Topic 2 – Bankruptcy Notice

 S.5(1)(a) IA 1967 – amount claimed in the bankruptcy notice must not be less than
RM100,000 with interest quantified, up to date of issue of bankruptcy notice, read
together with S.3(1)(i) – prior to Covid-19 was RM50,000
 Refer Insolvency (Amendment) Act 2020 & The Temporary Measures for Reducing
the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 – threshold to present
bankruptcy petition raised to RM100,000
 This however does not apply to matters ongoing in court
 Form 34 (Rule 89) IR 2017 – bankruptcy notice is issued by the court (Rule 89) and
served by the creditor who has obtained final judgment against the debtor. Notice
must carry an endorsement that if the debtor has any set-off or counter claim, he must
filed an affidavit within 7 days
 Form 35 (Rule 90) IR – bankruptcy notice must be accompanied by a request to the
Registrar to issue a bankruptcy notice
 S.3(1) – judgment debtor has 7 days to response to bankruptcy notice, excluding day
of service – failure to comply equals to judgment debtor committing an act of
bankruptcy

Final Judgment
 If a bankruptcy notice is served when an application is still ongoing or when appeal
was made within stipulated time, the bankruptcy notice shall be invalid.
 A judgment in default shall not be a final judgment. This is because a judgment in
default is obtained when a defendant failed to enter into appearance for the claim
made against him in court.
 When a court orders a judgment in default, this order is not made after deciding the
case on merits, it is simply made due to the failure of the defendant to answer the
claim made against him. The general rule is that a judgment or order is only final if it
disposes of the rights of the parties finally or no further step is necessary to perfect it
 However, if a debtor who has been given JID against, and does nothing, the JID
becomes a final judgment
 S.3(1)(i) – provides that one of the requirements before filing and serving bankruptcy
notice is that the bankruptcy notice must be founded on a final order or judgment, and
of which the execution has not been stayed

JID
 Re Udos ak Rigging ex parte Seabanc Kredit Sdn Bhd – in this case a judgment in
default (JID) was obtained against the debtor. The debtor subsequently filed for
appeal against the decision of JID. However, during application for the said appeal, a
bankruptcy notice was served on him. The court held that the JID is not final since it
was not decided on merits. Thus, a judgment that is not based on merit is liable to be
set aside by application made by the debtor. This is subject to debtor who must
exhausted all means to challenge the judgment i.e. appeal. If a debtor does nothing,
his rights is forfeited. In this case, the court held that the judgment of JID becomes
final when:
1. The debtor failed to apply to set aside the JID within time
2. Where debtor filed application to set aside the JID, but was dismissed, and the
debtor failed to appeal against the dismissal within time
3. Where an appeal against dismissal was filed by the debtor, but the court
dismissed this appeal and no further appeal is possible
Summary Judgment
 Sri Jeluda Sdn Bhd v Pentalink Sdn Bhd – where a summary judgment was obtained
which was then appealed by the debtor. The plaintiff then issued a bankruptcy notice
to which the debtor applied to set aside on the basis that it was pending appeal, since
the debt was being disputed. The Court of Appeal in this case held that summary
judgment remained a good judgment, until it is set aside on appeal.
 Lee Bak Soon @ Lee Pak Choon v RHB Bank Bhd – where the Court of Appeal held
that summary judgment under O.14 RHC obtained which became the basis of the
judgment creditor’s application for bankruptcy notice is a final judgment, as the
judgment debtor had not appealed nor obtained a stay of execution. The judgment
creditor was therefore entitled to enforce the final judgment.
 Re Lim Chan Kwang, ex parte Public Bank Bhd – a creditor obtained a JID against
debtor. Debtor then applied to set aside JID, court allowed. Later, the bank appealed
on the ground that debtor had no triable issues, which the court allowed. The debtor
appealed, during this appeal, the creditor served bankruptcy notice on the debtor. The
court held that the judgment given in application for summary judgment became
judgment on merits
 Perwira Habib Bank Bhd v Samuel Pakianathan – a summary judgment is hence a
final judgment

Date
 A formal bankruptcy proceedings is deemed to commence upon the issue of the
bankruptcy notice
 R 94 IR 2017 – bankruptcy notice shall be valid for 3 months (therefore, must serve
BN within 3 months)
 S.3(1) – judgment debtor has 7 days to response to bankruptcy notice, excluding day
of service
 Fadzil bin Othman v Malayan Building Ltd – in calculating period for compliance
with the bankruptcy notice, the date of service is excluded. Which means a day after
the successful service, the time starts running
 Re Fadzil Othman ex parte MBB – bankruptcy notice was served on 8/6/1992 but the
petition stated on 15/6/1992 (6 days after). The representative for the Official
Assignee argued that this was incorrect as the judgment debtor had to comply with the
notice within 7 days of service, excluding day of service. The court held that this error
was oppressive to the judgment debtor. The court held that this non-compliance is
fatal and thus notice was set aside
 S.3(1)(i) read together with Form 36 (Rule 93) IR 2017 – the most common provision
to set aside applications of BN

