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www.ipsofactoJ.com/archive/index.htm
[1989] Part 6 Case 7 [HCM] |
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www.ipsofactoJ.com/archive/index.htm
[1989] Part 6 Case 7 [HCM] |
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HIGH COURT OF MALAYA |
Wee (trading as Vienna Music Centre)
- vs -
Public Finance Bhd
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Coram EDGAR JOSEPH JR J |
11 AUGUST 1989 |
Judgment
Edgar Joseph Jr J
In this case the judgment debtor has sought to impugn the bankruptcy notice herein on a number of ground.
First of all, the bankruptcy notice having been issued on 12 May 1988 and served upon the judgment debtor on 9 June 1988 although the judgment debt upon which it was grounded was dated 13 May 1982, it was said that proceedings in bankruptcy had been commenced more than six years after judgment had been recovered, without leave of the court as required under O 46 r 2(1) of the Rules of the High Court 1980. The case of Re V Gopal, ex p Bank Buruh (M) Bhd [1987] 1 CLJ 602 was cited in support.
Now, I need hardly say that a condition precedent to bankruptcy is that a debtor must have made himself liable to be proceeded against by committing an act of bankruptcy, that is to say, one of the eight acts which constitutes presumptive evidence of insolvency and which is the judicial event upon which the court has the power to make a receiving order. (See s 3(1) of the Bankruptcy Act 1967 (‘our Act’).)
In the present case, the only act of bankruptcy alleged was that the judgment creditor having obtained a final judgment, had caused to be served upon the debtor the bankruptcy notice aforesaid with which he had not complied within seven days after service. (See s 3(1)(i) of our Act.)
The key to the solution of the problem posed by this branch of the judgment debtor’s submissions is the proper interpretation to be placed on s 3(1)(i) of our Act and the proviso thereto which, omitting immaterial portions, read as follows:
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A debtor commits an act of bankruptcy ....
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In the UK, the provisions of s 1(1)(g) of the Bankruptcy Act 1883, which are generally in pari materia with s 3(1)(i) of our Act, have been judicially considered and I have derived much assistance from the cases decided there.
Before I embark upon a consideration of the UK decisions, I would make the preliminary observation that the issue of a bankruptcy notice is not execution to enforce a judgment. (See e.g. Re A Bankruptcy Notice [1898] 1 QB 383 per Chitty LJ at p 386.) At most, it seems to me that the issue of a bankruptcy notice may be regarded as a species of practical enforcement.
I shall now take the cases in the UK to assist me in my task of interpreting s 3(1)(g) of our Act.
In Re Ide, ex p Ide (1886) 17 QBD 755 the creditor had obtained judgment against a firm and had purported to issue a bankruptcy notice founded on that judgment against an individual partner. By s 4 sub–s 1(g) of the Bankruptcy Act 1883, the statutory predecessor of the Bankruptcy Act 1914, it was a condition for the validity of a bankruptcy notice founded on a final judgment or final order that execution had not been stayed thereon. The Court of Appeal held that on the proper construction of the subsection, to entitle a creditor to issue a bankruptcy notice he must be in a position to issue execution on his judgment at the time when he issued his bankruptcy notice. In other words — I would interpolate — in addition to there being no stay on the judgment, there must be no other impediment to issue execution on the judgment. Accordingly, O XLII r 10(c) of the RSC (the predecessor of the present O 81 r 5(4) requiring the leave of the court to issue execution, was held to be such an impediment.
In Re Woodall, ex p Woodall (1884) 13 QBD 479 one Houlston had recovered a final judgment against Woodall. Houlston then died and his executrix served a bankruptcy notice on Woodall without obtaining leave from the court under r 23 of O XLII of the RSC 1883 to issue execution on the judgment. The bankruptcy notice not having been complied with, the executrix presented a bankruptcy petition. The registrar made a receiving order.
