Wednesday, 3 March 2010

When bankrupts sue for defamation

When bankrupts want to take a person to court, they first have to seek permission from the Official Assignee’s (OA) Office, which oversees their affairs.

2 comments:

Guanyu 道 said...

When bankrupts sue for defamation

K.C. Vijayan
01 March 2010

When bankrupts want to take a person to court, they first have to seek permission from the Official Assignee’s (OA) Office, which oversees their affairs.

The only exception provided for in the Bankruptcy Act is when the suit involves an ‘injury to the person’, although the type of injury is not specified.

Former lawyer and bankrupt Thomas Loh had tried to argue that he should not need to get approval from the OA before suing a bank for defamation as he had suffered injuries to his reputation.

But this argument was thrown out by the Court of Appeal - the first time Singapore’s highest court has had to define what qualifies as an ‘injury’ in this Act.

The 14-page judgment, written by Judge of Appeal V.K. Rajah on behalf of the other two presiding judges - Chief Justice Chan Sek Keong and Judge of Appeal Andrew Phang - distinguished between physical and psychological injuries, compared to defamation.

It also ruled that the OA’s sanction for a bankrupt to sue has to be obtained before the suit is filed in court and cannot be obtained retrospectively.

The issues involving bankrupts’ freedom to sue arose from a suit by Mr. Loh, represented by lawyer Andre Arul, who took Standard Chartered Bank to court for defamation in May 2004, a year after he became bankrupt.

The bank had failed to honour three cheques totalling about $700 which Mr. Loh, 48, had issued six years before that.

This, Mr. Loh claimed, caused him to suffer a grievous loss of ‘goodwill and reputation’. At one stage of the lawsuit, he was claiming for more than $1 million in damages, an amount the judges said was ‘rather remarkable’.

The bank’s lawyers - from Rajah & Tann - argued that the case should be thrown out simply because the OA had not given permission for Mr. Loh to file the suit.

The Court of Appeal agreed, pointing out that the relevant clause in the Act was worded to require prior, and not retrospective, permission.

The provision was meant to give the OA ‘full control’ of the administration of the bankrupt’s assets for the creditors’ benefit, said Justice Rajah.

As of the end of last year, there were 25,609 undischarged bankrupts. The Insolvency & Public Trustee’s Office said it does not keep track of the number of bankrupts who seek permission from the OA to sue.

Mr. Loh’s case appears to be the first where a bankrupt had filed a lawsuit without first seeking approval.

Under the Act, bankrupts who fail to obtain the requisite sanction may be fined up to $10,000 or jailed up to two years, or both.

In the judgment, Justice Rajah set out to explain why defamation should not be considered an ‘injury’ under the Act.

He noted that this definition had not been previously decided in any Singapore court case and was an issue of ‘considerable importance’. The Court of Appeal thus made its decision based on court decisions on this issue in the English and Malaysian courts.

Justice Rajah explained that defamation was concerned with the character or reputation of the bankrupt, whereas an action for damages in respect of injury to the person is concerned with physical injury to the bankrupt’s body.

This would include injury to the bankrupt’s mind, such as nervous shock and psychological or psychiatric injuries.

Justice Rajah noted that ‘while personal insolvency is today no longer viewed as being in itself suggestive of criminal behaviour, Parliament has not in the slightest way modified the stringent disabilities imposed on bankrupts more than a century ago’.

And even though there is a ‘more enlightened view that bankrupts should not be permanently stigmatised, there is no gainsaying the fact that Parliament still considers it important that significant disabilities should continue to be imposed on bankrupts’.
Mr. Loh said the court’s decision to throw out his case against the bank was based on a technicality which could have been decided 51/2 years ago when he first began this suit.

Guanyu 道 said...

‘The law could be amended to reflect the position before this case was decided as otherwise, there is an onerous burden placed on the Official Assignee, given they are administering more than 20,000 bankrupts,’ he said.

vijayan@sph.com.sg

Justice Rajah explained that defamation was concerned with the character or reputation of the bankrupt, whereas an action for damages in respect of injury to the person is concerned with physical injury to the bankrupt’s body. This would include injury to the bankrupt’s mind, such as nervous shock and psychological or psychiatric injuries.