Rhb Investment Bank Berhad v LIM Kian Boon (WA-29NCC-1069-06/2024)

These Grounds concern 2 bankruptcy proceedings against LIM KIAN BOON (“JD1”) in Bankruptcy 1069 and AHMAD AKMAL BIN HAMZAH (“JD2”) in Bankruptcy 1069. JD1 and JD2 were Individual Guarantors for facilities granted by RHB Investment Bank Bhd (“the JC”) to Arus Dermaga Sdn Bhd (“the Borrower”). There are 2 similar appeals in each bankruptcy. The parties have agreed that I deal with Bankruptcy 1069 first and similar orders will be made in the 2 appeals in Bankruptcy 1070. a. In Bankruptcy 1069, 2 Notices of Appeal dated 22.1.2026 (Encls 61 and Encl 62) were filed by JD1 against my decision to allow Encls 37 and 38 with costs of RM2,500.00 for each appeal. b. In Bankruptcy 1070, 2 Notices of Appeal dated 22.1.2026 (Encl 66 and Encl 67) were filed by JD2 against my decision to allow Encls 41 and 42 with costs of RM2,500.00 for each appeal.

In Bankruptcy 1069, Encls 37 and 38 (“the Appeals”) were filed by the JC against the decisions of the Senior Assistant Registrar (“the SAR”) dated 7.3.2025. a. Encl 37 is an appeal allowing JD1’s application to set aside the Bankruptcy Notice (“the BN”) dated 21.6.2024 (“the Setting Aside Application”) and b. Encl 38 is an appeal dismissing the JC’s application for leave under s. 5(3)(b) and Rule 97 to commence bankruptcy proceedings against JD1 (“the Leave Application”).

The parties filed consolidated submissions pursuant to my direction given on 8.12.2025, that the Appeals be addressed in a single set of submissions for each party, given the numerous lengthy submissions by the parties. JD1 Consolidated Submissions are in Encl 59 (“JD Subs”) and the JC Consolidated submissions are in Encl 60 (“JC Subs”).

All references herein to sections are with reference to sections of the Insolvency Act 1967 (“IA”) and all references to Rules are with reference to the Insolvency Rules 2017 (“IR”).

The contents of these Grounds are set out in the table below. Contents Para No Bankruptcy 1069 2-5 THE BACKGROUND FACTS 6-15 The JC’s Challenges & Appeals 16-17 ENCL 37 - SETTING ASIDE THE BN 18 The Consent Order is Final under s. 3(1)(i) 19-21 The Consent Order was not enlarged to include a Bridging Loan 22-23 The Consent Order was Not Varied 24-28 Ss. 92 and 94 Do Not Apply 29-31 The BN is Unambiguous 32-34 Interest and Limitation 35-38 All Execution have been Exhausted 39-42 ENCL 38 - LEAVE TO COMMENCE BANKRUPTCY 1069 43-44 CONCLUSION 45

The background facts are derived from paras 3 to 3.23 of the JC Subs dated 19.6.2025 (Encl. 58 pp. 5 to 13), for which I am grateful.

On 16.5.2008, the JC granted a Term Loan to the Borrower. The Term Loan was secured, inter alia, by a joint and several guarantee dated 9.9.2008 (“the Guarantee”) executed by JD1 and JD2 (collectively, “the Individual Guarantors”), and a corporate guarantee executed by One Petrol One Resources Berhad (“the Corporate Guarantor”).

Following the Borrower’s default, the JC on 24.10.2012 commenced recovery proceedings against the Borrower, the Individual Guarantors and the Corporate Guarantor (“the Defendants”). The proceedings culminated in a Consent Order dated 20.9.2013 (“the Consent Order”) (Encl. 56 pp. 40 to 42) whereby the Defendants, agreed to be jointly and severally liable to the JC for a judgment sum of USD24,843,933.67 (less the sale proceeds of a vessel) together with interest and costs (“the Judgment Sum”). Execution of the Consent Order was stayed for 6 months.

