Insights from Chia Kok Kee v Tan Wah [2024] SGHC(A) 36
In Chia Kok Kee v Tan Wah [2024] SGHC(A) 36, the Appellate Division of the High Court set out the legal principles under r 68(2) of the Insolvency, Restructuring and Dissolution (Personal Insolvency) Rules 2020 (“PIR”) for determining when a statutory demand maybe set aside.
Background to the Dispute
Mdm Tan Wah (“Mdm Tan”) and Mr Chia Kok Kee (“Mr Chia”) are shareholders of HX Investment Pte Ltd (“HX”), holding 60% and 31% respectively. In 1995, they invested in a hydro-electric joint venture in the People’s Republic of China (“PRC”) through Sichuan New Dujiang Electrical Power Co Ltd (“SND”), with HX holding 25% of SND (the “Investment”).
Disputes between Mr Chia and Mdm Tan led to a series of legal proceedings spanning over a decade, including:
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- HC/S 558 (2005) – Mr Chia claimed an additional 20% from Mdm Tan’s 60% share in the Investment; claim dismissed.
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- CA/CA 127 (2007) – Appeal dismissed with costs.
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- CA/OS 331/2010 – Attempt to set aside earlier judgments dismissed.
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- HC/S 97 (2011) – Alleging collusion and fraud against Mdm Tan; claim struck out.
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- CA/CA 158 (2011) – Appeal partially allowed to rectify HX’s records and obtain an account of dividends; a global stay order was imposed to maintain the status quo on the Investment.
In April 2018, another investor, State Grid Sichuan Dujiangyan Electric Power Supply Company Limited (“SGSDEPS”), filed for SND’s bankruptcy in the PRC, leading to a restructuring plan under which Sichuan Tongda Railway Engineering Co Ltd (“Tongda”) would settle SND’s debts and acquire its equity. The plan was approved at a creditors’ meeting on 6 September 2021 and confirmed by the People’s Court of Dujiangyan on 10 September 2021, resulting in the disposal of HX’s Investment.
Following this, Mdm Tan applied in SUM 25 (2023) to lift the global stay order, which was granted on 6 November 2023. On 7 December 2023, Mr Chia was served with a statutory demand by Mdm Tan for $886,275.69, comprising court-ordered costs, underpaid dividends, and interest.
Application to Set Aside Statutory Demand Failed
Mr Chia applied in HC/OSB 108/2023 to set aside the statutory demand, arguing:
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- Costs were incorrectly taxed; and
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- He had a cross claim against Mdm Tan exceeding the statutory demand.
The Court dismissed the application on 1 February 2024.
Appeal Against Dismissal of Application to Set Aside Statutory Demand
Mr Chia filed RA 33/2024, seeking to adduce fresh evidence. He alleged that Mdm Tan sold the Investment without consent, received undisclosed payment, and colluded with PRC parties, including SGSDEPS, Ms Xu (SND’s liquidation manager), and Tongda. He valued the Investment at RMB21 million, claiming that his and Mdm So’s combined share exceeded $1.58 million. He also lodged a complaint with the Central Commission for Discipline Inspection of the Communist Party (“CCDI”) against the PRC judge, Ms Xu, and SGSDEPS’s legal representative.
Mdm Tan denied any agreement to receive payment and argued that Mr Chia’s cross claim was an afterthought designed to frustrate his bankruptcy proceedings. She also disputed his valuation of the Investment, noting that even if she had received funds, it would not cover the statutory demand amount.
On 3 July 2024, the Court dismissed RA 33, holding that there were no triable issues with regard to:
(a) whether Mdm Tan had sold the Investment without Mr Chia’s agreement; and
(b) whether the Investment was worth RMB21 million.
On the first issue, Mr Chia’s claim was contradicted by the Creditors’ Meeting minutes, which confirmed that Tongda would acquire the Investment and HX would receive no compensation. The Judge also noted that the additional evidence adduced by Mr Chia in April 2024 at best showed a conditional, in-principle agreement for the sale, which was superseded by the final restructuring plan.
