1. ) Berkenaan: Md Shariff bin Ahmad ...Penghutang Penghakiman (29NCC-4455-12/2015)

This was an appeal to the Judge in Chambers filed by the Judgment Debtor (JD) against the decision of a Senior Assistant Registrar (SAR) dated 26.10.2016 dismissing the JD’s application (encl. 25) to set aside the Creditor’s Petition dated 21.4.2016 (CP).

On 9.3.2017, this Court dismissed the JD’s appeal and affirmed the SAR’s decision. The JD was not satisfied with the decision of this Court and appealed to the Court of Appeal. This judgment serves as the reasons for the decision, and the reasons are set out at below.

The Judgment Creditors (JCs) filed this bankruptcy action against the JD based on a judgment dated 3.4.2014 obtained in the Kuala Lumpur High Court via suit No. 22NCC-164-02/2012. The JCs were the plaintiffs and the JD was the 2nd defendant in the suit.

A Bankruptcy Notice dated 21.12.2015 (BN) was issued against the JD by the JCs. The BN was served on the JD by way of substituted service; and on 18.3.2016, the JD committed an act of bankruptcy when he failed to satisfy the BN. The bankruptcy proceeding took its course. On 8.8.2016, the JD filed an application (encl. 25) to set aside the CP, but the application was dismissed by the SAR. The JD filed an appeal to the Judge in Chambers against the decision of the SAR.

At the hearing of the JD’s appeal before me, the counsel for the JD informed the Court that she would rely only on two issues to support the Page 3 of 8 appeal although she had raised numerous issues in her written submission. First, the BN was defective because the amounts stated therein were incorrect, excessive and not based on the judgment sum obtained. Secondly, the JCs’ CP did not comply with FORM 9 of the Schedule of the Bankruptcy Rules 1969, and this therefore rendered the whole proceeding defective.

The counsel for the JD contended that the sums stated in the BN were incorrect, excessive and not according to the judgment dated 3.4.2014. The counsel for the JD submitted that the wording in the judgment did not state the amounts for the chargeable interest which the JCs were entitled. The counsel for the JD submitted that the total amount stated in the BN for the chargeable interest was exorbitantly high.

This Court could not agree with the JD’s counsel’s submission. Reference is made to the relevant part of the judgment, it states as follows: “5. Seterusnya Plaintif-Plaintif mempunyai pilihan sama ada sebelum atau selepas penyiasatan forensic tersebut untuk mendapatkan 50% pemegangan syer Plaintif-Plaintif dalam ekuiti di dalam syarikat Defendan Pertama atau jumlah wang sebanyak RM1,290,000.00 dibayar bersama dengan faedah pada kadar 8% setahun dikira dari tarikh wang Page 4 of 8 dikeluarkan oleh Plaintif-Plaintif kepada Defendan Pertama sehingga penyelesaian penuh yang mana perlu dibayar oleh Defendan Kedua dan Ketiga kepada Plaintif-Plaintif. Sekiranya, Plaintif-Plaintif memilih untuk mendapatkan syer, pendaftaran syer Plaintif-Plaintif hendaklah dilakukan serta-merta; salinan asal Borang 32A diserahkan kepada Plaintif-Plaintif untuk didaftarkan dengan Suruhanjaya Syarikat Malaysia.”

The words in bold above clearly allow the JCs to charge interest at the rate of 8% based on the amount paid to be calculated from the date the JCs paid the money to the 1st defendant until the date of full settlement. Based on this decree, the JCs worked out the different amounts paid out. There were a total of seven payments made on different dates. The interest chargeable for these seven amounts was calculated based on the dates the money was released up the date of the BN. The JCs have tabulated in the BN as to how the amounts of the chargeable interest were derived. The JCs stated the total number of days the interest was calculated based on each and every amount released. The submission of the counsel for the JD on this first issue was without any basis. There were no supporting facts in the application to suggest the amounts for the chargeable interest were incorrect, excessive or not based on the judgment.

The counsel for the JD submitted that the JCs’ CP did not follow the wording in FORM 9 of the Schedule, and therefore, the CP is defective and invalid, and should be set aside. The JD’s counsel Page 5 of 8 submitted that the CP has omitted the whole of paragraph 3 of FORM 9 which concerns security for payment. As such, the CP was defective. FORM 9 is a mandatory statutory form, and failure to comply with it renders the whole bankruptcy proceeding invalid, the JD’s counsel submitted.

