AmBank (M) Berhad & 6 lagi v Lim Sue Beng (03-1-03/2018(W))

1 IN THE FEDERAL COURT OF MALAYSIA AT PUTRAJAYA (APPELLATE JURISDICTION) CIVIL APPEAL NO. 03-1-03/2018 (W) BETWEEN

1. AMBANK (M) BERHAD [dahulunya dikenali sebagai AmFinance Berhad, yang menerima segala aset, hak dan liabiliti serta perniagaan AmBank Berhad menurut Perintah Mahkamah bertarikh 18.5.2005]

2. DBS BANK LTD, CAWANGAN LABUAN [dahulunya dikenali sebagai The Development Bank of Singapore Limited (Cawangan Labuan)]

3. ALLIANCE MERCHANT BANK BERHAD

4. MALAYAN BANKING BERHAD [yang menerima pindahmilik keseluruhan aset dan liabiliti Maybank Finance Berhad yang telah diletakhak menurut Perintah Mahkamah bertarikh 17.8.2004 dan Maybank Investment Bank Berhad (dahulunya dikenali sebagai Aseambankers Malaysia Berhad menurut Perintah Mahkamah bertarikh 21.5.2007]

5. MALAYSIAN INDUSTRIAL DEVELOPMENT FINANCE BERHAD

6. CIMB BANK BERHAD [dahulunya dikenali sebagai Bumiputra-Commerce Bank Berhad yang telah mengambil-alih keseluruhan perniagaan-perniagaan, aset dan liabiliti Southern Bank Berhad]

7. AFFIN BANK BERHAD .. APPELLANTS AND LIM SUE BENG .. RESPONDENT 2 [In The Matter of Court of Appeal of Malaysia (Appellate Jurisdiction) Civil Appeal No. W-03(IM)-46-04/2016 Between Lim Sue Beng .. Appellant And

1. RHB Bank Berhad

2. AmBank (M) Berhad [dahulunya dikenali sebagai AmFinance Berhad, yang menerima segala aset, hak dan liabiliti serta perniagaan AmBank Berhad menurut Perintah Mahkamah bertarikh 18.5.2005]

3. DBS Bank Ltd, Cawangan Labuan [dahulunya dikenali sebagai The Development Bank of Singapore Limited (Cawangan Labuan)]

4. Alliance Merchant Bank Berhad

5. Malayan Banking Berhad [yang menerima pindahmilik keseluruhan aset dan liabiliti Maybank Finance Berhad yang telah diletakhak menurut Perintah Mahkamah bertarikh 17.8.2004 dan Maybank Investment Bank Berhad (dahulunya dikenali sebagai Aseambankers Malaysia Berhad menurut Perintah Mahkamah bertarikh 21.5.2007]

6. Malaysian Industrial Development Finance Berhad

7. CIMB Bank Berhad [dahulunya dikenali sebagai Bumiputra-Commerce Bank Berhad yang telah mengambil-alih keseluruhan perniagaan-perniagaan, aset dan liabiliti Southern Bank Berhad]

8. Affin Bank Berhad .. Respondents] 3 [In the Matter of High Court of Malaya at Kuala Lumpur (Commercial Division) Bankruptcy No: 29-750-2011 Re: Lim Sue Beng .. Judgment Debtor Ex parte:

1. RHB Bank Berhad

2. AmBank (M) Berhad [dahulunya dikenali sebagai AmFinance Berhad, yang menerima segala aset, hak dan liabiliti serta perniagaan AmBank Berhad menurut Perintah Mahkamah bertarikh 18.5.2005]

3. DBS Bank Ltd, Cawangan Labuan [dahulunya dikenali sebagai The Development Bank of Singapore Limited (Cawangan Labuan)]

4. Alliance Merchant Bank Berhad

5. Malayan Banking Berhad [yang menerima pindahmilik keseluruhan aset dan liabiliti Maybank Finance Berhad yang telah diletakhak menurut Perintah Mahkamah bertarikh 17.8.2004 dan Maybank Investment Bank Berhad (dahulunya dikenali sebagai Aseambankers Malaysia Berhad menurut Perintah Mahkamah bertarikh 21.5.2007]

