Tan Hup Yuan Patrick v The Griffin Coal Mining Co Pty Ltd (administrators appointed) and others

Woo Bih Li J:

[1] This was an appeal by Patrick Tan Hup Yuan (“the Plaintiff”) against the decision of the Assistant Registrar dismissing the Plaintiff’s application in Originating Summons (Bankruptcy) No 13/2013 (“the OSB 13/2013”) for the following orders:

(a) that the statutory demand (“the Statutory Demand”) dated 13 February 2013 issued by the defendants (“the Defendants”) against the Plaintiff demanding payment of AUD3,037,236.88 be set aside;

(b) that the bankruptcy proceedings by the Defendants against the Plaintiff be stayed; and

(c) that the Defendants pay the Plaintiff costs of the originating summons.

[2] After hearing arguments, I dismissed the Plaintiff’s appeal. I set out my reasons below.

[3] The main issue was whether the Plaintiff could rely on allegations of certain facts to resist the Statutory Demand in the light of a settlement agreement and a consent judgment which I will elaborate on below. I decided that he could not.

[4] The Defendants commenced Suit No 749 of 2010 (“the Singapore Suit”) against the Plaintiff for, inter alia, an alleged breach of a deed of guarantee dated 27 August 2010 (“the Guarantee”). The Plaintiff had guaranteed the performance of the obligations of Montreal Capital Group Limited (“Montreal”) under an agreement (“the Implementation Agreement”) with the Defendants to, inter alia, inject fresh capital to the first defendant in voluntary administration.

[5] The Statutory Demand which was the subject of OSB 13/2013 was issued when the Plaintiff failed to pay the sums due under a consent judgment dated 20 November 2012 (“the Consent Judgment”) made in the Singapore Suit by Prakash J. This Consent Judgment was made pursuant to a settlement agreement dated 19 November 2012 entered into by the parties (“the Settlement Agreement”). Clause 6 of the Settlement Agreement was an entire agreement clause which provided:

[6] The Plaintiff made two arguments to support his application to set aside the Statutory Demand. First, the Defendants had assigned to another party, through a Deed of Assignment and Appointment of Attorney dated 28 February 2011 (“the Deed of Assignment”), its interests under the Guarantee dated 27 August 2010 entered into between the Plaintiff and the Defendants. Since the Defendants’ claim in the Singapore Suit was on the basis of a breach of this guarantee which had been assigned to another party, the Defendants were not entitled to maintain the Singapore Suit and enter judgment against the Plaintiff. I will refer to this argument as “the locus standi argument”.

[7] Secondly, the Plaintiff argued that he had a valid cross-claim against the Defendants arising from the Defendants’ breach of an alleged agreement made at a meeting on 27 August 2012 in Sydney which I will refer to as “the Sydney Agreement”. I will refer to this argument as “the cross-claim argument”.

[8] The thrust of the Sydney Agreement was as follows. The Plaintiff had allegedly agreed to discount five standby letters of credit totalling AUD250m which the Defendants were looking to discount, at between 5% to 6%. In consideration of this, the Defendants allegedly agreed before the Settlement Agreement dated 19 November 2012 and the Consent Judgment dated 20 November 2002 that the Singapore Suit would be considered settled. The Defendants were to furnish information showing the primary text of the standby letters of credit, which would allow the Plaintiff’s bank to quote the applicable rates. AUD250m was to be held on escrow by the Plaintiff’s counsel. If the Defendants were to receive confirmation from the Plaintiff’s bank that the bank was prepared to discount the letters of credit, this sum would not be remitted to the Defendants.

[9] Pursuant to the Sydney Agreement, the Plaintiff contacted JP Morgan, Singapore, and secured it as the discounting bank at a rate of 5.5%. At the Defendants’ request, the Plaintiff and JP Morgan signed a non-disclosure agreement before the Defendants would release the wording of the standby letters of credit. However, the Defendants allegedly failed to provide the Plaintiff with the wording of the standby letters of credit despite repeated requests to do so. Accordingly, the Plaintiff claimed to have suffered loss and damage from the Defendant’s breach of the Sydney Agreement.