On the second issue, there was no evidence that the Investment was worth RMB21 million at the time of disposal. The valuations relied on by Mr Chia were irrelevant, and even the unsigned agreement from April 2021 would not have made his cross claim exceed the amount claimed in the statutory demand.
The Judge ordered Mr Chia to pay Mdm Tan costs of $10,500.
The Present Appeal
On 15 July 2024, Mr Chia filed AD/CA 58/2024. Mdm Tan resisted the appeal.
The appeal had been brought under Order 18 of the Rules of Court 2021, although the proper provision was Order 19. Notwithstanding this, the Court exercised its discretion to hear the appeal to proceed. The Court noted that the earlier appeal turned on a single, narrow issue and a limited evidential record, and was therefore suitable for review under the Order 18 regime.
This was a rare instance where the Court directed that the Order 18 rules apply to an Order 19 appeal. This facilitated a more efficient disposal of the matter, as the parties were not required to file Appellant’s and Respondent’s Cases, and the appeal proceeded expediently, ultimately benefiting the creditor.
Legal Principles to Set Aside a Statutory Demand
The Court considered the relevant legal principles under r 68(2) of the Insolvency, Restructuring and Dissolution (Personal Insolvency) Rules 2020 (“PIR”).
📖 Legal Principle
A statutory demand must be set aside if the debtor can show:
- There is a counterclaim, set-off, or cross demand; or
- The debt is genuinely disputed.
The standard for establishing a triable issue is no higher than that for resisting a summary judgment application, as bankruptcy courts are generally not suited to determine the merits of a commercial disputes without a full trial to examine the evidence.
Issues before the Court
The Appellate Division of the High Court considered whether Mr Chia’s cross claims raised triable issues as to:
- Whether Mdm Tan had sold the Investment without the consent of Mr Chia; and
- Whether the Investment was valued at RMB21 million.
The appeal was dismissed. The Court held that Mr Chia’s claim lacked adequate evidence and was inconsistent with his own conduct. The key findings were:
First, after the creditors’ meeting on 6 September 2021, Mr Chia wrote to Mdm Tan seeking her agreement to re-open proceedings against SGSDEPS to safeguard the Investment. The letter did not allege that Mdm Tan had disposed of the Investment without consent or received payment. Mr Chia later claimed he withheld these allegations to secure her cooperation. The Court rejected this explanation as implausible, noting his own statements that he had been “totally shocked” to learn of the alleged payment. The claim that Mdm Tan received payment from Tongda was unsupported by evidence.
Second, when Mdm Tan applied to lift the global stay order in CA 158, Mr Chia did not object, explaining only that he was on medical leave and believed the stay permanent. The Court found this unsatisfactory.
Third, Mr Chia’s account of Mdm Tan’s misconduct changed over time. His first affidavit and a letter to the Supreme Court Registry dated 11 December 2023 did not accuse her of collusion, attributing responsibility instead to various PRC parties. Only in his 2 January 2024 affidavit did he first suggest she may have agreed to sell HX’s Investment to new investors, and even then, no conspiracy was alleged. It was only at the appeal that he claimed collusion between Mdm Tan and the PRC parties, which the Court found unconvincing as a belated and inconsistent allegation.
Fourth, Mr Chia’s criticisms of the Creditors’ Meeting minutes were unfounded. He disputed the translation relied on by Mdm Tan, arguing that Tongda “must acquire all equities of [SND] as consideration of the restructuring investment,” implying HX should receive value. The Judge rejected this. Even if the translation was correct, it did not show that Tongda necessarily acquired all shares for value or that HX received payment.
Overall, Mr Chia’s cross claim appeared to be an afterthought aimed at overturning the statutory demand. There was no evidence the Investment was worth RMB21 million at the time of disposal, and the claim raised no issues for trial.
Commentary
The appeal was dismissed, and indemnity costs of $20,000 were awarded to Mdm Tan. The decision highlights the severe cost consequences of pursuing unmeritorious claims. As the Judge observed, Mr Chia’s cross claim, was inconsistent with contemporaneous documents and clearly an afterthought, designed to frustrate due process of bankruptcy proceedings.
The successful respondent was represented by Yuen Law’s Disputes Resolution Practice.
Read full judgment.