6. Malaysian Industrial Development Finance Berhad

7. CIMB Bank Berhad [dahulunya dikenali sebagai Bumiputra-Commerce Bank Berhad yang telah mengambil-alih keseluruhan perniagaan-perniagaan, aset dan liabiliti Southern Bank Berhad]

8. Affin Bank Berhad .. Judgment Creditors] 4 CORAM: AZAHAR MOHAMED, FCJ BALIA YUSOF WAHI, FCJ ALIZATUL KHAIR OSMAN KHAIRUDDIN, FCJ ROHANA YUSUF, FCJ MOHD ZAWAWI SALLEH, FCJ JUDGMENT OF ALIZATUL KHAIR OSMAN KHAIRUDDIN Introduction [1] The background facts leading to the present appeal has been set out quite comprehensively in my learned brother Justice Azahar bin Mohamed’s judgment. However for the purpose of this judgment, the salient facts bear repeating. Salient Facts [2] The appellants together with RHB Bank (the judgment creditors) brought an action against Gula Perak Berhad (Gula Perak) for the recovery of a sum of RM28,170,931.83 (Civil Action No. D5-22-1648-2005 (the suit)) pursuant to a syndicated loan granted by the judgment creditors to Gula Perak, the 1st defendant in the suit. The respondent stood as guarantor to that loan facility and was added on as a 2nd defendant. [3] On 29.10.2011, after a full trial, judgment was obtained by the judgment creditors against Gula Perak and the respondent. 5 [4] As the judgment obtained was based on the syndicated loan granted by the judgment creditors to the 1st defendant (guaranteed by the respondent), the judgment sets out specifically the amounts payable to each judgment creditor. The (total) judgment sum payable under the judgment is RM28,651,503.00 (as at 7.11.2012). RHB Bank’s portion is RM9,268,336.25. [5] Premised on the aforesaid judgment, the judgment creditors on 24.2.2011, initiated bankruptcy proceedings by issuing a bankruptcy notice against the respondent in respect of the judgment sum outstanding. [6] On 23.5.2011, the bankruptcy notice was served on the respondent personally. [7] The respondent failed to comply with the bankruptcy notice within the stipulated period, resulting in an act of bankruptcy being committed by the respondent. [8] Based on the said act of bankruptcy, the judgment creditors presented a creditors’ petition against the respondent on 29.11.2011. [9] The respondent filed various applications to challenge the bankruptcy proceedings which culminated in the Court of Appeal dismissing on 31.3.2014, the respondent’s appeal against the decision of the High Court dismissing his application to oppose and set aside the bankruptcy notice. 6 [10] Much was made by the respondent of the judgment creditors’ act in issuing a single bankruptcy notice (and creditors’ petition). This is what was said by the respondent in their written submission:- “It appears that the Judgment Creditors took the view that bankruptcy proceedings in respect of the judgment had to be approached as a collective exercise on the part of the Judgement Creditors, their interests being inter-connected by reason of the nature of the claim and the terms of the judgment. The Appellants collectively issued the BN. In the like manner, on or about 25.11.2011, they presented the CP.” [11] It must be remembered that although the judgment on which the bankruptcy notice is premised provides for specific amounts to be paid to each judgment creditor, the judgment sum payable to the judgment creditors under the judgment is RM28,651,503.00. [12] That amount represents the judgment debt due and owing to the judgment creditors and they are therefore entitled under the law to issue a (single) bankruptcy notice requiring the debtor (the respondent) to pay the said judgment sum within the period stipulated under section 3(1)(i) of the Bankruptcy Act 1967. [13] The fact that the courts have upheld the validity of the bankruptcy notice despite the attempts of the respondent to impugn it lends support to the above proposition. 7 [14] The creditors’ petition was finally fixed for hearing on 15.2.2015. [15] On 30.9.2015, the respondent wrote to RHB Bank proposing full and final settlement of the portion of the judgment debt due to RHB Bank by paying the sum of RM3,851,200.00. [16] Pursuant thereto, RHB Bank informed the appellants’ solicitors that as the respondent had settled the judgment debt owed to RHB Bank, it no longer wished to continue as a party to the bankruptcy proceedings and requested the appellants’ solicitors to withdraw RHB as a party in the bankruptcy proceedings against the respondent. This was in accordance with the terms of settlement agreed upon by the respondent and RHB Bank. (see pages 103-104 of the Record of Appeal (ROA), Vol. 2). That part of the terms of settlement is reproduced below:- “(8) Upon full payment of the Settlement Sum, the Bank will:

