake money was ring-fenced for the reasons stated above, it is strictly not necessary to discuss the effect of the bankruptcy application per se. However, as the parties had made submissions on this issue, I propose to briefly touch on the effect of the bankruptcy application, if any, on the court’s power to order payment out assuming that the stake money was not ring-fenced.

[41] The significance of a bankruptcy application was entirely overstated by Mr Yeo who submitted that the Official Assignee should be the party to administer the stake money in light of the bankruptcy application filed by the defendant’s wife on 6 November 2014. Prior to the bankruptcy order, the property of the bankrupt remains vested in the debtor and is at the debtor’s – and not the Official Assignee’s – disposal. Section 76(1)(a)(i) of the Bankruptcy Act provides that the property of the bankrupt shall vest in the Official Assignee without any further conveyance, assignment or transfer on the making of the bankruptcy order. In fact, under s 105(1) of the Bankruptcy Act, a creditor of the bankrupt who has issued enforcement proceedings against the bankrupt may retain the benefit of the enforcement if execution was completed before the date of the bankruptcy order (see also Jeyaretnam Joshua Benjamin v Indra Krishnan [2007] 3 SLR(R) 433 at [44]). As stated, the defendant has not been adjudicated a bankrupt. Until then, there cannot be any suggestion that the stake money should be administered by the Official Assignee.

[42] I am mindful that the making of a bankruptcy application can, nonetheless, produce certain legal consequences. A bankruptcy application may be indicative of a debtor’s financial position, and there are legal principles that provide a framework to preserve the assets of a debtor for the general body of creditors in the event of the debtor’s bankruptcy. Accordingly, s 74(1) of the Bankruptcy Act provides that the court may by order, stay proceedings against the person or property of a debtor at any time after the making of a bankruptcy application. Section 77(1) of the Bankruptcy Act also provides that, when a person is adjudged bankrupt, any disposition of property made by him in the period beginning with the making of the bankruptcy application and ending with the making of the bankruptcy order shall be void, unless the disposition of property was made with the consent, or subsequent ratification, of the court (see generally Cheo Sharon Andriesz v Official Assignee of the estate of Andriesz Paul Matthew, a bankrupt [2013] 2 SLR 297 where the Court of Appeal commented on the application and interpretation of s 77 of the Bankruptcy Act).

[43] In the present case, the bankruptcy application was filed long after the Stakeholder Order and Stay of Execution Order. Besides, there was no proper application by the defendant’s wife to stay further proceedings (for eg, by stopping the payment out application) under s 74(1) of the Bankruptcy Act. There was nothing to engage the bankruptcy jurisdiction of the court.