Lim Lye Hiang v Official Assignee

V K Rajah JA (delivering the judgment of the court):

[1] This is an appeal by Lim Lye Hiang (“the appellant”) against the decision of a High Court Judge (“the Judge”) in Re Lim Lye Hiang, ex parte the Official Assignee [2011] 1 SLR 707 (“the Judgment”).

[2] Upon a petition of Keppel Bank of Singapore Limited, a bankruptcy order was made against the appellant on 9 January 1998.

[3] Separately, the appellant’s sister, Lim Lye Keow (“LLK”), had nominated the appellant pursuant to s 25 of the Central Provident Fund Act (Cap 36, 2001 Rev Ed) (“the CPFA”) to receive LLK’s Central Provident Fund (“CPF”) monies and SingTel discounted shares (collectively, “the Monies”). LLK passed away on 14 March 2008, at which point the appellant was still an undischarged bankrupt.

[4] On 18 September 2008, the CPF Board (“the Board”) sent a letter to the appellant informing her that although she had been nominated by LLK to receive the Monies, the Monies would instead be released to the Official Assignee (“the OA”) because she was an undischarged bankrupt. Although this letter was copied to the OA, it had no record of receiving the letter. As a result, no action was taken by the OA to claim the Monies from the Board.

[5] On 26 June 2009, the Board sent an e-mail to the OA. The Board referred to its earlier letter of 18 September 2008 and requested the OA’s instructions for the transfer of the Monies to it if the appellant was an undischarged bankrupt. Again, the OA had no record of receiving this e-mail and no action was taken on its part to claim the Monies.

[6] On 16 October 2009, the OA filed a report to the court (“the Discharge Report”) in support of its application to discharge the appellant from bankruptcy. By this time, the OA had admitted proofs of debt lodged by 13 creditors totalling $1,179,422.68, and had published a notice that it intended to declare a first and final dividend. The last day for receipt of proofs of debt had expired on 12 May 2008. The Discharge Report stated, inter alia, that:

(a) The OA intended to declare a first and final dividend of about 0.989% to the creditors (ie, of about $11,664).

(b) The appellant had no further realisable assets.

(c) A period of more than 11 years had elapsed since the bankruptcy order.

(d) The appellant was 52 years old and was employed as a kitchen helper earning a net monthly salary of about $800. The appellant had been making regular contributions of between $50 to $150 per month to her estate in bankruptcy.

(e) The OA had completed the administration of the appellant’s case.

[7] On 13 November 2009, the court granted an order discharging the appellant from bankruptcy (“the Discharge Order”) pursuant to s 124 of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (“the BA”), without any conditions attached.

[8] On 12 January 2010, the appellant attempted to claim the Monies from the Board. The Board did not accede to her claim. Instead, on 14 January 2010, the Board wrote to the OA again by e-mail. It referred to its previous letter on 18 September 2008 and e-mail on 26 June 2009, and requested the OA to give instructions for the transfer of the Monies to it if the appellant remained an undischarged bankrupt.

[9] The OA responded immediately. On the same day (ie, 14 January 2010), the OA instructed the Board to forward the Monies to the OA. The Board then requested confirmation that the Monies were to be forwarded to the OA even though the appellant had already been discharged from bankruptcy. The OA confirmed that the Monies were to be forwarded to it for administration. Later that day, the Board informed the appellant that it had been instructed to release the Monies to the OA.

[10] On 24 February 2010, the Board wrote to the OA informing the OA that the Monies, amounting to $102,614.84, had been transferred to its bank account. The Board expressed its belief that the Monies vested in the OA and that the appellant’s discharge did not alter that position. This letter was copied to the appellant. On 2 March 2010, the Monies were received in the OA’s bank account.

[11] On 12 May 2010, the OA filed Summons No 600059 of 2010 (“the Summons”) seeking, inter alia, an order that the Monies be divisible among the appellant’s creditors and payable to them as dividends on the basis that the Monies were property which had devolved on the appellant on 14 March 2008 (the date of LLK’s death), notwithstanding that the Monies were received by the OA after the appellant’s discharge from bankruptcy.

[12] Before we provide a summary of the Judge’s decision and the issues raised in this appeal, it is convenient that we first set out the relevant statutory provisions. The relevant provisions in the CPFA at the time of LLK’s death on 14 March 2008 were as follows:

[13] The relevant provisions in the BA at the time of LLK’s death were as follows:

Some of these provisions have since been amended but none of the amendments have altered the substance of the issues considered in this appeal or our decision on those issues.

