Chan Chee Chiu v Ketua Pengarah Jabatan Insolvensi Malaysia (WA-29PB-359-03/2024)

CHAN CHEE CHIU (Singapore NRIC No.: S1269448B)

CHAN KENG SENG, HUBERT (Singapore NRIC No.: S6806352C) …PLAINTIFFS

1.

DR. MUBARAK CHAN CHIN CHEUNG (NRIC NO.: 341112-10-5145/67818) …RESPONDENTS S/N xIwdpdx1v0eLoH5BCblmew Contents Page INTRODUCTION 3-5 BACKGROUND FACTS 5 The DGI decides to discharge 5-6 Locus Standi 6-7 THE LEGISLATIVE STRUCTURE & POLICY OF THE DISCHARGE PROVISIONS 7-8 The Three (3) Options to Discharge 8-10 THE DGI’S DISCRETION 10-14 DGI - EXERCISE OF DISCRETION & ABUSE 14 The JD’s Estate Must Still be Administered as There Are Dividends to be Received 15-19 Exemptions under section 33B(2A) 20 Advertisement 20-21 CONCLUSION 21 S/N xIwdpdx1v0eLoH5BCblmew GROUNDS OF JUDGMENT [1] These Grounds of Judgment deal with an application under section 33B(4) of the Insolvency Act 1967 (“IA”) to prevent the Director General of Insolvency (“the DGI”) discharging the bankruptcy of a judgment debtor under section 33A(1). INTRODUCTION [2] Chan Wing is the late father of the 2nd Respondent, Dr. Mubarak Chan Chin Cheung (“the JD”). The estate of Chan Wing (“Estate”) is one of the creditors of the JD. The Plaintiffs (“JC”) are the joint trustees of the Estate. On 27.6.2013, the JC submitted a Proof of Debt in the JD’s estate for RM147,461.95 (“POD”). [3]

Sundari d/o M Subramaniam ex p United Prime Corp. Bhd [2004] 1 CLJ Section 33 seems to list out what conduct does not justify a discharge from bankruptcy rather than identify the converse of it. If the bankrupt had committed any of the offences listed under subsection (4), the court shall not, unless there are special reasons, give him a discharge. In the alternative the court may suspend the operation of the order until a dividend of not less than fifty per centum has been paid to the creditors. In addition if there is proof of the facts listed in subsection

(6), the court shall:

refuse the order; or

suspend the operation of the order for a specified time; or

suspend the operation of the order until a dividend of not less than fifty per centum has been paid to the creditors; or

grant an order of discharge subject to such conditions as aforesaid. The facts listed under subsection (6) are a long list of activities that should not be indulged in by a bankrupt such as trading in the knowledge that he is insolvent, contracting debts that cannot be repaid etc. It also includes a list of circumstances preceding the bankruptcy that shows misconduct on the part of the bankrupt which brought about or caused the bankruptcy such as omitting to maintain account books for purpose of business dealings, extravagance in living, recklessness, gambling, want of reasonable care in business etc.” [Emphasis mine] [27] The third option is under section 33A. The Court in Bassanio Teo (supra) continued: “The bankrupt in the instant case, had taken a third route to release himself from the shackles of bankruptcy, i.e. through section 33A which was inserted in 2003 by Parliament. In Re Mohana Sundari d/o M S/N xIwdpdx1v0eLoH5BCblmew Subramaniam ex p United Prime Corp. Bhd , Zulkefli Ahmad Makinudin J (as he then was) quoted with approval the following passage from the judgment of Warren Khoo J in the case of Re Siah Ooi Choe, exp. Hongkong and Shanghai Banking Corporation [1998] SLR 903 which discussed the philosophy behind the law that allowed bankrupts who have not settled their debt to earn a discharge: “… the Act was designed to meet two major conflicting concerns. One stemmed from the fact that many an individual businessman become insolvent not through any fault, moral or otherwise, but through just being caught at the wrong turning of the economic cycle. It would be in the interests of society that people who had become bankrupt in such circumstances should be given a second chance in life ... The other concern was that, without proper safeguards, people who have used dishonest and fraudulent methods in conducting their business affairs to the detriment of their creditors might get an undeserved advantage from their own wrong doings.” Zulkefli Ahmad Makinudin J then commented that the new of provision of section 33A which conferred the power on the DGI to give discharge to a bankrupt after being one for five years is another provision: “designed and enacted by Parliament in furtherance of their original intention to afford a bankrupt some relief.” Very interestingly, unlike section 33 under which a bankrupt seeks reprieve from the bankruptcy, section 33A does not provide any guideline for the DGI to consider in granting a discharge. The only precondition is that five years must have elapsed since the commencement of the bankruptcy. Learned counsel for the creditor in this case has urged the court to prohibit the DGI from granting a discharge on the grounds that I enumerated earlier.” [Emphasis mine] THE DGI’S DISCRETION [28] The parties appear to be in agreement as to the principles applicable to the exercise of discretion by the DGI to issue a certificate of discharge under section 33A. The principles are as below. S/N xIwdpdx1v0eLoH5BCblmew