Subsequent Agreement
 The Bankruptcy Notice should be based on terms in the final judgment, and not based
on mutual agreement arrived by the parties subsequently
 Datuk Md. Sari v Norwich Winterthur Insurance – parties in this case agreed on
installment repayments of the debt as agreed in the final judgment. However, the
debtor defaulted from paying. The respondents proceeded with bankruptcy notice.
The court held that there is no act of bankruptcy committed, for non-compliance with
 a bankruptcy notice that is not based on the final judgment. For example, when the
amount is modified by subsequent agreement

Amount Claimed
 The Bankruptcy Notice should be accurate – it must particularize the amount
including interest which should be accurately quantified i.e. the exact sum

Quantify Exactly
 UOBB v Loke Lai Ying & Anor – any uncertainty or ambiguity would invalidate the
bankruptcy notice. However, the court held that if there was a typing error in the
CALCULATION, but does not effect the final amount in the bankruptcy notice, it
would not invalidate the bankruptcy notice
 Re Wong Su Tiung ex parte Yeo Hiap Seng Trading Sdn Bhd – the court held that it
is not enough to stipulate the rate of interest on the basis that it can be translated to an
exactly quantifiable sum at any given time. Therefore, must quantify exactly

Continued Interest
 A bankruptcy notice is bad if the amount that is actually demanded is unclear
 S.6(3) Limitation Act – action on judgment shall not be brought after 12 years from
date of judgment and interest accrued is up to 6 years only
 O.46(2)(1)(a) – if action is taken after 6 years from judgment date, must obtain leave
of court (though LA provides for 12 years)
 Dr Shamsul Bahar & Anor v RHB Bank Bhd – Federal Court held that if a creditor
wishes to commence bankruptcy proceedings after 6 years from date of judgment, he
must obtain leave of court as per O.46. Therefore, judgment is valid for 12 years but
interest can only be claimed up to 6 years
 Ghazali Mat Noor v Southern Bank Ltd – the court held that petitioner cannot merely
reproduce the terms of the judgment, without quantifying the amount demanded. The
interest must be calculated up to the date of issue of Bankruptcy Notice. Therefore, a
bankruptcy notice must include judgment sum and interest up to the date of issue of
said bankruptcy notice
 United Malayan Banking Corporation Berhad v Ernest Cheong Yong Yin – the court
held that S.6(3) of Limitation Act 1953 limits the interest on judgment sum to 6 years
from the date on which it became due i.e. date of judgment
 Therefore, there can be no continuous interest
 Re Ismail bin Daud and Haja Qameriah – the court held that interest cannot be stated
to be continuing and left to be unquantified. This would render the bankruptcy notice
uncertain and thus invalidate it (HC, should be given little weight since it contradicts
Supreme Court in Ghazali)

Exceed Judgment Sum

 Soo Kok Loong v Hong Kong Bank Bhd – bankruptcy notice will only be invalid if
the amount in it exceeds the judgment sum. On the facts of this case, the sum was less
than RM30,000 and thus was not entitled to issue bankruptcy notice (not reach
threshold)

Amount not Calculated

  Low Mun v Chung Khiaw Bank Ltd – if the amount is not calculated, it will not be
deemed to be liquidated and this cannot be cured. Amount must be quantified (similar
to Ghazali)
 J Raju M Kerpaya v Commerce International Merchant Bankers Bhd – a bankruptcy
notice that claims for sums not provided in the judgment such as interest is null and
void

Limitation and Acceptance of Part Payment

 Moscow Norodny Bank Ltd v Ngan Chin Wen – debtor applied to set aside
bankruptcy notice due to irregularities, SAR allowed the application. Creditor then
appealed. The first issue is whether limitation had set in and whether acceptance of
part payment as to complete and satisfy the debt and renders the proceedings abuse of
process. The Federal Court allowed the creditor’s appeal and held that date of interest
becomes due is judgment date as in UMBC v Ernest and there was no evidence
showing accord or satisfaction of the debt, the payment after is not an oppression.
 Loh Kok Huah v Bann Hin Lee Bank ex parte – judgment debtor can carry on making
payments on the judgment sum even where bankruptcy has commenced, so long as
sum is not less than statutory minimum at date of receiving order and adjudicating
order

