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Case Perspective: Recognition of Indonesian Bankruptcy Order in Singapore

Bankruptcy

Should Singapore Courts Recognize A Foreign Bankruptcy Order?

In the recent case – Paulus Tannos v Heince Tombak Simanjuntak and others and another appeal [2020] SGCA 85 (‘Paulus Tannos’), the Singapore Court of Appeal held that in determining whether to recognise a foreign bankruptcy order, the Singapore Courts could decline to recognise the foreign bankruptcy order (‘BO’) if there was, according to Singapore law, a breach of natural justice in obtaining the foreign BO.

FACTS

On 22nd February 2017, the four appellants, Indonesian citizens (and permanent residents of Singapore) – Mr Paulus Tannos, his wife and two children were declared bankrupt by the Commercial Court of the Central Jakarta District Court. The respondents are the Indonesian Court appointed receivers and administrators of the appellants. On 28th December 2017, the respondents began proceedings in the Singapore High Court to recognise the BO in Singapore.

The Singapore High Court recognised the BO for four reasons. First, the appellants had submitted to the Indonesian court’s jurisdiction by participating in creditor meetings which form part of the Indonesian court process. Second, the appellants had failed to show the BO was not final and conclusive. Third, there were no valid defences against recognising the BO – in particular, the High Court found that the BO was not obtained in breach of natural justice. Last, the BO was made by a court of competent jurisdiction. The appellants appealed the Singapore High Court’s decision, contesting all reasons, but emphasised the breach of natural justice point on appeal.

ISSUES

The following issues had to be determined by the Singapore Court of Appeal –

  1. Whether there was material non-disclosure in the obtaining of the ex-parte recognition orders;
  2. Whether the Indonesian BO was obtained in breach of natural justice, which branched out into 2 factual inquiries:
    1. whether there was adequate service on the appellants in Indonesia; and
    2. whether there was recourse to Indonesian Courts regarding the BO available to the appellants.

As the appellants’ counsel acknowledged, the second issue was their ‘main point of attack’, it forms the focus of this article.

‘BREACH OF NATURAL JUSTICE’

Regarding the argument on breach of natural justice, the Singapore Court of Appeal (in a rare 2-1 split decision) disagreed with the Singapore High Court and found there was indeed a breach of natural justice. The appellants were deprived of their right to be notified and the opportunity to be heard. The former stemmed from inadequate service of legal documents; the courier service records stated that delivery had failed with the reason being ‘alamat tidak lengkap’ or incomplete address. While the proceedings were advertised, the Court considered Indonesian civil procedural rules and deemed this method of service was not of ‘general application’, and was instead reserved for cases where the defendant’s address was unclear, which was not the case here (since the appellants’ registered addresses were known to the creditors).

The respondents further argued that the Indonesian Courts would have held that there was proper service. To this argument, the Singapore Court of Appeal held that they were not bound by the views of foreign courts on the question of whether the requirements of natural justice were met; the breach of natural justice is a question for the recognition court (i.e. the Singapore Courts) alone to answer.

Regarding recourse, the majority of the Singapore Court of Appeal found the appellants did not have actual knowledge of the proceedings before the hearing. The respondent’s argument that the appellants were evading service of documents did not bear out on the facts, and was made with the benefit of hindsight. In this connection, Woo Bih Li J dissented, finding on the facts that the appellants did not give a ‘clear and consistent’ explanation of when they first learnt of the Indonesian proceedings. Nonetheless, Woo J did not appear to disagree with the majority’s position that if the appellants did not have actual notice of the proceedings, there would be a breach of natural justice – which would preclude the Singapore Court’s recognition of the foreign BO.

CONCLUSION

The case is noteworthy as it shows that bankruptcy orders made in other jurisdictions would not automatically be recognized in Singapore, especially if fundamental rules of natural justice were breached in the process of obtaining the same. In this regard, the Singapore Court remains an independent arbiter in deciding whether to recognise foreign BOs locally.

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Source: Oon & Bazul LLP