Owes $31m but freed from bankruptcy
Saying there were no losses or fraud, court grants full discharge
By K.C. Vijayan, Law Correspondent
MR SOH Seow Poh stood as guarantor for loans totalling $31 million to his four Malaysian firms and others.
But losses incurred in the Asian financial crisis led to his being declared a bankrupt in August 2001. Over the next seven years, Mr Soh paid between $100 and $250 a month to the Official Assignee to settle his debts. It totalled about $12,000.
But last week, the Court of Appeal ruled that he need not repay the remaining millions and discharged him from his bankruptcy, despite objections from his creditors. Lawyers said it was a landmark move as he was given a full discharge from bankruptcy, with no conditions attached, despite the size of the sum that remained unpaid.
The Court also made clear in the grounds for its decision published yesterday that the relevant laws provide powers for the court to discharge a bankrupt where the circumstances of the case do not justify imposing conditions.
Mr Soh, 48, had incurred the losses because of the Asian financial crisis and through no personal fault of his own. Neither fraud nor dishonesty was involved in the losses.
Hong Leong Bank’s predecessor Hong Leong Finance Berhad had granted some $26 million in loans to the four firms in which Mr Soh was director and shareholder, and sought to recover the money from him.
After he was made a bankrupt in August 2001, he made payments of $100 a month to the Official Assignee towards his debt and two years later doubled that amount. By then, he was employed at $5,000 a month, of which $4,700 went to family expenses.
In September 2007, the Official Assignee applied to the High Court for Mr Soh to be discharged, after having traced whatever limited assets that could be realised and given to creditors.
He also did not default on payments.
Hong Leong Bank opposed the move for him to be discharged without conditions but was overruled in the High Court. At the Court of Appeal, the bank’s lawyers Chong Kuan Keong and Tan Joo Seng from Chong Chia & Lim argued that special factors in the case called for conditions to be attached to Mr Soh’s discharge from bankruptcy. The Court of Appeal disagreed after having looked at these special factors and found they did not justify imposing conditions when ordering that Mr Soh be discharged.
It made clear it had the power to order a discharge without imposing conditions. ‘What conditions should appropriately be imposed must depend on the circumstances of each case, bearing in mind the bankrupt’s degree of culpability and the deterrent value of each condition,’ said Justice Chao Hick Tin in the grounds of decision of the Appeal Court.
He added the relevant legislation had to be construed ‘in a way which, while protecting creditors and commercial morality, does not discourage entrepreneurship’. In granting the discharge, the Court found the Official Assignee’s reports on Mr Soh to be adequate. His lawyer Eric Tin from Donaldson & Burkinshaw had also made submissions as to his income and personal details.
Mr Soh was not living lavishly but had worked hard at providing for his family.
The Court of Appeal also concurred there was no benefit in ordering him to continue making payments because the enormity of his debt rendered any condition as to repayment ‘ludicrous’.
Instead, it affirmed the High Court was right in accepting a sum of $40,000 to be paid by a third party on Mr Soh’s behalf as a final dividend to his creditors.
But at the same time the court made clear it would continue to balance this against the public interest by ensuring the deterrent element is achieved by imposing conditions on a bankruptcy discharge where deemed appropriate.
vijayan@sph.com.sg
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