Effect
 Fawzia b Osman v Bank Bumiputra Malaysia Bhd & Anor – these defects are not
mere irregularities that can be curable under S.131 BA or Rule 274 Bankruptcy Rules

Two or More Judgments

 O.89(2) IR – 2 or more judgments cannot be combined in one notice to satisfy the
statutory amount of RM50,000 (now RM100,000 due to Covid)
 Re Chan Chong Fatt Willy ex parte Hitachi Lease – the judgment creditor in this case
combined the consent judgment and summary judgment obtained in the same suit
under one bankruptcy notice. The court held that although it may be obtained in the
same suit, a bankruptcy petition cannot be founded on two or more separate
judgments. Thus, the leave to amend the bankruptcy notice must be refused
 Haroun Al Rashid b Md. Yusof ex parte Daya Leasing Sdn Bhd – in this case, the
appellant contended that the bankruptcy notice was invalid due to it being based on
two judgments. Where in this case, there was a final judgment dated 28/6/1988 and
another was an ORDER (not judgment) dated 27/7/1988 which was made in respect
of the costs pursuant to the judgment in 28/6/1988. Therefore, the court held that the
judgment 28/6/1988 was valid and effective and not the latter order
 Dr. R Ramachandaran ex parte Ganeshwary a/p Ponnudurai – the judgment debtor
applied to set aside the bankruptcy notice as the gross sum was the combined sum of 3
separate orders. The court held that the bankruptcy notice was a breach of S.3(1)(i) of
BA 1967 and also O.91(2) of BR. This is because any bankruptcy notice that is based
on more than one final judgment or order, will vitiate any bankruptcy proceedings

Two or More Persons To Pay Judgment Debt

 Where there are 2 or more persons jointly liable to pay the judgment debt, the notice
may be issued against one without including the other(s)
  Yeo Ah Wong v UMBC – however, the court here held that if the judgment is made
against 2 or more persons, who are jointly liable, then the bankruptcy notice must be
issued to both persons
 Khoo Kay Hoe v Chor Phairk Har & Anor – the appellants here were trustees for a
deceased who were ordered to pay costs to respondents amounting to RM160,000 by
Penang High Court and allocator was issued. No payments were made by the
appellants and thus respondents commenced bankruptcy proceedings against them.
The appellants were adjudged bankrupt, they applied to set aside the bankruptcy
proceedings on the ground of nullity. Issues were whether the bankruptcy notice was
valid and whether it was defective. The Federal Court held that the allocator was a
final judgment and thus the allocator was in accordance with the terms of court final
order and thus valid. Therefore it need not be cured

Service of Notice
 When the Bankruptcy Notice is sealed and returned to judgment creditor, it must be
served on:
1. The judgment debtor – must be by personal service (R.95 IR and S.6 IA)
 R.95 IR 2017 – bankruptcy notice must be served personally and be proved by an
affidavit of service
 R.94 IR – bankruptcy notice must be served within 3 months from its issue, subject to
discretion of court to extend
 Practice Note No 1 of 1968
 S.93(4) IA – the creditor may apply for extension and the court has discretion to
extend time where service could not be effected within the prescribed time
 Koh Thuan Kuang v UMBC – the creditor here could not serve the debtor by way of
personal service due to the debtor evading the service. The creditor opted for
substituted service. Later, the debtor was able to affirm an affidavit two days after the
substituted service. This showed the usefulness of the substituted service where the
debtor is clearly evading service
 Kamaruddin bin Md v UMW (M) Sdn Bhd – an order for substituted service requires
posting on the notice board at the High Court KL and judgment debtor’s premises
within prescribed time. This is in addition to advertisement. However, the debtor
contended that the time for posting was not complied with although he had knowledge
of the substituted service. The court held that since it was brought to debtor’s
knowledge, service was sufficient
 Re S Nirmala – if the debtor is evading service, the Practice Note is not applicable. In
this case, the court held that the creditor making enquiries at the last known address
was sufficient
 Re Peh Kong Wan – the court held that it is the duty of the creditor to ascertain the
whereabouts of the debtor by making reasonable enquiries
 Re KV Sathasivam ex parte Phileoallied Bank (M) Bhd – debtor alleged several
irregularities including substituted service. The court held that the court has power to
order substituted service of document if it appears impracticable to serve personally.
The aim of substituted service is to bring notice to the debtor, if that is achieved, then
the service is deemed good and sufficient. In this case, the debtor admitted that the
bankruptcy notice was brought to his knowledge and thus the debtor’s allegation was
disallowed
 Low Mun v Chuung Khiaw Bank Ltd – the court has wide discretion in deciding the
mode of substituted service as long as it brings notice to the knowledge of the debtor
  Re Walter Su – application to extend time may be made before or after expiry of three
months
 Rohani Hamidah binti Nor v Sincere Leasing Sdn Bhd – an application to extend time
will be allowed if it can be shown special circumstances and a good cause to extend
 MUI Bank v Raju – extension of time can be made even more than 3 months