On appeal, the question for decision was whether the executrix was a ‘creditor’ within the meaning of s 4 sub–s 1(g) of the Bankruptcy Act 1883. It was argued that the representative of the person who originally obtained the final judgment does not fill the character of creditor under sub–s 1(g), if he has not obtained leave under r 23 to issue execution. In upholding that submission, Baggally LJ said:
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But those words (‘and execution thereon not having been stayed’ in sub–s 1(g) tend to show that the creditor spoken of must be a person who is in a position to issue execution upon the final judgment. The original creditor is in that position. If the person who applies for the notice is the executor of the original judgment creditor he does not, as I read the subsection, fill the required character until he has obtained leave to issue execution on the judgment. |
The cases of Re Ide (1886) 17 QBD 755 and Re Woodall (1884) 13 QBD 479 have stood unchallenged for more than 100 years and I take it that they represent the law on the point concerned.
To my mind, it is not an unfair summary of the position in the UK to say that a creditor can issue a bankruptcy notice only when he has obtained a final judgment or a final order. The judgment or order must be one on which the creditor is in a position to issue execution so that if execution cannot be issued at all, no bankruptcy notice can be issued. If the execution can be issued only with leave of the court, the creditor must obtain such leave before he can issue a bankruptcy notice.
It was urged upon me by counsel for the judgment creditor that I should decline to follow the cases of Re Ide (1886) 17 QBD 755 and Re Woodall (1884) 13 QBD 479 because, in this country, unlike in the UK, we have r 276 of the Bankruptcy Rules 1969 (‘the BR’), which expressly provides that the Rules of the Supreme Court (now the Rules of the High Court 1980) regulating the procedure in its civil jurisdiction shall not apply to any proceedings in bankruptcy. Accordingly, it was submitted that there being no requirement in the BR that leave was required for commencing bankruptcy proceedings founded on a judgment entered more than six years previously, no such leave was required. As such, the only bar to the commencement of bankruptcy proceedings would be if and when a judgment creditor is barred by s 6(3) of the Limitation Act 1953 — so ran counsel’s submission.
I regret I find counsel for the judgment creditor’s submission regarding this part of the case unacceptable. In my opinion, the overriding consideration here is, as I have indicated, the proper interpretation of s 3(1)(i) of our Act. I am not at liberty to brush aside the explicit provisions of s 3(1)(i) merely because of r 276 of the BR. Accordingly, if there is any conflict between these two measures I would regard s 3(1)(i) as having overriding effect since it ranks as principal legislation whereas the BR are subsidiary legislation. (See s 23(1) of the Interpretation (States of Malaysia) Act 1967.) In my view, therefore, the UK decisions are of direct relevance when construing s 3(1)(g) of our Act and I would respectfully follow them.
Accordingly, I must next consider whether, at the material time, the judgment creditor in this case was in a position to issue execution on his judgment. The question arises, what is the material time?
In Re V Gopal, [1987] 1 CLJ 602 VC George J held (at para 9) that the material date was not the date of issue of the bankruptcy notice but the date of its service. In so holding, he appears to have been swayed by the decision of the Court of Appeal in Re Ide (1886) 17 QBD 755 for he says (at para 5):
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In the judgment of the English Court of Appeal in Ex p Ide (1886) 17 QBD 755 it was held that when a creditor has obtained judgment against a firm but has not obtained the requisite leave of court to issue execution against a person alleged to be a member of the firm, he cannot effectively serve such a person with a bankruptcy notice. |
It also appears that, in referring to the ratio in Ex p Ide (1886) 17 QBD 755 he relied on the head note to the report of that case. However, it seems to me that a reading of the three judgments in that case, makes it clear that the Court of Appeal held (as I have already said) that on the proper construction of the subsection concerned, to entitle a creditor to issue a bankruptcy notice he must be in a position to issue execution on his judgment at the time when he issued his bankruptcy notice. To demonstrate, I propose to reproduce the relevant passages in the three judgments.
