Grounds of Judgment (MAM Teguh).pdf - Muhammad Faisal bin Zulkifli

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WA-29NCC-192-02/2022 Kand. 60 25/05/2023 15:08:00 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION) BANKRUPTCY NO.: WA-29NCC-192-02/2022 BETWEEN MAM TEGUH SDN BHD (COMPANY NO: 932024-T) …. JUDGMENT CREDITOR AND AZMI BIN ARIFIN (NO. K/P: 780610-01-5833) …. JUDGMENT DEBTOR JUDGMENT OF THE COURT Introduction [1] The Judgment Debtor (“JD”) filed a Summons in Chambers in Encl. 32 to set aside the Creditor’s Petition on 15.2.2023. [2] On 19.5.2023, this Court dismissed the JD’s Summons in Chambers in Encl. 32 with cost of RM 1500 subject to allocator fee. After the decision was given, both parties argued regarding the filing of notice under rule 116 of the Insolvency Rules 2017 by the JD three days before the decision. [3] However, the notice has failed to specify the statements in the petition which JD intends to deny or dispute. After being questioned by the Court, the counsel on behalf of JD admitted that the notice was filed with the same reasons as in Enclosure 32. 1 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal [4] Hence, this Court also dismissed the notice in Enclosure 46 on the same grounds with decision against Enclosure 32. [5] Aggrieved by the decision, JD then filed a Notice of Appeal to Judge in Chambers in Enclosure 53 against the decision in Enclosure 32. Decisions [6] After careful scrutiny and judicious consideration of affidavits and written submissions of the parties in respect of the Summons in Chambers to set aside the Creditor’s Petition, this Court ordered as follows: (a) Summons in Chambers in Encl. 32 is dismissed with cost of RM 1500 subject to allocator fee. Issues [7] After perusing the JD’s submissions in respect of JD’s Summons in Chambers, it is worth noting there are several issues have been taken up by the JD collectively as follows: - a) the amount of claim against the JD is below the minimum threshold amount of RM 100,000.00; and b) whether this Court is within its’ jurisdiction to grant a Bankruptcy Order based on the Amended Creditor’s Petition in Enclosure 31. Analysis and Findings [8] This Court scrutinized JD’s statement in his affidavit and find that JD has made payment of RM 9000 on 9.4.2022 by way of online transfer into the JC’s account. On the basis of this payment, JD submitted to the Court that the balance amount owed to JC is reduced below the threshold of RM 100,000.00 and thus, it is not permissible for JC to present Creditor’s Petition against him and no Bankruptcy Order shall be recorded against him. 2 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal [9] It is crucial to note here the disputed amount of debt in the Bankruptcy Notice is unchallenged by the JD despite JD has made the payment and subsequently, JD has committed an act of bankruptcy which resulted in the filing of the Creditor’s Petition. [10] This Court find that the payment of RM 9000 has been made without prior notification and/or discussion with the JC. JD only informed JC regarding the payment on the next day, which is on 10.4.2022. [11] It is pertinent to note here that since the transfer of payment, the JD has not made any effort to pay off the whole amount of debt. This is averred by JC in the affidavit in reply and based on this basis, this Court find that JD has no intention of paying the balance amount which is also clearly quoted in the JD’s affidavit (Enclosure 40, paragraph 12) in which JD averred as follows: - “Perenggan 9 adalah dipertikaikan. Saya tidak mempunyai apa-apa obligasi di bawah undang-undang untuk memberi cadangan penyelesaian langsung. Sekiranya saya gagal membuat bayaran ke atas penghakiman berkenaan, Pemiutang Penghakiman boleh memfailkan proses pelaksanaan yang diinginkan. Apa yang tidak boleh dilakukan adalah pemfailan Petisyen Pemiutang apabila hutang yang tertunggak telah menjadi kurang dari RM 100,000.00 seperti yang telah dilakukan oleh Pemiutang Penghakiman.” [12] This Court also refers to Section 6(3) of the Insolvency Act 1967 which also holds that: “If the Court is not satisfied with the proof of the petitioning creditor’s debt or of the act of bankruptcy or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts, or that for other sufficient cause no order ought to be made, the court may dismiss the petition.” [13] It is clear from the above provision that the JD shall satisfy this Court the elements laid in the section 6(3) of the Act and most importantly the ability of the JD to pay off his debt. By observing the conduct of JD and his statement in the affidavit, this Court is 3 