The exercise of discretion is subject to s. 33B and must be made judiciously depending on the circumstances. In Re Benny Ong Swee Siang; Ex parte United Overseas Bank (Malaysia) Berhad [2016] 3 CLJ 1001, it was held at para 19: “[19] From my reading of ss. 33A and 33B of the Bankruptcy Act 1967, the DGI does not have the absolute discretion to issue the certificate of discharge. The DGI's exercise of the discretion is plainly subjected to the provisions in s. 33B. It must be made judiciously depending on the circumstances of each case. In the Supreme Court case of Savrimuthu Sinnapan v. PP [1987] 1 CLJ 368; [1987] CLJ (Rep) 322; [1987] 2 MLJ 173, Salleh Abas LP held that public interest, reason and justice demand that any statutory power must be exercised reasonably and with due consideration.” [Emphasis mine]

A person in whom any power is vested by Parliament (in this case, the DGI) is akin to a trustee and the said person is under an obligation to exercise it reasonably and in accordance with the terms of the relevant statute that confers the power. It is not an uncontrolled discretion. Datuk Bandar Kuala Lumpur v. Zain Azahari Zainal Abidin [1997] 2 CLJ 248, at page 268, followed the judgment of Raja Azlan Shah Ag. CJ (Malaya) (as he then was). Gopal Sri Ram JCA said: “Raja Azlan Shah Ag. CJ (Malaya) explained the principle and its raison d'etre in words that are accorded respect that is usually reserved to statutory formulae found in an Act of Parliament: On principle and authority, the discretionary power to impose such conditions 'as they think fit' is not an uncontrolled discretion to impose whatever conditions they like. In exercising their discretion, the planning authorities must, to paraphrase the words of Lord Greene MR in Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. have regard to all relevant considerations and S/N xIwdpdx1v0eLoH5BCblmew disregard all improper consideration, and they must produce a result which does not offend against common sense; or to repeat Lord Denning MR's words in Pyx Granite Co. Ltd. v. Ministry of Housing and Local Government [1958] 1 All ER 625, approved in Fawcett Properties Ltd. v. Buckingham County Council [1960] 3 All ER 503, the conditions to be valid must fairly and reasonably relate to the permitted development. The dictum of Lord Denning MR has been frequently quoted and followed in these matters. … Applying the principles stated above, what is the effect of the condition under consideration? I read the affidavit of the Chairman, Land Executive Committee as claiming an unfettered discretion to grant or reject any application under s. 124 or impose such conditions or other requirements as the committee think fit. I cannot subscribe to this proposition for a moment. Unfettered discretion is a contradiction in terms. My understanding of the authorities in these cases, and in particular the case of Pyx Granite (ante) and its progeny compel me to reject it and to uphold the decision of the learned Judge. It does not seem to be realised that this argument is fallacious. Every legal power must have legal limits, otherwise there is dictatorship. In particular, it is a stringent requirement that a discretion should be exercised for a proper purpose, and that it should not be exercised unreasonably. In other words, every discretion cannot be free from legal restraint; where it is wrongly exercised, it becomes the duty of the Courts to intervene. The Courts are the only defence of the liberty of the subject against departmental aggression.” [Emphasis mine] [29] Based on the above, it cannot be disputed that the DGI’s discretion in issuing a certificate of discharge is not absolute and unfettered. It must be exercised based on valid and legitimate grounds. [30] The Court’s power to interfere with the DGA’s discretion under section 33A is limited. In Bassanio Teo (supra), it was held: “In my opinion, in reviewing the reasons for discharge under section 33A, the court should, save for exceptional reasons, be slow to substitute its own views as to how that discretion should be exercised as that duty has been entrusted to the DGI by Parliament. The court should be mindful S/N xIwdpdx1v0eLoH5BCblmew that this is not an application under section 33 where the court has the sole power to determine whether a bankrupt should be discharged. The power granted under section 33B is only the power to delay the discharge of a bankrupt. The representative of the DGI in the instant case has deposed that the respondent has diligently complied with the order to pay RM50 for eight years. He further deposed that the respondent has no assets to be realised. He added that to continue with the administration of the bankruptcy would only burden the respondent as well as the government. The outstanding amount is still a big sum as the payment of RM50 a month would never be able to catch up with the accretion of interests on a sum of over RM80,000. Therefore, if the situation were allowed to remain as it were, the bankruptcy would continue indefinitely as feared by the DGI.” [Emphasis mine] [31] His Lordship continued: “In the premises, I am of the view that the power of the court to prohibit the DGI from issuing the certificate to discharge the respondent for a period of two years should only be exercised in clear cut cases of abuse of section 33A. Guidance could be sought from section 33(6) but the court should resist the temptation to apply them stringently as that would tantamount to exercising original discretion under section 33(1). Clear cut cases of abuse would be where the bankrupt had obtained huge loans with no intention of paying them back or where the bankrupt is maintaining an extravagant lifestyle beyond his reported income or where he has continued to be reckless in his financial affairs. I note that even if the above facts were proved by the creditor, the court can only delay the discharge of the bankrupt by two years as Parliament in its wisdom had granted the power to discharge a bankrupt to the DGI. However, I hasten to add that in this case, from the affidavit of the representative of the DGI, there is no reason to infer that there has been any abuse of section 33A. Therefore there is no reason for me to interfere with the exercise of the statutory discretion which has been vested in the DGI by delaying the discharge of the bankrupt for a period two years.” [Emphasis mine] [32] It is clear that the discretion of the DGI should not be interfered with unless there is an abuse of the discretion. S/N xIwdpdx1v0eLoH5BCblmew [33] Further, in the event it is found that the DGI’s decision was an abuse or improper, the only remedy under the section 33A/33B regime is to grant a suspension of the issuance of the Certificate of Discharge for two (2) years. DGI - EXERCISE OF DISCRETION & ABUSE [34] The Registrar’s Decision in dealing with the appeal in (Encl 19) included making the order that the issuance of the Certificate of Discharge be suspended for two (2) years. Although the DGI did not file a report, the DGI filed an affidavit explaining his decision (Encl 3). The DGI only cited two (2) grounds for exercising his discretion to discharge the JD (Encl 3, para 21), being that:

