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LIA4009 Bankruptcy Group Assignment - Question 1 Answer

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29 views17 pages

LIA4009 Bankruptcy Group Assignment - Question 1 Answer

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Wong Ee Ling
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© © All Rights Reserved
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LIA4009: BANKRUPTCY & WINDING UP

GROUP ASSIGNMENT
Question 1 Answer

Submitted to Associate Professor Puan Zuraida Rastam Shahrom


Students’ names 1. Hanis binti Hazidi (LIA160039 / 17183172/1
2. Rizq Nurrqausar binti R M Bakri (LIA160122 //
17171756/1)
3. Nurina Haziqah binti Haron (LIA160109 //
17101729/1)
4. Aishah Nurfitri binti Azraimee (LIA160004 //
17123342/1)
5. Shazwan Abazah bin Fikri Abazah (LIA160128 //
17123440/1)
Date of submission 22 June 2020
TABLE OF CONTENTS
1.0 Whether the Bank can proceed with bankruptcy proceedings against Mr
SusahPayah......................................................................................................................................... 1

1.1 S.5(1)(a) & (b): The debt must amount to not less than RM50,000 and it must
be a liquidated sum payable immediately or at some certain time in the future .......... 1

1.2 S.5(1)(c): The petition must be from an act of bankruptcy which occurred
within 6 months before the presentation of the petition ..................................................... 2

1.2.1 Act of bankruptcy....................................................................................................... 2

1.2.1.1 Sub-issue 1: Whether leave is required for the Bank to proceed with
the issuance of the bankruptcy notice ............................................................................. 4

1.2.1.2 Sub-issue 2: Whether the Bank can claim any interest in the
Bankruptcy Notice assuming that leave of court has been acquired ...................... 6

1.2.2 The act of bankruptcy has occurred within 6 months before the
presentation of the petition ..................................................................................................... 8

1.3 S.5(1)(d): The debtor must be domiciled in Malaysia or within 1 year before
the date of the presentation of the creditor’s petition, the debtor must either be in
the conditions prescribed in s.5(1)(d) ...................................................................................... 9

1.4 Conclusion ......................................................................................................................... 10

2.0 Necessary steps that should be taken by the Bank in the commencement of the
bankruptcy proceedings. ............................................................................................................... 10

Bibliography ...................................................................................................................................... 14
1.0 Whether the Bank can proceed with bankruptcy proceedings against Mr
SusahPayah.
Insolvency is the inability of a person to pay their debts as they fall due and it is the
condition prior to the commencement of any legal proceedings against the person in which
the end result is that the person may be declared “bankrupt”.1 The bankruptcy proceedings in
Malaysia is governed under the Insolvency Act 1967 (IA 1967) and Insolvency Rules 2017 (IR
2017). The proceedings begin when a debtor commits an act of bankruptcy upon which the
creditors then can proceed to the stage of issuance of bankruptcy petition. Hence, to
determine whether a bankruptcy proceeding can be commenced against a person, certain
requirements in respect of matters up until this stage must be fulfilled.

S.5(1) of IA 1967 provides for conditions that must be fulfilled before a bankruptcy
petition may be presented. These criteria must be complied with so that the bankruptcy
proceeding can be taken against Mr SusahPayah.

1.1 S.5(1)(a) & (b): The debt must amount to not less than RM50,000 and it must
be a liquidated sum payable immediately or at some certain time in the
future
Apart from the minimum threshold of RM50,000 provided under para (a) of s.5(1), the
debt must also be a liquidated sum as stipulated in para (b). The High Court in Re Fong Yuan
Kwong, ex p Public Bank Bhd2 explained that a claim for interest is considered as a liquidated
demand because it can be duly calculated as a mere matter of arithmetic. The court also cited
the White Book 1991 and further emphasised that a liquidated demand is in the nature of debt
which refers to a specific amount of money due and payable by virtue of a contract. It is
important for the amount to be ascertained or capable of being ascertained. Hence, this means
that the requirement for the debt to be a liquidated sum is fulfilled when it arises out of a
contract and the amount can be quantified and ascertained.

In this present case, the judgement sum owed by Mr SusahPayah to Kodaline Bank
(the Bank) is RM300,000 as per the judgement by the Kuala Lumpur Sessions Court on 1
January 2013. This amount alone is well beyond the minimum threshold provided under s.5
of IA 1967. Furthermore, given that the debt came from personal loan made by the Bank and

1
Gita Radhakrishna, Insolvency Law: Bankruptcy and Companies Winding-Up, (Selangor: The Malaysian
Current Law Journal Sdn Bhd, 2020).
2
[1996] 4 MLJ 42.

