Sia Beng Kim v Malayan Banking Berhad (JA-29PB-120-03/2024)

This is an appeal by the Judgment Debtor (the “JD”) against the decision of the Senior Assistant Registrar (“SAR”) dated 22.08.2024 which dismissed the JD’s application for discharge pursuant to subsection 33(3) of the Insolvency Act 1967 [Act 360].

Having considered the cause papers, the affidavits filed, the reports of the Director General of Insolvency (“DGI”), the written submissions of parties, and the applicable law, I allowed the appeal and set aside the decision of the SAR.

Below are the grounds of my decision.

The background facts in this appeal are gathered from the Affidavits and submissions filed by the parties and stated in chronological order.

On 15.11.2019, the Judgment Creditor (the “JC”) filed a Creditor’s Petition (“CP”) against the JD in the Johor Baharu High Court (“JBHC”) Bankruptcy No: JA-29-774-04/2019 (Bankruptcy proceeding) for the alleged sum of RM101,464,321.82.

On 28.01.2020, an Adjudication and Receiving Order (“AORO”) was granted against the JD, and the JD was adjudged a bankrupt.

The JD commenced the discharge application vide Summons in Chambers dated 08.03.2024 pursuant to subsection 33(3) of Act 360.

The bankruptcy arose from the facilities granted to Chye Hup Heng Sdn. Bhd. (the “Borrower”) by the JC, for which the JD acted as one of the guarantors.

The JD contends that he was merely a guarantor for the corporate borrowing and had subsequently ceased involvement in the Borrower after disposing of his shares pursuant to a Sale and Purchase Agreement dated 22.09.2008 (“SPA”) (see exhibit “S-1”, pages 17 to 24 of the JD’s Affidavit In Support in Enclosure 2).

The JD further contends that he had previously sought to be released from his obligations as guarantor and relies on a purported Letter of Indemnity and correspondence exchanged with the JC.

The JC subsequently through their letters dated 04.04.2012 to the JD stated that they were prepared to agree to release and discharge the JD from all the liabilities and obligations under the facilities granted to the Borrower subject to written consent being obtained from all remaining Directors/Guarantors and the Borrower in the form of a resolution from the Board of Directors (the “Conditional Discharge and Release”).

The JC later issued a letter dated 16.08.2012 to the JD stating that the JC had rescinded the consent/approval for the request to discharge JD’s obligations and liabilities under the facilities since the JD has failed to fulfil the Conditional Discharge and Release.

The Borrower and/or the JD had breached their obligations by failing to make repayment towards the facilities granted by the JC.

The JC had obtained summary judgment against the JD on 27.02.2018. No appeal was filed by the JD against the said summary judgment.

The JD was adjudged bankrupt through Bankrupt Order dated 28.01.2020.

On 08.03.2024, the JD filed an application pursuant to subsection 33(3) of Act 360 seeking an order for discharge from bankruptcy.

In support of the application, the JD relies, inter alia, on the following reasons:

his elderly age of 67 years;

his status as a retiree without meaningful income;

his medical condition involving heart-related illness, hypertension and dyslipidemia;

he had complied with his obligations to the best of his ability; and

continued bankruptcy would serve no practical purpose.

The JC opposed the discharge application on several grounds, including—

the alleged commission of offences under section 16 of Act 360 arising from delay in filing the Statement of Affairs (“SOA”);

the insufficiency and alleged inaccuracies in the DGI’s reports;

the low dividend contribution by the JD; and

the substantial outstanding debt exceeding RM100 million.

The DGI subsequently issued a report dated 24.04.2024 and an amended report dated 14.07.2024 pursuant to subsection 33(3) of Act 360.

The amended DGI’s report stated, inter alia, that searches conducted with the relevant local authorities revealed no ownership of immovable property by the JD, save for a forklift vehicle with road tax expiry in 1995.

On 22.08.2024, the SAR dismissed the discharge application with no order as to costs.

Dissatisfied with the said decision, the JD filed a Notice of Appeal to the Judge in Chambers dated 02.09.2024 vide Enclosure 24.

The issues arising for determination in this appeal are as follows:

whether the JD had committed any offence under Act 360 relevant to the discharge application;

whether the JD's discharge application was correctly dismissed due to the DGI’s report being insufficient, incomplete, and inaccurate;

whether the JD's age, financial standing and the practical benefit of continued bankruptcy justify its continuation;

whether the JD's pre-bankruptcy reasons and sequence of events are relevant factors for the Court to consider in a discharge application; and

whether the SAR erred in dismissing the JD’s application for discharge under subsection 33(3) of Act 360. ANALYSIS AND COURT’S FINDINGS

It is trite law that section 33 of Act 360 confers upon a bankrupt the right to apply to the Court for an order of discharge at any time after being adjudged bankrupt.

