Durable MIX Sdn. Bhd. v Chok Kim Sin (JA-29NCC-1950-10/2019)

In lieu of such sum owed, four apartments in the Project were offered to the JC via four sale and purchase agreements (“SPAs”), wherein the JC signed as the purchaser, one Syarikat Perumahan Negara Berhad (“SPNB”) signed as Vendor/ Developer, and Haluan Menang Sdn Bhd (“Haluan Menang”) signed as the Land Proprietor for the Project. Cosmic acted for SPNB and Haluan Menang via a power of attorney, and the JD had signed on behalf of Cosmic.

However, there was a failure to deliver vacant possession of the four apartments within the 36 months as stipulated in the SPAs.

The JC then brought an action in Court against SPNB, Haluan Menang and Cosmic in Civil Suit No. JA-22NCvC-194-09/2017 (“the First Suit”). After mediation sessions, a consent judgment (“the Consent Judgment”) was reached wherein Cosmic was to pay MYR1 million (“the Judgment Sum”) to the JC within six months from the date of the 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 3 Consent Judgment, with a payment guarantee of such sum by the JD, via a letter of guarantee dated 6 June 2018 (“Letter of Guarantee”). It was agreed that the JC would transfer to Cosmic the rights and obligations in the four apartments only after the Judgment Sum had been paid settled.

Both Cosmic and the JD failed to pay the Judgment Sum, and as a result thereof, the JC instituted Civil Suit No. JA-22NCvC-7-01/2019 (“the Second Suit”) against the JD. On 29 May 2019, the JC obtained summary judgment (“Summary Judgment”) against the JD. Since the JD had failed to comply with the Order granting Summary Judgment, the JC proceeded to file bankruptcy proceedings against the JD.

The JD filed an application to set aside the Bankruptcy Notice, which was dismissed by the Senior Assistant Registrar (“SAR”) in February

In September 2020, the JD’s appeal to the High Court against such decision was also dismissed. The JD had also filed an application to stay the bankruptcy proceedings which was dismissed by the Court on 29 June 2020. [8] In July 2020, the JC filed a creditor’s petition (“Creditor’s Petition”) against the JD. In response, the JD filed an application to set aside the Creditor’s Petition, which was dismissed by the SAR. As a result thereof, the JD appealed to this Court. This appeal was dismissed for the following reasons. [9] For ease of reference Diagram A below is produced for a macroscopic view of the intertwining applications and appeals filed by the JD. 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 4 Diagram A May 2019 - Summary judgment obtained against JD Jan 2019 – The Second Suit July 2019 - JD appealed Parties failed to comply Oct 2019 – Bankruptcy proceedings against JD initiated Nov 2019 - JD applied to set aside BN July 2020 – Creditor’s Petition (CP) filed Dec 2019 - JD applied to stay bankruptcy Feb 2020 - Application dismissed by SAR Dec 2020 - JD applied to strike out CP April 2021 - Application dismissed by SAR Appeal to this Court Sept 2020 - Appeal to High Court also dismissed June 2020 - Application dismissed by High Court JD has now appealed July 2020 - JD applied to set aside consent judgment Feb 2021 – Application struck out by HC pursuant to JC’s application August 2020 - Appeal struck out by Court of Appeal 2017 – The First Suit 2018 - Consent judgment entered. Letter of guarantee signed by JD 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 5 Contentions, evaluation, and findings Whether the Consent Judgment was being re-litigated [10] The JD contended that the Creditor’s Petition should have been struck out since he had, in July 2020, applied to set aside the Consent Judgment in the First Suit, as alluded to in Diagram A. [11] It must be noted however, that the JD’s application to set aside the Consent Judgment had been already struck out in February 2021 by the High Court pursuant to the JC’s application. At this juncture, it is important to bear in mind the legal implications of a consent judgment. [12] The law on the effect of a consent order is trite and has been expounded by the Federal Court in several cases including Ganapathy Chettiar v. Lum Kum Chum & Ors And Another Appeal [1981] 1 LNS 59; [1981] 2 MLJ 145; Tan Geok Lan v. La Kuan [2004] 2 CLJ 301; Tong Lee Hwa & Anor v. Chin Ah Kwi & Another Appeal [1971] 1 LNS 143; [1971] 2 MLJ 75; Lee Heng Moy & Ors v. Pacific Trustees Bhd & Ors [2016] 6 CLJ 368, and Kamil Azman Abdul Razak & Ors v. Amanah Raya Berhad & Ors [2019] 6 CLJ 419; [2019] 1 LNS 613, FC. In Lee Heng Moy & Ors v. Pacific Trustees Bhd & Ors, it was stated by Mary Lim JCA (as she then was): It is fairly settled and trite law that an order of the court reached by consent of the parties involved is in effect a contract between those parties: Ganapathy Chettiar v. Lum Kum Chum & Ors And Another Appeal [1981] 1 LNS 59; [1981] 2 MLJ 145. Such a consent order must therefore be given its full contractual effect - see Tan Geok Lan v. La Kuan [2004] 2 CLJ 301; [2004] 3 MLJ 465. Such an order remains valid, effective and binding on all the parties involved until and unless the order is set aside for 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 6 some vitiating reason - see the Federal Court's decision in Tong Lee Hwa & Anor v. Chin Ah Kwi & Another Appeal [1971] 1 LNS 143; [1971] 2 MLJ