1
Mr SusahPayah, the debt therefore falls squarely under the definition of liquidated sum as
provided in Re Fong Yuan Kwong, ex p Public Bank Bhd. The judgement sum, together with
the interest too can be calculated and ascertained. Hence, it can be concluded that the debt
is a liquidated sum which is payable immediately or at some certain times in the future.
Therefore, the two requirements provided in para (a) and (b) of s.5(1) are fulfilled.

1.2 S.5(1)(b): The petition must be from an act of bankruptcy which occurred
within 6 months before the presentation of the petition
There are two aspects to this particular requirement that must be analysed.

1.2.1 Act of bankruptcy


In the case of Re EM Abdulla & Co, ex p Henry Waugh & Co,3 where it was established
that an act of bankruptcy is a personal act and must be committed personally by the debtor.
A person cannot be said to commit an act of bankruptcy if the act was committed by his agent
without his authorisation and of which he had no cognisance of. This means that the act of
default must be committed by the debtor himself.

In our present case, the act of bankruptcy stemmed from the personal loan taken by
Mr SusahPayah himself from the Bank. No third parties were involved in this transaction and
it was done out of his own accord. Hence, Mr SusahPayah has fulfilled the requirement of
having the act committed out of his own personal act.

Next, we must look into s.3(1) of IA 1967. This section sets forth 9 acts of bankruptcy
and any act purported to be an act of bankruptcy must fall within the ambit in any of the
paragraphs provided under this section. For our current case, the most suitable act of
bankruptcy is provided under s.3(1)(i). Under this paragraph, there are 4 important elements
that must be fulfilled.

The first element is that the creditor has obtained a final judgement or a final
order against the debtor. In Peninsular Land Development Sdn Bhd v K Ahmad (No.2),4 a
final judgement or order is described to take place when it finally disposes of the rights of the
parties. If the judgement or order does not provide for this, then it is a mere interlocutory order.
The fact that the judgement is on appeal or can be appealed does not strip off the fact that the

3
[1938] 1 MLJ 130.
4
[1970] 1 MLJ 253.

2
judgement is a final judgement so long as it disposes the rights of the parties. This was
explained in Re Tan Ah Poi.5

Applying these principles in the current case, the judgement that the Bank is basing its
claim on is the judgement made by the Kuala Lumpur Session Court on 1st of January 2013.
The judgement made is a final judgement as it disposes the parties’ rights by giving the
judgement in favour of the Bank. This judgement was never appealed and even if it was
appealed, this does not affect its finality as exhibited in Re Tan Ah Poi. Hence, the first element
is fulfilled.

The second element is that the creditor must be able to execute the final
judgement. This means that there cannot be any stay of execution against the judgement.
Apart from that, the exact amount of the debt inclusive of the cost and interest must be
quantifiable. This was shown in Low Mun v Chung Khiaw Bank Ltd6 where the court held that
the judgement debt was incapable of being executed given that at the time the bankruptcy
notice was issued, the interest payable could not be calculated. This was due to the fact that
the bank’s base lending rate was not known. Furthermore, the cost was also not taxed. Hence,
the cumulative effect of these factors is that the judgement debt could not be quantified and
hence cannot be executed. What this means is that the interest must be capable of being
calculated or ascertained by some formula or other means even if it is not claimed as a fixed
sum in the bankruptcy notice.7

In the current case, the judgement provided to the Bank is clear and the interest can
be calculated unlike the situation in Low Mun v Chung Khiaw Bank Ltd. In addition, there has
been no stay of execution for the judgement since 2013. Therefore, the judgement could be
executed and the correct amount claimed must be correctly specified in the bankruptcy notice.

The third element is that the bankruptcy notice has been served on the debtor,
requiring him to pay the judgement sum. R.94 of the IR 2017 provides that that the
bankruptcy notice shall be served within 3 months from the issuance of the bankruptcy notice.
The date of the issuance bankruptcy notice is usually on the same day that the bankruptcy
notice is being filed. In respect of its method of service, s.3(2) of the IA 1967 provides that the
general rule governing the service is that it shall be served personally to the debtor.

In our present case, the bankruptcy notice was filed and issued on 1.1.2020 and was
later served on 8.1.2020. The gap between these two dates were lesser than 3 months and
hence falling within the time provided in r.94 IR 2017. The bankruptcy notice was also served

5
[1999] 2 MLJ 555.
6
[1988] 1 MLJ 263.
7
Re Annie Lim [1987] 2 MLJ 276.

3
personally to Mr SusahPayah, following the prescription in s.3(2) of IA 1967. Hence, the third
element is fulfilled.

