www.ipsofactoJ.com/highcourt/index.htm [2000] Part 1 Case 12 [HCSS]    

 

HIGH COURT OF SABAH & SARAWAK

 

Re Loi;

Ex parte MBf Finance Bhd

Coram

AS TEE J

25 MAY 1999

Judgment 

AS Tee, J

  1. This is an application by summons-in-chambers under Rule 18(1) of the Bankruptcy Rules 1969 ("the BR") for the following:

    1. an order that the creditor's petition dated January 24, 1998 be struck out;

    2. an order that the bankruptcy notice dated July 7, 1997 be struck out; and

    3. costs to be awarded to the judgment debtor.

  2. The application is supported by the affidavit of Loi Teck Soon affirmed on January 4, 1999. The relevant parts read as follows:

    1. That I am the abovenamed Judgment Debtor.

    2. That Messrs. Loi Teck Soon & Sons Quarry Sdn. Bhd. ("the third party") who is the principal debtor on the judgment had paid a net sum of RM49,985 after the service of the Bankruptcy Notice under the Bankruptcy Proceedings No 20-29-119 of 1997. The Judgment Creditor had issued 2 official receipts, one bearing No. 7-857094 dated 21st August 1997 and another one bearing No. 7-856125 dated 15th November 1997. A copy each of the receipts are now produced and shown to me marked as "LTS".

    3. That I am at the material times residing in Bintulu, Sarawak at the given address whether before and after the alleged judgment debt was incurred and I believe that the High Court at Bintulu is the proper or convenient forum and has the local territorial jurisdiction in the bankruptcy proceedings and I have not given any consent in writing for the proceedings to be heard by the High Court at Sibu.

    4. That the judgment on which the Bankruptcy Notice was based on had awarded interest before the date of judgment and therefore had contravened Order 42 Rule 12 of the High Court 1980.

    5. That the said Judgment with interest awarded at 1.5% per month on overdue interest of RM17,529.49 has contravened Section 11 of the Civil Law Act 1956.

    6. That the Bankruptcy Notice has failed to comply with Section 3 (1)(i) of the Bankruptcy Act 1967 in that the amount of debt specified in the Bankruptcy Notice was not in accordance with the terms of the Judgment.

    7. That Mr. Loi Hieng Sing was not lawfully or duly authorised to sign the Creditor's Petition under seal of the corporation for the abovenamed Judgment Creditor.

    8. That I am no longer indebted to the Judgment Creditor or if any (which is denied) is far less than the statutory minimum of RM10,000.00.

    9. That the Creditor's Petition was not presented within 6 months before the alleged act of bankruptcy (which is denied) and is void.

    10. That the Creditor's Petition did not truly describe my present address and when the debt or liability was incurred.

    11. That the Creditor's Petition did not state the true account of any payment made by the third party after the issuance of the Bankruptcy Notice.

    12. That the Creditor's Petition has purported to demand payment of unascertained sums (which is denied) from me.

  3. An affidavit in opposition was affirmed by Loi Hieng Sing on February 8, 1999. The relevant parts read as follows:-

    1. I am the branch manager of the Judgment Creditor, namely MBf Finance Berhad of No-21, Blacksmith Road, 96000 Sibu and have authority and personal knowledge to depose of the matters hereinafter stated.

    2. The matters deposed herein are from my personal knowledge and from the records and documents in the custody and possession of the Judgment Creditor and its advocates namely Messrs. Hii & Co. Advocates of Sibu.

    3. I crave leave to refer to the Affidavit of Mr. Loi Teck Soon sworn on 4.1.1999 (hereinafter referred to as "LTS's Affidavit") which was served, together with the Summons-in-Chambers dated 6.1.1999, on my advocates namely Messrs. Hii & Co. Advocates on 26.1.99.

    4. I refer to paragraph 2 of LTS's Affidavit and say that the Judgment Debtor paid only RM9,985.00 to the Judgment Creditor on November 15, 1997. The alleged payment of about RM40,000.00 was in respect of another account.