[14] At first instance, the Assistant Registrar (“the AR”) granted the order sought by the OA (see [11] above). He explained that it was the entitlement to the Monies (ie, a chose in action) which was in issue, and not the Monies per se. He held that the appellant became entitled to the Monies when LLK died, and that therefore the chose in action vested in the OA due to the operation of s 78(1)(a) of the BA.

[15] The Judge dismissed the appeal from the AR’s decision. The appellant’s first argument before the Judge was that the Monies did not devolve upon her immediately upon LLK’s death. According to s 20(1) of the CPFA, the Monies could only be withdrawn if authorisation was granted by the Board. Such authorisation was not yet granted when she was discharged from bankruptcy. Therefore, the Monies fell outside the definition in s 78(1) of the BA of “property” which vested in the OA.

[16] The Judge rejected this argument (at [15]–[26] of the Judgment). He noted that the appellant’s focus on the actual transfer of the Monies to the OA on 24 February 2010 was misplaced because what was in issue was the entitlement to the Monies. The Judge found that this entitlement, which arose at the point of LLK’s death, did fall within the definition of “property” which vested in the OA. Section 20(1) of the CPFA merely stipulates a procedural requirement of authorisation from the Board before withdrawal could be effected. This procedural requirement did not alter the nature of the appellant’s entitlement to the Monies as a chose in action which fell within the ambit of s 78(1)(a) of the BA and therefore vested in the OA.

[17] The appellant’s second argument was based on s 24(4) of the CPFA, which provided that a CPF member’s funds are not subject to his debts and will not vest in the OA upon his bankruptcy. The Judge rejected this argument (at [28] of the Judgment), stating that the protection conferred by s 24(4) was only intended to protect the savings of a member for his retirement from his creditors. There was no reason why Parliament would have intended the ambit of this protection to extend to nominees. Nominated CPF monies were in substance no different from other testamentary gifts. This argument was not pressed on appeal to this Court.

[18] The appellant’s final argument before the Judge was that her discharge had the effect of revesting the rights to the Monies in her. She relied on the case of Chong Chee Keong v Official Assignee [2005] 3 SLR(R) 546 (“Chong Chee Keong”) as authority for this proposition. The Judge rejected this argument (at [31]–[32] of the Judgment), holding that Chong Chee Keong could be distinguished on the facts.

[19] The first issue to consider is whether the entitlement to the Monies constituted “property” within the ambit of s 78(1) of the BA and therefore vested in the OA at the point of LLK’s death.

[20] If the first issue is answered in the affirmative (ie, if the entitlement to the Monies vested in the OA at the point of death), the second issue which then arises is whether the appellant’s subsequent discharge from bankruptcy had the effect of revesting that entitlement in the appellant.

[21] Section 25 of the CPFA allows CPF members to nominate beneficiaries to receive their CPF funds upon death. Upon the death of a CPF member who had made such a nomination, s 15(5) provides that the nominee “shall be entitled to withdraw” the amounts stipulated by the deceased.

[22] The appellant argues that a nominee’s right to withdraw CPF funds that a member has nominated in his favour does not arise immediately upon the member’s death. According to her, the Judge failed to recognise that s 15(5) provides that a nominee is entitled to withdraw CPF monies “after the death” of the member “in accordance with s 25(1)”. Following on from that, she points out that s 25(1) refers to monies that are payable “under s 20(1)”. Her contention is that because monies can only be paid to the nominee upon authorisation by the Board under s 20(1), the entitlement to withdraw the monies only arises upon such authorisation.

[23] This argument is misconceived. As the OA rightly points out, the appellant has conflated, on the one hand, a nominee’s entitlement to withdraw the monies and, on the other hand, the process which has to be complied with by the nominee in order to obtain actual possession of the monies. We agree with the Judge (at [23]–[26] of the Judgment) that s 20(1) was merely a procedural mechanism which was not relevant to the question of whether and when the entitlement to the Monies had crystallised. Section 15(5) of the CPFA is unambiguous: upon the death of LLK on 14 March 2008, the appellant became “entitled to withdraw” the Monies.

[24] This interpretation of ss 15(5), 20(1) and 25 of the CPFA is supported by the decision of this Court in Central Provident Fund Board v Lau Eng Mui [1995] 2 SLR(R) 826, which concerned the interaction between a court order pursuant to what is now s 112 of the Women’s Charter (Cap 353, 2009 Rev Ed) (“Women’s Charter”) and a nomination pursuant to s 25 of the CPFA. The court stated (at [14]):

In other words, the time of death of the CPF member is the critical time at which the nomination under s 25 takes effect such that the nominee becomes entitled to receive the nominated CPF monies.