9.

The material terms of the SA include, inter alia, that: a. the SA was entered into between the Borrower and the Corporate Guarantor, pursuant to the Consent Order (Section 2.01 at Encl. 59 p. 50); b. the Individual Guarantors remained liable to the JC under the Guarantee not merely as sureties but also as principal debtors (Section 1.01(5) at Encl. 59 p. 47); c. by reason of the default under the Term Loan, the Borrower, the Individual Guarantors and the Corporate Guarantor were indebted to the JC in the Judgment Sum as at 27.9.2012 of USD24,843,933.67 (inclusive of the principal sum of USD23,893,694.74) (Section 1.03(6) at Encl. 59 p. 49); d. the JC refrained from executing the Consent Order for a period of 6 months from the date of the Consent Order (Section 3.01(2)(f) at Encl. 59 p. 51); e. the Borrower and the Corporate Guarantor jointly and severally agreed, inter alia, to pay the JC a sum of RM6.5 million (“the Settlement Sum”) (Section 3.01(1)(a) at Encl. 59 p. 50); f. the JC expressly reserved its right to recover the balance of the Judgment Sum (after deducting the Settlement Sum and the Sale Proceeds) against the Individual Guarantors, notwithstanding the discharge of the Borrower and the Corporate Guarantor, subject to the receipt of the Settlement Sum (Sections 3.01(2) and 3.01(4) at Encl 59 pp. 50 and 51).

On 21.11.2014, a Supplemental Settlement Agreement (Encl. 59 pp. 63-83) (“the Supp SA”) was entered into to amend the mode of payment of the Settlement Sum. Again, the Individual Guarantors were not parties to the Supp SA.

On the same day (21.11.2014), the Individual Guarantors executed a Letter of Confirmation (at Encl. 59 p. 119) irrevocably acknowledging, inter alia, that their liabilities under the Consent Order remained unaffected and in full force and effect.

On 3.7.2015, the Individual Guarantors separately proposed (Encl. 59 p. 143) a 2-tranche settlement to discharge their liabilities under the Consent Order. The JC accepted the proposal subject to the terms set out in the JC’s letter dated 14.9.2015 (Encl. 59 p. 128). The JC expressly reserved its right to enforce the Consent Order in the event of non-payment.

Despite several extensions of time by the JC between 20.5.2016 and 28.2.2018, the Individual Guarantors failed to make full payment under their proposed 2-tranche settlement arrangement. On 13.3.2018, the JC through its solicitors, issued a letter of demand dated 13.3.2018 (Encl. 61 pp. to 122) declaring an event of default and demanded immediate payment of the outstanding judgment sum.

The JC took the position that its debt under the Consent Order remained unsatisfied. The JC thus procured the issuance of the Bankruptcy Notice dated 21.6.2024 (“the BN”) against JD1, based on the Consent Order.

On 7.3.2025, the SAR allowed the Setting Aside of the BN with costs and dismissed the Leave Application. In short, the SAR held, that the BN was defective, rendering the Leave Application to commence bankruptcy proceedings based on a defective BN, academic.

The JC challenged the SAR’s decision. On 20.3.2025, the JC filed the Appeals.

It is common ground that the BN was premised on the Consent Order at pp 40 to 42 of Encl 56. The following are the Grounds raised by JD1 against the BN. The Consent Order is Final under s. 3(1)(i)

JD1 contended that the Consent Order is not a final judgment within s. 3(1)(i), as it contemplated further steps to be taken to work out a settlement of the indebtedness. I find that there is nothing contingent about the Consent Order and the amounts to be deducted for the sale proceeds of the vessel is a mechanical exercise and may be easily quantified. a. The sale proceeds were stated in the SA, which were signed by JD1 and JD2 who must have been aware of the quantum of the sale proceeds. b. In the BN, there is a precise statement as to the amount of proceeds received. In this sense, there was no doubt as to the amount to be paid within Ghazali bin Mat Noor v Southern Bank Berhad and four other appeals [1989] 2 MLJ 142. c. Indeed, the amount stated in the SA to have been received was USD11,509,803.34 but the amount received as stated in the BN was RM13,267,946.11. As such there does not appear to be any prejudice to JD1.

