Lok Seng v Zulkifli Bin Abdul Latiff (WA-29NCC-298-03/2022)

Semua prosiding kebankrapan termasuk apa-apa tindakan kebankrpan [act of bankruptcy] digantung sehingga keputusan muktamad permohonan di sini;

Notis Kebankrapan bertarikh 8.3.2022 termasuk segala Prosiding Kebankrapan melalui adalah diketepikan dan/atau dibatalkan;

Kos bagi permohonan ini adalah kos di dalam kausa; dan

Seterusnya apa-apa relif sebagaimana yang difikirkan sesuia dan manfaat untuk diberikan oleh Mahkamah yang Mulia ini. [3] Today is fixed for hearing/decision. Brief facts [4] The BN was founded on the Judgment of the Shah Alam Sessions Court dated 7.12.2021 (“Judgment”). The Judgment was obtained by the Judgment Creditor (“JC”) against both the Defendants, (1) Tan Pin Soon and

the JD, and the terms of the Judgment– [5] On 8.3.2022, the JC filed the request to issue a Bankruptcy Notice and the Bankruptcy Notice (“BN”) was thereafter issued on the same day. [6] The BN was then personally served on the JD on 16.3.2022. The application in Encl. 10 to set aside and/or strike out the BN was later filed on 8.6.2022. JC’s Submission [7] The Judgment Creditor’s (“JC”) inter alia submits that –

the JD is not a guarantor within the meaning of section 5(3)(b) of the Insolvency Act 1967 (“IA”);

there is nothing in the Promissory Note dated 20.2.2020 (“PN”) which expressly states that the JD is a guarantor;

the words “escrow cheque” in the PN merely show that the JD has the obligation to repay the debt to the JC as agreed upon by Tan Pin Soon and the JD themselves;

the JC refers to Afidavit Jawapan Defendan Kedua affirmed on 14.10.2021 and submits that the JD has admitted to– (aa) making payment to the JC; and (bb) owing the JC in the sum of RM375,000.00 only after returning RM125,000.00 to the JC,

the JC refers to the case of Hong Leong Bank Berhad v Ong Moon Huat [2018] 1 LNS 1612; Hong Leong Bank Berhad v Khairulnizam bin Jamaludin [2016] 4 MLJ 302 and submits that the BN can be issued without leave of the court under section 5(3)(b) of the IA;

the JD is a maker/debtor based on Clause 3 of the PN and the sections 88, 89, 90 and 93 of the Bills of Exchange Act 1949; and

Tan Pin Soon and the JD are jointly and severally liable to repay the debt owed to the JC under the PN. JD’s Submission [8] Briefly the JD submits that– (aa) the JD is the second Maker under Clause 3 of the PN via the escrow cheques to be issued to the JC and therefore the JD is a guarantor; (bb) “Clause 3.2 The FIRST MAKER shall deposit his 6 cheques drawn on his bank which shall be known as the Primary Cheques. Clause 3.3 The SECOND MAKER shall deposit his 6 cheques drawn on his Bank which shall be known as Escrow Cheques. Clause 3.4 The Holder on the date set out above shall submit the 1st MAKERS cheques for encashment. Clause 3.5 In the event that any of the First Makers Cheques are not encashed and are returned unpaid by the First Makers Bank for any reason whatsoever the Holder shall submit the Second MAKER’S escrow cheque for encashment.”

(cc) Since the JD is a guarantor, the JC has to obtain leave of the court before the JC request for the issuance of the BN;

(dd) the JC in seeking leave of the court under section 5(3)(b) of the IA must satisfy the court that the JC has exhausted all modes of execution and enforcement to recover the debt owed to the JC; (ee) the JC has to prove by way of affidavit evidence that the JC has taken necessary action to recover the debt from the principal debtor, Tan Pin Soon, in which case the JC has failed to do so. Issues [9] Upon careful deliberation and consideration of the application in Encl. 10, affidavits and submissions, this Court finds that the following two (2) issues are most pertinent for this Court’s determination:

whether the JD is a guarantor; and

whether the JC has to comply with sections 5(3)(b), (4), (5) and

IA because the JD is a guarantor. Findings of this Court Issue (a) – whether the JD is a guarantor. [10] The crux of the issue is actually whether the JD is a guarantor under the PN entered into between the JC, Tan Pin Soon and the JD. [11] It is apparent from the PN that the PN was properly stamped under the Stamp Act 1949 and the signature of the JD on the PN proves that the JD had executed the PN conclusively as the Second Maker under PN. [12] Further to that, it can be seen clearly from Clause 2 of the PN that Tan Pin Soon as the First Maker and the JD as the Second Maker (collectively known as the “Makers”) have jointly and severally, and also irrevocably promised to pay LS Speeds Enterprise / the JC, the principal sum of RM650,000.00. [13] For ease of reference Clause 2 stipulates as follows:

