Case Summaries

Paulus Tannos v Heince Tombak Simanjuntak and others and another appeal [2020] SGCA 85

SUPREME COURT OF SINGAPORE

27 August 2020

Case summary

Paulus Tannos v Heince Tombak Simanjuntak and others and another appeal [2020] SGCA 85

Civil Appeals No 69 and 70 of 2019

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Decision of the Court of Appeal (delivered by Chief Justice Sundaresh Menon on behalf of Judge of Appeal Tay Yong Kwang and himself, with Justice Woo Bih Li dissenting):

Outcome: CoA (by a 2:1 majority) allows appeal by appellants to set aside HC decision recognising bankruptcy orders made against the appellants in Indonesia, on the basis of a breach of natural justice in the making of the Indonesian bankruptcy orders.

Pertinent and significant points of the judgment

  • The Court of Appeal expressly left open the question of whether applying the traditional requirements for the recognition of foreign judgments in personam to the recognition of foreign bankruptcy orders was correct: at [22].
  • The evidence on both sides with regard to the issue of service and when the appellants had knowledge of the PKPU proceedings was not entirely unsatisfactory. On balance, however, the respondents could not establish that the notices of the bankruptcy application were properly served on the appellants in Indonesia. There was no basis to draw the inference that the appellants had actual knowledge of the proceedings but had chosen not to attend. On balance, they were deprived of the opportunity to present their case for why the bankruptcy orders should not have been made: at [56] and [70].

 

Background to the appeal

1 The four appellants, who are Indonesian citizens, were declared bankrupt by the Commercial Court of the Central Jakarta District Court in February 2017. The respondents, who are the receivers and administrators of the appellants’ estate (“the Receivers”) commenced proceedings ex parte in the Singapore High Court and obtained orders recognising the Indonesian bankruptcy orders against the appellants in Singapore. The appellants applied to set aside the ex parte orders. The High Court dismissed the setting-aside application and the appellants appealed against that decision.

The material facts

2 The first appellant is the majority shareholder of PT Megalestari Unggul (“MLU”). On 26 October 2011, MLU obtained a loan of IDR200bn from an Indonesian bank. The appellants are alleged to be the guarantors of the loan to MLU, by way of four deeds of personal guarantee purportedly signed by the appellants and dated 26 October 2011.

3 The receivables from the loan to MLU were eventually assigned to PT Senja Imaji Prisma (“PT Senja”). On 8 December 2016, PT Senja commenced bankruptcy proceedings in the Central Jakarta District Court against MLU and the appellants, as guarantors. The matter was heard by the Indonesian court on 9 January 2017 (“the PKPU hearing”). MLU was represented by counsel at the PKPU hearing, but neither the appellants nor their counsel were present. The court ordered MLU and the appellants to undergo an interim debt rescheduling for 45 days to arrive at a composition plan that was agreeable to the creditors (“the PKPU Decision”).

4 The PKPU Decision was followed by three creditors’ meetings to discuss the potential composition of the debts. The appellants made their first appearance in the proceedings at these meetings, where they argued that they had not received notice of the PKPU application or the PKPU Decision. The appellants also contended that the personal guarantees they had allegedly given in relation to the MLU loan were fraudulently obtained and invalid.

5 The creditors’ meetings did not result in a successful composition plan. On 22 February 2017, the Indonesian court pronounced MLU insolvent and the appellants bankrupt, and appointed the first and second respondents as Receivers of the appellants’ estate (“the Bankruptcy Decision”). The third respondent was subsequently added as a Receiver on 17 April 2017. The first and second respondents have since resigned from their official duties, and the only active Receivers presently are the third- to fifth-named respondents.

6 The Receivers applied for and successfully obtained ex parte orders from the Singapore High Court recognising the Indonesian bankruptcy orders against MLU and the appellants. The appellants applied to set aside the recognition of the Indonesian bankruptcy orders against them. The High Court dismissed the appellants’ setting aside applications, and the appellants appealed. The focus on appeal was the argument relating to natural justice, concerning the appellants’ lack of notice of the PKPU proceedings and their absence at the PKPU hearing.

Decision of the majority (delivered by Chief Justice Sundaresh Menon on behalf of Judge of Appeal Tay Yong Kwang and himself)

7 The majority allowed the appeals, finding that on the balance of probabilities, the appellants had shown that they did not have sufficient notice of the PKPU proceedings and were consequently deprived of the opportunity to contest the making of the PKPU orders: at [70].