[10] In respect of the locus standi argument, the Defendants argued that:

(a) The Plaintiff was attempting to go behind the Consent Judgment and inquire into the validity of the debt, and this was not permissible.

(b) The fact that the Plaintiff had not proceeded to set aside the Consent Judgment showed that he did not believe that he had legitimate grounds to do so.

(c) The Plaintiff’s argument was in effect, a plea that there was no cause of action between the Defendants and the Plaintiff. This was prohibited by cause of action estoppel by virtue of the Consent Judgment. In the alternative, the issue was fundamental to the finding of the Plaintiff’s liability established by the Consent Judgment. Accordingly, an issue estoppel operated to prevent the Plaintiff from raising this argument.

[11] In respect of the cross-claim argument, the gist of the Defendants’ argument was that:

(a) the Plaintiff was precluded from relying on the Sydney Agreement in view of cl 6 of the Settlement Agreement, which was the entire agreement clause; and

(b) the cross-claim argument was not credible.

[12] As regards the locus standi argument, the starting point was r 98(2) of the Bankruptcy Rules (Cap 20, R 1, 2006 Revised Edition) (“the Rules”), which set out the grounds which a court could rely on to set aside a statutory demand:

[13] Rule 98(2)(e) of the Rules is to be read with para 144 of the Supreme Court Practice Directions (2013 Ed, 1 January 2013 release) (“the PD”) which provided:

[14] Where there is a genuine triable issue, the court will normally set aside the statutory demand, but it is not obliged to do so: Mohd Zain bin Abdullah v Chimbusco International Petroleum (Singapore) Pte Ltd and another appeal [2014] 2 SLR 446 (“Chimbusco”) at [29]. It will not suffice for a debtor to raise spurious allegations in order to fend off bankruptcy proceedings. The court will only set aside a statutory demand where the debtor is able to adduce evidence on affidavit that raises a triable issue: Chimbusco at [30].

[15] In my view, there was no dissonance between the Rules and the PD. The effect of para 144(2) of the PD was to supplement r 98(2)(b) because r 98(2) is not confined to the situation where the statutory demand is based on a judgment, ie, the statutory demand may not be based on a judgment. However, where it is based on a judgment, para 144(2) of the PD states that the court will not inquire into the validity of the debt. In other words, any dispute on the debt will not appear to be substantial under r 98(2)(b). While practice directions do not have the force of law (see BNP Paribas (formerly known as Banque National De Paris) v Polynesia Timber Services Pte Ltd and another [2002] 1 SLR(R) 539 at [37]; Odex Pte Ltd v Pacific Internet Ltd [2008] 3 SLR(R) 18 at [29] and [30]), they are directions from the court nonetheless and a court will not normally depart from its directions unless there is a good reason for doing so. Moreover, para 144(2) is consistent with what is already the law on res judicata which I will elaborate on below.

[16] In the present case, the locus standi argument challenged the Defendants’ entitlement to commence the Singapore Suit against the Plaintiff as the locus standi argument was that the Defendants were not the right parties to make the original claim in the Singapore Suit. In my view, by making this argument, the Plaintiff was asking the court to go behind the Consent Judgment and inquire into the validity of the debt, namely, whether the debt was indeed owed to the Defendants. The Plaintiff was not entitled to do this pursuant to para 144(2) of the PD. By consenting to the Consent Judgment, he had accepted that the Defendants were entitled to make the claim. The proper step for him would have been to apply to set aside the Consent Judgment but he did not do so.