I also agree that the Consent Order conclusively determines the rights and liabilities of the parties and is therefore final and binding unless set aside. In Re: Tioh Ngee Heng [2000] CLJU 197 at p.4 of the report, the Court held: “It should be noted that the issuance of a BN has to be founded upon a final judgment or a final order. This is reflected in s. 3(1)(i) Bankruptcy Act 1967, in particular the proviso therein… the consent order stipulates payment by the JD of a quantified sum of RM33,000 in instalments providing for payment of interest in the event of default. Clearly, it finally disposes the rights of the JC and the liability of JD1. It is therefore in the nature of a final order: (see Haron bin Mohd Zaid v. Central Securities (Holdings) Bhd [1982] CLJ 26 (Rep); [1982] CLJ 293; [1982] 2 MLJ 94). It is also significant to note that the consent order has not been set aside nor has the JD taken any step to challenge it. It is trite law that an order, even if irregular, is valid and enforceable until set aside. This principle is particularly relevant in bankruptcy proceedings where the court generally will not look behind the judgments or order save in very limited circumstances of fraud or illegality, etc. …”.

In my mind, the Consent Order is a final order within s. 3(1)(i). The Consent Order was not enlarged to include a Bridging Loan

JD1 alleged that the Consent Order was enlarged to include a bridging loan, for which the Corporate Guarantor was the principal debtor.

With respect, the point has no merit. The terms of the BN covers the amounts due under the Consent Order which only includes sums under the Term Loan and makes no reference to nor does it include any sums due under a bridging loan, see also the JC’s Certificate of Indebtedness as at 20.3.2020 which is limited to the Judgment Sum only (Encl. 56 pp. 152–154). The Consent Order was Not Varied

JD1 contended that the Consent Order was varied as the SA and the Supp SA restructured the indebtedness and provided for the discharge of the Borrower and the Corporate Guarantor. It was submitted that such discharge released JD1 as guarantor under ss. 87 and 88 of the Contracts Act 1950 (“CA”). These sections provide: “Discharge of surety by release or discharge of principal debtor 87. The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Discharge of surety when creditor compounds with, or gives time to, or agrees not to sue principal debtor 88. A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.”

I agree with Counsel for the JC that these sections have no application. The parties have contracted out of these sections. By clauses 8(d), (e) and (h) of the Guarantee (Encl. 56 pp. to 87), it was agreed that the Guarantors shall not be released by, inter alia, any indulgence given or compromise with the Borrower under the Term Loan, with or without JD1’s consent or notice to him.

In Kedah Cement Sdn Bhd v Vimix Concrete Sdn Bhd & Ors [2023] MLJU 3366, the guarantor similarly contended that he is discharged following a settlement agreement with the borrower. The Court rejected this contention and held at p 98. “[32] The most distinguishing feature would have to be that the case presently before this Court has an express clause in Clause 3 of the Joint and Several Guarantee dated 19.6.2017 which in particular allows the Plaintiff to grant time or indulgence to the Principal Debtor (the 1st Defendant) to settle its indebtedness. In the case of Tan Poh Khiang (supra) this express clause does not exist. [33] Furthermore, it is undeniable that the Plaintiff in this suit has expressly reserved its rights to pursue its claim to recover the outstanding amount against the 3rd Defendant. In the case of Tan Poh Khiang (supra) the plaintiff did not reserve its rights to pursue against the guarantor. [34] It was also expressly stated in the Plaintiff’s letter giving indulgence to pay was for the full amount inclusive of interest and not a lesser payment as was the case of Tan Poh Khiang (supra). [35] Under the circumstances section 88 of the Contracts Act 1950 is inapplicable as the Plaintiff never agreed not to sue the 1st Defendant ...”.