The law on recognition of foreign bankruptcy orders at common law

8 Since the parties did not dispute the applicable requirements for recognition of the foreign bankruptcy orders at common law, the Court of Appeal expressly left open the question whether that legal position was correct: at [22].

Whether the Receivers were in breach of their duty of full and frank disclosure

9 The appellants did not give up their submission that the Receivers were in breach of their duty of full and frank disclosure in relation to their failure to disclosure related Indonesian proceedings concerning the personal guarantees, and the problems with service. These arguments were dismissed by the Court of Appeal. Although the recognition orders were granted ex parte, it was a relevant consideration that once the appellants had filed their applications to set aside the orders, the matter became fully contested with arguments on any issues of non-disclosure and their materiality. The Judge had considered all these matters and did not think that either alleged non-disclosure was relevant or material to his decision: at [25].

Whether the Indonesian bankruptcy orders were obtained in breach of natural justice

10 A preliminary point with regards the issue of a potential breach of natural justice was whether the appellants had any legal recourse against the Indonesian bankruptcy orders in Indonesia. This issue arose because the appellants argued, in the alternative, that the Indonesian bankruptcy orders were subject to pending appeals and judicial review applications in Indonesia. On the evidence, however, it was not possible to conclude that there were avenues of legal recourse available to the appellants at present. It was accordingly not premature for the Singapore court to be considering if any breach of natural justice had been occasioned in the making of the bankruptcy orders: at [30], [40] and [41].

11 Although the Judge had dismissed the appellants’ arguments on breach of natural justice on the basis that they had attended the subsequent creditors’ meetings, with respect, that reasoning failed to consider if the appellants had the opportunity to register their protests against the initiation of the bankruptcy process. The transcripts and minutes of the meetings showed that the appellants were repeatedly told that the meetings were not the appropriate forum to raise objections to the PKPU Decision. The purpose of the bankruptcy hearing on 22 February 2017, moreover, was simply to record whether the interim debt restructuring had been successful. Since no composition plan was reached, the Central Jakarta District Court noted that it must declare the appellants bankrupt. It was therefore clear that despite attending the creditors’ meetings and the bankruptcy hearing, the appellants no longer had the opportunity by then to raise their procedural or substantive objections to the making of the PKPU order: at [43]–[48].

Whether there was proper service of the PKPU summons

12 The Receivers could not establish that service of the PKPU summons was properly effected. Service of the PKPU summons was not a matter within the Receivers’ personal knowledge, and moreover, the courier service records showed that delivery of the legal documents to the appellants’ registered address to Depok had failed. Although the PKPU hearing had been advertised in a local Indonesian newspaper of limited circulation on 27 December 2016, there was no evidence on whether this method of service was valid under Indonesian rules of civil procedure: at [51]–[56].

Whether it could be inferred that the appellants had actual knowledge of the PKPU proceedings

13 The Receivers urged the Court to draw the inference that regardless of whether service was properly effected, the appellants did have actual knowledge of the PKPU proceedings prior to 9 January 2017 and had deliberately chosen not to attend. This submission arose because of a factual discrepancy in the appellants’ evidence. On the one hand, the first affidavit filed by the appellants’ lawyer, Mr Wijaya, stated that the appellants learnt of the PKPU Decision when it was “advertised” in the Indonesian newspapers. It was an undisputed fact that the PKPU Decision was advertised in two major Indonesian newspapers on 13 January 2017. The evidence, however, showed that the appellants had signed powers of attorney appointing their respective legal counsel to act for them in the PKPU proceedings as early as 11 January 2017: at [59]–[61].

14 The appellants were granted leave to file further affidavits to explain the discrepancy. The appellants clarified, in their latest affidavits, that their knowledge did not come from the two advertisements on 13 January 2017. Instead, the appellants stated that they had learnt of the PKPU Decision on 10 January 2017, when the decision had been reported in a different newspaper known as Kontan: at [62].