In the first place, I shall refer to the following passages in the judgment of Lord Esher MR at p 759 para 2:
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Under these circumstances, is he a person against whom, under s 4, sub section 1(g) of the Bankruptcy Act, a bankruptcy notice can be issued, upon failure to comply with which he can be made a bankrupt? Sub–s 1(g) says: ‘If a creditor has obtained a final judgment against him’ (that is against the person whom he proposes to make bankrupt) ‘for any amount, and, execution, thereon not having been stayed,’ has served on him a bankruptcy notice. It is true that in the present case execution on the judgment has not been stayed, but the words seem to me necessarily to imply that the judgment must be one upon which execution could go immediately, unless it was stayed. But here execution cannot go immediately whether it is stayed or not; it cannot go without the leave of the court. I think, therefore, that this was not a final judgment such as is described in sub–s 1(g) on which a bankruptcy notice could issue. |
Next, I shall refer to the following passages in the judgment of Bowen LJ where the point is made even more emphatically at p 759 para 4:
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With regard to the construction of sub–s 1(g) of s 4, I also agree that, in order to entitle a creditor to issue a bankruptcy notice, he must be in a position to issue execution on his judgment at the time when he issues the bankruptcy notice. |
Lastly, I shall refer to the following passages in the judgment of Fry LJ at p 760 para 2:
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It would be very strange if the enactment were that bankruptcy notice could not be issued when execution on the judgment had been stayed, and yet that a bankruptcy notice could be issued when execution could not go at all without the leave of the court, and the proceedings had not been stayed simply for that reason. |
I regret, therefore, that I cannot agree with VC George J when he says in Re V Gopal, [1987] 1 CLR 602 that the relevant date for determining whether the creditor was in a position to issue execution on his judgment is the date of the service of the bankruptcy notice.
I would add that quite apart from authority, in principle, adopting the date of issue of a bankruptcy notice rather than the date of its service as the material time is fairer because delays in effecting service are often not the fault of a creditor. Indeed, such delays could well be because the debtor is deliberately avoiding service.
Consequently, following Re Ide, (1886) 17 QBD 755 I would hold that the relevant date is the date of the issue of the bankruptcy notice. It goes without saying that if a creditor cannot issue a bankruptcy notice, he cannot serve one and so there cannot possibly be an act of bankruptcy as defined in s 3(1) of our Act.
In the present case, I have already mentioned in the opening paragraph of this judgment that the judgment debt was dated 13 May 1982, and the bankruptcy notice upon which it was grounded was issued on 12 May 1988. This would be within the six–year time limit imposed by O 46 r 2(1). There was, therefore, no need for leave to issue execution against the judgment debtor at the time of the issue of the bankruptcy notice and so this ground of objection fails.
The second point taken on behalf of the judgment debtor was that the bankruptcy notice includes interest not recoverable under the second limb of s 6(3) of the Limitation Act 1953, which provides that ‘no arrears of interest in respect of any judgment debt shall be recoverable after the expiration of six years from the date on which the interest became due’. A perusal of the judgment upon which the bankruptcy notice was grounded shows that it provides for the payment of interest on the judgment debt ‘at the rate of 8% pa calculated from 12 March 1982 to date of payment or realization’. The bankruptcy notice was, as I have already noted, issued on 12 May 1988 and served on the debtor on 9 June 1988.
It therefore does include an element of interest recovery which is barred by s 6(3) of the Limitation Act 1953, namely, a trifling sum of interest in respect of a period of just two months. Accordingly, the sum specified in the bankruptcy notice as being due by way of interest exceeds the amount actually due.
However, our Act by proviso (ii) to s 3(2) reads as follows:
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Provided that a bankruptcy notice ....
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In this case, the judgment debtor had affirmed and filed an affidavit in the registry of the court on 20 June 1988 disputing the sum specified in the judgment notice as the amount due, and served the same on the judgment creditor’s solicitors on 21 June 1988.
But, the seven–day period stipulated in the bankruptcy notice as being the time allowed for disputing payment had expired at midnight on 16 June 1988 with the result that the notice given to the judgment creditor was out of time. Consequently, in the words of proviso (ii), the bankruptcy notice ‘shall not be invalidated by reason only that the sum specified in the notice exceeds the amount actually due’ and therefore this ground of objection fails. (See Re Dato Loh Fook Yen, ex p Malayan United Finance Bhd [1988] 3 MLJ 499)
In any event, I am of the view that having regard to the particular circumstances of this case, the defect in the bankruptcy notice was a mere irregularity which had caused no substantial injustice and so can and should be condoned under s 131 of our Act. (See Rengasamy Pillai v Comptroller of Income Tax [1970] 1 MLJ 233 (PC))
For the same reasons, the contention that the bankruptcy notice includes penal interest must be rejected. In any event, I am satisfied that the bankruptcy notice includes nothing of the sort.
