Client Update

June 2014
Business Finance & Insolvency
1 Rajah & Tann LLP
Singapore High Court Determines
Landmark Cross-Border
Bankruptcy Case
Introduction
In an increasingly globalised world, it is common for a company or an individuals economic
footprint to go beyond geographical boundaries. However, in the event of insolvency, uncertainties
regarding the interplay of proceedings in separate jurisdictions may arise. In the landmark case of
Tang Yong Kiat Rickie v Sinesinga Sdn Bhd [2014] SGHCR 06, the Singapore High Court had the
opportunity to consider the validity of a local bankruptcy in light of a concurrent foreign
bankruptcy.
The case involved concurrent bankruptcy proceedings in Singapore and Malaysia, where
bankruptcy orders against the Plaintiff had first been obtained in Malaysia and then in Singapore.
The Plaintiff sought to annul the Singapore bankruptcy order, submitting that the Defendants had
not obtained leave from the Malaysian Courts to commence proceedings against the Plaintiff in
Singapore, and that distribution ought to take place in Malaysia under Malaysian bankruptcy law.
The High Court upheld the Singapore bankruptcy order, finding that it was not unjust in the
circumstances for the Plaintiff to be subjected to bankruptcy in both jurisdictions. The Singapore
order was well-founded, and the Plaintiffs creditors and assets were situated across both Singapore
and Malaysia, thus justifying the concurrent distribution.
The Defendants were successfully represented by Chua Beng Chye, Raelene Pereira, and Cherie Tan
(for the 1
st
Defendant), as well as Ryan Loh and Matthew Teo of Rajah & Tann LLP (for the 2
nd
to 4
th
Defendants).
Brief Facts
The Plaintiff was a Singapore citizen who carried on business activities in Malaysia. On the basis of
certain judgments issued against him by the Malaysian Court due to unsatisfied personal
guarantees, the 1
st
Defendant successfully applied for the Plaintiff to be adjudged a bankrupt in
Malaysia.
While the Malaysian bankruptcy proceedings were ongoing, the 1
st
Defendant applied to register
one of the Malaysian judgments in Singapore. The 1
st
Defendant succeeded in doing so and
commenced bankruptcy proceedings in Singapore, eventually obtaining a Singapore bankruptcy
order against the Plaintiff as well. The 1
st
Defendant subsequently applied to appoint the 2
nd
to 4
th
Defendants as trustees of the Plaintiffs estate in bankruptcy in Singapore.
Client Update
June 2014
Business Finance & Insolvency
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Almost one year and nine months after the Singapore bankruptcy order was made, the Plaintiff filed
an application to annul the Singapore bankruptcy order.
Issues
The Plaintiff sought to annul the Singapore order on three grounds:
(i) The Defendants had not obtained leave from the Malaysian Courts to institute bankruptcy
proceedings in Singapore;
(ii) Distribution ought to take place in Malaysia as proceedings were pending there for the
distribution of the Plaintiffs estate and effects under Malaysian law; and
(iii) Distribution ought to take place under the bankruptcy laws of Malaysia as the majority of
the creditors were resident there and as the Plaintiffs assets had vested in the Malaysian
Official Assignee pursuant to the making of the Malaysian bankruptcy order.
Holding of the High Court
The High Court upheld the Singapore bankruptcy order, rejecting all three grounds of the Plaintiffs
application.
Leave of Malaysian Courts
The Plaintiff sought to rely on s123(1)(a) of the Bankruptcy Act, which allows the Singapore Court to
annul a bankruptcy order if it should not have been made at the time, arguing that the Defendants
should have obtained leave of the Malaysian High Court to institute proceedings in Singapore.
The Singapore High Court held that there is no reason why a person adjudged a bankrupt in
Malaysia should not be similarly declared a bankrupt in Singapore if the application is well-
founded. In this case, there was no other reason why the Singapore order should not have been
made, as the Singapore proceedings were not an abuse of process, and there were benefits to the
concurrent proceedings across both jurisdictions in that the pool of assets for distribution was
increased.
Pending Proceedings in Malaysia
The Plaintiff also raised s123(1)(c) of the Bankruptcy Act, which allows annulment of a bankruptcy
order where bankruptcy proceedings are pending in Malaysia for the distribution of the Plaintiffs
estate and effects in Malaysia.
