Speech by SMS A/P Ho Peng Kee during Committee of Supply Debate, 2 Mar 2007

2 Mar 2007 Posted in Parliamentary speeches and responses

Bankruptcy

1. Let me first address the cuts on bankruptcy. Dr Teo Ho Pin, Mr Inderjit Singh and Mr Hri Kumar ask what plans the Ministry has to reduce the number of persons becoming bankrupt, in other words, upstream, to try to reduce the flow. Well the good news is that last year, less than 3,000, in fact, 2,983 persons became bankrupt continuing a trend that began in 2004. Incidentally that is the lowest number since 2001. So I think that reflects the improving economy.

Existing bankruptcy prevention measures

2. Measures to reduce the number of new bankrupts indeed must start upstream. One way is to help people realize the importance of managing their finances. Happily here, professional groups do their part and this is what Mr Teo Ser Luck has mentioned - how to involve the private sector. So for example here, the Banks and the Association of Financial Management Professionals chip in by organizing seminars, and these seminars complement those organized by the Insolvency & Public Trustee’s Office or IPTO which are targeted at helping the public realize that it is important to manage their finances properly. Members who want to encourage their constituents to come to these seminars can let me know.

3. Further downstream, Dr Teo Ho Pin mentioned mediation. Indeed IPTO has taken some steps towards that. For several years now, IPTO has been running a Pre-Bankruptcy Advisory and Mediation Centre to advise persons in danger of becoming insolvent of the options that are available. Last year this service helped 1,200 debtors. It is up to the parties to agree to come for mediation, in other words, the creditors and the debtor to come and talk and agree on a debt agreement, so really it is voluntary. Last year, 12 such cases were mediated and 4 were successful. But these are early efforts. So what more can be done? That is the key query Members have asked. Indeed we will do more. What we are doing is to follow-through on what we said at last year’s COS. And it is a natural follow through to IPTO’s efforts in terms of mediation.

Proposed Debt Repayment Scheme

4. Last year we said we would consider implementing a repayment scheme to help wage-earner debtors with relatively small unsecured debts avoid bankruptcy. We said that we would consult key stakeholders on its feasibility. We have been doing this, the past several months, consulting the Association of Banks, its members, insolvency practitioners and lawyers and I am happy to say that there is general support for this scheme, which we will call the Debt Repayment Scheme or DRS.

5. The DRS will differ from the voluntary arrangement scheme or VAS, which is already available currently under the Bankruptcy Act, I think Mr Hri Kumar mentioned that. Indeed he is right, the VAS has limitations: it is court-based, all the parties must agree and creditors’ agreement must be sought. It can be costly and protracted. What we want to do is especially for consumer wage-earning debtors. What can we do to help them? The VAS may be more applicable to businesses and partnerships.

6. This new scheme we are introducing called the DRS is in fact modeled after Chapter 13 of the US Bankruptcy Code. I think Mr Inderjit Singh has mentioned that. The Official Assignee has looked at it and found some good features which we are adopting. It will benefit debtors who are working and whose debts do not exceed $100,000. Based on last year’s figures, this would have covered 1,863, or 62% of the debtors who were made bankrupt. A majority of these would be wage earner consumer debtors, who were facing temporary cash flow problems.

7. Under the DRS, the debtor will have a chance to work out a repayment plan, formulated and implemented under the supervision of an administrator, to be completed within a maximum period of 5 years. Although the repayment plan will not be voted upon by the creditors, the administrator will have to ensure that creditors’ rights are not compromised, i.e., that they will receive no less than if the debtor had been made bankrupt. When the debtor completes the plan, he will be released from his debts, thus avoiding bankruptcy. If the debtor is dishonest or fails to cooperate with the administrator, the administrator can declare that the plan has failed, upon which any creditor may then proceed to make the debtor a bankrupt.

8. Whilst the DRS is principally intended to help wage earner debtors who have a regular source of income to repay some or all of the debts, IPTO will be flexible. Deserving debtors who, for example, may be in between jobs and therefore not currently earning wages, can also take advantage of the Scheme. To keep it simple, the DRS will apply for a start only to individual debtors, and will not be available to businesses or partnerships.

9. With this Scheme, I think more can avoid bankruptcy. But the essence of this Scheme really is that it is “self-help”. The debtor must realize that this is an opportunity to avert bankruptcy. So he must cooperate and show good faith, and ensure he complies with the terms of the repayment plan.

10. MinLaw will issue a Consultation Paper. After that, we will refine the Scheme based on the feedback received. We intend to amend the Bankruptcy Act before the end of the year to bring the Scheme into effect.

