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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(COMMERCIAL DIVISION)
BANKRUPTCY NO: 29-750-2011
RHB BANK BERHAD & 7 ORS.
v.
LIM SUE BENG
GROUNDS OF JUDGMENT
Enclosure 23 is the Judgment Creditor’s (JC) appeal against
the Learned Deputy Registrar’s (“the Registrar”) decision made on
28.6.2013 allowing the Judgment Debtor’s (JD) application to set
aside the Bankruptcy Notice (BN) dated 24.2.2011 pursuant to
Rule 18 of the Bankruptcy Rules 1969. The Application is supported
by an Affidavit which was affirmed by the JD dated 27.5.2011
pursuant to Rule 95 of the Bankruptcy Rules 1969.
I have considered the Written Submissions as well as the authorities
referred to by both Counsels and allowed the appeal by the JC. My
reasons are as stated below.
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The JC obtained a Judgment against the Gula Perak (the Borrower)
and the JD as the Guarantor for a Term Loan Facility on 29.10.2010.
The Bankruptcy Notice (BN) dated 24.2.2011 demanded a sum of
RM28,170,931.83. The JC served the BN on the JD on 23.5.2011.
The JD did not pay the amount demanded within 7 days and
committed an act of bankruptcy on 30.5.2011. A creditors petition
was presented against him on 25.11.2011 and served on the JD on
27.2.2012.
On 31.5.2011, the JD filed an application pursuant to Rule 95 of
the Bankruptcy Rules 1969 (BR) (Encl. 4A) and another application
dated 6.3.2012, pursuant to Rule 18 BR (Encl. 10) to set the BN. On
5.11.2012, the JD proposed a settlement. On 7.11.2012, the JD paid
to the JC vide a bank draft RM2million procured from a third party.
The learned DR allowed the application to set aside the BN based on
the following grounds:(i)
The JC accepted the RM2million and the JC did not
reject or return the said amount.
(ii)
The DR was of the opinion that by paying the said
RM2million the JD is solvent and able to pay his debts.
The BN filed by the JC is based on the Judgment dated 29.10.2010.
Section 3(1) of the Bankruptcy Act 1967 provides as follows,
“ A debtor commits an Act of bankruptcy in each of the following cases:
………….
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…………..
..…………
(i) if a creditor has obtained a final judgment or final order against him for
any amount and execution thereon not having been stayed has served
on him in Malaysia, or by leave of the court elsewhere, a bankruptcy
notice under this Act requiring him to pay the judgment debt or sum
ordered to be paid in accordance with the terms of the judgment or order
with interest quantified up to the date of issue of the bankruptcy notice,
or to secure or compound for it to the satisfaction of the creditor or the
court; and he does not within seven days after service of the notice in
case the service is effected in Malaysia, and in case the service is
effected elsewhere then within the time limited in that behalf by the order
giving leave to effect the service, either comply with the requirements of
the notice or satisfy the court that he has a counterclaim, set off or cross
demand which equals or exceeds the amount of the judgment debt or
sum ordered to be paid and which he could not set up in the action in
which the judgment was obtained or in the proceedings in which the
order was obtained:
Provided that for the purposes of this paragraph and of section 5 any
person who is for the time being entitled to enforce a final judgment or
final order shall be deemed to be a creditor who has obtained a final
judgment or final order;…”.
However section 3(2)(ii) provides,
“(2) A bankruptcy notice under this Act shall be in the prescribed form
and shall state the consequences of non compliance there with and
shall be served in the prescribed manner:
Provided that a bankruptcy notice—
may specify an agent to act on behalf of the creditor in respect of any
payment or other thing required by the notice to be made to or done
to the satisfaction of the creditor; and
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(i) shall not be invalidated by reason only that the sum specified
in the notice as the amount due exceeds the amount actually
due unless the debtor within the time allowed for payment
gives notice to the creditor that he disputes the validity of
the notice on the ground of such mistake; but if the debtor
does not give such notice he shall be deemed to have complied
with the bankruptcy notice, if within the time allowed he takes
such steps as would have constituted compliance with the
notice had the actual amount due been correctly specified
therein.”.
Gopal Sri Ram JCA in (as he the was) J Raju M Kerpaya v.
Commerce International Merchant Bankers Bhd. [2000] 3 CLJ
104 said,
“ 1. When determining an issue under the Act, it is incumbent upon the
court to accord its provisions a strict construction.
2. The consequence of such an approach to construction is that a
bankruptcy notice that requires a debtor to pay a judgment debt
otherwise than in accordance with the terms of the judgment founded
is null and void ab initio. Hence, a debtor does not commit an act of
bankruptcy if he makes default upon such a notice.
3. A challenge on the ground that a bankruptcy notice requires a
debtor to pay a judgment debt otherwise than in accordance with
the terms of the judgment may be taken at any time after service
of the notice.