Nonetheless, there are other sub-issues that need to be explored at this juncture. The
judgement date given by the Kuala Lumpur Sessions Court was on 1.1.2013 but the
bankruptcy notice was only served on 8.1.2020. Under o.46 r.2 of the Rules of Court 2012
(ROC 2012), it is provided that a writ of execution to enforce a judgement or order may only
be issued with the leave of court if 6 years have lapsed since the date of the judgement or
order. In our current case, it has been more than 6 years since the judgement was given by
the court when the bankruptcy notice was issued. Hence, two additional issues must be
solved; whether leave is required for the Bank to proceed with the issuance of bankruptcy
notice and whether the Bank is entitled to claim any interest.

1.2.1.1 Sub-issue 1: Whether leave is required for the Bank to proceed with the
issuance of the bankruptcy notice
On the sub-issue of whether leave is required for the Bank to proceed with the issuance
of bankruptcy notice, o.46 r.2 of the ROC 2012 has provided so. In Re Mohamad Fadzimi
Yaakub, ex parte United Malayan Banking Corp Bhd,8 the court confirmed that a bankruptcy
notice can only be issued when there is a final judgement or order and, in the event that the
execution can only commence with the leave of court, then the leave of court becomes
mandatory.

Prior to the Federal Court’s decision in Dr Shamsul Bahar Abdul Kadir v RHB Bank
Bhd,9 (Dr Shamsul Bahar) our jurisprudence had a different approach to this issue. In Perwira
Affin bank v Lim Ah Hee,10 (Lim Ah Hee) the Federal Court stated that a writ of execution
under o.46 r.2 of Rules of High Court 1980 (RHC 1980) (now the same provision in ROC 2012)
did not include a bankruptcy proceeding. In this case, the court did not expressly rule that
leave was not required to issue a bankruptcy notice on a judgement made more than 6 years
before such issuance, as it was not part of the question posed to the court, however its finding
that a bankruptcy proceeding was not an execution proceeding gave rise to the notion that
o.46 RHC 1980 was not applicable to a bankruptcy proceeding. Instead, in answering the
issue posed to it, the court took the stand that a bankruptcy proceeding is an action upon a
judgement within the meaning of s.6(3) of Limitation Act 1953 (LA 1953) and hence any

8
[1998] 1 CLJ 783.
9
[2015] 4 CLJ 561.
10
[2004] 3 MLJ 253.

4
bankruptcy proceeding could be instituted at any time within 12 years from the date of the
judgement. Nonetheless, it is to be noted that this case’s view on the applicability of o.46 r.2
RHC 1980 was only an obiter.11

However, further confusion took place when the Federal Court in 2013 through
AmBank (M) Bhd (formerly known as AmFinance Bhd) v Tan Tem Son and another appeal12
(Tan Tem Son) took Lim Ah Hee’s implicit obiter and declared that a judgement creditor
intending to file a bankruptcy notice based on a judgement made more than 6 years old did
not have to obtain prior leave of the court as required under o.46 r.2. The rationale given was
that a bankruptcy proceeding was governed under a separate law and rules and therefore had
a characteristic of a fresh proceeding. Therefore, a bankruptcy proceeding is an action upon
a judgement rather than an executionary proceeding. Hence, o.46 r.2 had no application.

However, both decisions in respect to this issue were overturned when the Federal
Court in 2015 through Dr Shamsul Bahar disagreed with both positions. The court criticised
Lim Ah Hee in that it failed to discuss on the meaning of the words “execution thereon not
having been stayed” as provided in s.3(1)(i). In Dr Shamsul Bahar, the court referred to the
English Court’s decisions in the interpretation and application of the words “execution thereon
not having been stayed”13 and concluded that the words mean that the judgement or order
must be one in which the creditor is in a position to execute it. If the creditor cannot execute
the judgement, the creditor cannot issue a bankruptcy notice. Hence, leave under o.46 r.2
ROC 2012/RHC 1980 becomes applicable here. If the creditor needs to get a leave to execute
a judgement, he needs to get it before he issues a bankruptcy notice. The court also rejected
the decision in Tan Tem Son because of its complete disregard to the history and case law
that established otherwise.14

The court then went on to explain that o.46 r.2 is compatible with s.6(3) of LA 1953
which stated an action upon any judgement shall not be brought after 12 years on which the
judgement became enforceable and no arrears of interest in respect of any judgement debts
shall be recovered after 6 years from the debt. The cumulative reading of these two provisions
provided us with 3 conclusions:

11
Tan Chwee Hock v AmBank (M) Bhd [2012] 8 CLJ 905.
12
[2013] 3 MLJ 179.
13
Woodall, Re, ex p Woodall (1884) 13 QBD 479; Ide, Re, ex p Ide (1886) 17 QBD 755; Re Connan, ex parte Hyde
[1886 – 90] All ER Rep 869.
14
The English cases prescribed in Ibid remain relevant in Malaysian jurisprudence because the court observed
that the words “execution thereon not having been stayed” remained wholly intact and unchanged even after
the changes of Bankruptcy Act in England and Malaysia. Hence, the English authorities on the English
Bankruptcy Acts 1883 and 1914 which explained the meaning of such words remain relevant.