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal convinced JD has clearly made the payment of RM 9,000 with an intention only to reduce the amount of debt below the threshold and not to pay the full amount of debt. [14] Although JC has received the payment of RM 9000 and only on 19.12.2022 tried to return the payment to JD, it is not a relevant issue to be argued here. The JC has mentioned in his affidavit that the payment of the said amount was received without prejudice and for the intention to give time and opportunity for JD to pay the remaining balance amount before the Creditor’s Petition is filed. [15] This Court is of the view that the question arises after the Bankruptcy Notice has been served to the JD is whether JD is solvent when the act of bankruptcy is committed. It is imperative for JD to satisfy the Court that he is solvent by tendering full amount of payment as stated in the Bankruptcy Notice. Any other payment lesser than the full amount shall not be entertained as the dispute between parties has now come before the Court. The Bankruptcy Notice has been filed in this bankruptcy proceeding and thus no efforts to cause delay shall be allowed by the Court. [16] This Court reiterates that the Bankruptcy Notice is key to the whole bankruptcy proceedings and the amount stated therein must be settled by the JD before expiration of seven (7) days after service of notice (in this case is 14 days). [17] In the case of OCBC Bank (M) Bhd v Sethu a/l Ambalagara Thevar [1998] 3 MLJ 769 the Court said as follows:- “In our view, if the Judgment Debtor is able to settle the full amount stated in the Bankruptcy Notice, he has not committed an act of bankruptcy. If he tenders the full amount as stated in the bankruptcy notice, the petitioning creditor is obliged to accept that amount as full settlement of the sum owing under the said bankruptcy notice and the petitioning creditor could not petition for a receiving order. If the petitioning creditor refuses to accept the amount he does so at his 4 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal own peril. In our view the payment of the full amount as stated in the bankruptcy notice is the best evidence that the judgment debtor is solvent.” It is clear in our case that the JD did not tendered payment of full amount and thus, it is the best evidence that JD is insolvent. [18] This Court also refers to case as relied by the JC of Husain Manaf, Ex P Malayan Banking Bhd [2002] 7 CLJ 556 in which the Court said that: - “Petisyen dicabar di segi jumlah bayaran yang diterima oleh perayu dan didakwa gagal diambilkira. Afidavit responden sendiri menyatakan bahawa bayaran itu dibuat dengan cek yang dimasuk terus ke dalam akaun responden dengan perayu. Ia bukan dibuat untuk menyelesai jumlah yang dituntut dalam NK (Notis Kebankrapan). Perayu hanya diberitahu tentang bayaran masuk itu selepas tempoh yang ditetapkan dengan cadangan penyelesaian yang gagal atau sebab kemungkinan sendiri. Untuk lepas daripada efek NK responden perlu membayar atau menawarkan bayaran penuh seperti yang dinyatakan dalam Notis Kebankrapan atau membuktikan persetujuan perayu untuk menerima bayaran yang ditawarkan sebagai penyelesaian penuh tuntutannya.” [19] This Court also refers to Lilley v American Express Europe Limited [2000] BPIR 70 in which this case is pertaining to the Insolvency Act 1986 of the United Kingdom. The Court in this case held that there was no further requirement under the Act or the Insolvency Rules 1986 that the petition debt must still exceed the bankruptcy level at the date the petition is heard. The Court has a discretion as to whether to make the bankruptcy order in such circumstances. [20] This Court also refers to the case of Allen v London Borough of Haringey [2017] EWHC 2664(CH). In this case, the District Judge has made a bankruptcy order against the Judgment Debtor eventhough the amount of debt has been reduced 5 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal below the threshold of £5,000. Aggrieved by this decision, the Judgment Debtor appealed to the High Court. Mr Justice Norris in dismissing the appeal, has confirmed that there is no error made by the learned District Judge who made the bankruptcy order against the Judgment Debtor. The District Judge, as being recorded in the case, was quoted by Mr Justice Norris as follows:- [7] “There then followed some further debate, at the end of which the learned judge suggested to the parties that, in the light of her indication that she was not likely to make a bankruptcy order when the debt is less than £5,000, there should be further discussions with the solicitors. Addressing Mr. Allen, she said that