4. A debtor who seeks to set aside a bankruptcy notice on the ground
that it requires him to pay a judgment debt otherwise than in
accordance with the terms of the judgment, must make an application
in that behalf in accordance with r. 18 of the Rules.
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5. A debtor who seeks to challenge the validity of a bankruptcy notice
is also entitled to proceed under r. 95 of the Rules. However, if does
so, he must show that he has a counterclaim, set off or cross
demand which equals or exceeds the amount of the judgment debt
which he could not set up in the action in which the judgment was
obtained. Further, he must act within the time limit prescribed by s.
3(1)(i) of the Act.
6. A debtor who seeks to challenge a bankruptcy notice on the ground
that the amount specified therein exceeds the amount actually due,
must act in accordance with proviso (ii) to s. 3(2) of the Act. Hence,
he must, within the time prescribed in the bankruptcy notice give
notice in writing to the creditor that he disputes the validity of the
notice on the ground that it mistakenly claims an amount larger than
that lawfully due.
7. A debtor who opposes a creditor's petition must comply with the
procedure prescribed by r. 117 of the Rules. If he does not do so, any
challenge he may mount is liable to fail for non-compliance of the
Rules.”.
In Low Mun v. Chung Khiaw Bank Ltd. [1987] CLJ (Rep) 172
it was held that the demand for payment in the notice must not
only be quantified but also be the correct sum owing as at the date
of notice.
The Supreme Court dismissed the appeal and held,
“ However, if they elected for some reason to claim for a lesser sum,
or where it is not possible to quantify the maximum sum, it could not
by itself render the bankruptcy notice bad in law for the simple reason
that it could not possibly affect the correctness of the sum actually
owing as at the date of issue of the bankruptcy notice. As far as interest
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on judgment debt is concerned, the correct sum owing as at the date
of issue of the bankruptcy notice (which in the present case was the
same as the date named in the notice) could therefore either be the
maximum quantified sum or any lesser sum that existed at an earlier
date as a judgment debt and available for bankruptcy purposes. In the
circumstances, the bankruptcy notice in this case was not bad in
law
merely because the quantified sum demanded in the body of the notice
was as at 31 March 1988 and not as at the date of issue of the notice, on
8 June 1988.”.
The learned Counsel for the JD argued that by accepting the
RM2 million the JC had accepted the proposal for settlement by the
JD based on the terms of the JD’s letter dated 15.11.2012. He further
submitted that by virtue of section 8 of the Contracts Act 1950,
acceptance could be concluded by performing conditions or receiving
considerations.
The case of Kerpa Singh v. Bariam Singh [1966] 1 MLJ 38 was
referred where it was held that as the Creditor had accepted the
tender by cashing the cheque and retaining the money he must be
taken to have agreed to discharge the Debtor from any further
liability. In that case, the judgment debt had been satisfied by the
tender by a third party by a cheque for a smaller amount than the
sum due as payment in full, which cheque was accepted and cashed
by the Creditor.
It was submitted by the learned Counsel for the JD that the JC had
concluded the acceptance as they had adjourned all the civil suits.
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The learned Counsel for the JC argued that the RM2 million was
accepted on a ‘without prejudice basis’. Furthermore, there was no
documentary evidence of any reply from the JC accepting the
proposed settlement.
The learned Deputy Registrar had allowed an Affidavit by the JD
dated 27.5.2011 pursuant to Rule 95 Bankruptcy Rules 1969. Rule 95
of the said Rules provides as follows:“ 1) The filing of an affidavit shall operate as an application to set aside
the bankruptcy notice, and thereupon the Registrar shall fix a day for
hearing the application, and shall give not less than three clear days'
notice thereof to the debtor, the creditor and their respective solicitors, if
known.
(2) If the application cannot be heard before the time specified in the
notice for compliance with its requirements, the Registrar shall extend
the time, and no act of bankruptcy shall be deemed to have been
committed under the notice until the application has been heard and
determined.”.
In the aforesaid Affidavit filed the JD alleged that the JC had
demanded a sum more than what is due in the BN. It was
further stated that the BN failed to take into account the sum of
RM1,285,232.00.
The JD in the instant case failed to disclose that he has a
counterclaim, cross claim or set-off against the Judgment Creditor
in his affidavits as he is required to depose under section 3(1)(i)
of the Bankruptcy Act 1967,
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“ ...either comply with the requirements of the notice or satisfy the court
that he has a counterclaim, set off or cross demand which equals or
exceeds the amount of the judgment debt or sum ordered to be paid and
which he could not set up in the action in which the judgment was
obtained or in the proceedings in which the order was obtained. ”.
