United Overseas Bank Ltd v Ishak bin Ismail

[1] This is an appeal from the decision of the Assistant Registrar dismissing the appellants’ bankruptcy petition against the debtor Ishak bin Ismail in the amount of $20,156.43. The petition was dismissed on the basis that the service of the statutory demand, which the petitioning creditor relied on to found the presumption that the debtor was unable to pay the debt, had been irregular. The only live issue in the appeal is whether this was indeed the case.

[2] The law regulating service of the statutory demand is found in r 96 of the Bankruptcy Rules (Cap 20, R1, 2002 Rev Ed). It provides:

[3] The affidavit of service of the statutory demand filed by a clerk of the firm acting for the petitioning creditors, one Marcus Lin Han Chiang (“Lin”), stated that he had on two occasions, ie 5 January 2003 at 7.30pm and 8 January 2003 at 9.10pm, attended at the premises of Block 241, Jurong East Street 24, #05-687, Singapore 600241, for the purposes of serving the demand personally on the debtor. On the first occasion there had been no response from within the premises after knocking on the door several times. On the second occasion, he had been informed by a male Indian that there was no one of the debtor’s name staying at the premises. In addition, a Property Tax Search dated 29 August 2002 showed that the owner of the premises was one Rahimah bte Abdul Kadir, and not the debtor.

[4] Having taken, in his view, “all reasonable efforts” and used “all due means” in his power to serve the statutory demand, Lin then on 10 February 2003 posted a copy of the demand on the front door of the premises, being the last known address of the debtor.

[5] As the Assistant Registrar has rightly pointed out in his Grounds of Decision the loan documents upon which the debt in question was founded show the debtor’s address to be the premises at which the statutory demand was posted. However, the loan documents were processed in February and May 2001 and no evidence was adduced (such as correspondence from the debtor) from which it could be inferred that the debtor was still residing at those premises at about the time the demand was sought to be served. The evidence adduced in fact pointed the other way: the property tax search showed that the debtor was not the owner of the premises as early as August 2002, and further, the clerk who had attempted personal service in January 2003 was told by an occupant that there was no one of the debtor’s name residing there. That being the case, the Assistant Registrar took the view that posting the statutory demand on the front door had not passed the test of being the “most effective means of bringing the demand to the notice of the debtor” that is stipulated in r 96(3). He was also satisfied, bearing in mind the provisions of r 96(6)(b), that the mode of substituted service adopted in this case was not a mode that, in the circumstances of this case, the court would have ordered. I should say that looking at all the facts I cannot but agree with the Assistant Registrar.

[6] Putting a person in bankruptcy is not something which should be taken lightly. A person who has wrongfully been put into that legal status can, of course, apply to rescind or annul the order of bankruptcy after it has been made. But this involves considerable time and expense, and the person should not be put to this inconvenience unless reasonable efforts have been made to make him aware of the demand so that he would have reasonable opportunity to contest the debt. It seems clear to me that in the present circumstances the service of the documents by posting on the front door of the Jurong premises was most unlikely to bring the demand to the debtor’s attention. In these circumstances, the most sensible course of action would have been to advertise the demand in a local newspaper in a language which the debtor is known to understand. If the office address of the debtor was known to the creditor, efforts should have been made to serve the statutory demand on the debtor at his office before resorting to other modes of service.

[7] In the present case, counsel for the petitioning creditor relied on the case of Wong Kwei Cheong v ABN-Amro Bank NV [2002] 3 SLR 594, a decision by me also relating to substituted service of a statutory demand. In the court below, the Assistant Registrar distinguished Wong Kwei Cheong on the ground that the pre-requisites for effecting substituted service of the statutory demand by advertisement, as had occurred in that case, had not been met. This is sufficient ground to resolve the different outcomes between that case and this one, but I would add that there was the additional factor in the Wong Kwei Cheong case that the creditors there were in contact with the debtor’s solicitors and yet did nothing to try to serve the demand through the debtor’s solicitors. Instead, they proceeded to advertise the statutory demand: an act criticised by the debtor as high-handed and designed to embarrass him.

[8] The directions in r 96 relating to substituted service of documents are at the end of the day mere guidelines which attempt to balance the interests of the party seeking service against the interest of the party to be served. This is evident from the use of the word “may” in r 96(3): the demand “may” be served by such other means as would be most effective in bringing the demand to the notice of the debtor. Each case must therefore be digested on its own facts with a healthy dose of practical sense. And solicitors acting for the creditor should ensure that the affidavit of service that is filed is comprehensive and contains sufficient facts to show that the mode of service adopted would,

These requirements flow from r 96(6) of the Bankruptcy Rules.

[9] In Wong Kwei Cheong’s case, it was quite clear that there might well have been a more effective and therefore more appropriate way to effect service, which train of inquiry the creditors had chosen to ignore. I therefore took the view that the creditors in that case were not entitled to rely on service by advertisement. In the present case, however, it seems quite clear that service by advertisement is the more likely of the alternatives to be effective. I should add that in cases where there are clearly better modes of services other than those enumerated in r 96(4)(a), (b) and (c) of the Bankruptcy Rules (ie, by posting on the door, by registered post, or by advertisement), the pre-requisites in the Practice Directions of two attempts at personal service do not absolve the creditors from exploring those avenues. That principle, if any, is the ratio decidendi of Wong Kwei Cheong’s case.

[10] For the above reasons, I affirm the Assistant Registrar’s decision below and dismiss the appeal.