(ii) __ ” (emphasis added) [17] The appellants and RHB Bank then applied vide summons in chambers dated 16.12.2015 (Enclosure 46) for, inter-alia, an order that RHB Bank cease to be a party to the bankruptcy proceedings and that consequential amendments be made to the bankruptcy notice and the creditors’ petition to remove any reference(s) to RHB Bank. 8 [18] Despite agreeing to the terms of settlement, the respondent nonetheless objected to the application on the ground that it was misconceived and thus an abuse of process. It was contended by the respondent that given the settlement between the respondent and RHB Bank, the appellants (the judgment creditors) were not entitled to rely on the original act of bankruptcy. Further as the Bankruptcy Act 1967 did not make provision for the withdrawal of a co-petitioner in the manner proposed, the circumstances did not validly allow for the proposed amendments to the creditors’ petition. [19] The respondent’s argument did not find favour with the High Court judge as her Ladyship allowed the appellants’ application with costs. On appeal, however, the Court of Appeal reversed the High Court’s decision holding, inter-alia, that the High Court had no power to grant the appellant’s application as there is no express provision in the Bankruptcy Act 1967 to allow any amendment to withdraw and substitute the petitioner save and except in accordance with section 95 of the Bankruptcy Act 1967. [20] The Court of Appeal further held that the appellants could not resort to rule 276 of the Bankruptcy Rules 1969. The proper course of action, according to the Court of Appeal, was for the appellants to file a fresh bankruptcy proceeding against the respondent. [21] On 12.3.2018, the appellants were granted leave to appeal to this court. 9 Question of Law [22] The question of law allowed by this court is as follows:- “Whether in the case of petition presented by multiple petitioners, could the bankruptcy notice and creditors’ petition be amended - the deletion of one or more petitioners be allowed under section 93(3) of the Bankruptcy Act 1967 and/or rule 276 of the Bankruptcy Rules 1969.” [23] The crux of the appeal before us revolves essentially around the construction of section 93(3) of the Bankruptcy Act 1967 and/or rule 276 of the Bankruptcy Rules 1969, based on the factual matrix of this case and the findings of the Court of Appeal. [24] I propose to deal with section 93(3) of the Bankruptcy Act 1967 first. Section 93(3) of the Bankruptcy Act 1967 reads as follows:- “The court may at any time amend any written process or proceeding upon such terms, if any, as it thinks fit to impose.” [25] As stated earlier the Court of Appeal in allowing the appeal had expressed the view that there is no express provision in the Bankruptcy Act 1967 to allow an amendment to withdraw save and except in accordance with section 95 of the Bankruptcy Act 1967. This is what the Court of Appeal said: “We have anxiously perused the relevant provision of the BA 1967 and the 1969 BR. We are satisfied that there are no express 10 provisions in the above-mentioned laws which allow for RHB Bank, a co-petitioner in the BN and CP to withdraw from being a party to the bankruptcy proceedings when there are multiple judgment creditors. In this case RHB Bank had elected to proceed collectively and this election was central to the character of the BN and the CP. Unlike the U.K position, where substitution and change of carriage are permitted in additional circumstances, amongst others, in the event o disentitlement of the petitioner to do so, or where the petitioner consents to withdraw or allow the petition to be dismissed or non-appearance of the petitioner on the date of the hearing (see paragraph 173 & 174 of Halsbury Laws of England, Fourth Edition Reissue). Under section 95 of the BA 1967 the bankruptcy court is only empowered to substitute a judgment creditor in a situation where the judgment creditor does not prosecute his petition with due diligence and in no other circumstances. … We were of the view as there is no express provision in the relevant laws as discussed above for RHB Bank to withdraw as a party to the bankruptcy proceedings when there are multiple judgment creditors, the decision of the learned Judge to allow for RHB Bank to do so is erroneous.” [26] As pointed out by learned counsel for the appellant, the Court of Appeal, in concluding that there is no express provision