In Datuk Lim Kheng Kim v. Malayan Banking Bhd. [1993] 3 CLJ
324 the Supreme Court held that:“ Enclosure 3 merely denied and disputed that the appellant was indebted
to the respondent for the sum stated in the bankruptcy notice but failed
to disclose that he had a counterclaim, set-off or cross demand against
the respondent which he is required to depose under s. 3(1)(i) of the
Bankruptcy Act 1967 and as provided for in Form 7 of the Rules. The
said affidavit could not operate as an application to set aside the
bankruptcy notice within the contemplation of s. 3(1)(i) of the Act, and
the case should have been treated as if no affidavit under Rule 95 of the
Rules had in fact been filed.”.
Therefore since the said Affidavit did not disclose that the JD had a
counterclaim, set-off or cross claim, it could not be accepted as an
affidavit to set aside the BN.
The learned Counsel for the JC argued that there is no basis for
the learned Deputy Registrar to have allowed Enclosures 4A and
10 setting aside the BN on the ground that the JD is solvent
and able to pay his debt. It is contended by the JD that the BN
is invalid as it demanded the incorrect sum and therefore no
act of bankruptcy was committed. It is also submitted that the JC
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had in fact demanded a sum more than what is stated in the
BN as the sum of RM1,285,232.00 was purportedly paid by
Universal Trustees (Malaysia) Sdn. Bhd. pursuant to a supplemental
agreement.
The sum in the BN is based on a Judgment dated 29.10.2010. No
documentary evidence was adduced by the JD to show that the
sum of RM1,285,232.00 is in actual 30% of proceeds of sale of
the lands assigned to the Trustee. I find that there is no merits in
this argument as the amount demanded in the BN is based on a
judgment sum.
A Creditor’s rights are not in any way prejudiced if he accepts a
lesser amount for payments of a debt. Such acceptance of payment
would not render the BN defective. In the case of Sovereign General
Insurance Sdn. Bhd. v. Koh Tian Bee [1988] 1 CLJ 277 referred by
the learned Counsel for the JC the Supreme Court said,
“ Where a bankruptcy notice has been served, and not complied with, in
respect of a judgment debt which has subsequently been reduced on
appeal, that reduction does not retrospectively per se cause the notice
to become defective or irregular, …..”.
The Federal Court in the case of Moscow Narodny Bank Ltd. v.
Ngan Chin Wen [2004] 2 CLJ 241 held that the jurisdiction of the
bankruptcy Court is not ousted when the balance debt is still above
the statutory limit. Hamid Mohamad FCJ (as he then was) in his
written judgment referred to the case of Re Patel (a debtor) [1986]
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1 All ER 522 where it was held that where a debt on which the
bankruptcy petition was founded, had by the date of the hearing of
the petition been reduced by part-payment to less than the statutory
minimum, the Court had no jurisdiction to make a receiving order.
If the debt at the time of making the receiving order, is less than
the statutory minimum, then the bankruptcy Court clearly has
no jurisdiction to make the receiving orders. However, where the
debt is above the statutory minimum, the Court’s jurisdiction is not
ousted.
His Lordship in his written judgment said,
“ Malaysian courts have, on many occasions, followed Re Patel
(supra) and took a similar view, i.e., where after the filing of the
creditor’s petition the amount owing by the debtor is reduced, the
petition is not bad as long as the amount remaining owing at the date
of hearing of the petition is more than the statutory limit. See Re
Chong Ah Kwan Construction Co. [1966] 2 MLJ 39; Re Loh Kok Huah,
ex p Ban Hin Lee Bank Bhd [1991] 3 CLJ 1817; [1991] 3 CLJ (Rep)
183; Re Ti Hock Soon [1993] 1 CLJ 477; Re Sharifah Mohsin, ex p
Perwira Habib Bank Malaysia Bhd [1994] 3 CLJ 373; Re Fong Yuan
Kwong, ex p Public Bank Bhd [1996] 4 MLJ 42; Re Darshan Singh a/l
Atma Singh, ex parte OCBC Bank (Malaysia) Bhd. [1996] MLJU LEXIS
1195; Rozila binti Mohamed v. American Express (M) Sdn. Bhd. [1999]
MLJU LEXIS 959.”.
Applying the above principles I am of the view that there is no
legal basis at all that the BN is invalid by the payment of RM2
million as contended by the JD. The BN was properly issued
based on a judgment sum which was duly served on the JD.
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Furthermore, the acceptance of the sum of RM2million does not
result in the BN being defective as the amount stated in the BN
is based on a judgment and the balance owing is still more than
RM30,000.00.
Based on the reasons mentioned above the appeal by the Judgment
Creditor is therefore allowed.
sgd.
( HASNAH BINTI DATO’ MOHAMMED HASHIM)
Judge
High Court of Malaya
Kuala Lumpur.
21st January 2014
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Counsels:
For the Judgment Creditors/Appellants/Respondents:
Messrs. Soo Thien Ming & Nashrah
- A.S. Lua
- Razinah
For the Judgment Debtor/Respondent/Appellant:
Messrs. Woon & Co.
- Tony Woon Yeow Thong