[25] The appellant’s alternative argument is that even if the entitlement to withdraw the Monies pursuant to the CPFA arose upon LLK’s death, that entitlement did not fall to be divided amongst her creditors under s 78(1)(a) of the BA. The appellant again, in support of this argument, relied upon the fact that s 20(1) of the CPFA required authorisation by the Board before a nominee may obtain payment of the monies which he is entitled to receive. As a result, the entitlement did not vest in the OA as part of the appellant’s estate in bankruptcy.

[26] Section 78(1)(a) of the BA provides that all “property” which is vested in the bankrupt at the commencement of his bankruptcy or is “acquired by or devolves on him” before his discharge forms part of his estate in bankruptcy. We have already determined that the appellant’s entitlement to the Monies arose at the time of LLK’s death (see [23]-[24] above). Therefore, the entitlement to the Monies was acquired by or had devolved upon the appellant before her discharge from bankruptcy. The only remaining question which has to be considered is whether the statutory entitlement of a nominee to nominated CPF monies constitutes “property” as understood in the BA.

[27] Section 2(1) of the BA provides that “property” includes choses in action. A chose in action is an expression used to describe “all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession”: see Torkington v Magee [1902] 2 KB 427 at 430. The statutory entitlement of a nominee to nominated CPF monies falls squarely within this explanation of what constitutes a chose in action.

[28] It is trite law that the existence of a chose in action does not depend upon immediate enforceability. In Kwok Chi Leung Karl v Commissioner of Estate Duty [1988] 1 WLR 1035, the Privy Council (on an appeal from Hong Kong) was faced with the issue of, inter alia, whether an obligation to pay a sum of money on demand after sixty days constituted an existing chose in action at the time when the obligation was entered into. Lord Oliver of Aylmerton (delivering the judgment of the court) held that the obligation was indeed an existing chose in action at the time when the obligation was entered into. He stated (at 1040E–G):

[29] This reasoning was adopted by Ferris J in the case of In re Landau (a bankrupt) [1998] Ch 223 (“Re Landau”) which was cited by the OA. This case dealt with the question of whether rights under a pension policy fell within a bankrupt’s estate. At the age of 53, Mr Landau entered into an arrangement whereby he was entitled to an annuity for the rest of his life starting from when he turned 65. He was made a bankrupt when he was 61. He was discharged from bankruptcy when he was 64. When Mr Landau reached the age of 65 in 1994, he sought to obtain the benefits under the policy.

[30] Ferris J held that the trustee in bankruptcy was entitled to receive all the sums payable under the policy, despite the fact that the benefits were only payable at a time when Mr Landau had already been discharged from bankruptcy, ie, in 1994 when Mr Landau turned 65. His reasoning was as follows (at 232B–G):

[31] We agree that this is the correct approach to view choses in action. The fact that there was no authorisation given by the Board to the appellant at the time of LLK’s death (or at any point before the appellant’s discharge) is therefore irrelevant. The appellant’s reliance on s 20(1) of the CPFA conflates, on the one hand, the process by which the chose in action is realised, and, on the other hand, the conditions for the existence of the chose in action. The fact that the Monies were only paid out after the appellant was discharged from bankruptcy is also irrelevant, because such payment merely represents the realisation of the chose in action. What is crucial is that the entitlement came into existence upon LLK’s death and that the appellant was still an undischarged bankrupt at this time.

[32] Apart from the argument based on the mere fact that authorisation was required by s 20(1) of the CPFA for the withdrawal of the Monies, the appellant advanced a distinct but related argument based on the width of the discretion of the Board to authorise withdrawals. She submits that the lack of substantive criteria in s 20(1) indicates that the Board possesses a wide discretion as to whether or not to authorise withdrawals, and that therefore the entitlement should not constitute “property” within the BA. She also points out that s 20(1) merely states that the Board “may” authorise withdrawal by the nominee. We do not think that this argument assisted the appellant in any way. Any discretion, however wide or narrow, has legal limits: see Chng Suan Tze v Minister for Home Affairs and others and other appeals [1988] 2 SLR(R) 525 at [86]. Proceedings by way of judicial review could be brought against the Board if it wrongfully refused to authorise withdrawal of the monies. Furthermore, the word “may” is not infrequently held to mean “shall”. In the context of the architecture of the CPFA, we do not think that the Board has the discretion to decline to effect payment to a person lawfully entitled to receive the monies in question.