15 On balance, the appellants’ new position was to be believed. The Kontan article, though undated, could only have been published after the PKPU Decision was rendered. The fact that the appellants had taken a different position in the High Court was not determinative of the fact that their latest affidavits were untruthful. In fairness to the appellants, the exact date on which they had learnt of the PKPU Decision was not regarded as a significant issue in the High Court, and only assumed central importance at the hearing of the appeals. The appellants’ latest affidavits were consistent with the broader position that the appellants had always taken, namely, that they had only learnt of the PKPU Decision after it was rendered: at [65].

16 Conversely, there was little and arguably no evidence at all suggesting that the appellants knew of the proceedings prior to 9 January 2017. The Receivers’ submission on this point was built on their case theory that the appellants were evading service in order to dissipate moneys in advance of any PKPU orders that might be made against them, but the evidence simply did not bear this out. Given the appellants’ subsequent conduct in strenuously protesting the lack of service and the validity of the underlying debt at the creditors’ meetings, and their efforts in seeking to mount appeals against the Indonesian bankruptcy orders, it was illogical that they would not have appeared to contest the PKPU hearing had they known of it beforehand. There was no basis to draw the inference that the appellants had actual knowledge of the PKPU proceedings prior to the hearing on 9 January 2017: at [66]–[69].

17 In the circumstances, the appellants were neither served with the PKPU application in time, nor had they known of the proceedings until the PKPU orders were made. The appellants were therefore deprived of a fair opportunity to be heard by the Indonesian court on why the PKPU orders, and the Indonesian bankruptcy orders ultimately, ought not to have been made. The appeals were therefore allowed: at [70]–[71].

Decision of the minority (delivered by Justice Woo Bih Li)

18 The question was whether the appellants in fact had notice of the PKPU proceedings before 9 January 2017. This was a matter within the appellants’ personal knowledge, and it would have been a simple matter for them to state such information clearly and consistently. They, however, did not do so: at [73] and [74].

19 The explanation in the appellants’ latest affidavits raised even more questions. It was important to bear in mind that Mr Wijaya did not say in his latest affidavit that he had overlooked the Kontan article in his first affidavit. Rather, his explanation was that his affidavit was instead referring to the Kontan article as the appellants’ first source of information: at [88].

20 First, the appellants’ latest affidavits did not exhibit the electronic trial by which the first appellant allegedly received the photograph of the Kontan article from a friend in Indonesia, nor the electronic trial by which the first appellant allegedly sent the photograph to Mr Wijaya. Second, the method in which the first appellant had allegedly contacted Mr Wijaya about the PKPU Decision was also quite differently described between Mr Wijaya’s first affidavit and his latest affidavit: at [89]–[90].

21 Third, there was a not insignificant difference between the word “advertise” and “report”, which Mr Wijaya would be well aware of. It was clear that he had intended to refer to the two advertisements in his first affidavit: at [91].

22 Fourth, and most importantly, there was no mention of the Kontan article until the latest affidavits from the appellants. The appellants had been referring all along only to the two advertisements as the genesis of their knowledge of the PKPU proceedings. There was no explanation why they had done so if indeed their knowledge was from the Kontan article instead: at [92].

23 It was clear that it was untrue that the appellants had known of the PKPU proceedings from the two advertisements. However, the latest explanation of the Kontan article was also untrue for the reasons stated. The two untruths compelled the inference that the appellants did know of the PKPU proceedings before 9 January 2017 but chose not attend, and therefore could not provide a clear and consistent explanation as to when they first learnt of the PKPU proceedings. There was no breach of natural justice in the circumstances: at [93]–[94].

24 In light of the decision of the majority, it was unnecessary to address the question of material non-disclosure by the respondents of various material facts, as alleged by the appellants. However, the respondents’ attitude towards the duty to disclose material facts in an ex parte application was disappointing. There was at least one material fact that ought to have been disclosed to the Singapore court, namely, the fact that at the time of the ex parte application, the first and second appellants had obtained a declaration from the District Court of Bekasi that the personal guarantees underlying the MLU loan were invalid. An appeal to the High Court of Bandung was dismissed. The respondents did not explain on affidavit why these decisions were not disclosed. Since the Indonesian bankruptcy orders were premised on the appellants’ liability under the personal guarantees, it was at least incumbent on the respondents to disclose the court decisions in favour of the appellants, and explain why a Singapore recognition order was still warranted notwithstanding those decisions. Whether that non-disclosure would have resulted in a setting-aside of the Singapore recognition order was a separate matter: at [95]–[102].

 

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

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