This is a novel point of law on this provision in the Bankruptcy Act, and the Court had to determine
its application. It held that the existence of Malaysian proceedings was not in and of itself enough to
Client Update
June 2014
Business Finance & Insolvency
3 Rajah & Tann LLP
justify annulment; the Plaintiff had to further show that (i) distribution ought to take place in
Malaysia, and that (ii) the Singapore bankruptcy order ought to be annulled in the circumstances.
On the point of whether distribution ought to take place in Malaysia, the Court acknowledged that
the majority of the creditors were resident in Malaysia. However, this was outweighed by the fact
that there were also Singapore-based creditors, and that the Plaintiff had no assets in Malaysia.
Further, a substantial amount of time had passed from the making of the bankruptcy orders to the
present application, meaning that a substantial amount of work had already been put into the
administration of the Plaintiffs estate in Singapore.
On the point of whether the Singapore order ought to be annulled, the Court found in favour of the
Defendants on the basis that both bankruptcy regimes had successfully co-existed for a substantial
period of time. Further, although the Malaysian authorities were not incapable of administering the
Plaintiffs estate, this in itself was not enough to warrant annulling the Singapore order.
Therefore, the Plaintiffs submission on this ground was rejected as well.
Creditors Resident in Malaysia
The Plaintiffs third ground lay in s123(1)(d) of the Bankruptcy Act, which provides for annulment
where a majority of creditors are resident in Malaysia, and where the estate ought to be distributed
under Malaysian law due to the situation of the bankrupts property or for other reasons.
Mirroring the circumstances of s123(1)(c), there was a lack of case law regarding this provision as
well. Here, the Court similarly held that, apart from the creditors being resident in Malaysia, the
Plaintiff had to show that (i) the estate ought to be distributed under the bankruptcy laws of
Malaysia, and that (ii) the Singapore bankruptcy order ought to be annulled in the circumstances.
As the subjective requirements of s123(1)(d) mirrored those of s123(1)(c), the Court adopted its
analysis of the application of s123(c), rejecting the Plaintiffs submission under s123(1)(d) as well.
Therefore, following the failure of all three grounds of contention, the Plaintiffs application to annul
the Singapore bankruptcy order was dismissed.
Concluding Words
With cross-border bankruptcy proceedings being relatively common, this judgment provides some
much needed insight into the interaction of the different bankruptcy regimes. In particular, it
clarifies the application of certain provisions in the Bankruptcy Act governing the co-existence of
Singaporean and Malaysian bankruptcy proceedings.
Client Update
June 2014
Business Finance & Insolvency
4 Rajah & Tann LLP
Contacts
Please feel free to also contact the Knowledge and Risk Management Group at eOASIS@rajahtann.com
Rajah & Tann LLP is the largest law firm in Southeast Asia, with regional offices in China, Lao PDR, Vietnam, Thailand and Myanmar, as
well as associate and affiliate offices in Malaysia, Cambodia, Indonesia and the Middle East. Our Asian network also includes regional
desks focused on Japan and South Asia. As the Singapore member firm of the Lex Mundi Network, we are able to offer access to excellent
legal expertise in more than 100 countries.
Rajah & Tann LLP is firmly committed to the provision of high quality legal services. It places strong emphasis on promptness, accessibility
and reliability in dealing with clients. At the same time, the firm strives towards a practical yet creative approach in dealing with business
and commercial problems.
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Please note also that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only
intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any
particular course of action as such information may not suit your specific business and operational requirements. It is to your advantage to
seek legal advice for your specific situation. In this regard, you may call the lawyer you normally deal with in Rajah & Tann LLP or e-mail
the Knowledge & Risk Management Group at eOASIS@rajahtann.com.
Raelene Su-Lin Pereira
Partner
D (65) 6232 0401
F (65) 6428 2027
raelene.pereira@rajahtann.com
Chua Beng Chye
Partner
D (65) 6232 0419
F (65) 6428 2005
beng.chye.chua@rajahtann.com
Cherie Tan Shu Ying
Associate
D (65) 6232 0428
F (65) 6428 3460
cherie.tan@rajahtann.com