    5. I am advised by my lawyer Mr. Hii Hieng Sing that:-

      1. The High Court in Sibu has jurisdiction over the bankruptcy proceedings in this action;

      2. The said judgment has not contravened Order 42 Rule 12 of the Rules of the High Court, 1980;

      3. The interest rate of 1.5% per month does not contravene Section 11 of the Civil Law Act 1956;

      4. The Judgment Creditor has complied with Section 3(1)(i) of the Bankruptcy Act 1967 and the terms of the said judgment while the Judgment Debtor has failed to comply with Rule 95(1) of the Bankruptcy Rules, 1969; and

      5. I, as the branch manager of the Judgment Creditor was lawfully and duly authorised to sign the Creditor's Petition.

    6. I refer to paragraph 8 of LTS's Affidavit and say that the Judgment Debtor is still indebted to the Judgment Creditor in a sum far greater than RM10,000.00

    7. I refer to paragraph 9 of LTS's Affidavit and say that from the records of the Judgment Creditor and Messrs. Hii & Co. Advocates the Creditors' Petition was presented within six months from the date of the act of bankruptcy.

    8. The Creditors' Petition has truly described the Judgment Debtor's address and also the date when liability was incurred.

    9. The Creditors' Petition has demanded payment of ascertained sums.

  4. The learned counsel for the judgment debtor in his written submission contended, inter alia, as follows:-

    1. A third party Loi Teck Soon & Sons Quarry Sdn Bhd (who is the principal debtor on the judgment) had on occasions paid in a net sum of RM49,985 after service of the said bankruptcy notice on the judgement debtor. The total debt stated in the bankruptcy notice as claimed by the judgment creditor was RM49,328.65 as July 8, 1997. In effect the debt as claimed has been settled. It extinguished the debt or at most only leave interest charges from July 8,1997 which is now well below the statutory minimum (s 5(1)(a) of the Bankruptcy Act 1969 ("the BA"). In support the following case were cited:-

    1. Kerpa Singh v Bariam Singh [1966] 1 MLJ 38.

    2. Chinn Swee Onn v Puchong Realty Sdn Bhd [1990] 1 MLJ 108.

    3. Re Lau Puong Ong [1998] CLJ LN 255.

    The judgment creditor has failed to explain why the payments were split into different accounts and for what debt.

    1. The High Court in Sabah and Sarawak at Bintulu is the proper or convenient forum to hear the bankruptcy proceedings as the judgment debtor was and is at all times residing in Bintulu, Sarawak. In support the following cases were cited:-

      1. Sova Sdn Bhd v Kasih Sayang Realty Sdn Bhd [1988] 2 MLJ 268.

      2. Dayasar Corporation Sdn Bhd v CP Ng & Co Sdn Bhd [1990] 1 MLJ 191.

      3. In Re Lim Hong Kee David [1995] 4 MLJ 564.

    2. Judgment was entered in the sum of RM115,043.47 with interest at 8% per annum from December 13, 1992 till date of full settlement and further interest on overdue interest of RM17,529.49 at 1.5% per month from December 13, 1992 till date of full payment. The interest started to accrue from December 13, 1992 but judgment in default of appearance was entered on November 24, 1994. This contravenes Order 42 r 12 of the Rules of the High Court 1980.

      Interest of 1.5% per month on an overdue interest of RM17,529.49 is in contravention of s 11(a) of the Civil Law Act 1956.

      It was submitted that the judgment was irregular and bad in law. The case of Bintulu Realty Estate Sdn Bhd v Samat Hj Othman [1993] 4 CLJ 571 was cited.

    3. If the court is not prepared to go behind the judgment, the judgment creditor has failed to comply with the terms of the judgment in that the judgment creditor has claimed interest upon the interest in the sum of RM115,043.47 as shown in the bankruptcy notice.