the administration of the JD’s estate had been continuing for 13 years since 2011; and

the JD is already 90 years old. [35] The DGI also states (Encl 3, para 21) that in deciding whether to grant a discharge of the bankruptcy, the DGI must balance the interests of the JD against the other creditors of the JD’s Estate. [36] In short, the JC submitted that a major piece of evidence was not considered by the DGI. [37] It is this. S/N xIwdpdx1v0eLoH5BCblmew The JD’s Estate Must Still be Administered as There Are Dividends to be Received [38] The JD has received dividends from the Estate since 2016. These dividends were paid by the Estate into the JD Estate by directly paying such dividends to the DGI. These dividends amount to SGD179,330.00 (approximately RM627,655.00), see the JC’s affidavit (Encl 2) at paras 15 to 19. The bankruptcy is therefore not spent as it was in Bassanio Teo (supra) at para 30 above. [39] Indeed, the JD stands to receive further dividends from the Estate. For 2022, the dividend has been determined to be SGD35,950.00 (approximately RM125,825.00). The dividend for 2023 has not as yet been determined by the Estate, see paras 16 to 18 of Encl 2. [40] Therefore, a further sum of at least RM125,825.00 will be paid into the JD Estate. [41] This is not a case where the JD is unable to contribute to the JD Estate, as would be the case where there are no assets in estate. In such cases, the bankruptcy would be spent and its maintenance would serve no purpose other than to burden the Government. In those circumstances, the DG1 would be justified in discharging a Bankrupt. [42] This was the case in Bassanio Teo (supra) where the Court dismissed an appeal by the Judgment Creditor against the decision of the Registrar refusing to suspend granting the Certificate of Discharge. The Court noted (as emphasised in para 30 above): S/N xIwdpdx1v0eLoH5BCblmew “The representative of the DGI in the instant case has deposed that the respondent has diligently complied with the order to pay RM50 for eight years. He further deposed that the respondent has no assets to be realised. He added that to continue with the administration of the bankruptcy would only burden the respondent as well as the government. The outstanding amount is still a big sum as the payment of RM50 a month would never be able to catch up with the accretion of interests on a sum of over RM80,000. Therefore, if the situation were allowed to remain as it were, the bankruptcy would continue indefinitely as feared by the DGI.” [Emphasis mine] [43] The decision of the DGI to discharge was justified. [44] In our case the facts are wholly different. The DGI confirms (at Encl 3 paras 13 and 19) that creditors are owed at the least, a total of RM16,252,596.95; the balance of the assets in the JD’s estate is RM500,409.19. There will be more assets in the form of dividends from the Estate that will be received by the DGI which would be administered for the benefit of the creditors. The DGI has more administration to carry out. The bankruptcy is not spent. [45] The JC stresses that if the appeal is allowed and the suspension is lifted, then the anticipated future dividends from the Estate will be paid to the JD directly and he would be free to use those assets as he thinks fit. Based on the JD’s averments in Encl 5, the JD is desirous to retain the dividends payable by the Estate for his own personal use. This would be at the expense and to the detriment of the creditors. [46] The JC is correct. S/N xIwdpdx1v0eLoH5BCblmew [47] First, after further research, Jeuro Developments Sdn Bhd v Badan Pengurusan Bersama Kondominium Lagenda, Applicant [2017] MLJU 2396 establishes the effect of the discharge. At para 33, Vaseer Alam J (as he then