it was obviously in his interest to pay what he could before the next hearing, "because the court will still have a discretion at the next hearing to make a bankruptcy order if, for example, it turns out the payments are not continued.” [21] It is imperative to note here that the Court will still have a discretion to grant a bankruptcy order if the payments are not continued despite the amount of debt has been reduced below the minimum threshold. The learned District Judge then continued to give directions for the Judgment Debtor to show to the Court in the next hearing that the Judgment Creditor has been very unreasonable in not engaging with the Debtor. The learned District Judge said:- [8] “I cannot determine it today, so if on the next occasion the Council feel very strongly that discretion should be exercised in favour of granting a bankruptcy order, I would expect them to show that you have been very unreasonably. And if you're of the view that the Council have been very unreasonable in not engaging with you, I would expect you to have prepared a witness statement explaining how far back you've made offers and showing to this Court that you have made good…” [22] It is pertinent to note here that in our case, the JD is clearly not having any intention to make offers to settle the remaining debt to the JC. It is crystal clear to observe this absence of intention and effort made by the JD. [refer to Enclosure 40, paragraph 12]. 6 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal Mr Justice Norris then continued:- [13] “The District Judge gave a considered judgment on the issue before her, she noted that the last adjournment had been because the court wished to consider whether it was appropriate to make a bankruptcy order, despite the fact that the debt was now below the bankruptcy threshold.” …. The learned District Judge has also referred to section 271 of the United Kingdom Insolvency Act 1986 in which sub section 3 of that section permitted the Court to dismiss the petition if a debtor has made an offer to secure or compound for the petition debt which the petitioning creditor ought reasonably to have accepted. This Court is of view that this sub section is in pari materia with our section 6(3) of our Insolvency Act 1967. The learned District Judge also referred to the test set out by Chief Registrar Baister in HMRC v Garwood [2012] BPIR 575. She said: [14] "In order to consider that the offer had been unreasonably refused, the court would have to conclude that no reasonable, hypothetical creditor in the possession of the petitioning creditor would refuse the offer. That means, in effect, that if the refusal is within the reasonable range of responses to the offer put forward, then the court is not in a position to interfere and insist that the offer is accepted, and the petition is dismissed.” It is clear from our case here that there was no offer made by the JD. There was only a partial payment of RM 9,000 in which the JC has tried to returned it to JD. The payment is unreasonable for JC to accept it as it is clearly as only a tool for JD to avoid bankruptcy. [23] Coming back to the Allen’s case, the Court recorded as follows:- [17] “She then went on to say that insofar as Mr. Allen had produced evidence of his income and his outgoings, that was scant and suggested that he would find it very difficult to maintain payments of £500 per month. That was because his mortgage outgoings absorbed about two-thirds of his available income. If on top of that he was to pay £500 per month to the Council, he would be left with almost nothing on which to 7 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal live. The learned judge noted also that a petitioning creditor was not obliged to be patient or generous and that these were long outstanding debts in respect of which Mr. Allen had given no explanation in evidence as to why they had not been paid. She also noted that Mr. Allen had not paid any council tax for the current period. In the light of that, she considered that in Mr. Allen's difficult financial circumstances, he was not able to pay the debt within a reasonable period, even though he was apparently the owner of two properties which provided a source of funds to which he could have had resort and to which resort could be had in a bankruptcy. In the circumstances, she decided to make a bankruptcy order. She then told Mr. Allen that in the light of that order, he might want to take some further advice from the Bankruptcy Advice Centre about what his options were at this stage.” Mr Justice Norris in affirming decision made by the learned District Judge, has said as follows:- “She