    4. There was no evidence that Mr. Loi Hieng Sing was an officer duly authorised to file the petition on behalf of the judgment creditor under the seal of the corporation as required by s 133 of the BA and Rule 215 of the BR. In support the following cases were cited:-

      1. Re Samuel Pakianathan exp Pewira Habib Bhd [1996] 2 AMR 2055.

      2. Re Chen Sing Chew; Ex parte Oriental Tin Sdn Bhd [1974] 2 MLJ 69.

      3. Re Haroun Al-Rashid Mohd Yusof; Exp Daya Leasing Sdn Bhd [1996] 5 MLJ 317

      As such, Mr. Loi Hieng Sing has no locus standi in the presentation of the petition for the judgment creditor.

    5. The creditor's petition was not presented within six months from the act of bankruptcy. (See s 5(1)(c) of the BA). In support the case of Nga Ching Wen; Exparte Moscow Nafodny Bank Ltd [1996] 2 CLJ 943 was cited.

    6. The creditor's petition has failed to state truly the petitioning creditor's debt in a liquidated sum and whether it is payable immediately or at some future time. In support the case of Michael Chong Ngan Fong v Syarikat Fong Sam Timber [1977] 1 MLJ 263 was cited.

  5. The learned counsel for the judgment creditor stated that the judgment creditor would rely solely on the affidavit-in-opposition affirmed by Loi Hieng Sing.

  6. I shall now deal with the matter before me.

  7. The rule as to the payment of debt by a debtor who owes several distinct debts is governed by ss 60, 61 and 62 of the Contracts Act 1950 which read as follows:-

    60.

    Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.

    61.

    Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.

    62.

    Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law relating to the limitation of suits if the debts are of equal standing, the payment shall be applied in discharge of each proportionately.

  8. In the present case, the judgment debtor averred in paragraph 2 of his affidavit-in-support that Messrs Loi Teck Soon & Sons Quarry Sdn Bhd ("the third party") who is the principal debtor on the judgment paid a net sum of RM49,985 after the service of the bankruptcy notice.

  9. In paragraph 4 in the affidavit-in-opposition it is averred that-

    I refer to paragraph 2 of LTS's affidavit and say that the judgment debtor paid only RM9,985 to the judgment creditor on November 15, 1997. The alleged payment of about RM40,000 was in respect of another account.

  10. The judgment debtor did not adduce any affidavit evidence to state that the third party did intimate to the judgment creditor that the two payments were to be appropriated to the judgment in default of appearance dated November 24, 1994 or in respect of the bankruptcy notice dated July 7, 1997.

    So the judgment creditor can under s 61 the Contracts Act 1950 appropriate the two payment at his discretion to any lawful debt actually due payable to him from the judgment debtor.

  11. In Exh "LTS" in respect of receipt No 7-857094 dated August 21, 1997 the payment was appropriated to Account No 9-0904-000159-8 in the sum of RM29,991. And in respect of receipt No 7-856125 dated November 15, 1997 the payment was appropriated as follows:-

    To Account No.9-0904-000159-8  RM10,015

    To Account No.9-0904-000139-5  RM  9,985

  12. It is clear that the two payments were appropriated to two different accounts. In respect of Account No 9-0904-000139-5 the amount paid was RM9,985. So, I am of the view that Exh "LTS" supports paragraph 4 of the affidavit-in-opposition that the judgment debtor paid only RM9,985 to the judgment creditor on November 15, 1997 and that the payment of about RM40,000 was in respect of another account. As such, I reject the contention of the judgment debtor that the debt owing is now below the statutory minimum under s 5(1)(a) of the BA.

  13. I shall next deal with the issue whether this court has jurisdiction to hear the bankruptcy petition.

  14. The case of Re Lim Hong Kee David [1995] 4 MLJ 564 deals with the jurisdiction of the High Court in Malaya and the High Court in Sabah and Sarawak and as such is inapplicable to the facts of the present case.