was), held, following Jeffrey Tan J (as he then was) in Ptavihchandra Doshi (T/A M/S P Doshi & Co) v Ismail Bin Syed Mohamed & Anor [1999] 1 MLJ 35 at 42) that: “[33] I am in complete agreement with the observations of my learned brother Jeffry Tan J (as he then was) as to the effect of a discharge of bankruptcy. Once an absolute discharge is given, the property of the discharged bankrupt, except for those caught under sections 35(1)(a) and 35A of the Bankruptcy Act 1967, divests from the Director General of Insolvency and the discharged bankrupt is free to deal with these property, The Director General of Insolvency has no reason to hold on to the estate of the discharged bankrupt, especially when all of the bankrupt’s debts had been settled.” [48] The learned Judge held that Re Wolverhampton Steel & Iron Co Ltd and others [1977] 3 All ER 467 CA, which held that the upon a discharge of the bankruptcy without setting aside of the receiving order did not divest the trustee of bankruptcy of the assets of judgment debtor. This means that despite the discharge of the bankruptcy, the assets would remain vested in the DGI. It would follow that there would be no prejudice to the creditors as the DGI would still administer these residual assets for the benefit of the creditors. [49] However, the Court in Jeuro Developments held that the legislative provisions in the UK were different. And that in Malaysia, upon an unconditional discharge, the DGI would be divested of the assets of the JD and such assets will then be returned to the control of the JD to do as he pleases. S/N xIwdpdx1v0eLoH5BCblmew [50] Secondly, to allow these payments in priority to his creditors (Encl 23 para 44) would, in my judgment, be an abuse within Bossaino Teo (supra) at para 29 above. This is because in an insolvent administration, the estate, whether of an individual or a corporation ought to be fully distributed to the creditors before being returned to the insolvent. This is because given the insolvency of the JD, these assets, in substance, belong ‘beneficially’ to the creditors. This concept has now been accepted in numerous cases in Company Law. [51] Thus, it is only proper for the creditors that the discharge of the JD is to be suspended for another 2 years under section 33B(4) to allow more funds to be paid to the JD Estate thus increasing the returns to creditors. [52] I am acutely aware that the JD is aged and is 90 years. However, there is nothing to show whether the policy and purpose of sections 33A and 33B would be offended if the suspension of the issuance of the Certificate of Discharge was to be imposed. Indeed, there is little or no evidence to determine whether the JD’s debts were just incurred due to misfortune through no fault of the JD, which may trigger the policy behind the protection of these sections, see para 27 above. [53] Indeed, the admitted debts are large and amount to RM16,252,596.95 whilst the balance left in the JD Estate is merely RM500,409.19. Even the repayment by the JD of RM100.00 per month was breached (Encl 3) para 20. S/N xIwdpdx1v0eLoH5BCblmew [54] The total amount collected from the JD amounts to only RM8,300.00 as at January 2018 (Encl 3, para 20). [55] In summary, it is more detrimental to the JC and the creditors than to the JD if the JD were unconditionally discharged at this juncture. [56] I agree that the appeal be dismissed. [57] One last point taken by the JC. The JC also attacks the conduct of the DGI in not administering the JD Estate properly for the benefit of the creditors. [58] The DGI had failed to furnish the creditors with any information whatsoever regarding the administration of the JD’s estate. The creditors complain that they have no knowledge of the assets of the JD, what