5
i. An action upon a judgement shall not be brought after the expiration of 12 years
from the date that the judgement becomes enforceable;
ii. No arrears of interest in respect of any judgement debt shall be recovered after
6 years from the date the interest becomes due; and
iii. A writ of execution to enforce a judgement or order may be issued after six
years of more has lapsed since the date of the judgement or order only if there
is leave from the court.

Hence, Dr Shamsul Bahar has confirmed the position that a leave from court is
necessary to be acquired if the execution of the judgement which is the issuance of the
bankruptcy notice is done after six years since the judgement date has lapsed. In our current
case, the facts are silent on whether the Bank has obtained the leave from the court before
the issuance of the bankruptcy notice on 1.1.2020. Assuming that the Bank has obtained such
leave, then it can proceed with bankruptcy proceeding. However, if the Bank has never done
so, then the bankruptcy notice may become unenforceable.

1.2.1.2 Sub-issue 2: Whether the Bank can claim any interest in the Bankruptcy
Notice assuming that leave of court has been acquired
S.6(3) of LA 1953 provides that no interest can be recovered after the expiration of 6
years from the date in which the interest becomes due. In UMBC v Ernest Cheong Yong Yin,15
the bankruptcy notice was filed 9 years after the judgement date and the interest calculated in
the bankruptcy notice was correct because it was calculated only up the date of 6 years from
the date of the judgement. Hence, the bankruptcy notice in respect to the amount claimed was
in order. However, since it was issued after the period of 6 years and without any leave of
court, the notice was rendered invalid. In Moscow Norodny Bank Ltd v Ngan Ching Wen,16
one of the issues was in interpreting s.6(3) of LA 1953, whether the date when the interest
became due under a judgement is the date of judgement or the date of commencement of
interest as stipulated in the judgement. The court followed the decision in UMBC v Ernest
Cheong Yong Yin and held that such date is the judgement date. The same decision in respect
of the claim of interest was exhibited in Lim Ah Hee and in Dr Shamsul Bahar.

Hence, since the issuance of bankruptcy notice was made 7 years after the judgement
date, the calculation of post-judgement interest being portrayed in the bankruptcy notice must
only be limited to the expiration date of 6 years after the judgement date. If the Bank puts in

15
[2002] 2 MLJ 385.
16
[2005] 3 MLJ 693.

6
more than that, this will result in the miscalculation of the bankruptcy notice and hence causing
the invalidity of such bankruptcy notice.

The fourth element is that upon receiving the service of the bankruptcy notice,
the debtor must within 7 days, after the service of the notice, either comply with the
requirement of the notice or satisfy the court that he has a counterclaim, set off or cross
demand. Failure of the debtor in doing either of the two options provided, the debtor is then
said to commit an act of bankruptcy under s.3(1)(i).

On the issue of compliance period, the express provision in s.3(1)(i) that the date for
compliance starts after the day of service of the notice is in line with s.54(1)(a) of the
Interpretations Act 1948 and 196717 In Re Fadzil b Othman v Malayan Building Ltd,18 the
bankruptcy notice was served on 8.6.1992 but the bankruptcy petition stated that the act of
bankruptcy was committed on 15.6.1992. The court held that by virtue of s.54(1)(a) of the
Interpretations Act 1948 and 1967, the calculation for the date of compliance started on
9.6.1992, a day after the service of the notice. Under the same section, it is also provided that
in respect of period exceeding 6 days, public holidays and weekly holidays19 are counted in
the computation of time.20 In Re Dato Loh Fook Yen, ex parte Malayan United Finance Bhd,21
the court held that since s.3(2) of the Bankruptcy Act 1967 provides that the period of
compliance is 7 days, weekly holidays and public holiday must be included in the computation
of time, unless it falls on the last day of compliance, upon which s.54(1)(d) would not be
applicable.

In the current case, Mr SusahPayah failed to comply with the requirement or even
claimed a counterclaim, set off or cross demand against the bankruptcy notice. Instead, he
has been unresponsive even after 7 days-period stipulated ends. Since the service of notice
was done on 8.1.2020, the date of compliance started from 9.1.2020 until 15.1.2020 which
was on a Wednesday. The act of bankruptcy was committed on 16.1.2020 (Thursday). The
weekly holidays which was on Sunday, 12.1.2020, was also counted as part of the compliance

17
S.54(1) of Interpretation Act 1948 and 1967: In computing time for the purposes of any written law –
a) a period of days from the happening of an event or the doing of any act or thing shall be deemed to
be exclusive of the day on which the event happens or the act or thing is done
18
[1994] 2 MLJ 474.
19
S.66 of Interpretations Act 1948 and 1967 and s.2 of Holidays Act 1951 provide that weekly holiday refers to
Sunday or, in states where Friday is observed as the weekly holiday, Friday.
20
S.54(1)(d) of Interpretation Act 1948 and 1967: where any act or proceeding is directed or allowed to be
done or taken within any time not exceeding six days, excluded days shall not be reckoned in the computation
of the time.
This indicates that in respect of period exceeding 6 days, public holidays and weekly holidays are counted in
the computation of time.
21
[1988] 3 MLJ 499.