[33] To sum up, the appellant’s entitlement to the Monies was a chose in action which came into existence at the point of LLK’s death. Because the appellant was an undischarged bankrupt at that point in time, that chose in action, by operation of s 78(1)(a) of the BA, constituted part of the appellant’s estate in bankruptcy. Consequently, it automatically vested in the OA by virtue of s 76(1)(a).

[34] The appellant’s final argument on this issue is that even if s 78(1)(a) of the BA has been satisfied, it is necessary for both limbs of s 78(1) to be satisfied on the basis that the terms “and”, and “shall comprise” are used in the section. The appellant goes on to argue that s 78(1)(b) is not satisfied because she is unable to withdraw the monies until authorised by the Board.

[35] This argument is entirely without merit. First, as the OA points out, the word “and” may be used in a disjunctive sense, for instance, where the various paragraphs which are joined by the word merely set out a list of different objects or classes of objects, related only by the fact that they qualify to be in that list.

[36] Secondly, the English and Australian courts have interpreted similar provisions in their respective bankruptcy statutes in a disjunctive manner. In Cummings v Claremont Petroleum NL and another (1996) 185 CLR 124, the High Court of Australia considered whether the right of appeal of a judgment debtor (the bankrupt) against the judgment formed part of the bankrupt’s estate within the meaning of s 116(1) of the Bankruptcy Act 1966 (Cth), which is in pari materia with s 78 of the BA. Brennan CJ, McHugh and Gaudron JJ held that s 116(1)(a) was not satisfied because neither the obligation to comply with the judgment nor the right of appeal constituted “property”. They applied In re Rose; Trustee of the Property of E T Rose v Rose [1904] 2 Ch 348 (“Re Rose”) and held that s 116(1)(b) was intended to encompass powers of appointment in relation to “property” which could be exercised for the bankrupt’s benefit. As there was no “property” over which the powers could be exercised, they held that this limb was not satisfied (at 133).

[37] The High Court of Australia did not treat both limbs of s 116(1) as having a conjunctive relationship. If both limbs were conjunctive, they need not, having held that s 116(1)(a) was not satisfied, have gone on to consider whether s 116(1)(b) was satisfied. The same approach has been taken by the English courts. In Re Rose itself, Farwell J stated (at 351­–352):

[38] The appellant’s argument that s 78(1)(b) is not satisfied is actually correct because there are no powers of appointment in the present case. But that does not advance her case because s 78(1)(a) has been satisfied, and that alone is sufficient for the entitlement to constitute part of the appellant’s estate in bankruptcy which vests in the OA.

[39] As we have explained (see [27]–[31] above), the entitlement to the Monies was a chose in action which vested in the OA at the point of LLK’s death. The next issue is whether that entitlement revested in the appellant when she was subsequently discharged from bankruptcy. This issue requires the consideration of the following questions:

(b) If a discharge does not ipso facto revest property, is the position different if the discharge is granted after a final dividend has been declared by the OA?

[40] The appellant’s most promising argument is based on the decision in Chong Chee Keong (see [18] above). The plaintiff was a shareholder of a company which was wound up on 13 August 1999. The Official Receiver (“the OR”) was appointed as the liquidator. On 10 December 1999, the plaintiff was made a bankrupt. The OA, qua trustee in bankruptcy of the plaintiff, filed a proof of debt of $682,304 against the company on 21 April 2001. The plaintiff was discharged from bankruptcy on 30 June 2003. On 5 July 2004, the OR declared a dividend of 16.33% in the liquidation of the company. The plaintiff applied for a declaration that the money (about $111,420) should be paid over to him personally.

[41] Choo Han Teck J granted the declaration. He accepted the OA’s argument that the plaintiff’s right to claim the dividend, qua chose in action, vested in the OA. He stated (at [2]):

However, he went on to decide that the chose in action (which was vested in the OA) reverted to the plaintiff after his discharge. He stated (at [4]):

[42] We had some difficulty with this particular conclusion and therefore at the conclusion of the hearing on 13 April 2011 directed both parties to tender further submissions on (a) the effect (if any) of a discharge from bankruptcy on property rights which are vested in the OA, and (b) whether Chong Chee Keong was correctly decided. In its further submissions, the OA argues that Chong Chee Keong is wrong and should be overruled for the following reasons:

(a) The concept of an express reservation of rights by the OA is not contained in the BA and is inconsistent with ss 127 and 128 thereof.

