Sia Leng Yuen also known as Xie Ning Yun v Ko Chun Shun Johnson (No 2)

[2] A sum of US$2million was loaned by Johnson Ko Chun Shun (‘Ko’) to Sia Leng Yuen also known as Xie Ning Yun (‘Sia’), upon the latter’s request. This loan was evidenced by a promissory note dated 4 January 2001. The security for the loan was said to be 50 membership certificates in a certain country club known as Blue Canyon Country Club. This security was provided by Sia.

[3] Insofar as is material, cl 3 of the said promissory note provided, amongst other things, as follows:

[4] There was apparently a default on the part of Sia in honouring the loan repayment terms. As a result, Ko proceeded to issue a statutory demand under section 62 of the Bankruptcy Act 1995, dated 31 August 2001 (‘the first statutory demand’) against Sia for the full amount of the debt plus interest, totalling US$2,197,260.27. The said first statutory demand did not include any reference to the value of the security provided by Sia.

[5] Sia, then applied to the court in OSB 600118 of 2001 to set aside the said first statutory demand, contending that the said demand did not comply with Rules 94(5), 94(6), 98(2) (c), (d) and (e) of the Bankruptcy Rules. The relevant segments of Rule 94 and 98 of the Bankruptcy Rules are reproduced below:

[6] When the application concerning the first statutory demand came up for hearing before the Assistant Registrar, he dismissed Sia’s application, holding that the statutory demand did comply with the requirement of r 94(5) (b) of the Bankruptcy Rules.

[7] Sia appealed and his appeal was heard by Lee Seiu Kin JC (as he then was). In allowing Sia’s appeal and setting aside the statutory demand, Lee Sieu Kin JC said at para 13 of his judgment:

[12] Lord Herschell in his speech (at pages 415 and 416) made the following observations:

[13] Lord Fitzgerald in the same case (at page 416) observed:

[14] In Hines v Birkbeck College and Another (No 2) [1991] 3 WLR 557, the Court of Appeal in England, applied the principles stated by the House of Lords in M’Cabe. Nourse LJ, delivering the judgment of the Court of Appeal said at pages 556 and 557:

[15] Counsel for Ko tried to argue that there were special circumstances in this case to warrant the adoption of a less rigid approach, as has been envisaged by Mervyn-Davies J, in Hines v Birkbeck. In this connection, paras 31 to 34 of his submission read as follows:

[17] In any event, the statement by Ko’s counsel in his submission that Sia had put the value of security in issue was found by me to be both ironic and significant. If, as being suggested by counsel, the value of the security given by Sia was again going to be a subject matter of substantial contention in the next round of hearings, the likelihood of the second statutory demand meeting a similar fate as that of the first statutory demand could not be ruled out. In Wong Kwei Cheong v ABN-AMRO Bank NV [2002] 3 SLR 594, Rajendaran J set aside a statutory demand when it became apparent to the court that the debt was being disputed on substantial grounds. He held that it was not the function of the bankruptcy court to conduct a full hearing if there was a substantial dispute arising over the subject matter. I share the same views.

Order accordingly.