7
date since 7 days are provided for the days of compliance and r.64 of the IR 201722 has no
application in our current case. Hence, his failure to comply to this fourth element indicates
the commission of an act of bankruptcy by Mr SusahPayah.

Given that he has fulfilled all the four elements that must be proven in s.3(1)(i), Mr
SusahPayah has committed an act of bankruptcy.

1.2.2 The act of bankruptcy has occurred within 6 months before the
presentation of the petition
This particular requirement indicates that the creditor’s petition must be presented
within 6 months after the act of bankruptcy has been committed. In Kewangan Utama Bhd v
Muhibah Hj Ali,23 the court held that any petition presented outside of the period of 6 months
stipulated will be considered as run out of time. In this case, the act of bankruptcy was
committed on 15.12.2005. By virtue of s.5(1)(c) of Bankruptcy Act 1967 (now IA 1967), the
creditor must file the petition within 6 months from 15.12.2005 in which the last date was
14.6.2006. Hence, since the creditor petitioned it before such stipulated date, his petition was
still within the period prescribed.

the bankruptcy notice was served on Mr SusahPayah on 8.1.2020 at 12 noon. Mr


SusahPayah had 7 days to comply with the notice before the act of bankruptcy is considered
to be committed. The calculation of the date started on 9.1.2020 since the date of service is
not included in the calculation24 and ended on 15.1.2020. This means that the act of
bankruptcy was committed on 16.1.2020. The Bank therefore needs to serve the petition within
6 months after 16.1.2020.

22
R.64 of IR 2017 provides for effect of service after certain hours which are 3.30pm and 12pm for on a day
preceding a weekly holiday upon which the calculation for the date of compliance starts on the day following
the weekly holiday. This rule has no application here because the notice was served at 12 noon on a
Wednesday and hence none of the provisions in this rule is applicable.
23
[2008] 1 LNS 880.
24
S.3(1)(i)

8
1.3 S.5(1)(d): The debtor must be domiciled in Malaysia or within 1 year before
the date of the presentation of the creditor’s petition, the debtor must either
be in the conditions prescribed in s.5(1)(d)
Under s.5(1)(d) of IA 1967, it is a requirement that the debtor must be a domicile in
Malaysia or within 1 year before the presentation of the creditor’s petition, either resided in
Malaysia or had dwelling house here or had a place of business in Malaysia or carried on
business in Malaysia or had been a member of a firm or partnership with business in Malaysia.
In Per: Alfred Lam Choong Choy v Ex parte: Downtown Condominium Joint Management
Body and another appeal,25 the court stated that the key word in s.5(1)(d) is the disjunctive
“or” between the words “ordinarily resided” and “had a dwelling house” in Malaysia and both
expressed in the past tense. This indicates that the creditor has to prove that the debtor
committed either of these two options within one year before the presentation of the petition.
Apart from that, the creditor may also rely on the debtor’s domicile to issue the petition. In Re
Leong Nyuk Weng, Ex P Public Bank Bhd,26 it was held that s.5(1)(d) provides for conditions
similar to s.3(3) with one exception where the creditor may also present the petition if the
debtor is domiciled in Malaysia or in any state of Malaysia. This indicates that the scope of
s.5(1)(d) is arguably wider as the creditor may petition against the debtor if the debtor is
domiciled in Malaysia regardless whether the debtor’s place of residence has changed. If the
debtor wishes to prove that he is not of Malaysian domicile, the debtor then has the burden of
proving at the relevant time, he was not domiciled in the Federation of in any state thereof as
stipulated in Re James Kuok Khoon Huai: ex p Lim & Tan Securities Pte Ltd.27 It was held in
this case that in order to prove so, he must prove fact and intention of acquiring a domicile of
choice elsewhere.