Similarly, by clause 8 of the Guarantee, JD1 agreed to contract out of ss. 87 and 88 CA. Further, the JC has consistently reserved its rights to recover the outstanding Judgment Sum against JD1 notwithstanding the settlement with and discharge of the Borrower and the Corporate Guarantor, see sections 3.01(2) and 3.01(4) of the SA and the JC’s letters 21.6.2016 and 25.9.2017 granting JD1’s requests for the first and second extension of time (Encl. 56 pp. 129 to 130 and 148 to 149).

By the Letter of Confirmation dated 21.11.2014 (Encl. 56 p. 119) JD1 confirmed that his obligations under the Consent Order were in full effect. Further, section 3.01(4) of the SA (Encl. 56 p. 51) expressly reserved the JC’s right to recover the Judgment Sum (after deducting the Settlement Sum and the sale proceeds of the vessel) against the Individual Guarantors, which right remained unaffected and enforceable. Clause 6.12 of the Supp SA preserved the rights under the SA. I find that the SA and Supp SA preserved the Consent Order and did not vary it.

JD1 further alleged that the JC beached ss. 92 and 94 CA by releasing and discharging the Borrower (as principal debtor) and the Corporate Guarantor, thereby impairing JD1’s rights, as guarantor to the “security” provided by the Borrower. The sections provides: “Discharge of surety by creditor’s act or omission impairing surety’s eventual remedy 92. In the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.” Surety’s right to benefit of creditor’s securities 94. A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses or, without the consent of the surety, parts with the security, the surety is discharged to the extent of the value of the security.”

First, I am unclear as to which security was allegedly impaired Indeed, JD1 did not identify any such security. I cannot understand how ss. 92 and 94 CA applies.

Secondly, the parties have contracted out of ss 92 and 94. Clauses 7 and 8(c) of the Guarantee state that it shall not be affected if any security is released (cl 8(c)) or be affected by any security (clause 7), Encl. 56 pp. 86 and 87. The BN is Unambiguous

JD1 contended that the sum claimed in the BN is uncertain and ambiguous due to the alleged failure to particularise the applicable rate of interest, the method of computation, and the intervals between payments.

It must be noted that the BN does provide the amount ordered under the Consent Order, the interest accrued, the sums received, and the total outstanding balance due and owing by JD1 as at the date of the BN. I accept that the debt claimed is plainly ascertainable. Further, the JC’s Certificate of Indebtedness as at 20.3.2020 provides a detailed breakdown of the judgment sum, interest computation, relevant periods and payments received, and has demonstrated how the sum stated in the BN was derived (Encl. 56 pp. 152 to 154).

I do not find anything in this point. Interest and Limitation.

JD1 further contended that the BN improperly included interest exceeding 6 years from the date of the Consent Order dated 20.9.2013, in contravention of s. 6(3) of the Limitation Act.

As a matter of law, any interest due prior to the date of the Consent Order would merge into the judgment, see the Court of Appeal in Captain Ho Fooi v Standard Chartered Bank Malaysia Berhad [2009] 4 MLJ 511 at pp. 523C to 524B. Only post judgment interest will be due.

For the purposes of this complaint, Interest claimed under the BN would only run from the date of the Consent Order dated 29.9.2013 until the date of the BN dated 20.9.2019. It does appear that this exceeds the 6 year period by 9 months. This excess interest in the 9 month period is minimal. I accept the submission of Counsel for the JC that even if the excess is deducted from the amount claimed in the BN, the said amount claimed will nevertheless be above the statutory minimum prescribed under section 5(1)(a). The Federal Court in Moscow Narodny Bank Ltd v. Ngan Ching Wen [2005] 3 MLJ 693 at p. 714, held: “Malaysian courts have, on many occasions, followed Re Patel and took a similar view, ie where after the filing of the creditor’s petition the amount owing by the debtor is reduced, the petition is not bad as long as the amount remaining owing at the date of hearing of the petition is more than the statutory limit.”