FOR VALUE RECEIVED, THE UNDERSIGNED, DATO TAN PIN SOON (NRIC: 590517-10-5343) OF NO 1 JALAN CEMPAKA KUNING 1 TAMAN CEMPAKA 42700 BANTING (the FIRST “MAKER”) AND ZULKIFLI BIN ABDUL LATIF (NRIC: 590818-10-6593) OF A-33-2 RIANA GREEN EAST CONDO, WANGSA MAJU SEKSYEN 5 53300 KUALA LUMPUR, W. PERSEKUTUAN (kl) (THE SECOND “MAKER”) (COLLECTIVELY “the MAKERS”), HEREBY JOINTLY AND SEVERALLY IRREVOCABLY PROMISE TO PAY TO THE ORDER OF LS SPEEDS ENTREPRISE (REGISTRATION NUMBER: 0029380884-T) OF NO 109, JINJANG UTARA TAMBAHAN, 52000 KUALA LUMPUR, WILAYAH PERSEKUTUAN (the “HOLDER”), THE PRINCIPAL SUM OF RINGGIT MALAYSIA SIX HUNDRED FIFTY THOUSAND (RM 650,000.00) (“the value received”) ONLY PURSUANT TO THE TERMS AND CONDITIONS SET FORTH HEREIN. [14] It follows that, by reference to the terms and conditions in Clauses 3 of the PN, both Makers shall deposit 12 post dated cheques for the sums as stated in Clauses 3.i – vi with the Holder / JC. The First Maker’s / Tan Pin Soon’s 6 cheques are known as the Primary Cheques and the Second Maker’s / JD’s 6 cheques are known as the Escrow Cheques. In the event that the First Maker’s 6 cheques are unable to be encashed, the Holder / JC shall encash the Second Maker’s 6 Escrow Cheques. [15] In Clauses 4 and 10 of the PN, both Makers (Tan Pin Soon and the JD) shall have the right to prepay the Holder / JC in full for the value received under the PN and all of the terms and conditions in the PN shall bind the Makers (Tan Pin Soon and the JD) and their successors. [16] It is also undisputed fact that the governing law of the PN is section 88 of the Bills of Exchange Act 1949 as stipulated in Clause 14 of the PN. [17] Based on the terms and conditions above, it is manifestly clear that the Second Maker’s / JD’s 6 Escrow Cheques executed and/or drawn in favour with the Holder / JC is a form of financial agreement and / or assurance to the Holder / JC that the Holder / JC will receive payment in the event that the First Maker’s / / Tan Pin Soon’s 6 Primary Cheques cannot be encashed by the Holder / JC. [18] Therefore, this Court opines that such Escrow Cheques as issued / deposited with the Holder / JC under the PN is an escrow financial process, the escrow arrangement of both the Makers (Tan Pin Soon and the JD) and the Holder / JC as agreed upon under the PN whereby the money is held in the escrow account pending the fulfillment of the First Maker’s / Tan Pin Soon’s obligations to make payments for the value received as per the terms of the PN in Clauses 3.i until vi. [19] Once the non-fulfillment of the obligations by the First Maker / Tan Pin Soon occurred, the Second Maker / the JD shall give instruction to disburse the 6 Escrow Cheques to the JC and this escrow financial process under the PN is clearly the escrow arrangement to make sure that the JC is protected with payments that are promised under the promissory note to be honoured by Tan Pin Soon and the JD themselves and also, such payments by 6 Escrow Cheques can proceed in case of the non-encashment of 6 Primary Cheques deposited by Tan Pin Soon. [20] The effect of the cheques deposited and to be honoured under the PN is well explained in the case of Fielding and Platt Ltd v. Najjar [1969] 2 All ER 150 by Lord Denning wherein it was held that a cheque or promissory note is to be treated as cash, and is to be honoured unless there is some good reason to the contrary and only in exceptional circumstances will a court deprive a claimant of judgment on a claim based on a cheque – see also Nulink Solutions Sdn Bhd v. Afdilia Holdings Sdn Bhd [2016] 1 LNS 1244; [2016] 6 AMR 639; Gan Kok Hwa v Loo Chooi Ting [2021] 1 LNS