In our current case, Mr SusahPayah, despite not being a Malaysian nationality, has a
resided in Malaysia for the past 3 years before the presentation of the petition. He also has a
real estate business here in Kuala Lumpur. This shows that he has, within one year before the
date of presentation of the petition, ordinarily resides in Malaysia and he also has a place of
business here which are prescribed under s.5(1)(d). Alternatively, it can also be inferred that
he domiciles in Malaysia. This is because he has for the past 3 years been living in Malaysia
and even set up a business here. Despite the fact that he never let go of his nationality as a
Panem national, his conduct mentioned before including the fact he even borrowed a large
sum from the Bank and even involved himself with the negotiation process throughout the
years from 2013 prove that he intends to stay in Malaysia and he has not shown any intention

25
[2016] MLJU 1349.
26
[2003] 4 CLJ 260.
27
[2001] 3 MLJ 321.

9
of acquiring a domicile elsewhere. Therefore, going either way, it can be said that s.5(1)(d) is
fulfilled. If Mr SusahPayah intends to prove otherwise, the burden shall be on him to prove so
as described in Re James Kuok Khoon Huai: ex p Lim & tan Securities Pte Ltd.

1.4 Conclusion
In conclusion, having fulfilled all the elements provided under s.5(1) of IA 1967, the
Bank can proceed with the bankruptcy proceedings against Mr SusahPayah with the condition
that certain requirements explained before such as the need for the Bank to obtain leave
before the issuance of the bankruptcy notice is fulfilled and that the petition must be filed within
6 months after 16.1.2020 which is the date of commission of the act of bankruptcy.

2.0 Necessary steps that should be taken by the Bank in the commencement of the
bankruptcy proceedings.
There are procedures provided by IA 1967, IR 2017 and cases that must be adhered
to by the Bank in initiating bankruptcy proceedings against Mr SusahPayah.

Firstly, the Bank must issue bankruptcy notice to Mr SusahPayah. Bankruptcy notice
is a demand for payment of money by a creditor from a debtor. The first step is that the Bank
has to obtain court judgement that worth more than RM50,000, which has been fulfilled as
mentioned above. However, it is to note that the judgement against Mr SusahPayah was
entered in 2013, which was 7 years ago. This leads the Bank to the second step which is to
obtain the leave of court as established in Federal Court case of Dr Shamsul Bahar where a
leave of court is required to issue a bankruptcy notice when 6 years have lapsed since the
date of judgment. The procedural guideline as to leave of court is provided under o.46 r.2(1)(a)
of the ROC 2012.28 This application for leave of court is to be made ex parte by a notice of
application in Form 8829 and supported with affidavit with particulars mentioned in o.46 r.3(2).
After the leave of court is granted, the Bank can proceed with the third step which is to
produce to the Registrar several documents as provided in r.90(1) of IR 201730 in applying for
the issuance of bankruptcy notice. Besides that, the Bank must also file the notice together

28 A writ of execution to enforce a judgment or order may not be issued without the leave of the Court
where six years or more have lapsed since the date of the judgment or order.
29 O.46, r.3(1) of Rules of Court 2012.
30 An office copy of the judgment or order on which the bankruptcy notice is founded; a copy of OS or

writ of summons on which the notice is found; and a copy of agreement on which a judgment or order
is made against the debtor.

10
with a request for issue guided by Form 35 of IR 2017. Failing to comply to these procedural
rules will cause the application to be rejected by court.31

After the application of issuance bankruptcy notice is allowed, the fourth step is for
the Bank to prepare the bankruptcy notice as provided in Form 1 and Form 34 of IR 2017
within three months before serving to Mr SusahPayah as stated in r.94 of IR 2017. The Bank
must also note that the particulars in bankruptcy notice have to be endorsed.32 Once endorsed,
the Bank is required to serve to Mr SusahPayah. Based on facts, Mr SusahPayah is residing
in Petaling Jaya, Selangor, Malaysia. So, the service must be done within a period of 7 days.33
As for the mode of service, the IA 1967 provides personal service34 and substituted service in
special circumstances35. Applying to the current case, the Bank has filed the issuance of BN
on 1.1.2020 and later served the endorsed BN on 8.1.2020 at 12 noon. This is done within the
7 days period, hence the Bank complies with the rules. It can also be seen that the bankruptcy
notice was also served through personal service by Mr Azman b Ali as the solicitor’s clerk.

After the service, the fifth step that has to be taken by the Bank is to observe whether
Mr SusahPayah complies to the requirements of the bankruptcy notice within 7 days from the
date of service of notice in accordance to s.3(1)(i) IA 1967. The first issue to consider is
whether the 7 days are inclusive of the date of service. This was held negative in Re Fadzil b
Othman v Malayan Building Ltd36 as explained before. The case referred Interpretation Acts
1948 and 1967 which provides that a period of days is exclusive of the day which the event
happens or the act or thing is done37. The next matter to be noted by the Bank is the application
of r.64 IR 2017 which is the computation of time. According to r.64(1) IR, service on weekdays
must be affected before 3.30pm while on weekly holiday service should be affected before 12
noon. “Weekly holiday” means Sunday, or Friday; depending on the States.38 Applying to the
current case, it is noted that the date of service by Mr Azman as mentioned previously is on
8.1.2020 at 12 noon. By referring to 2020 calendar, it is observed that 8/1/2020 is on
Wednesday (Weekday). The Bank in the present case also has affected at 12 noon (before
3.30pm), hence as mentioned, r.64 IR 2017 has no application here and the counting of day
shall begin on 9.1.2020 onwards. Hence, Mr SusahPayah has 7 days from 9.1.2020 upon
which the compliance shall be made before or on 15.1.2020.