(b) Choo J was correct to state that a discharge releases a bankrupt from almost all of the debts which were provable in his bankruptcy, and therefore wipes the slate clean for him so that he may carry on with his life afresh free of past debts and liabilities. However, it did not follow that “residual rights must revert to the discharged bankrupt”. The concept of residual rights which reverted to the discharged bankrupt is not contained in the BA and is inconsistent with ss 127 and 128 thereof.

[43] Section 127(1) of the BA provides that a discharge releases the bankrupt from all debts provable in his bankruptcy. The proviso, viz, “[s]ubject to this section and any condition imposed by the court under section 124 or 126”, is a qualification to that broad proposition. In other words, the discharged bankrupt is not released from the following categories of provable debts: (a) debts specified in s 127 itself; and (b) debts which are specified by the court pursuant to its power under ss 124 or 126.

[44] Section 127(1) goes on to state that the fact that the bankrupt is released from most debts provable in his bankruptcy does not have any effect on the functions of the OA (so far as they remain to be carried out). The appellant notes that the Discharge Order was an “absolute” order of discharge, ie, one without any conditions specified therein. She argues that because the Discharge Order was absolute in nature, there were no residual functions of the OA to be discharged and that, therefore, the order had the effect of automatically revesting the entitlement to the Monies in her.

[45] We do not accept this argument. The reference to conditions imposed by the court under ss 124 or 126 merely qualifies the general proposition that the bankrupt is discharged from all debts provable in his bankruptcy. In other words, if the court had specified that the appellant was not to be released from a particular debt or particular category of debts, then this condition would be given effect by virtue of the proviso to s 127(1). The absence of such a condition means that (if no debts specified in s 127 are in issue) the bankrupt is released from all debts provable in his bankruptcy. This does not answer the question of whether or not a discharge (whether absolute or conditional) has the additional effect of revesting property, over and above releasing the bankrupt from all debts provable in his bankruptcy. We pause here to note that apart from releasing the discharged bankrupt from most debts provable in his bankruptcy, a discharge also has the following beneficial effects:

(a) All property which is acquired by or devolves on him after discharge will belong to him: see ss 75(b), 78(1)(a).

(b) He is freed from the legal and practical disabilities of being an undischarged bankrupt: see ss 75(b), 130, 131.

[46] We agree with the OA that a discharge in itself does not have the effect of revesting property in the bankrupt and that therefore Chong Chee Keong is wrong on this point. First, the statutory provisions plainly contemplate that the administration of the bankrupt’s estate may still continue after discharge. While s 127(1) provides that the discharge has no effect on the functions of the OA (so far as they remain to be carried out), s 128(1) clearly contemplates, as the OA argues, that property remains vested in it because s 128(1) provides that a discharged bankrupt shall provide assistance in the realisation and distribution of “such of his property as is vested” in it. Reading both sections together, it can be concluded that certain functions of the OA may remain to be carried out in relation to the realisation and distribution of the bankrupt’s estate even after the bankrupt has been discharged.

[47] The other provisions of the BA also lend support to the view that a discharge does not automatically revest property. Although Parliament expressly provided in s 76(1)(a) that the property of the bankrupt automatically vests in the OA at the onset of bankruptcy, s 127(1) is significantly silent as to any revesting of property upon discharge which marks the end of bankruptcy. By contrast, the provisions on annulment expressly provide that an annulment has the effect of revesting property. An annulment may be granted (a) by a court order pursuant to s 123 of the BA, or (b) by a certificate of the OA pursuant to either ss 95A or 123A of the BA. All three sections provide that upon an annulment the “property of the bankrupt” will generally “revert to the bankrupt”: see, for instance, s 123(3). In Tan Teck Guan v Mapletree Trustee Pte Ltd (trustee of Mapletree Industrial Trust) [2011] 3 SLR 1031 (“Tan Teck Guan”), Chan Seng Onn J held (at [14]), following English, Australian and Malaysian authorities, that annulment “has the effect of wiping out the bankruptcy altogether and putting the bankrupt in the same position as if there had been no bankruptcy order made against him”. He added (at [15]) that this did not mean that annulment had retrospective effect for all intents and purposes, such as where exceptions to the general rule were created by the provisions of the BA. We agree with Chan J’s analysis in Tan Teck Guan. Given that Parliament expressly provided that property would in general revest in the “bankrupt” upon an annulment, it is very unlikely that the same effect would be achieved by means of a discharge given that s 127 is silent on this point.