In fact, until that happens, until and unless the consent order is set aside, the consent order operates as an estoppel disallowing the defendants today from departing from its terms. [Emphasis added.] [13] A consent order is akin to a contract with the superadded judicial command as emphasised in Tan Geok Lan v. La Kuan @ Lian Kuan. Once a consent judgment had been perfected, the parties are bound by it and the Court is duty bound to enforce the agreed terms of the same. The Court is also not at liberty to vary any of the agreed terms unless with the mutual consent of the parties. Hence, the Court is functus officio or in other words, the Court is bereft of jurisdiction to entertain any request to set aside such judgment. [14] In the present case, it was palpable that the JD had attempted to re-litigate the issues pertaining to the Consent Judgment, which, in my view, should not be allowed. This was made clear in a plethora of authorities, including Maybank Allied Bhd (Formerly Known as Phileo Allied Bank (M) Bhd) v Kennet Godfrey Gomez & Anor [2011] 5 MLJ 2192 and Abdul Razak bin Sheikh Mahmood & Ors v Amanah Raya Bhd & Ors and Another Appeal [2018] 5 MLJ 2. In Maybank Allied Bhd (Formerly Known as Phileo Allied Bank (M) Bhd) v Kennet Godfrey Gomez & Anor, views were expressed by Ramly Ali JCA (as he then was) in the following passages: [23] It is trite that a consent order could give rise to a plea of res judicata. There are a number of authorities on this point. Among them are: Palmer and another v Durnford Ford (a firm) and another [1992] 2 All ER 122; 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 7 Cohen v Jonesco [1926] 1 KB 119; In re South American and Mexican Company; Ex parte Bank of England [1895] 1 Ch 37; and Malaysian National Insurance Sdn Bhd v Lim Tiok [1997] 2 MLJ 165. [24] The consent order in the present case is founded on a contract or agreement between the parties based on both parties’ willingness to submit to the discontinuance of the first suit on certain terms. Once the appellant and the respondents took the matter beyond contract and recorded a consent order then they must accept all the implications of a court judgment or order. In this sense the court now cannot vary the terms of the order. The application by the respondents for striking out the second suit under O 18 r 19 was in effect to enforce the terms of the agreement or contract and the said consent order. [25] … Thus the doctrine of estoppel as expounded in Boustead Trading

Sdn Bhd v Arab-Malaysia Merchant Bank Bhd [1995] 3 MLJ 331 is applicable in the present case. The appellant ought to be estopped from filing the second suit against the respondents. In the circumstances, to allow the appellant to file a fresh action (the second suit) based on the same facts or substantially the same facts would be unjust and grossly prejudicial to the respondents particularly when the counterclaim against the appellant had been withdrawn by the respondents. [Emphasis added.] [15] The JD had also attempted to challenge the Consent Judgment in Durable Mix Sdn Bhd v Chok Kim Sin [2019] 1 LNS 1390 in the JC’s application for Summary Judgment pursuant to the Second Suit, where the learned Judicial Commissioner had described as contemptuous, any form of challenge to the Consent Judgment, in the following passage: When a guarantor steps into a suit and present himself to the Court, he is taken as giving consent of himself/property that he pledged to be at the service for the judgment was entered. As so long as:- (1) He is full age and of sound mind; (2) He acted on his accord and voluntarily too, he has with permission of the Court entered into the consent order and dispute and has 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 8 made himself a constructive defendant when he puts up himself as the guarantor and it shall be taken that he has done so in good faith. He may not walk away after the judgment entered and puts up a claim that the judgment is unenforceable. To do so is a mockery of the Court and an abuse of the process of the Court. A guarantor now who denies the enforceability of the guarantee he puts up, which the Court accepted and acted upon is in essence, a utter disrespect to the judgment. Such a person is liable for contempt and the Court may, initiate a contempt proceeding against him, as its own volition. [Emphasis added.] [16] To fortify the argument of the JC, failure to comply with the Consent Judgment resulted in the Second Suit, wherein Summary Judgment had been obtained against the JD. In addition, the JD’s application to set aside the Consent Judgment was also dismissed by the High Court. As such, the issues regarding the Consent Judgment cannot be considered by this Court. [17] The JD had also contended that the JC still had the security of the four apartments with the value of MYR779,797, and that the four apartments were a “contra” for the Judgment Sum. In my view, this was not a factor that could be considered in this Appeal simply because this would revive issues pertaining to the First Suit which had led to the Consent Judgment, which in my view, should not be revisited. [18] In any event, the First Suit was filed by the JC to terminate the SPAs, after SPNB/ Cosmic had failed to deliver vacant possession of the four apartments within the 36 months; and that pursuant to the Consent Judgment, it was agreed that the JC would transfer to Cosmic the rights 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 9 and obligations in the four apartments only after the Judgment Sum had been paid settled. [19] It is also crucial to note that these arguments raised by the JD in this Appeal had already been ventilated in his applications to set aside the Bankruptcy Notice and to stay the bankruptcy proceedings, all of which were dismissed by the SAR, and High Court. [20] The JD further submitted that this Court is not prevented from reviewing its decision pursuant to section 92 of the Insolvency Act 1967 (“Insolvency Act”), which reads: Section 92 – Appeals in bankruptcy