in the Bankruptcy 11 Act 1967 or the Bankruptcy Rules 1969 allowing for RHB Bank to withdraw from being a party to the bankruptcy proceedings, made specific reference to Halsbury’s Laws of England, Fourth Ed. Reissue Vol. 3(2), paragraphs 173 and 174 and drew comparison between the U.K. position which allows for substitution and change of carriage in additional circumstances (see s. 271 (5) of the UK Insolvency Act 1986 and rules 6.22, 6.30 and 6.31 of the UK Insolvency Rules 1986) and our Bankruptcy Act 1967 and Bankruptcy Rules 1969 which do not contain similar provisions. [27] However our Bankruptcy Act 1967 is modelled not on the UK Insolvency Act 1986 but on the UK Bankruptcy Act 1914. The precursor to the UK Bankruptcy Act 1914 is the UK Bankruptcy Act 1883. [28] Contrary to the Court of Appeal’s finding that there is no express provision in the Bankruptcy Act 1967 to allow for the withdrawal and substitution of a petitioner except in accordance with section 95 of the Bankruptcy Act 1967, the English courts have long recognized the principle of law that such withdrawal and substitution may be effected by the court under section 109(3) of the UK Bankruptcy Act 1914. [29] Our section 93(3) of the Bankruptcy Act 1967 is in pari materia with section 109(3) above and its precursor section 105(3) of the UK Bankruptcy Act 1883. Our section 93(3) reads as follows:- “The court may at any time amend any written process or proceeding upon such terms, if any, as it thinks fit to impose.” 12 [30] Section 109(3) of the UK Bankruptcy Act 1914 states in almost identical terms as follows: “The court may at any time amend any written process or proceeding under this Act upon such terms, if any, as it may think fit to impose.” [31] Thus in the UK, the courts have, using the aforesaid provision, allowed amendments to be made to a bankruptcy petition not merely to correct clerical or minor errors as seen in Ex parte Dearle (1884) 14 QBD 184, Lowell and Christmas V Beauchamp (1894) AC 607 and Ex parte Owen, in Re Owen (1884) 15 QBD 113CA. [32] In the latter case, a firm with two partners presented a bankruptcy petition against a debtor, based on an act of bankruptcy of the debtor for his failure to comply with the bankruptcy notice. Before the petition came to be heard, one of the partners went into liquidation and a trustee in liquidation was appointed. The Court of Appeal held that in order to justify the receiving order made on the petition, the trustee ought to have been made a party to it, and ought to have been before the Court at the hearing of the petition and that the proper course is to give leave to amend the petition by adding as a co-petitioner the trustee in liquidation. [33] The Court (per Cotton LJ) in granting leave to amend, made the following observation: “I am of the opinion that the bankruptcy notice was a good notice, and that the act of bankruptcy was complete though, when the petition came on to be heard, a receiving order could not properly be made on it in the absence of the trustee in the liquidation.” (emphasis added) 13 [34] Similarly here, the act of bankruptcy was complete on 30.5.2011 when the respondent failed to pay the amount stated in the Bankruptcy Notice which was personally served on him on 23.5.2011. [35] The amendment to the creditor’s petition and the bankruptcy notice therefore does not change the above position as the act of bankruptcy had already been committed on 30.5.2011. [36] In other words there is no prejudice to the respondent if the Court were to allow the amendment to remove or exclude RHB Bank as a co-petitioner. [37] As noted by noted by the authors William and Muir Hunter in their book, the Law and Practice in Bankruptcy, in relation to the Court’s power to amend under S.105(3) of the UK Bankruptcy Act 1914: “The Court will not permit an amendment, nor will the court invalidate valid proceedings, unless it is satisfied that by so doing no injustice will be done to the other parties.” (emphasis added) [38] Thus in Ex Parte Dearle, a bankruptcy petition presented by a bare trustee of a debt was dismissed on the ground that the cestui que trust (the beneficiary) ought to have been joined as a petitioner. The Court of Appeal however granted leave (more than 3 months after the petition had been presented) to amend the petition (under S.105(3) of the UK Bankruptcy Act 1914) by joining the cestui que trust with her consent, as a co-petitioner. 