identified an issue for decision: should a bankruptcy order be made, even though the petition debt was now below the bankruptcy level? She identified what was being said on each side of that issue. On the Council side, that this was a long- standing debt; on Mr. Allen's side, that he was making offers. She set out a mechanism for how that issue should be resolved, giving permission to Mr. Allen to file a witness statement setting out the history and directing him to where he could obtain advice at no cost as to what was required. She expressly reserved the possibility that a bankruptcy order would be made at the subsequent hearing in the course of addressing submissions which had been made by Haringey as to the form of the order. [22] It is right that if you cherry-pick only one sentence out of the District Judges' observations, you can pick up that she expected that if the Council was to press for a bankruptcy order, she would expect them to show that Mr. Allen had been unreasonable. That observation was however balanced by an expectation that Mr. Allen would on his side demonstrate that it was unreasonable of the Council to have refused the offers which he was making. [23] This is not a case like that of the London Borough of Camden v Martin [2009] EWHC 2040, where the Registrar had endorsed on the file that if the debtor paid a specified sum by the next hearing, "the petition would be dismissed", and at the subsequent hearing, the debtor (having paid that sum) found that the bankruptcy order 8 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal was made against her. As Mr. Jules Sher QC sitting as a Deputy High Court Judge said at para.31 of his judgment: "It would be too narrow a view of the matter to consider whether the court was bound by the doctrine of estoppel. Because at the subsequent hearing wider considerations of fairness needed to be taken into account." There was nothing unfair in affording to Mr. Allen the opportunity to put before the court the material on which he relied, the burden being on him to show that he had made offers of settlement that were unreasonably refused, and in deciding the case in the light of the evidence.” Applying the principle as elaborated in the Allen’s case, this Court is of the view that the Court will still have a discretion to grant a bankruptcy order if the payments are not continued despite the amount of debt has been reduced below the minimum threshold. This Court is also of the view that JD had been unreasonable. JD has failed to demonstrate that it was unreasonable of the JC to have refused the offers which he was making, as he has not made any offer and the payment made only serve as a tool to reduce the amount of debt. [24] As recognised by Selborne Says (2019) 5 CRI 187 dated 1st October 2019, in answering question regarding situation when the hearing of the petition has been adjourned when following a number of ad hoc payments by the debtor, the author has provided a solution as follows: - “In the further alternative, the client is entitled to reject the offer of further payment and to press ahead with the petition, asking the Court to make a bankruptcy order at the hearing. This may be done for number of reasons. It may be that the client has serious doubts as to the genuineness of the debtor’s intention to make further payments or his ability to do so. In the circumstances, it would be appropriate to seek a bankruptcy order without further delay. It may be that the client sees little point in accepting further payments from the debtor as he will most likely have to return them to the trustee in bankruptcy when a bankruptcy order is inevitably made later down the line. Again, in these 9 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal circumstances, it would be appropriate to press ahead without any further delay. Assuming the papers are otherwise in order, there is no reason why a Court would refuse make a bankruptcy order on the basis of a potential part- payment by the debtor in the future.” [25] This Court is of the opinion that the Judiciary must not be treated as a fool, and the law must not be manipulated dishonestly. The Court is vested with discretion, and shall exercise the discretion in allowing Creditor’s Petition to be heard and granted Bankruptcy Order despite the amount has been reduced below the minimum threshold of bankruptcy in certain circumstances as been elaborated above. Dated: 24.5.2023 t.t (MUHAMMAD FAISAL BIN ZULKIFLI) Senior Assistant Registrar High Court of Malaya Kuala Lumpur 10 S/N ukHZb1/yVUScqC3aWzC6hg **Note : Serial number will be used to verify the originality of this document via eFILING portal