The court may review, rescind or vary any order made by it under its bankruptcy jurisdiction.

Orders in bankruptcy matters shall, at the instance of any person aggrieved, be subject to appeal in the same way as orders of the High Court in other matters are for the time being appealable.

For the purposes of this section the Director General of Insolvency shall be deemed to be aggrieved by the refusal of any application made by him to the court. [21] I am mindful of section 92 of the Insolvency Act and the jurisprudence on which it is premised. However, in my view, such provision cannot be used as a carte blanche to revive and re-litigate issues which had already been deliberated and decided, especially since in the present case, there were several applications and appeals filed by the JD pertaining to the same issues. Justice must be accorded to both parties in a suit and want of finality to proceedings is contrary to the concept 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 10 of justice and fairness. Some certitude is, therefore, required to prevent unnecessary litigation on issues which would result in a waste of judicial time. Whether leave of Court was necessary [22] The JD further contended that this Appeal should be allowed on the premise that the JD was a guarantor, and that the JC had failed to obtain leave pursuant to section 5(3)(b) of the Insolvency Act, which reads: Section 5 – Conditions on which creditor may petition …

A petitioning creditor shall not be entitled to commence any bankruptcy action- …

against a guarantor other than a social guarantor unless the petitioning creditor has obtained leave from the court. [Emphasis added.] [23] At this juncture, it is crucial to note that the rationale for section 5 of the Insolvency Act is to provide protection for the guarantor against whom bankruptcy proceedings are to be brought. This was explained in the Court of Appeal case of Hong Leong Bank Berhad v. Ong Moon Huat & Another Appeal [2018] 1 LNS 1612, in the following passage: The protection comes in the form of ensuring that enforcement has been exhausted in respect of the principal debtor prior to proceeding against the guarantor. It is to remedy the mischief of judgment creditors proceeding 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 11 against the guarantors directly in bankruptcy rather than executing and enforcing against the principal debtor. [24] After considering the factual history of the involvement of the JD in the debt owed by Cosmic to the JC, I was of the view that the JD was no longer a guarantor, based on the following reasons. First and foremost, the action brought against him that culminated in bankruptcy proceedings was pursuant to the Second Suit, in which Summary Judgment was entered against him. [25] In any event, the Letter of Guarantee signed by the JD pursuant to the Consent Judgment in the First Suit contained the following clauses, which indicated that the JD was not a mere guarantor, but a principal debtor: Clause 1 – This Guarantee shall not be determined or in any way prejudiced by any change in the constitution of the 3rd Defendant whether by amalgamation or otherwise. The obligations under this Guarantee shall subsist and shall remain in full force and effect against us notwithstanding such changes; … Clause 4 This Guarantee shall at all times remain valid and enforceable until the 3rd Defendant or I have fully settled all the liabilities arising under the Consent Judgment. … Clause 6 My liability under this Guarantee shall deem to be primary or principal as if I was the 3rd Defendant in the Consent Judgment. 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 12 [Emphasis added.] [26] Furthermore, in the bigger scheme of things, section 5 of the Insolvency Act refers to the ‘borrower’, in the following subsections: Section 5 – Conditions on which creditor may petition …

Where the petition is presented against a guarantor pursuant to subsection (4), a petitioning creditor shall state in his petition the particulars of his borrower.