14 [39] As observed by Brett M.R.: “In order to maintain a bankruptcy petition under the present Bankruptcy Act, there must be a good petitioning creditor’s debt, a good act of bankruptcy, and the proper petitioning creditor. In the present case it cannot be doubted that there is a good petitioning creditor’s debt–the debt is a judgment debt–and to my mind it is equally clear that there is a good act of bankruptcy.” (emphasis added) [40] The same can be said of the case before us, as all the elements required to maintain a bankruptcy petition under our Bankruptcy Act 1967 as set out by Brett M.R. above, have been satisfied. [41] Ex parte Dearle (at pg 190-192) further held that where the act of bankruptcy consists of a failure to comply with a bankruptcy notice, any creditor who has a good petitioning creditor’s debt may present a bankruptcy petition founded on that act of bankruptcy. [42] This principle is reflected in section 95 of our Bankruptcy Act 1967 which allows a petitioner to be substituted (if he fails to proceed with due diligence on his petition) as petitioner and obtain the necessary bankruptcy orders. [43] If a petitioning creditor can be substituted in the circumstances set out in S.95 of the Bankruptcy Act 1967 then I can see no reason why the Court, cannot, under S.93 (3) of the Bankruptcy Act 1967 allow for the petition to be amended to remove RHB Bank as a co-petitioner and for the amount of the judgment debt to be correspondingly reduced following the settlement of the debt by the respondent. 15 [44] Such an amendment in my view would not affect the validity of the act of bankruptcy as the amount remaining due following the deduction is well above the statutory limit and based on Ex parte Dearle there is nothing in law to prevent the remaining petitioning creditors from continuing with the bankruptcy proceedings against the respondent based on the amended petition. [45] In this regard I am unable to agree, with respect, with the Court of Appeal’s view that such an amendment cannot be allowed for the reason alluded to in their judgment which is as follows:- “The JCS in this case had elected to proceed collectively on the strength of a single judgment, therefore, the election is central to the character of the BN and CP. …the JCS are not permitted to change the character of the BN and CP in the manner it was done in this case…” (see paragraph 20 of the Court of Appeal’s judgment). [46] The Court of Appeal did not however provide us with any authority to support their proposition neither did they go on to say that such an amendment would render the bankruptcy notice defective or irregular such as to affect its validity. [47] In my view to hold that such an amendment is not permitted for the reasons stated by the Court of Appeal would result in an absurd situation whereby each time the respondent settles his debt with one of the petitioning creditors, a fresh bankruptcy notice would have to be issued. 16 [48] This would defeat the purpose of the appellants obtaining a joint judgment and a single bankruptcy notice (all of which have not been impugned by the court) particularly since this is a syndicated loan granted to the respondent by a consortium of lenders (ie the petitioning creditors). [49] For the above reasons, I would agree with the appellant that the Court of Appeal erred in holding that the court only has power to amend parties to the proceeding under section 95 of the Bankruptcy Act 1967 and that it misdirected itself when it failed to take into account the court’s power to amend proceedings under section 93 (3) of the Bankruptcy Act 1967. [50] As I have found that the court is empowered under section 93(3) of the Bankruptcy Act 1967 to amend the bankruptcy proceedings in the manner proposed in Encl. (46), it is not necessary for me to consider whether the court can rely on rule 276 of the Bankruptcy Rules 1969 to invoke the provisions of the Rules of Court 2012 to allow for such an amendment. [51] I would accordingly answer the question of law in the affirmative. The appeal is therefore allowed with costs. The Order of the Court of Appeal is set aside and the Order of the High Court reinstated. ALIZATUL KHAIR BINTI OSMAN KHAIRUDDIN Federal Court Judge Dated this day, 15th May 2019 17 For the Appellants: Lua Ai Siew and Elyazura binti Md Shaarani Messrs Soo Thien Ming & Nashrah For the Respondent: Malik Imtiaz Sarwar, Tony Woon Yeow Thong and Chan Wei June Messrs Woon & Co.