[48] Apart from the difference in wording of the relevant provisions, the difference in the effect of an annulment as compared to a discharge is also supported by the difference in the objectives of the two regimes. A discharge, while acknowledging that the bankrupt was rightly made a bankrupt, is intended to give him “a second chance in life”: see Re Siah Ooi Choe, ex parte Hongkong and Shanghai Banking Corp [1997] 3 SLR(R) 706 at [9]. By contrast, an annulment “neither casts any aspersions nor provides any indication vis-à-vis the conduct of the person subject to the bankruptcy order”: see Tan Teck Guan at [27].

[49] Furthermore, s 122, which provides that the bankrupt “shall be entitled to any surplus remaining after payment in full of his creditors” with interest and of the bankruptcy expenses, contemplates that the bankrupt will obtain property from his estate only if “his creditors” have been paid in full. This phrase, viz, “his creditors”, has been interpreted in In re Ward [1942] 1 Ch 294 (“Re Ward”) at 297–298 by Farwell J to refer to all creditors who have proved in the bankruptcy, and not all creditors in general regardless of whether or not they have proved in the bankruptcy. Although it is not necessary to decide this point in this appeal, we think that Farwell J’s approach is a sensible interpretation of s 122 which strikes an appropriate balance between the interests of the creditors and the bankrupt. Nonetheless, the point which is material in this appeal is that the revesting of property upon discharge will in effect circumvent s 122 because the discharged bankrupt will be obtaining property which constituted part of his estate without having paid off his creditors in full.

[50] Secondly, the proposition that a discharge does not automatically revest property is supported by the objectives of the discharge regime. During the Second Reading of the Bankruptcy Bill, the then Minister for Law, Professor S Jayakumar stated as follows (Singapore Parliamentary Debates, Official Report (25 August 1994) vol 63 at cols 400–402):

It is not unlikely that although the OA may not have completed the realisation and distribution of the estate in bankruptcy, he may yet be of the opinion that, after taking into account all relevant circumstances, a bankrupt is nonetheless deserving of discharge. Should a discharge have the effect of automatically revesting property, this consideration will militate against a decision to grant a discharge by the OA or the court. This would not be an interpretation of the BA which accords with its purpose of facilitating discharges where appropriate. It is no answer to this to say that the court can always impose conditions to prevent the revesting of property. As we have explained (see [44]–[45] above), the reference in s 127 to conditions imposed by the court under ss 124 or 126 is a qualification to the general principle that the bankrupt is released from all debts provable in his bankruptcy. These conditions are not relevant to the vesting of property, which is a distinct issue.

[51] Thirdly, the courts in England and Australia have adopted the same interpretation of their respective bankruptcy statutes in relation to the effect of a discharge, ie, that it does not in itself have the effect of revesting property. These decisions are highly persuasive in so far as the relevant provisions are in pari materia with those in the BA. In Pegler v Dale (1975) 6 ALR 62, S and F had an interest in a mortgaged property. The mortgagee paid the balance of the monies from the sale of the property into court. S had been made a bankrupt on 23 April 1963 but was automatically discharged on 4 March 1971. S and F argued that the automatic discharge had revested S’s share of the balance in her (at 63):

Needham J rejected this argument (at 63–64):

[52] Pegler v Dale was followed and applied by Barrett J in Re Emilco Pty Ltd [2001] NSWSC 1035, who stated (at [38]):

Although the Australian Bankruptcy Act 1966 (Cth) provides for an automatic discharge after a specified period of time, the BA does not. However, the reasoning of the Australian courts does not turn on the fact that discharges may occur automatically under their bankruptcy statute. Instead, their reasoning hinges on s 152(1) of the Bankruptcy Act 1966 (Cth) which is in pari materia with s 128 of the BA.

[53] The English courts have also adopted the same position. In In re A Debtor, Ex parte the Trustee of the Property of the Bankrupt v Clegg and others [1968] 1 WLR 788, Stamp J stated (at 791F–H):

Goff J agreed (at 801F–H):

[54] In fact, an argument strikingly similar to that of the appellant was advanced in Ex parte Waters; In re Waters (1874) LR 18 Eq 701. In that case, a liquidation petition was filed by two partners. A creditors’ meeting resolved that the partners should be discharged in respect of their partnership liabilities. Subsequently, the trustees in bankruptcy of the partnership discovered that one of the partners (one Robert Waters) had, after the order of discharge was granted, received about £188 on account of the partnership estate. The trustees obtained an order of court that he should pay that sum to them. Mr Waters failed to comply and an order of committal for contempt of court was made. He appealed, arguing inter alia that the money was received after the discharge was granted. Sir James Bacon CJ dismissed the appeal on the basis of s 19 of the Bankruptcy Act 1869 (c 71) (UK), which was as follows (at 702, footnote (2)):

Sir James Bacon CJ stated as follows (at 702–703):

[55] Re Landau (see [29]–[30] above) also stands for the proposition that a discharge does not in itself revest property in the bankrupt.