31 R.90(2) of Insolvency Rules 2017.


32 R.92(1) of Insolvency Rules 2017.
33 R.92(2) of Insolvency Rules 2017.
34 S.3(2) of Insolvency Act 1967.
35 S.3(2A), (2B) and (2C) of Insolvency Act 1967.
36 Re Fadzil b Othman v Malayan Building Ltd [1994] 2 MLJ 474.
37 S.54(1)(a) of Interpretation Acts 1968 and 1967.
38 S.66 of Interpretation Acts 1948; S.2 of Holidays Act 1951.

11
Nevertheless, based on the facts stated, Mr SusahPayah did not respond to the
issuance of bankruptcy notice by the Bank and has committed an act of bankruptcy. Hence,
the Bank may now proceed with the sixth step that is the preparation of the bankruptcy
petition to be filed in court and the service of such petition to Mr SusahPayah. Since the
Bankruptcy Petition will be issued by the Bank as a creditor, the petition shall follow the specific
format provided for creditor’s petition in Form 41 of IR 2017. When filling the creditor’s petition,
the Bank should take note of several rules provided by IR 2017. Firstly, according to r.98 of IR
2017, every petition shall be dated, attested39 and signed. In this case, the Bank is a
corporation under s.133(a) of IA 1967, therefore the signing of the petition has to be executed
by an authorised person by corporation under the company’s seal as provided in r.215 of IR
2017. In this case, the authorised person of the Bank is observed to be Muhammad Ariff bin
Zaini.

The Bank must also note that creditor’s petition must always be supported by affidavit
verifying the petition. Without the verification of affidavit, the creditor’s petition and all the
subsequent proceedings are a nullity. Hence, the seventh step is to prepare affidavit verifying
the creditor’s petition40 as to affirm the truth of the statement in the petition. The format of the
affidavit is provided by Form 42 of IR 2017. The Bank must also note that the affidavit verifying
petition must have the same title and distinctive numbers as the proceedings in bankruptcy
notice and creditor’s petition. This will allow the Registrar to identify the petition to the verifying
affidavit and thus the affidavit would verify the statement in the petition sufficiently.41 The next
thing for the Bank to take note is to make sure that the affidavit is affirmed. On the issue of
date of affirmation of the affidavit verifying the creditor’s petition, the IA 1967 and IR 2017 do
not expressly prescribe when; either before, simultaneously or after the presentation of
petition. Initially, the case of Sobri bin Arshad v Associated Tractors Sdn Bhd42 held that
affidavit verifying the petition must be sworn after the presentation of the petition.
Nevertheless, the following cases have studied and ruled that the affidavit verifying the CP
should be attached to the creditor’s petition to avoid any dispute as to what exactly is being
verified.43 However, if this is not done, it does not invalidate the creditor’s petition as long as
the verifying affidavit can be identified to the creditor’s petition by its distinctive title and
number.44 Therefore, the Bank in the present case is advised to file in the affidavit verifying

39 R.101 of Insolvency Rules 2017.


40 S.6(1) of Insolvency Act 1967; R.105 of Insolvency Rules 2017.
41 R.107 of Insolvency Rules 2017.
42 Sobri bin Arshad v Associated Tractors Sdn Bhd [1991] 3 MLJ 32.
43 Re Ho Weng Keong, ex p Marketlink (M) Sdn Bhd [1993]1 MLJ 60; Re Teoh Thean Peng, ex p

D&C Leasing Sdn Bhd [1993] 2 MLJ 1; Re Koh Kim Kuay, ex p MBf Finance Bhd [1995] 1 MLJ 792.
44 Re Mohd Sharif bin Sapie, ex p Malayan Banking Bhd [1992] 2 MLJ 102

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petition with the creditor’s petition, to avoid any complexity arising from the attestation of
affidavit.

