Indonesian Bankruptcy Orders May Be Enforced in Singapore

Allen & Overy LLP

In Heince Tombak Simanjuntak & Ors v Paulus Tannos & Ors [2019] SGHC 216 (18 September 2019), the Singapore High Court granted recognition of Indonesian bankruptcy orders made against the four respondents, each of whom is an Indonesian citizen. This allows the applicants to administer the respondents’ property in Singapore. The case provides banks with the assurance that bankruptcy orders obtained in Indonesia may be enforced in Singapore.

Application for recognition of Indonesian bankruptcy orders

Indonesian bankruptcy proceedings had been brought against four Indonesian citizens, namely, Paulus Tannos, Lina Rawung, Pauline Tannos and Catherine Tannos, and the following orders had been obtained against each of them:

  • a moratorium on debt repayment, the Penundaan Kewajiban Pembarayan Utaang (PKPU), dated 9 January 2017;
  • a bankruptcy order against dated 22 February 2017; and
  • the appointment of an additional receiver and administrator on 17 April 2017.

The applicants sought to have the Indonesian bankruptcy orders and the orders for the appointment of the receiver and administrator recognised in Singapore. This would allow them to administer the respondents’ properties and accounts in Singapore.
 
Requirements for recognition were met
 
The Court stated that it had the power to recognise a foreign bankruptcy order if the following requirements were met:

  • the foreign bankruptcy order is made by a court of competent jurisdiction;
  • that court must have jurisdiction on the basis of the debtor’s domicile or residence, or on the basis of the submission by the debtor to the jurisdiction of the court;
  • the foreign bankruptcy order must be final and conclusive; and
  • no defences to recognition apply. 

The Court found that each of these requirements had been satisfied.
 
There was no dispute as to the orders having been made by a court of competent jurisdiction. It was also generally accepted by the parties that the Indonesian courts had jurisdiction over the respondents as Indonesian citizens and that the respondents had participated in the Indonesian proceedings.
 
As for whether the orders were final and conclusive, the Court noted that at common law, the foreign judgment must be final and unalterable in the court which pronounced it. It does not have to be unappealable, so long as the judgment may be enforced in its home jurisdiction. In such a case, recognition will not be denied, but a stay or other order may be made to preserve the position pending appeal. In this instance, the Court found that the orders were not subject to further appeal and were therefore final and conclusive.
 
Whether there were any defences to recognition
 
The Court then considered the defences to recognition raised by the respondents, which were as follows:

  • That there had been a breach of natural justice as the respondents had not been given sufficient notice of the proceedings;
  • That the orders had been obtained by fraud; and
  • That the enforcement in Indonesia of the orders had been carried out fraudulently.

The Court rejected all of the defences:

  • There had been no breach of natural justice as the evidence was that the respondents had participated in the Indonesian court proceedings.
  • The respondents’ allegations of fraud were that the Indonesian court had informed their lawyers that they could appeal and further that the respondents had been prevented from presenting certain arguments before the Indonesian court. The Court noted that in order for the fraud to be a defence, the respondents would have had to have shown that the applicants had through a fraud on the Indonesian court obtained the orders. Instead, the matters complained of by the respondent were matters that came properly within the powers of a court to decide and did not amount to a fraud on the Indonesian courts by the applicants.
  • The applicants were alleged to have enforced the Indonesian orders fraudulently by seizing the shares owned by the respondents in an Indonesian company and passing a shareholders’ resolution to oust the respondents from its management. The Court noted that even if the applicants had exceeded their lawful authority when enforcing the orders in Indonesia that was a matter for the Indonesian courts to rule on and did not affect the legitimacy of the judgments themselves. A Singapore court could withhold recognition as a result of egregious conduct in enforcement if that conduct resulted in the application for recognition and assistance becoming an abuse of the process in Singapore. However, the conduct complained of here did not cross this threshold.

Reciprocity not a requirement for recognition
 
Finally, the Court considered whether it was open to it to refuse recognition as the indications were that an Indonesian court would not in any situation recognise a Singapore insolvency or restructuring decision, or the appointment of Singapore receivers and managers. It concluded that as the common law did not require reciprocity as a condition to recognition, it was not open to it as the High Court to decide otherwise.
 
It therefore granted full recognition to the Indonesian orders on the following terms:

  • The applicants were empowered to administer the respondents’ property in Singapore, save that leave of court should be obtained in respect of transfers of real or immovable property and for the repatriation of any assets out of Singapore.
  • While the applicants were authorised to seek and receive information on the respondents’ finances from various banks, any moneys were to remain in the existing accounts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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