Singapore High Court: Tan Hup Yuan Patrick v The Griffin Coal Mining Co Pty Ltd (administrators appointed) and others [2014] SGHC 156*

One of the ways to enforce a Judgment is by means of bankruptcy proceedings. A stepping stone to the commencement of bankruptcy proceedings is the issuance of a statutory demand. The failure to pay the Judgment sum as set out in the statutory demand gives rise to a statutory presumption under the Bankruptcy Act (Cap. 20) that the debtor is unable to pay his debts, and should therefore be made bankrupt.

Some of the potential grounds for setting aside a statutory demand were raised in Tan Hup Yuan Patrick v The Griffin Coal Mining Co Pty Ltd (administrators appointed) and others [2014] SGHC 156.

In this case, the Plaintiff had entered into a settlement agreement and a consent judgment with the Defendants. Thereafter, the Defendants issued a statutory demand for the Plaintiff to pay over AUD3 million, and commenced bankruptcy proceedings against the Plaintiff. The Plaintiff’s application to set aside the statutory demand was dismissed by the Assistant Registrar. He appealed to the High Court.

In order to set aside the statutory demand, the Plaintiff had to show that the debt was disputed on grounds which appeared to be substantial or to adduce evidence on affidavit that raises a “genuine triable issue”. However, under para 144(2) of the Supreme Court Practice Directions (2013 Ed, 1 January 2013 release) (the “PD”), it is provided that on an application to set aside a statutory demand based on a judgment or an order, the Court will not go behind the judgment or order and inquire into the validity of the debt.

The High Court, in dismissing the appeal, held that the Plaintiff was precluded from making various arguments (on the Defendants’ locus standi and the Plaintiff’s cross-claim which allegedly exceeded the Judgment debt) to set aside the statutory demand because of:

 (1) Para 144(2) of the PD, which prevents the Court from going behind the judgment and inquiring into the validity of the debt. The Plaintiff should have but failed to apply to set aside the Consent Judgment;

 (2) Res judicata, namely cause of action estoppel, as a result of the Consent Judgment;

 (3) Res judicata in the wider sense, in that any such arguments or defences ought to have been raised in earlier proceedings; and/or

 (4) An entire agreement clause in the settlement agreement, which provided that the settlement agreement superseded any prior understandings, negotiations and agreements with respect to the subject matter of the settlement agreement.

In summary, it is clear from this case that where there is a Consent Judgment, there are formidable obstacles against any successful application to set aside or to dispute a statutory demand based on that Consent Judgment. Debtors entering into any settlement agreement or consent judgment for the payment of money should be careful to expressly exclude from any such agreement or judgment, their rights to sue on outstanding causes of actions, if any. On the other hand, creditors will do well to insert a clear entire agreement clause in their settlement agreement to reduce or negate the chances of any statutory demand being set aside on the grounds of any cross-claim from the debtor.

* Dominic Chan from Characterist LLC acted for the Plaintiff in this appeal.

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