Priority To Proceeds Of Sale Of Bankrupt's Property ' Contests Between Judgment Creditor And Estate

• Published date: 12 December 2022
• Subject Matter: Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Trials & Appeals & Compensation
• Law Firm: Rajah & Tann
• Author: Wilson Zhu

Introductions

The questions of who has priority over a bankrupt's assets and precisely when the priority arises are important ones in bankruptcy. For judgment creditors who have already taken steps towards enforcement, the answer affects whether they will have prior rights to the bankrupt's property, ahead of the bankrupt's other creditors.

In Abuthahir s/o Abdul Gafoor v Bangkok Bank Public Co Ltd [2022] SGHC 274, a judgment creditor and the bankrupt's estate both laid claim to the surplus proceeds from a mortgagee's sale of the bankrupt's property. The High Court held that the judgment creditor, who had registered an attachment order against the bankrupt's interest in the property and had issued a writ of seizure and sale ("WSS") prior to bankruptcy, had priority over the surplus proceeds. This was even though the surplus proceeds did not arise from a sale of the property under the judgment creditor's WSS.

In reaching its decision, the High Court clarified when the execution of an order against property is deemed to be completed. The Court also highlighted certain seemingly inconsistent provisions in the Insolvency, Restructuring and Dissolution Act 2018 ("IRDA") on priorities.

The Court's decision provides greater clarity on the priority of rights over a bankrupt's property. This Update provides a summary of the key points of the Court's judgment.

Brief Facts

Having obtained judgment against a debtor, the Judgment Creditor obtained a separate order for the debtor's interest in her Property to be attached and taken in execution to satisfy its judgment. The attachment order was duly registered with the Singapore Land Authority. Following registration, the Judgment Creditor issued a WSS in respect of the debtor's interest in the Property. Ultimately, the Sheriff appointed by the Judgment Creditor did not sell the Property pursuant to the WSS, as that process was led by the debtor's mortgagee via a mortgagee sale.

The debtor was subsequently adjudged a bankrupt, and disputes arose between her Private Trustee and the Judgment Creditor on entitlements to the surplus proceeds of sale.

High Court's Holding

The Court held that the Judgment Creditor was entitled to the surplus proceeds in priority over the bankrupt's estate. In reaching its decision, the Court considered:

1. When the Judgment Creditor's execution against the bankrupt's interest in the Property was deemed completed and
2. Which provision in the IRDA applied in the circumstances (which would in turn...