This Court refers to s.131 of the Bankruptcy Act 1967 and Rule 274 of the Bankruptcy Rules 1969. They state as follows: “s.131 Formal defect not to invalidate proceedings No proceeding in bankruptcy shall be invalidated by any formal defect or by any irregularity, unless the court before which an objection is made to the proceeding is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of that court.” “274. Effect of non-compliance with Rules 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.”

This Court also refers to the decision of the Court of Appeal in Arab-Malaysian Finance Bhd v Mohd Zakaria Salim [2002] 3 CLJ 530, pp. 532-3, wherein in the judgment of Gopal Sri Ram JCA (as he then was) stated as follows: “It is our judgment, the time has long passed when courts are troubled by the question as to whether in the initiation of prosecution or conduct of proceedings, the breach of a rule of court amounts to a mere irregularity or a nullity. The modern approach is exemplified by the judgment of Lord Woolf MR in Nicholls v. Nicholls [1997] 147 NLJ 61. That was a case of contempt of court where the breach of an order made in matrimonial proceedings was the subject matter of the complaint. It was held, after a discussion of the earlier authorities on the subject, that a breach of a rule of the court, even in such a serious matter as contempt of court, would be overlooked unless such breach produced a miscarriage of justice or serious prejudice to the alleged contemnor. Nicholls v Nicholls was applied by our Federal Court in the judgment of Mohammed Azmi FCJ in a case concerning the non-observance of the requirements of the Rules of the High Court 1980. See, Lai Yoke Ngan & Anor v Chin Teck Kwee & Anor [1997] 3 CLJ 305. Further, very recently this court in Maril-Rionebel (M) Sdn Bhd v Perdana Merchant Bankers Berhad [2001] Page 7 of 8 3 CLJ 248 took the same approach to a breach of the Companies Winding-up Rules which are not dissimilar in context and consequence to adjectival bankruptcy legislation.”

Having regard to the relevant law above and the approach taken by our Malaysian Courts in regard to non-compliance of rules, be it the Rules of Court, Companies Winding-up Rules or Bankruptcy Rules, the litmus test is whether such breach has occasioned a miscarriage of justice to the extent that it has caused substantial injustice to the other party. But in a case of breach of the bankruptcy rules, the injustice caused must be to the degree that it cannot be remedied by any order of that court.

Applying the above test to the present case, this Court is of the considered view that the omission of paragraph 3 could not occasion such a serious miscarriage of justice to the JD. Paragraph 3 in FORM 9 provides several situations in which a petitioner may be holding any security for payment. When a petitioner does not hold any security, he may elect to state the first part of paragraph 3 and to cancel/delete the rest of the paragraph.

Since the entire paragraph 3 of FORM 9 was omitted in the CP, it would mean that the JCs were not holding any security for payment. It is observed that the JCs were not a secured creditor as defined in s. 5(2) read together with s. 2 of the Bankruptcy Act 1967, and therefore, did not hold any security for payment. Hence, the fact that paragraph 3 of FORM 9 of the Schedule is not found in the CP would, in the opinion of this Court in this given set of facts, not in any way have caused any Page 8 of 8 miscarriage of justice to the JD. Further, there was no injustice caused to the JD which requires the Court to grant any remedy. Reading s.131 of the Bankruptcy Act 1967 and Rule 274 of the Bankruptcy Rules 1969 together, such non-compliance of FORM 9 of the Schedule could not in any manner render the bankruptcy proceeding invalid.

The Court has also considered other issues raised in the JD’s counsel’s written submission, but is not satisfied that the CP or the bankruptcy proceeding is invalid.

Based on the above reasoning, this Court dismissed the JD’s appeal and ordered costs of RM1,000.00 to be paid to the JCs by the JD. -Signed- …………………………………….. (CHOO KAH SING) Judicial Commissioner High Court, Johor Bahru JD’s counsel : Suhaidi Zakaria Tetuan Mastura & Associates JCs’ counsel ; Azad B Akhtar Khan Tetuan Kesavan