For the purposes of subsection (4), modes of execution and enforcement include seizure and sale, judgment debtor summon, garnishment and bankruptcy or winding up proceedings against the borrower. [Emphasis added.] [27] According to the Court of Appeal in Hong Leong Bank Berhad v. Ong Moon Huat & Another Appeal, ‘debtor’ in section 5 of the Insolvency Act, refers to the principal debtor or the borrower. In the present case, Cosmic was neither the borrower nor principal debtor, as the Letter of Guarantee very clearly refers to the JD as the principal debtor. As such, section 5 of the Insolvency Act did not apply and the application for leave was, therefore, unnecessary. [28] The JC had also brought to the attention of this Court, the fact that the JD had filed several applications and appeals, and contended that in all these applications and appeals, the same issues were canvassed, ventilated, and argued. An analogy was drawn to the case of Liew Hon Kong @ Liew Kwan Voon v Bank Pertanian Malaysia Berhad [2019] 1 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 13 LNS 1712, where it was observed in that case, that the attempts of the judgment debtor at challenging the bankruptcy proceedings thrice before, and that all such attempts were dismissed by the court, were indicative that the judgment debtor was trying to delay the proceedings. [29] In the same vein, in the present case, I would have to agree with the JC that the same issues ventilated in the JD’s previous applications and appeals, have led to needless delay in the bankruptcy proceedings. Whether there was non-compliance with rule 116 of the Insolvency Rules [30] The JC had also drawn the Court’s attention to the non-compliance of rule 116 of the Insolvency Rules 2017 (“Insolvency Rules”), which reads: Rule 116 – Debtor intending to show cause Where a debtor intends to show cause against a petition, he shall file a notice in form 45 with the Registrar specifying the statements in the petition which he intends to deny or dispute and submit by post or otherwise to the petitioning creditor and his solicitor, if known, a copy of the notice three days before the day on which the petition is to be heard. [31] In the present case, the JD had not filed Form 45 (Notice By Debtor Of Intention to Oppose Petition) in his application to set aside the Creditor’s Petition as prescribed by rule 116 of the Insolvency Rules. As a result of non-compliance, the learned SAR had struck out the application. It is important to note that compliance with rule 116 of the Insolvency Rules is mandatory as explained in Syed Kamaruzaman 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 14 bin Syed Abdullah v AmBank Berhad [2015] MLJU 1900. This had fortified the reasons for this Court in dismissing this Appeal. Conclusion [32] Based on the aforesaid reasons, and after careful scrutiny and judicious consideration of all the evidence before this Court, and written and oral submissions of both parties, this Appeal was dismissed with costs. Dated: 2 November 2021 SIGNED …………………………………………. (EVROL MARIETTE PETERS) Judicial Commissioner High Court, Johor Bahru Counsel: For the Appellant/ Judgment Debtor – G Ravi, Aida Hassan and Ang Wei Jun; Messrs G Ravi For the Respondent/ Judgment Creditor – YM Chai and KC Kok; Messrs Choo & KC Kok 2 November 2021 ……………………………………………………………………………………………… ________________________________________________________________________ 15 Cases referred to:  Abdul Razak bin Sheikh Mahmood & Ors v Amanah Raya Bhd & Ors and Another Appeal [2018] 5 MLJ 2  Durable Mix Sdn Bhd v Chok Kim Sin [2019] 1 LNS 1390  Ganapathy Chettiar v. Lum Kum Chum & Ors And Another Appeal [1981] 1 LNS 59; [1981] 2 MLJ 145  Hong Leong Bank Berhad v. Ong Moon Huat & Another Appeal [2018] 1 LNS 1612  Kamil Azman Abdul Razak & Ors v. Amanah Raya Berhad & Ors [2019] 6 CLJ 419; [2019] 1 LNS 613  Lee Heng Moy & Ors v. Pacific Trustees Bhd & Ors [2016] 6 CLJ 368.  Maybank Allied Bhd (Formerly Known as Phileo Allied Bank (M) Bhd) v Kennet Godfrey Gomez & Anor [2011] 5 MLJ 2192  Syed Kamaruzaman bin Syed Abdullah v AmBank Berhad [2015] MLJU 1900  Tan Geok Lan v. La Kuan [2004] 2 CLJ 301  Tong Lee Hwa & Anor v. Chin Ah Kwi & Another Appeal [1971] 1 LNS 143; [1971] 2 MLJ 75 Legislation referred to:  Insolvency Act 1967 – sections 5, 92  Insolvency Rules 2017 – rule 116