The eighth step is to file the creditor’s petition together with affidavit verifying the
creditor’s petition to the court. The filing of the creditor’s petition shall be made at the High
Court45 in the state where the judgement debtor resides or carries on business46. Applying to
this case, Mr SusahPayah is residing in Petaling Jaya, Selangor and has a business in Kuala
Lumpur. Thus, the Bank may file the creditor’s petition at either High Court of Malaya in Shah
Alam or High Court of Malaya in Kuala Lumpur. The Bank must also remember to deposit to
the DGI the sum of RM2,000 before filing the creditor’s petition and affidavit verifying the
petition to the High Court as the receipt must be produced to the court during the filing of
petition.47

After filing the creditor’s petition and the affidavit verifying the petition to the High Court,
the creditor’s petition must be served to Mr SusahPayah. Service of creditor’s petition is the
ninth or final step. This must be done through personal service to Mr SusahPayah as
provided in s.6(1) of IA 1967 and r.108 of IR 2017. The service of the creditor’s petition must
also be proved by an affidavit48 and must follow the requirements as provided in Form 44 of
IR 2017.

In conclusion, the aforementioned procedures are the necessary steps that the Bank
must take in initiating bankruptcy proceedings against Mr SusahPayah. From this point
onwards, the matter will proceed to hearing on a date, time and place as appointed by registrar
in the petition49 which cannot be before the expiration of 8 days of service to Mr SusahPayah50.

45 S.88 of Insolvency Act 1967; R.100 of Insolvency Rules 2017.


46 Paragraph 2(ii) Practice Direction No. 3 of 1993.
47 R.102 of Insolvency Rules 2017.
48 R.110 of Insolvency Rules 2017.
49 R.121 of Insolvency Rules 2017.
50 R.113(2) of Insolvency Rules 2017.

13
Bibliography
Acts

Bankruptcy Act 1967.

Holidays Act 1951.

Insolvency Act 1967.

Interpretation Acts 1948 and 1967.

Rules

Insolvency Rules 2017.

Rules of Court 2012.

Cases

AmBank (M) Bhd (formerly known as AmFinance Bhd) v Tan Tem Son and another appeal
[2013] 3 MLJ 179.

Dr Shamsul Bahar Abdul Kadir v RHB Bank Bhd [2015] 4 CLJ 561.

Ide, Re, ex p Ide (1886) 17 QBD 755.

Kewangan Utama Bhd v Muhibah Hj Ali 2008] 1 LNS 880.

Low Mun v Chung Khiaw Bank Ltd [1988] 1 MLJ 263.

Moscow Norodny Bank Ltd v Ngan Ching Wen [2005] 3 MLJ 693.

Peninsular Land Development Sdn Bhd v K Ahmad (No.2) [1970] 1 MLJ 253.

Per: Alfred Lam Choong Choy v Ex parte: Downtown Condominium Joint Management Body
and another appeal [2016] MLJU 1349.

Perwira Affin bank v Lim Ah Hee [2004] 3 MLJ 253.

Re Annie Lim [1987] 2 MLJ 276.

Re Connan, ex parte Hyde [1886 – 90] All ER Rep 869.

Re Dato Loh Fook Yen, ex parte Malayan United Finance Bhd [1988] 3 MLJ 499.

Re EM Abdulla & Co, ex p Henry Waugh & Co [1938] 1 MLJ 130.

Re Fadzil b Othman v Malayan Building Ltd [1994] 2 MLJ 474.

Re Fong Yuan Kwong, ex p Public Bank Bhd [1996] 4 MLJ 42.

Re Ho Weng Keong, ex p Marketlink (M) Sdn Bhd [1993]1 MLJ 60.

Re James Kuok Khoon Huai: ex p Lim & Tan Securities Pte Ltd [2001] 3 MLJ 321.

14
Re Koh Kim Kuay, ex p MBf Finance Bhd [1995] 1 MLJ 792.

Re Leong Nyuk Weng, Ex P Public Bank Bhd 2003] 4 CLJ 260.

Re Mohamad Fadzimi Yaakub, ex parte United Malayan Banking Corp Bhd [1998] 1 CLJ 783.

Re Mohd Sharif bin Sapie, ex p Malayan Banking Bhd [1992] 2 MLJ 102.

Re Tan Ah Poi [1999] 2 MLJ 555.

Re Teoh Thean Peng, ex p D&C Leasing Sdn Bhd [1993] 2 MLJ 1.

Sobri bin Arshad v Associated Tractors Sdn Bhd [1991] 3 MLJ 32.

Tan Chwee Hock v AmBank (M) Bhd [2012] 8 CLJ 905.

UMBC v Ernest Cheong Yong Yin [2002] 2 MLJ 385.

Woodall, Re, ex p Woodall (1884) 13 QBD 479.

Court’s Practice Direction

Practice Direction No. 3 of 1993.

Books

Gita Radhakrishna, Insolvency Law: Bankruptcy and Companies Winding-Up, (Selangor: The
Malaysian Current Law Journal Sdn Bhd, 2020).

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