  15. In Wee Chow Yong t/a Vienna Music Centre v Public Finance Bhd [1989] 3 MLJ 508 His Lordship Edgar Joseph Jr, J (as he then was) at p 512 said:-

    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 Rule 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, Rule 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 Rule 109(1) of the BR and so the question arises whether the same should be condoned under the provisions of Rule 274 of the BR which provides.

    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 Rule 274. Accordingly, this ground of objection fails.

  16. In our case both Sibu and Bintulu are in the State of Sarawak. Based on the authority of Wee Chow Yong t/a Vienna Music Centre v Public Finance Bhd [1989] 3 MLJ 508, I have no doubt that I have jurisdiction to rule on the validity of the bankruptcy petition.

  17. In Sovereign General lnsurance Sdn Bhd v Koh Tian Bee [1988] 1 MLJ 304 His Lordship Lee Hun Hoe CJ (Borneo) delivering the judgment of the Supreme Court at p 305 said:-

    In the exercise of his jurisdiction in bankruptcy proceedings, the learned Judge cannot go behind the judgment ... As a general principle, the validity of the judgment debt will only be inquired into when there is evidence of fraud or collusion or miscarriage of justice. Re Flatau (1889) 22 QBD 83, Re Howell (1915) 84 LJKB 1399.

    In this case the judgment debtor has not adduced any fraud, collusion or miscarriage of justice. I am of the view that the validity of the default of appearance cannot be inquired into.

  18. It is to be noted that the interest charged as stated in the bankruptcy notice was in accordance with the judgment obtained. The bankruptcy notice was issued in accordance with the judgment obtained against the judgment debtor.

  19. I shall consider whether the creditor's petition was presented within six months from the act of bankruptcy. The bankruptcy notice was issued on July 7, 1997.

  20. According to the affidavit of service of bankruptcy notice affirmed by Sii How Tung, the bankruptcy notice was served on the judgment debtor on August 2, 1997 at 10.50a.m.

    So the judgment debtor committed an act bankruptcy on August 9, 1997 when he failed to pay the sum as claimed in the bankruptcy notice on or before August 9, 1997. (See s 3(1)(i) of the BA).

  21. The relevant parts of s 5(1)(c) of the BA read as follows:

    (1)

    A creditor shall not be entitled to present a bankruptcy petition against a debtor unless -

    (c)

    the act of bankruptcy on which the petition is grounded has occurred within six months before the presentation of the petition.

  22. So the last day of filing the bankruptcy petition is on or before February 8, 1998. The creditor's petition was filed in court on January 24, 1998.

    As such, I am of the view that the creditor's petitions has been filed within time and has complied with s 5(1)(c) of the BA.

  23. I now come to the last ground. The judgment debtor contended that there was a failure by the judgment creditor to comply with s 133(a) of the BA and Rule 215 of the BR.

  24. In Re Samuel Pakianathan Jabamanickarn, exp Perwira Habib Bank (M) Bhd [1996] 2 AMR 2055 His Lordship Kamalanathan Ratnam JC (as he then was) at p 2074 said as follows:-

    Section 133 reads:

    For all or any of the purposes of this Act -

    (a)

    a corporation may act by any of its officers authorized in that behalf under the seal of the corporation;

    Rule 215 reads:

    Where a corporation presents a petition or takes any other action under this Act, the officer of the corporation may act in his own name, stating that he is such officer duly authorized under seal; but a petition may be presented by the corporation, and signed by the officer on its behalf. Any person chosen by the corporation to act for it as agent, is an 'officer' within section 133, and if duly authorized under seal can act for the corporation.

    And at p 2075 His Lordship said as follows:-

    The appellant argued that nowhere in the petition or in the affidavit did the signatories say that they were authorized under seal of the company.

    The respondent in reply to this argument submitted that there are three limbs to Rule 215, i.e.:

    1. ... this officer of the corporation may act in his own name, stating that he is such officer duly authorized under seal.

    2. but a petition may be presented by the corporation, and signed by the officer on its behalf.

