19 November, 2016
Traditionally, a joint account in the names of the judgment debtor and non-judgment debtors cannot be subject to attachment under a garnishee order. This has been the position consistently taken by a number of Commonwealth jurisdictions. However, there was a surprising lack of local authority on this subject until the recent decision of One Investment and Consultancy Limited v Cham Poh Meng [2016] SGHC 208(“One Investment and Consultancy Limited”).
A small sum of $117.34 in a joint account held in the name of the judgment debtor and his wife found itself at the heart of an appeal against the Assistant Registrar’s (“AR”) decision in One Investment and Consultancy Limited.
After considering the authorities, the High Court judge, Kannan Ramesh JC, reversed the AR’s decision and
held that joint accounts in the name of the judgment debtor and others cannot be subject to attachment under a garnishee order.
The ruling in this case marks a welcome decision on a question of law which will have far-reaching implications for the banking industry and joint bank account holders.
Facts
The two plaintiffs were a British Virgin Islands company (“1st Plaintiff”) and its director (“2nd Plaintiff”). The 2nd Plaintiff secured a summary judgment against a party (“Defendant”) for sums due under a written agreement between the 1st Plaintiff, 2nd Plaintiff and the Defendant. It was ordered that the Defendant pay the 2nd Plaintiff interest on the sum of $10,518,293 amounting to $1,472,561. The 2nd Plaintiff took out a garnishee order against DBS Bank Ltd (“Garnishee”) for the Garnishee to show cause. The Plaintiffs’ position was that the money in the Defendant’s two accounts with the Garnishee could be attached to satisfy the judgment debt. This appeal, which was filed by the Garnishee, concerned one of these two accounts which was a joint account between the Defendant and his wife containing the sum of $117.34 (“the Joint Account”).
The Plaintiffs obtained a favourable ruling in the lower court. The AR accepted the Plaintiffs’ argument that it ceased to be the law that a debt cannot be attached where a garnishee is indebted to the judgment debtor and another person jointly, in light of decisions like Chan Shwe Ching v Leong Lai Yee [2015] 5 SLR 295 (“Chan Shwe Ching”) and Chan Yat Chun v Sng Jin Chye and another [2016] SGHCR 4 (“Chan Yat Chun”). In Chan Shwe Ching, it was held that the interest of a joint tenant in immovable property to be attached was identifiable and could be determined upon alienation and hence there was no reason why a writ of seizure and sale (“WSS”) could not be issued.
The AR found no reason to distinguish between the enforcement of a WSS against immovable property and the garnishing of money in a joint account, but the High Court had its reservations on the decision in light of an earlier High Court decision in Malayan Banking Bhd v Focal Finance Ltd [1998] 3 SLR(R)1008 which held that because registration of a WSS did not sever a joint tenancy, the interest of a joint tenant was not “distinct and identifiable” and therefore could not be the subject of a WSS.
In Chan Yat Chun, which examined the position of a tenant-in-common in relation to the same issue, the AR largely adopted the reasoning in Chan Shwe Ching, expressing concern that a debtor could protect his assets from execution by purchasing immovable property in joint names.
Summary of Decision
The High Court allowed the Garnishee’s appeal and held that the Joint Account could not be subject to attachment under a garnishee order. The High Court noted that the overwhelming weight of Commonwealth authorities supported the view that a joint account would not be subject to attachment under a garnishee order.
For example, the English courts had held that it would be contrary to justice for a judgment creditor to attach a debt due to two persons, when only the judgment debtor was liable. Moreover, a bank is liable to the account holders jointly and not severally.
The High Court also considered several policy considerations from the perspective of both the banks and the other account holders, which supported the traditional view:
- It is difficult for banks to ascertain the correct proportion of monies in the joint account to be attached to a garnishee order. Requiring banks to do so may not only increase costs, but also expose them to liability to the joint account holders.
- Further issues relating to priority can arise if the judgment debtor has multiple joint accounts with the same bank but with different joint account holders, and the total sum in these accounts exceeds the judgment debt. The bank will be put in an invidious position of deciding which accounts, or which portion of an account, should be frozen.
- The possibility of banks having to notify the other joint account holders of the garnishee order will significantly escalate costs, especially if there are a number of account holders or if there is a vigorous challenge by the other joint account holder(s).
- Other joint account holders may be prejudiced if they have no notice of the garnishee order and do not therefore have an opportunity to challenge the garnishee order. They may be further prejudiced if the court presumes that the judgment debtor is entitled to an equal share of the joint account, even though the judgment debtor’s contribution to the joint account is substantially lower than their contributions and may fall short of the amount sought to be garnished.
- Difficulties will also arise as to the freezing of a joint account in the period between the service of the order to show cause and the garnishee order being made final. If the entire joint account is frozen, an innocent joint account holder will be deprived of access to his or her money, a result which will run counter to the aim of garnishee proceedings.
The High Court observed that only the Canadian province of Nova Scotia had departed from the traditional view in Smith v Schaffner [2007] NSJ No 294. In that case, the Nova Scotia court considered it to be disrespectful to the law if a debtor could artificially and unfairly hide assets from the creditor through a joint account.
Shortly after that decision, a provision was enacted in the Nova Scotia Civil Procedure Rules for the garnishment of joint accounts.
Unlike Nova Scotia, English law takes the position that a joint account could not be attached under a Third Party Debt Order (“TPDO”), the English equivalent of our garnishee order, where the debt was owed by only one account holder, and this is provided for by its English Practice Direction 72 (Paragraph 3.2), which supplements the Civil Procedure Rules 1998 (SI 1998/3132). Since Singapore’s Rules of Court has roots in English rules of procedure, the High Court found the English position to be more persuasive.
The High Court held that while the most persuasive argument in favour of attaching a joint account under a garnishee order was that a debtor can easily ring-fence his assets from creditors by transferring funds into a joint account with a third party, the benefits of introducing such a policy would be disproportionate to the range of operation, cost and policy difficulties which would impact on debtors, creditors and third parties alike.
Conclusion
This decision clarifies the Singapore position on whether a joint account in the name of the judgment debtor and others who are not judgment debtors can be subject to attachment under a garnishee order. It is our view that the decision is correct as it achieves a fair balance among the interests of the judgment creditor, the judgment debtor, the garnishee bank and the innocent joint account holders and is consistent with the main thread of Commonwealth authority. The ball is ultimately in Parliament’s court to determine if the balance should lie further in favour of the interests of creditors
Vernon Voon, Partner, RHTLaw Taylor Wessing