[56] For these reasons, we hold that a discharge does not ipso facto revest property in the discharged bankrupt. The bankrupt’s discharge releases “him” from the debts and does not affect the debts themselves. As Kala Anandarajah et al, Law and Practice of Bankruptcy in Singapore and Malaysia (Butterworths Asia, 1999) explains (at p 437):

In other words, those creditors whose debts are provable in the bankruptcy and from which the bankrupt is released due to s 127 are left to prove in the bankruptcy against the bankrupt’s estate, which is vested (and remains vested) in the OA for this purpose. In Law Society v Shah [2009] Ch 223, it was argued that the effect of a discharge was to “extinguish” debts provable in the bankruptcy. Floyd J rejected this argument (at 237A):

[57] A possible argument that could have been advanced by the appellant is that even if a discharge does not automatically revest property, the discharge will have that effect if it is granted after a final dividend has been declared by the OA. Although s 127(1) provides that a discharge does not have any effect on the functions of the OA which remain to be carried out, no such functions remain to be carried out if the OA has already declared a final dividend. Such a declaration signifies the end of the administration of the bankrupt’s estate, and therefore property should revest in the discharged bankrupt upon discharge.

[58] On the facts of this appeal, the OA had given notice to the creditors that it intended to declare a first and final dividend, and the last day for creditors to come in to prove their debts had already expired (see [6] above). It, however, appears that the final dividend has not yet been declared: the Summons also contained a prayer to amend the Discharge Report to state that the OA will be able to declare a “first and final dividend of about 9.078%”. Nonetheless, we are of the opinion that it would be desirable in the interest of legal certainty for the wider community to consider the applicable principles in the event that the final dividend had been declared by the OA.

[59] Section 119(1) of the BA states that the OA shall declare a final dividend when it has realised all the bankrupt’s estate or so much of it as can, in its opinion, be realised without needlessly protracting the proceedings in bankruptcy. Section 119(2) states that the notice given by the OA “shall require claims against the bankrupt’s estate to be established by a date ... specified in the notice” [emphasis added]. Section 119(4)(b) provides that, after the final date, the OA shall declare and distribute the final dividend “without regard to the claim of any person in respect of a debt not already proved in the bankruptcy”.

[60] In Re Ward ([49] above), Farwell J held (at 297–298) that where all the creditors who had proved in the bankruptcy had been paid in full, the residue of the bankrupt’s estate constituted “surplus” within the equivalent of s 122 of the BA. The fact that there were other creditors who had not been paid was irrelevant because the Act “contemplates that there shall be finality” (at 297). This finding was made by Farwell J after having considered s 65 of the Bankruptcy Act 1914 (UK), which provided that a creditor who proves his debt after the declaration of a dividend is still entitled to be paid “any dividend or dividends he may have failed to receive”. Section 65 is in pari materia with s 118 of the BA. We agree with Farwell J’s analysis. It follows that the operation of s 118 is limited to interim dividends, ie, dividends which are not final.

[61] Although the ratio of Re Ward is confined to a situation where the creditors who had proved in the bankruptcy had been paid in full, Farwell J’s reasoning, viz, that there should be finality in terms of the identity of the creditors who are entitled to a portion of the bankrupt’s estate, applies with equal force even where creditors who have proved in the bankruptcy have not been paid in full. The presence or absence of a “surplus” has no bearing on the question of whether a creditor has submitted his proofs of debt by the final date. If a creditor fails to submit his proofs of debt in time, such a creditor has only himself to blame. If there is property which comes to light after the final dividend has been declared, creditors who have not proved are not entitled (a) to rely on s 118(2) to claim a share of that property in satisfaction of the past dividends which they failed to receive, or (b) to claim future dividends which are declared from the realisation of that property. In other words, the class of creditors who are entitled to dividends is crystallised on the final date (or extended final date).