Subsection 33(3) of Act 360 confers discretion upon the Court to grant a discharge to a bankrupt upon consideration of all relevant circumstances, including the report of the DGI.

It is well established that the jurisdiction under subsection 33(3) of Act 360 is discretionary and must be exercised judiciously upon consideration of the facts and circumstances of each case.

I must balance the interests of creditors, the conduct of the bankrupt, and the broader objectives of insolvency law. JD’s submission

The JD submits that the SAR erred in dismissing the discharge application despite the absence of any proven offence under Act 360.

The JD contends that—

subsection 33(6) of Act 360 only becomes applicable where an offence under the Act has been proven against the bankrupt;

the DGI never exercised powers under sections 84A, 85 or 86 of Act 360 to prosecute or charge the JD for any offence;

the SAR erred in treating the DGI’s report as insufficient despite the issuance of the amended DGI’s report dated 14.07.2024;

the DGI had adequately conducted investigations and that the JD had disclosed his affairs to the best of his ability; and

the JC’s proof of debt had not been admitted at the material time and therefore the JC’s challenge to the discharge application was defective.

The JD prays for an order allowing the appeal and granting a discharge pursuant to subsection 33(3) of Act 360. JC’s submission

The JC submits that the SAR correctly dismissed the discharge application.

The JC argues that—

the DGI’s reports were incomplete, lacking in particulars and contained inaccuracies;

the JD failed to comply with statutory obligations under section 16 of Act 360, including delay in filing the SOA;

the JD failed to fully disclose assets and affairs, including matters relating to ownership of a forklift vehicle;

the outstanding debt remains substantial and exceeds RM95 million; and

public interest and the interests of creditors militate against the grant of discharge. Court Analysis and Findings Whether the JD had committed any offence under Act 360 relevant to the discharge application

A central issue raised by the JC concerns the alleged non-compliance by the JD with section 16 of Act 360 relating to the SOA.

The amended DGI’s report dated 14.07.2024 expressly states that the JD contacted the Insolvency Department within seven (7) days of the first notice and attended the Insolvency Department for interview on 16.03.2020.

The DGI did not initiate any prosecution or criminal proceedings against the JD under Act 360.

The SAR rightly held that the JD had not committed any offence under section 16 of Act 360 by referring to the case of Dato’ Lim Huah Leong v. Engtex Marketing Sdn. Bhd. [2016] 5 MLRA 457, in which the Court of Appeal held as follows: “[27] Further, one can be said to be guilty of committing an offence under the Act only if the bankrupt is charged in court by the DGI for that offence. The meaning of the words "committed any offence" in s 33(4) of the Act has been duly considered in the case of Development & Commercial Bank Bhd. & Ors. v. Loke Theen Fatt [2009] 4 MLRH 11 8, [2010] 5 CLJ 583. David Wong Oak Wah J (as he then was) had this to say: "The word committed in s 33(4) of the Act meant that the bankrupt must have been charged in court by the DGI for that offence. Since the respondent had not committed any offence under the Act as specified under s 33(4) of the Act, it followed that the application for the respondent's discharge must be dealt with pursuant to s 33(3) of the Act.”. [Emphasis added]

I agree with the findings of the SAR that the absence of any prosecution or conviction remains a relevant consideration when assessing whether the alleged conduct should operate as a bar against discharge. Whether the JD's discharge application was correctly dismissed due to the DGI’s report being insufficient, incomplete, and inaccurate

The JC submits that the DGI’s reports were insufficient and incomplete where—

the report incorrectly stated the bankruptcy was based on a Judgment in Default, when it was actually a Summary Judgment dated 27.02.2018;

the DGI failed to conduct extensive searches. An address search was limited to specific municipal councils in Johor Bahru and Pasir Gudang, neglecting other relevant areas like Segamat where the Bankrupt resided; and

the ownership of the forklift was only discovered via a MYSIKAP JPJ search conducted after the JC raised objections, indicating the DGI’s initial investigation was not exhaustive.

Therefore, relying on Public Bank Bhd. v Choong Yew Wah [2014] 4 MLJ 559 the JC contended that the Court is duty-bound to ignore a DGI’s report that is lacking in details or reasonable justifications and cannot allow a bankrupt to benefit from such deficiencies.

