Beyond Hallmark Sdn. Bhd. v Yahnasegaran S Govindasamy (WA-29NCC-836-07/2022)

This is an appeal by the Judgment Debtor (“JD”) against the decision of the Senior Assistant Registrar (“SAR”) on 11.11.2022 dismissing the JD’s application to set aside a Request to Issue a Bankruptcy Notice (“RTIBN”) and a Bankruptcy Notice (“BN”), both dated 06.07.2022.

The Judgment Creditor (“JC”) and the JD entered into a consent Judgment dated 04.04.2022 (“the Consent Judgment”) in the Kuala Lumpur High Court vide suit No. WA-22NCVC-471-07/2019 (“Suit 471”).

The terms of the Consent Judgment, inter-alia, includes payment of the judgment sum by way of instalments, with the first instalment of RM100,000.00 to commence on/or before 15.04.2022 and subsequent instalments to be paid until full settlement of the judgment sum.

The Consent Judgment also provides for the instalments to be paid by way of post-dated cheques, all of which shall be delivered to the JC’s solicitors on/or before 08.04.2022.

The Consent Judgment further stipulates that time shall be of the essence of the Consent Judgment.

Paragraph 4 of the Consent Judgment stipulates that the full sum including interests thereon, less any previous payments made by the JD shall be immediately payable if the JD defaults on any of the instalment payments and that the JC shall be entitled to forthwith enforce the Consent Judgment.

The JD has not paid any of the instalments as provided in paragraphs 2(c) to 2(g) of the Consent Judgment up until the date of the BN.

Consequent to the JD’s breach of the terms of the Consent Judgment, the JC commenced bankruptcy proceedings against the JD.

The JD filed an application in Enclosure 5 to set aside the RTIBN and the BN. After hearing the parties respective submissions, the Senior Assistant Registrar (“SAR”) dismissed the application with costs on 11.11.2022. The JD then filed an appeal to this Court against the decision of the SAR.

At the outset, the SAR found in paragraph 20 of his grounds that the JD’s application in Enclosure 5 is defective since it was filed under the provision of Rules 93 and 95 of the Bankruptcy Rules 1969. The Bankruptcy Rules 1969 had been revoked by section 286 of the Insolvency Rules 2017. Thus, the Bankruptcy Rules 1969 are no longer applicable. The JD did not make any application to amend Enclosure 5. In the case of Squad Security Joint Services (M) Sdn Bhd v Jagendra Singh a/l Sarjit Singh (2018) MLJU 1757, the High Court held: “(7) … Apart from this, the Defendant had failed to cite the provision of law in which the Defendant was intending to move the court for the prayers asked. As such, it would cause prejudice to the Plaintiff as the Defendant could shift from one rule to another without any warning to the Plaintiff. To this extent, the Defendant’s defective Notice of Application and the Defendant’s Affidavit in Support is not curable and should be dismissed.” (See also the case of Lai Meng v Toh Chew Lian (2012) 10 CLJ 479)

I find the SAR was correct in finding that Enclosure 5 was defective and incurable, and additionally, that there was no application filed by the JD to amend Enclosure 5. On this ground alone, the SAR was correct in dismissing the application in limine.

The JD submits that the RTIBN and BN should be set aside on the following grounds:

The JC is purportedly not entitled to issue the Notices of Default based on a non-fundamental breach i.e., delay in producing cheques and purported error of the dates of the cheques (the “First Alleged Ground”);

(ii) The JC is not entitled to the penalty sum of RM1.5 million. The JC purportedly failed to explain in the RTIBN and the said BN that the RM1.5 million penalty sum has been added to the principal sum, which is a wrong sum (the “Second Alleged Ground”);

(iii) The sum claimed in the RTIBN and the said BN are not correct because the JC has received a sum of RM3,912.47 from the garnishment proceedings (the “Third Alleged Grounds”);

(iv) The said notices of “default’ are purportedly wrong at law and were issued within a short period of time i.e., about one-and-a half months after the date of the said Consent Judgment (04.04.2022). [13] The SAR rightfully found that the alleged grounds are without merits and therefore, are misconceived even on the substantive issue (see paragraphs 25 to 35 of his grounds). [14] The delay in delivery of the cheques and the errors on the dates of the post-dated cheques are clearly in breach of the terms of the Consent Judgment. Thus, the JC was entitled to call a default and to commence bankruptcy proceedings against the JD. [15] With respect to the alleged penalty (which was denied by the JC) and the submission by the JD that the sum stated in the BN is incorrect, it is trite law that even if the amount stated in the BN is incorrect, such error would not invalidate the BN. The Court of Appeal in Azlin Azrai bin Lan Hawari v United Overseas Bank (Malaysia) Bhd (2017) 5 MLJ 43 held that a BN is not invalidated even if the amount claimed is excessive, so long as the correct amount exceeds the statutory minimum amount. [16] In the present case, even after deducting the alleged “penalty” and the sum of RM3,912.47, recovered from the garnishee proceedings, the JD’s indebtedness is well above the statutory limit. In any event, the garnishee order absolute was made after the bankruptcy proceedings were commenced. [17] Further and in any event, section 3(2)(ii) of the Insolvency Act 2017 expressly provides that a bankruptcy notice shall not be invalidated by reason of excessive sums, unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the grounds of such mistake. On the facts of the present case, there is no such “notice” disputing the validity of the said BN on such grounds which has been given by the JD to the JC. Therefore, the said BN remains to be valid and proper. [18] I find the SAR has not committed any error in his decision to dismiss Enclosure 5. Therefore, I dismiss the JD’s appeal with costs of RM2,000.00. Dated 8th January 2024 …………t.t……………... Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE JUDGMENT DEBTOR: EBENEZER RAMESH JR SOLICITORS FOR THE JUDGMENT DEBTOR: TETUAN THE LAW OFFICE OF EBENEZER & ASSOCIATES COUNSEL FOR THE JUDGMENT CREDITOR: ALVIN LAI WITH PANG KWONG HANG SOLICITORS FOR THE JUDGMENT CREDITOR: TETUAN JUSTIN VOON CHOOI & WING Cases Referred to: ➢ Squad Security Joint Services (M) Sdn Bhd v Jagendra Singh a/l Sarjit Singh (2018) MLJU 1757 ➢ Lai Meng v Toh Chew Lian (2012) 10 CLJ 479 ➢ Azlin Azrai bin Lan Hawari v United Overseas Bank (Malaysia) Bhd (2017 5 MLJ 43 Legislation Referred to: ➢ Rules 93 and 95 of the Bankruptcy Rules 1969 ➢ Section 286 of the Insolvency Rules 2017 ➢ Section 3(2)(ii) of the Insolvency Act 2017 Decision Date : 05.04.2023