As such any violation of the Limitation Act as claimed will not invalidate the BN. All Execution has been Exhausted

JD1 also contended that the JC failed to satisfy s. 5(4) as the JC did not exhaust all available modes of execution and enforcement of the Consent Order against JD1 prior to commencing the bankruptcy proceedings.

S. 5(4) requires the Court to be satisfied that the JC has exhausted all modes of execution and enforcement against the principal debtor. It does not include complete enforcement against a guarantor such as JD1, see the Court of Appeal in Hong Leong Bank Berhad v. Ong Moon Huat & Another Appeal [2018] MLJU 1576 at paras 4 and 5. The Court of Appeal explained that the word “debtor” in s. 5(4) refers to the principal borrower and not a guarantor. “… It follows therefore that in construing section 5(4) regard must be given to section 5(6). And section 5(6) provides that the modes of execution and enforcement that must be exhausted include seizure and sale, judgment debtor summons, garnishment and bankruptcy against the borrower. It does not make sense that the reference to debtor in section 5(4) refers to the guarantor.”

The Borrower (being the principal debtor) in the present case has fully complied with its obligations and was discharged from all liabilities under the Term Loan and the Consent Order upon payment of the Settlement Sum pursuant to the SA and the Supp SA. As such, there is no basis for any further execution or enforcement proceedings against the Borrower.

The JC has no further modes execution against the Borrower to exhaust. The statutory precondition under section 5(4) was therefore satisfied, and there was no requirement for the JC to commence any other modes of execution against JD1 before commencing Bankruptcy Proceedings 1069.

Lastly, it is contended that under s. 5(3), the JC is required to apply for leave from Court before commencing Bankruptcy 1069 against JD1, who is a guarantor. Such leave is required if all modes of execution have been exhausted under s. 5(4). Ss. 5(3) and (4) provide: “(3) 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.

Before granting leave referred to in paragraph (3)(b), the court shall satisfy itself that the petitioning creditor has exhausted all modes of execution and enforcement to recover debts owed to him by the debtor.”

As stated above in paras 40 to 41, there are no available modes of execution against the Borrower as it has settled all the claims of the JC. I would have been prepared to grant leave if necessary. I therefore allow Encl 38.

In the circumstances, I allowed the appeals in both Encl 37 and 38 in Bankruptcy 1069 with costs. In accordance with the agreement of the parties, I made similar orders in Bankruptcy 1070 in relation to JD2 and allowed the 2 appeals in Encl 41 and 42 therein with costs. I must thank both Counsel for the considerable effort and research that went into the preparation of these Appeals. Dated the 9th day of March 2026 ........................tt............................ YA TUAN SAHERAN SUHENDRAN JUDICIAL COMMISSIONER OF THE HIGH COURT (COMMERCIAL 11) (INSOLVENCY 2) OF KUALA LUMPUR IN THE TERRITORY, MALAYSIA Case References: • Captain Ho Fooi v Standard Chartered Bank Malaysia Berhad [2009] 4 MLJ 511 • Ghazali bin Mat Noor v Southern Bank Berhad and four other appeals [1989] 2 MLJ 142 • Hong Leong Bank Berhad v. Ong Moon Huat & Another Appeal [2018] MLJU 1576 • Kedah Cement Sdn Bhd v Vimix Concrete Sdn Bhd & Ors [2023] MLJU 3366 • Moscow Narodny Bank Ltd v. Ngan Ching Wen [2005] 3 MLJ 693 • Re: Tioh Ngee Heng [2000] CLJU 197 Counsel for the Judgment Debtor: Solicitor: Karen Wilfred Messrs. Wilfred (Kuala Lumpur) Counsel for the Judgment Creditor: Solicitors: Jay Koh Mui Woon Messrs. Shook Lin & Bok (Kuala Lumpur) Legislation References: • Contracts Act 1950 (“CA”) • Insolvency Act 1967 (“IA”) • Insolvency Rules 2017 (“IR”) Decision Date: 13th January 2026