The third point taken on behalf of the judgment debtor was that the schedule to the bankruptcy notice does not specify the exact amount of interest due, contrary to the Supreme Court decision in Ghazali Mat Noor v Southern Bank Bhd [1989] 2 MLJ 142. A perusal of the bankruptcy notice shows that it does specify the exact amount claimed to be due on the judgment dated 13 May 1982 and the accompanying schedule stapled to the bankruptcy notice gives the particulars as to how that sum is arrived at. In the circumstances, it seems to me that there is nothing in the point.
The fourth point taken was that it had not been shown that the solicitors who applied for the issue of the bankruptcy notice pursuant to Form 4 of the BR had the authority to do so. I am satisfied from a perusal of the affidavit of the judgment creditor’s manager Ong Chin Huat affirmed to on 3 December 1988 (encl 10), to which is attached the letter of authority dated 10 May 1988, that the solicitors concerned had the requisite authority to issue the bankruptcy notice and nothing more need be said about the point.
The fifth point taken on behalf of the debtor was that the proceedings herein ought to have been filed not in the High Court of Penang, but in the High Court of Alor Setar, as he had been at all material times a resident in the State of Kedah.
I note that r 109(1) of the BR provides that a bankruptcy notice shall be issued by the court in which a bankruptcy petition against the debtor may subsequently be filed. And, r 101(2) of the BR provides that ‘where the debtor has for the greater part of one year immediately preceding the presentation of the petition carried on business in one state and resided in another state, the petition shall be filed in the court of the state in which he has carried on business.
Clearly, there has been a breach of r 109(1) of the BR and so the question arises whether the same should be condoned under the provisions of r 274 of the BR which provides:
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Non–compliance with any of these rules or with any rule of practice for the time being in force shall not render any proceeding void unless the court shall so direct but such proceeding may be set aside either wholly or in part as irregular or amended or otherwise dealt with in such manner and upon such terms as the court may think fit. |
The case of Sova Sdn Bhd v Kasih Sayang Realty Sdn Bhd [1988] 2 MLJ 268 reminds us of the familiar proposition that the High Court of each state in our country are but branches of the High Court of Malaya and that each branch has concurrent jurisdiction to entertain any civil proceeding regardless of whether the cause of action arose in another state. I have no doubt, therefore, that I have jurisdiction to rule on the validity of the bankruptcy notice. Furthermore, much time has been spent hearing legal argument as to the validity of the bankruptcy notice and, being satisfied that the breach is a mere irregularity, I shall therefore in the exercise of my discretion, condone the same under r 274. Accordingly, this ground of objection fails.
A final point was taken that the judgment creditor owes the judgment debtor costs in the matter of Bankruptcy No 119/85. The short answer to this is that the alleged costs have not been taxed and so is not a liquidated sum or a money demand which is ascertainable with certainty. See Ratna Ammal v Tan Chow Soo [1971] 1 MLJ 277. In all the circumstances, the application to set aside the bankruptcy notice is dismissed and I would declare that the judgment debtor has committed an act of bankruptcy from date hereof.
Cases
Re V Gopal, ex p Bank Buruh (M) Bhd [1987] 1 CLJ 602; Re A Bankruptcy Notice [1898] 1 QB 383; Re Ide, ex p Ide (1886) 17 QBD 755; Re Woodall, ex p Woodall (1884) 13 QBD 479; Re Dato Loh Fook Yen, ex p Malayan United Finance Bhd [1988] 3 MLJ 499; Rengasamy Pillai v Comptroller of Income Tax [1970] 1 MLJ 233; Ghazali Mat Noor v Southern Bank Bhd [1989] 2 MLJ 142; Kasih Sayang Realty Sdn Bhd v Sova Sdn Bhd [1988] 2 MLJ 268; Tan Chow Soo v Ratna Ammal [1971] 1 MLJ 277
Legislations
Bankruptcy Act 1967: s.3(1)(i), s.131
Bankruptcy Rules 1969: Rule 109 (1), Rule 276
Rules of the High Court 1980: Ord.46 r 2(1)
Representations
Darshan Singh for the judgment debtor/applicant.
Louis E Van Buerle (HJ Tan with him) for the judgment creditor/respondent.
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