was the amount that had been called in, what was the repayment scheme imposed by the DGI. Further, it also appears that no dividends have been paid out. [59] Effectively, this is a complaint that the administration of the JD’s estate was improper. The proper remedy would be for the removal and/or replacement of the DGI, a remedy that is not available under a section 33B(4) application. I will say nothing further on this complaint. [60] There are two (2) matters that are worth noting. S/N xIwdpdx1v0eLoH5BCblmew Exemption under section 33B(2A) [61] First, is the exemption under sub-section 33B(2A)(f), which came into force on 6.10.2023 after Encl 1 was filed on 26.3.2024. It must remain in doubt whether the section actually applies. The section lists specific categories of bankrupts against whom no objections may be made. Sub-section 33B(2A)(f) provides that a bankrupt aged seventy (70) years and above may be exempt from objection if, in the opinion of the DGI, he is incapable of contributing to the administration of his estate. [62] Even if the section applies, which I seriously doubt (see Ber Chin Su Hin; ex parte Linggi Agriculture Sdn Bhd [2023] MLJU 2646 at para 18, per the prolific Arun Noval Dass TP), the affidavit filed on behalf of the DGI (Encl 3) made no statement that the DGI formed the opinion that the JD is incapable of contributing to the JD Estate. In any event, it would be difficult to arrive at this conclusion given that the DGI has been receiving dividends from the Estate on behalf of the JD, with the JD having a real role to play. Advertisement [63] Secondly, it is claimed that the DGI failed to advertise the Notice to Creditors dated 18.5.2023 (Exhibit “C-3”) in a local newspaper in breach of section 33A. This, it is said, constitutes procedural non-compliance and impropriety. S/N xIwdpdx1v0eLoH5BCblmew [64] In my judgment, the obligation under section 33A(3) does not arise until the Discharge Certificate under section 33A(1) is issued. No such certificate has been issued and accordingly, the obligation to advertise has not arisen. No procedural breach has occurred. CONCLUSION [65] I note that the Court will be slow to interfere with the DGI’s discretion unless there is clear evidence of abuse. In this case, to allow the bankrupt to have free use of the assets of the JD Estate when there are unpaid creditors is such an abuse. [66] Accordingly, I dismissed the Appeal in Encl 19 filed by the JD against the Registrar’s Decision. Dated 9th January 2025 .................t.t........................ YA Tuan Saheran Suhendran Judicial Commissioner, High Court of Malaya, Kuala Lumpur. Hoo Yee Huan [Shook Lin & Bok (Kuala Lumpur)] for the Plaintiffs Franky Irwan Abdul Rashid (Jabatan Insolvensi Malaysia Wilayah Persekutuan Kuala Lumpur) Muhammad Nasron Rashid & Nik Syahirah Mohd Sani [Basharuddin Iskandar (Shah Alam)] for the Respondent S/N xIwdpdx1v0eLoH5BCblmew Cases Referred to: • Lim Chai Oi; Ex Parte Affin Bank Bhd [2020] 1 CLJ 518 • Re Mohana Sundari d/o M Subramaniam; ex p United Prime Corp Bhd [2004] 5 MLJ 227 • Asia Commercial Finance (M) Berhad v Bassanio Teo Yang [2009] MLJU 313 • Re Benny Ong Swee Siang; Ex parte United Overseas Bank (Malaysia) Berhad [2016] 3 CLJ 1001 • Datuk Bandar Kuala Lumpur v. Zain Azahari Zainal Abidin [1997] 2 CLJ 248 • Jeuro Developments Sdn Bhd v Badan Pengurusan Bersama Kondominium Lagenda, Applicant [2017] MLJU 2396 • Ptavihchandra Doshi (T/A M/S P Doshi & Co) v Ismail Bin Syed Mohamed & Anor [1999] 1 MLJ 35 • Re Wolverhampton Steel & Iron Co Ltd and others [1977] • Ber Chin Su Hin; ex parte Linggi Agriculture Sdn Bhd [2023] MLJU 2646 Legislation referred to: • Insolvency Act 1967 (“IA”) Decision date: 21st October 2024 S/N xIwdpdx1v0eLoH5BCblmew