[17] Moreover, I was of the view that the Plaintiff was prevented from making the locus standi argument by a principle of res judicata, namely cause of action estoppel. Cause of action estoppel was explained by Diplock LJ (as he then was) in Thoday v Thoday [1964] 2 WLR 371 (“Thoday”) at 384:

[18] In the present case, the Consent Judgment provided that final judgment had been entered against the Plaintiff:

[19] In my view, since the Consent Judgment provided that final judgment be entered against the Plaintiff and that the Plaintiff was to pay the Defendants the above-stated sum, the Plaintiff was to be taken to have consented to the Defendants’ locus standi to make the claim. A consent order was as efficacious as orders pronounced after a contest in creating cause of action estoppel: see KR Handley, Spencer Bower and Handley: Res Judicata (LexisNexis, 4th Ed, 2009) at para 2.16; Poh Huat Heng Corp Pte Ltd and others v Hafizul Islam Kofil Uddin [2012] 3 SLR 1003 at [18]. The Plaintiff’s locus standi argument, in essence, was that the Defendants were not entitled to commence the Singapore Suit based on the guarantee because the rights under the guarantee had been assigned to another party. In effect, this was a plea that the Defendants had no cause of action against the Plaintiff and hence contradicted the Consent Judgment which was given on the basis that the Defendants have a cause of action against the Plaintiff. Therefore, the Plaintiff was precluded from making the locus standi argument.

[20] I was also of the view that the Plaintiff was precluded by the defence of abuse of process from raising the locus standi argument. The defence of abuse of process, although distinct, was accepted as “the extended doctrine of res judicata” or “doctrine of res judicata in the wider sense”: see Lee Hiok Tng (in her personal capacity) v Lee Hiok Tng and another (executors and trustees of the estate of Lee Wee Nam, deceased) and others [2001] 1 SLR(R) 771 at [21]–[22]. Essentially, this defence does not permit matters to be raised which ought to have been raised in earlier proceedings. The traditional formulation of the defence was articulated by Wigram VC in Henderson v Henderson [1843–1860] All ER Rep 378 at 381–382. The modern restatement of the defence is found in Johnson v Gore Wood & Co (a Firm) [2002] 2 AC 1 (“Johnson”) at 31.

[21] The modern restatement of the defence in Johnson has been followed in Kwa Ban Cheong v Kuah Boon Sek and others [2003] 3 SLR(R) 644 at [25]–[26], Lai Swee Lin Linda v Attorney-General [2006] 2 SLR(R) 565 at [62], and Goh Nellie v Goh Lian Teck and others [2007] 1 SLR(R) 453 (“Goh Nellie”) at [52].

[22] I refer to the helpful guidance provided by Goh Nellie at [53]:

[24] In the circumstances, it is unnecessary for me to elaborate on issue estoppel.

[25] I now come to the cross-claim argument.

[26] As stated above at [7]–[8], the Plaintiff argued that he had a valid cross-claim against the Defendants arising from the Defendants’ alleged breach of the Sydney Agreement, which in turn provided that in consideration of the Plaintiff agreeing to discount the Defendants’ standby letters of credit, the Singapore Suit would be considered settled. In my view, the Plaintiff’s cross-claim argument was not correctly characterised as a cross-claim or counterclaim. Instead, the Plaintiff’s cross-claim argument would in substance be a defence to the Defendants’ claim in the Singapore Suit because the Plaintiff appeared to be alleging that the Plaintiff’s benefit from the alleged Sydney Agreement was that the Singapore Suit would be considered settled. Accordingly, the same objections against the Plaintiff raising the locus standi argument apply to the Plaintiff’s cross-claim argument, namely, the Plaintiff was precluded from raising the cross-claim argument pursuant to para 144(2) of the PD. Also, the defence of abuse of process applied (see above [16] and [23]). Therefore, I did not find that the debt was disputed on grounds which appeared to be substantial or that there were any genuine triable issues.

[27] In any event, any alleged Sydney Agreement was clearly and expressly superseded by cl 6 of the Settlement Agreement, which provided that the Settlement Agreement superseded any prior understandings, negotiations and agreements with respect to the Singapore Suit (see above at [5]).