Formal Defects and Irregularities

 S.131 – procedural irregularities (of any bankruptcy proceedings) shall not invalidate
proceedings unless court is of the opinion that substantial injustice has been caused by
the defect
 Re Arif b Sionggong ex parte Arab Malaysian Finance Bhd – in this case there was
error in the calculation of the date of act of bankruptcy. The court allowed this
application under S.131 as to not invalidate the proceedings. The court held that the
act of bankruptcy is complete on the last day prescribed for the payment of the
judgment debt, excluding the date of service
 S.3(1)(i) of IA – debtor has 7 days to comply with bankruptcy notice, excluding day
of service
 Re Fadzil Othman ex parte MBB – bankruptcy notice was served on 8/6/1992 but the
petition stated on 15/6/1992 (6 days after). The representative for the Official
Assignee argued that this was incorrect as the judgment debtor had to comply with the
notice within 7 days of service, excluding day of service. The court held that this error
was oppressive to the judgment debtor. The court held that this non-compliance is
fatal and thus notice was set aside
 Re Abdul Rahman bin Md ex parte Public Finance Bhd – this was an appeal against
the deputy registrar’s decision to strike out the appellant’s petition on the ground that
the petition did not state the exact date of act of bankruptcy. The court allowed the
appeal held that the omission to state the date is a mere formal defect or irregularity
which can be cured by an amendment at the hearing of the petition. It doesn’t render
the petition defective. There is no provision in bankruptcy law which prohibits a
technical error from being corrected. If the date was mistyped or otherwise, it can be
remedy under S.131

Setting Aside Bankruptcy Notice

Grounds
 R.92(1)(c) – a debtor may apply to set aside bankruptcy notice on the following:
 Counter claim, set off or cross demand which equals or exceeds the amount
claimed by the judgment creditor
 Defects in the bankruptcy notice i.e. non-compliance with the form of
judgment
 Defective service of bankruptcy notice
 Re Fadzil b Othman ex parte MBB – judgment debtor should file a summons in
chambers supported by affidavit within 7 days of service of the bankruptcy notice, as
per Form 7
 Datuk Lim Kheng Kim v Malayan Banking Bhd – the affidavit raised the questions of
debtor no longer trading as sole prop under the firm name, the sum interest calculated
based on 560 days and not 559 days, the bankruptcy notice is premature as the costs is
not taxed and that an appeal is pending against this judgment. The Supreme Court
held that the debtor failed to raise challenge to the bankruptcy notice that is within the
meaning of S.3(1)(i)
Excessive Sum in Bankruptcy Notice
 Ghazali b Mat Noor v Southern Bank – the court held that excessive sum in
bankruptcy notice is bad in law and thus null ab initio. All subsequent proceedings is
also a nullity
 S.3(1)(i) of IA – debtor has 7 days to comply with bankruptcy notice, excluding day
of service
 R.95(1) – debtor may file an application by way of affidavit
 Re KV Sathasivam ex parte Phileoallied Bank (M) Bhd – in this case the debtor
alleged several irregularities including substituted service. Among the issues were the
interest claimed on judgment calculated exactly 6 years from date of judgment, failure
of creditor to obtain leave of court to execute and non-compliance with rules of court.
The court held that judgment is within 12 years and interest was calculated exactly for
6 years and was stated clearly. The court added that the understatement of judgment
sum did not cause prejudice to the debtor. In regards to substituted service, the court
held that notice was brought to knowledge of debtor, and thus the objective is
achieved
 Tan Thean Chooi v Kuwait Finance House (Malaysia) Bhd & Another Case – the
judgment debtor in this case applied to set aside the bankruptcy notice on the grounds
that it was Islamic financing loan, the interest was only calculated up to 30/4/2012
contrary to S.3(1)(i), bankruptcy notice was served on Saturday, the judgment debtor
had counterclaim, set off or cross-demand against the judgment creditor and the
judgment was not a final judgment. The court held that the BA 1967 did discuss on
any provisions specifically to Islamic financing loans, interest calculated was valid,
service on Saturday did not violate any rules and the judgment obtained by the
judgment creditor was a final judgment
 Perwira Habib Bank Malaysia Bhd v Samuel Pakianathan a/l Jabamanikam – the
court held that the counterclaim must be equal or more than the debt claimed, it must
have put in good faith with reasonable probabilities of success. The court held that the
could not set up the counter claim in the action to which the judgment was obtained