11. Mr Teo Ser Luck asked whether this would result in IPTO being inundated with more work. I think IPTO will have to adjust and see whether it can cope. I think for a start, it can cope, but we will review manpower requirements and I am sure they will ask for help from HQ if need be. But the point is, let us give this Scheme a good start, support it, because I am sure bankrupts will indeed be helped.

Discharge from Bankruptcy

12. Next, Dr Teo and Mr Hri Kumar ask how we can expedite or incentivize bankrupts to work towards a discharge. Essentially our bankruptcy regime strives to strike the right balance, in other words between creditors’ interests - to recover as much of the debt as possible - and also the debtor’s interests - to give him a reprieve from his debts and a fresh start in his financial matters. Key to this still is that the bankrupt must be cooperative and cooperate with the OA.

13. Over the years indeed, the OA has implemented several measures to help bankrupts who are already in the regime to get out of bankruptcy. Those who were in the House in 1995 will know we introduced a discharge by Certificate of the Official Assignee (OA) scheme whereby, starting at that time with debts of up to $100,000, after a certain number of years, the OA can discharge the bankrupt. Well, this ceiling has been raised and currently stands at half a million dollars.

14. Also, the OA categorises bankrupts who cooperate with his office and who contribute regularly to their bankruptcy estate in a green zone. Bankrupts in this zone generally receive approval to travel overseas, or act as director or to manage a business.

Bankruptcy Offences

15. Mr Inderjit Singh asks why bankrupts who travel overseas without the OA’s consent are jailed, instead of fined.

16. First of all, let me say that requiring bankrupts to seek the approval of the OA before he travels is not only so in Singapore because other regimes also have that requirement. I think the rationale is quite clear. Unauthorised travel can enable the bankrupt and put him in a position to hide or dispose his assets and make it difficult to administer his estate. So he needs the OA’s permission before he travels. But the good news is that last year, 33,000 bankrupts applied for approval to travel and 30,500 or 91% were granted approval.

17. The other point is, why are they jailed? This is a Court decision. Let me just say that they are not all jailed because in fact the Act allows for the person to be either jailed or fine. So I would say we should leave it to the Courts to look at the facts and circumstances of the case because every case is unique: whether he has travelled before, how long he stays away, whether he is a cooperative bankrupt, whether he has other offences, so I think we should leave it to the Court. But my assurance to Mr Singh is that there are cases where the bankrupts are only fined, and not jailed, so it is not mandatory jail.

Criminal Procedure

Pre-trial disclosure of evidence

18. We have announced that we are amending the Criminal Procedure Code (“CPC”). In amending the CPC, we are looking at formalizing a framework where the prosecution would formally inform the defence of its case against the accused.

19. Indeed over the years, both the High Court with the preliminary inquiry (“PI”) and the Subordinate Courts with the Pre-trial Conference (“PTC”) have in place processes where both defence and accused persons are put in a position where more information have been exchanged. For example, medical reports, list of witnesses and statements of the accused that will be adduced by the prosecution can be made available through these processes.

20. Now we are reviewing the CPC and we will formalise the process. The amendments to the CPC are being framed. There will be a statutory framework where the prosecution will formally inform the defence of its case against the accused. This will include the list of witnesses and statements of the accused to be adduced by the prosecution.

21. As for disclosure of witnesses’ statements, we must exercise care. Ms Lim herself has addressed the nub of the issue. Exchange of witnesses’ statements may inhibit people from coming forward to assist in police investigations. We do rely on public assistance to solve crimes. If witnesses know that statements given in the course of police investigations may be given to the accused person, it may inhibit them from coming forward. Moreover some of this information may in fact be sensitive. If the information is disclosed, it may result in evidence being tampered with or destroyed.

22. We should not tamper with a system that has worked. There will be consultation on this, including probably a public consultation.

Powers of Appellate Court to enhance sentence

23. The other point is when the High Court hears Magistrate’s Appeals from the Subordinate Courts and the accused person appeals against the sentence to reduce it, why should the High Court have the power to raise the sentence?

24. We should leave it to the court to decide what is the right punishment in the entire circumstances of the case. Because when the court’s power is invoked to look at the sentence, if indeed it feels after looking at the circumstances of the case that the sentence is inadequate, we should not circumscribe its powers to enhance the sentence.

25. But having said this, last year, of the Magistrate’s Appeals that went up to the High Court there were only six cases where sentences were enhanced compared to 85 cases where the sentences were either affirmed or reduced. And of these six cases, in only two of them was it the accused person who lodged the appeal against sentence. Two out of more than 90 is a very small percentage and so let’s not be carried away as the court has always been very careful in enhancing sentences.

Last updated on 28 Nov 2012