[62] This interpretation of the effect of a final dividend is supported by a consideration of the legislative history of the BA and its associated subsidiary legislation. Forms 113 and 114 of the Bankruptcy Rules 1967 (S 64/1967) (“the 1967 Rules”) are as follows:

Forms 113 and 114 are in pari materia with Forms 123 and 124 of the Bankruptcy Rules 1886 (UK). Form 113 merely states that a failure to prove by the stipulated date would exclude the creditor from “this dividend”. By contrast, Form 114 is worded in stronger language. The use of the phrase “your claim will be expunged” is an indication that creditors who have not proven in the bankruptcy by the final date will not be able to subsequently come in and claim any dividends (whether past or future), because their claims against the estate will be treated as being non-existent for the purpose of the administration of the bankrupt’s estate. It is telling that while Form 114 refers to a “claim” being expunged, ss 27 and 29 of the Second Schedule to the Bankruptcy Act (Cap 18, 1970 Rev Ed) refer only to a “proof” being expunged:

This interpretation is supported by Ian F Fletcher, The Law of Insolvency (Sweet & Maxwell, 2009, 4th Ed) at para 10-043:

[63] The present Form 37 in the Bankruptcy Rules (Rg 1, 2006 Rev Ed) is as follows:

It is apparent that Form 37 is an amalgamation of the old forms, viz, Forms 113 and 114 of the 1967 Rules, without the phrase “your claim will be expunged”. The absence of this phrase is not a sufficient indication of a legislative intention, over and above an intention to simplify the bankruptcy procedures, to alter the applicable legal principles governing the effect of a final dividend. Furthermore, the phrase was retained in Form 50 of the Companies (Winding Up) Rules (Rg 1, 2006 Rev Ed) which is in pari materia with the old Form 114 of the 1967 Rules.

[64] Having considered the effect of a final dividend in principle, we now turn to the question of whether a discharge granted after a final dividend has been declared has the effect of revesting property. Where the discharge is granted after the final dividend falls short of satisfying the creditors who have proved in the bankruptcy before the final date in full, a revesting of property would in effect disrupt the statutory allocation of rights embodied in s 122 (see [49] above). This is because the discharged bankrupt would be obtaining property which formed part of his estate without having satisfied the conditions stipulated by s 122. For this reason, a discharge granted in such circumstances does not ipso facto revest property in the discharged bankrupt. Therefore, if any property which forms part of the estate in bankruptcy comes to light after discharge, that property must prima facie be realised by the OA in favour of the bankruptcy expenses and the creditors who have proved in the bankruptcy before the final date in so far as they have not yet been paid off in full. As for creditors who have not proved by the final date, they are not entitled to claim any share of such property: see [60]–[63] above.

[65] Where the discharge is granted after a final dividend of 100%, ie, where all the creditors who had proved in the bankruptcy by the final date have been paid in full, the requirements of s 122 have been met. Any property which subsequently comes to light will be held by the OA on trust for the discharged bankrupt beneficially: see Bird v Philpott [1900] 1 Ch 822 at 828. This is not because of the discharge per se but because the purpose for which the property is held by the OA has been achieved.

[66] We have held that a discharge does not revest property (which is vested in the OA) in the discharged bankrupt, regardless of whether the discharge occurs before or after the OA has declared the final dividend (see [40]–[65] above). If a discharged bankrupt desires that a particular item of property in his estate, or his entire estate, should revest in him for some reason, it would be prudent for him first to contact the OA to state his reasons and/or proposals. If the OA agrees with him, then it is for the OA to carry out the necessary steps for the transfer of title to the discharged bankrupt. If the OA disagrees, or imposes conditions with which the discharged bankrupt disagrees, then he should apply to the court pursuant to s 31 of the BA for review of the OA’s decision.

[69] We observe that the letter of 18 September 2008 from the Board to the appellant (which appears to be the first time she was contacted by either the Board or the OA in connection with this matter) stated that the Monies would be released to the OA because she was an undischarged bankrupt. There were no subsequent representations made to the contrary to the appellant by the OA or the CPF Board. The fact that the Monies were only paid to the OA after the appellant’s discharge from bankruptcy was due to an oversight on the OA’s part. The appellant was not misled in any way by the OA and the Board. It follows that she did not rely to her detriment on any mistaken perception created by the OA or the Board that she was entitled to the Monies. In fact, it was incumbent on the appellant to aid to the utmost of her power in the realisation of her property and the distribution of the proceeds among her creditors by the OA: see s 129(1)(i) of the BA. Given that she was told by the Board that the Monies were due to the OA because she was an undischarged bankrupt at the time of LLK’s death, she cannot then seek to take advantage of the OA’s oversight by claiming ownership of the Monies.