    3. any person chosen by the corporation to act for it as an agent, is an 'officer' within s 133 and if duly authorized under seal can act for the corporation. (emphasis added).

    The respondent submitted that limb (b) in the instance applied and therefore the issue of 'under seal' ought not to be considered by the court.

    Clearly, the words 'under seal' as is required under s 133 of the Act read with Rule 21 of the Rules is missing from the creditor's petition and the affidavit. Furthermore, there was no evidence presented to this court to show that both these officers had indeed been authorized under seal.

    And at p 2076 His Lordship said as follows:

    The principle which I draw from the above case is that so long as a person is authorized under seal of the company to act under s 148, he therefore becomes an 'officer' under the Act. Likewise, in s 133 of the Act, an 'officer' duly authorized must be one who had been authorized 'under the seal of the corporation'.

  25. I agree with the construction adopted by the court in Re Samuel Pakianathan Jabamanickam, exp Perwira Habib Bank (M) Bhd [1996] 2 AMR 2055.

  26. In my view, Rule 215 of the BR has to be read with s 133 of the BA. Reading the second limb in Rule 215 with s 133, it would seem clear that any office presenting a creditor's petition on behalf of corporation has to be duly authorised under seal.

  27. The relevant parts of the creditor's petition read as follows:

    Signed by the branch Manager, Mr. Loi Hieng Sing for and on behalf of the said MBf Finance Bhd (Petitioners / Judgment Creditors) in the presence of: -

  28. The judgment creditor has not shown that Mr. Loi Hieng Sing who presented the creditor's petition on behalf of the judgment creditor, a corporation, had been duly authorised under seal to do so. Neither the creditor's petition nor the affidavit of truth of statement deposed by Hii Hieng Sing give any indication that there was an authorisation under seal.

  29. As such the creditor's petition was a nullity and on this ground alone the creditor's petition should be set aside.

  30. In view of the foregoing, I dismiss the creditor’s petition with costs to the judgment debtor to be taxed unless agreed.

Cases

Samuel Pakianathan, Re; Exp Perwira Habib Bhd [1996] 2 AMR 2055; Sovereign General Insurance Sdn Bhd v Koh Tian Bee [1988] 1 MLJ 304; Wee Chow Yong t/a Vienna Music Centre v Public Finance Bhd [1989] 3 MLJ 508; Bintulu Realty Estate Sdn v Samat Hj Othman [1993] 4 CLJ 571; Chen Sing Chew, Re; Exparte Oriental Tin Sdn Bhd [1974] 2 MLJ 69; Chinn Swee Onn v Puchong Realty Sdn Bhd [1990] 1 MLJ 108; Dayasar Corporation Sdn Bhd v CP Ng & Co Sdn Bhd [1990] 1 MLJ 191; Haroun Al-Rashid Mohd Yusof, Re; Exp Daya Leasing Sdn Bhd [1996] 5 MLJ 317; Kerpa Singh v Bariam Singh [1966] 1 MLJ 38; Lau Puong Ong, Re [1998] CLJ LN 255; Lim Hong Kee David, In Re [1995] 4 MLJ 564; Michael Chong Ngan Fong v Syarikat Fong Sam Timber [1977] 1 MLJ 263; Nga Ching Wen; Exparte Moscow Narodny Bank Ltd [1996] 2 CLJ 943; Sova Sdn Bhd v Kasih Sayang Realty Sdn Bhd [1988] 2 MLJ 268

Legislations

Bankruptcy Act 1967: s. 3(1)(i), s. 5(1)(a), (c), s. 133

Bankruptcy Rules 1969: R. 18(1), R. 215

Civil Law Act 1956: s. 11(a)

Contracts Act 1950: s. 60, s. 61, s. 62

Rules of the High Court 1980: Ord. 42 r 12

Representation

Henry Ling (Ling & Wong Advocates) for Judgement Debtor

Hii Hieng Sing (Hii & Co Advocates) for Judgement Creditor

Notes:-

This decision is also reported at [2000] 1 AMR 807.

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