[21] The PN in the present case is a continuing security for the value received under the PN (a debt) and the First Maker / Tan Pin Soon together with the Second Maker / the JD, by executing the PN in favour of the Holder / JC, have made promises to pay the Holder / JC – see Leong Yew Chin v. Hock Hua Bank Bhd [2008] 1 LNS 94; [2008] 3 MLJ 340 at paras. 22 – 24. [22] The Holder / JC of the PN obtains a good title to PN when the PN is complete and regular and he may sue on the PN in his own name in the event of non-payment and / or non-fulfillment of any obligation to pay under the PN – see Majuikan Sdn Bhd v Barclays Bank Plc [2014] 9 CLJ 337. [23] Therefore this Court opines that the First Maker / Tan Pin Soon together with the Second Maker / JD having irrevocably made promises to pay the Holder / the JC by way of depositing the cheques with the Holder / JC, be it the Primary Cheques and/or the Escrow Cheques, are to be treated as cash payments to the JC in accordance with the terms and conditions in the PN – see also Yeo Hiap Seng v. Australian Food Corp Pte Ltd & Anor [1991] 1 LNS 19; [1991] 3 MLJ 144, Wong Fook Heng v. Amixco Asia Pte Ltd [1992] 2 SLR 342 (decisions of the Singapore High Court and Court of Appeal respectively); Dato' Francis Ng Tian Sang v. Alexander Wong Shoon Choy & Ors [2002] 7 CLJ 301; Affin Bank Bhd v. MMJ Exchange Sdn Bhd & Anor [2011] 9 MLJ 787; Raymond Mah Mun Kitt v. Bengjaya Sdn Bhd [2014] 1 LNS 82; Ting Sie Chung (A) v. Ors v. Yeap Jing Fong [2009] 1 LNS 274; [2009] MLJU 244, Uni Wall Architectural Product & Services Sdn Bhd v. Global Upline Sdn Bhd [2011] 6 CLJ 467; [2011] MLJU 517; Nulink Solutions Sdn Bhd v. Afdilia Holdings Sdn Bhd [2016] 1 LNS 1244; [2016] 6 AMR 639; Axisjaya Sdn Bhd v. B Cor Geotechnics Sdn Bhd [2020] 1 LNS 204; [2020] MLJU 324; Yee Teck Fah v. Lee Chee Meng [2020] 1 LNS 847; [2020] MLJU 1054. [24] Based on the foregoing statutory provisions and authorities, and upon construing and examining the terms and conditions in the PN carefully, this Court holds that the JD is actually the Second Maker of the PN and / or one of the Makers of the PN who has irrevocably promised to pay the Holder / JC, the sum of RM650,000.00 being the value received under PN in compliance with the terms and conditions under the PN on joint and several basis together with the First Maker / Tan Pin Soon. Therefore, it is clear that the JD is not a guarantor, and for the further reasons as follows–

as submitted by the JC that there is nothing in the Promissory Note dated 20.2.2020 which expressly states that the JD is a guarantor;

the JD’s own admission in Afidavit Jawapan Defendan Kedua affirmed on 14.10.2021 that he owed RM375,000.00 only after returning RM125,000.00 to the JC;

applying the provision in sections 88, 89, 90 and 93 of the Bills of Exchange Act 1949, the JD is clearly a maker, promisor and/or drawer of the PN in which the JD has promised to make payments in accordance with the terms and conditions of the PN. Issue (b): whether the JC has to comply with sections 5(3)(b), (4), (5) and

of the IA because the JD is a guarantor. [25] As adverted to in the foregoing, in that the JD is not a guarantor, therefore this Court finds that this issue must be answered in the negative for the very reason that the JC is not required to obtain leave of the court under sections 5(3)(b), (4), (5) and (6) of the IA to commence any bankruptcy action against the JD. [26] In any case, this Court is agreeable with the JC submission that and concur with the judgment laid down by the FC in Hong Leong Bank Bhd v Khairulnizam bin Jamaludin [2016] 4 MLJ 302 which clearly held that “… there is nothing to prevent a judgment creditor from obtaining leave at a point in time prior to the commission of an act of bankruptcy i.e. soon after the issuance of the bankruptcy notice or with the application for the issuance of a bankruptcy notice…”. Conclusion [27] In the premises, and after careful scrutiny and judicious consideration of all affidavits and the written submissions of the parties, the application in Encl. 10 is dismissed with costs subject to allocatur. Dated: 30.9.2022 t.t (CHAI GUAN HOCK) Senior Assistant Registrar High Court of Malaya Kuala Lumpur Counsel/Solicitors For the Judgment Creditor: Chong Kok Wai Messrs. Sheah, Tan & Rahman Advocates & Solicitors No. 149, Jalan 5/42, Petaling Garden off Jalan Gasing, 46000 Petaling Jaya Selangor, Malaysia For the Judgment Debtor: Ahmad Fadhli Salleh Messrs. Fadzil & Eddin No. 62-1 Jalan Temenggung 13/9 Bandar Mahkota Cheras 43200 Cheras, Selangor