Under subsection 33(3) of Act 360, the Court must take into consideration the report of the DGI in considering the JD’s application for discharge.

In this regard, I refer to the Court of Appeal’s case in Dato’ Lim Huah Leong v Engtex Marketing Sdn. Bhd.(supra), which bears striking similarities to the present case. The Court of Appeal held that— “[12] In dealing with the application for discharge, the court shall take into consideration a report of the DGI as to the bankrupt’s conduct and affair, including a report as to the bankrupt’s conduct during the proceedings under his bankruptcy. This is a mandatory requirement. Thus, in an application of this nature, a report of the DGI is very vital, in fact the most important consideration. Even though the court shall consider the DGI’s report as required under s 33(3), the court is not bound to accept it if the court is satisfied that the report is incomplete and unreliable or made based on incomplete investigation into the conduct and affairs of the bankrupt. Without a proper or complete report by the DGI, the court cannot decide on the issue of discharge. The purpose of the DGI’s report is to secure a full and complete investigation and disclosure of all the material facts or information relating to the bankruptcy particularly on issues stipulated under s 33(4) and (6) of the Act. The report is not only for the interest of the bankrupt and the creditors but also the interest of the public as well as the business community at large.”. [Emphasis added]

Based on the above authority, the Court is not bound to accept the DGI’s report without scrutiny.

Although subsection 33(8) of Act 360 provides prima facie evidential value to the DGI’s report, however such presumption is not conclusive. The Court may decline to place reliance on the DGI’s report where it finds that the said report is incomplete, unreliable, or the product of an insufficient inquiry into the JD's conduct and affairs. It is trite law that prima facie evidence remains rebuttable upon proof to the contrary.

The SAR concluded that the MYSIKAP JPJ search was only conducted after the issue being raised by the JC and hence, the SAR rejected the amended DGI’s report as the investigation conducted was incomplete. Further, the SAR held that the failure of the JD to disclose the existence of the forklift when he filed the SOA has affected the quality of the DGI’s report. Based on the above reasons, the SAR dismissed the JD’s application for discharge.

I note that in the DGI’s first report, the DGI has carried out its investigations dutifully by writing to various agencies, including Pasir Gudang and Johor Bahru City Council and most financial institutions to investigate the JD’s assets, except the DGI did not write to Segamat City Council and JPJ.

The amended report records searches conducted with local authorities which include Segamat City Council and JPJ regarding the JD’s assets. The search showed that there was no property under the name of JD except the JD owns a forklift bearing registration no: JDB2154. The conclusion that the JD has no other hidden or undisclosed assets reinforced the credibility and reliability of the DGI’s findings.

An amended DGI’s report was subsequently issued addressing certain concerns raised earlier by the JC. The amended DGI’s report has rectified the mistake or omission made in the first DGI’s report. Therefore, the amended DGI’s report has contained the accurate information of the JD's conduct and affairs.

Further, despite non-disclosure by the JD is an offence punishable under subsection 16(3) of Act 360, the JD was never charged in Court for the said offence till the date of application for discharge.

It is pertinent to note that the MYSIKAP JPJ forklift was registered twenty-six (26) years ago where the road tax has expired in 1995. There is no evidence that the road tax of the said forklift was renewed after 1995. Further, the forklift is likely to have depreciated in value and it holds no real value, use or benefit to the JD’s assets.

I further find that JC has failed to produce any evidence to show that JD has deliberately concealed the asset. The current value of the forklift was uncertain and it was not clear whether the said forklift is still existing or has been scrapped.

In the absence of contrary evidence demonstrating concealment of substantial assets, I am unable to conclude that the DGI had failed to perform its statutory functions and that the credibility of the DGI’s report is questionable. Whether the bankrupt's age, financial standing, and the practical benefit of continued bankruptcy justify its continuation

The JD is presently 67 years old and is a retiree with no meaningful source of income.

JD argued that his age, health, and status as a guarantor warranted a second chance.

While the Court may consider personal circumstances, these must be balanced against the public interest and commercial morality. In this case, although the JD’s failure to disclose a tangible asset (the forklift) has caused the incompleteness and insufficiency of the DGI’s first report, it has been rectified by DGI in their amended report. Hence, it does not bar the Court in considering the application for discharge filed by the JD.

The evidence before the Court also discloses that the JD suffers from health conditions including heart-related illness, hypertension and dyslipidaemia.

I must therefore consider whether any practical utility remains in continuing the bankruptcy administration.

The JC argued that under subsection 33(4) of Act 360, a discharge should be refused unless a dividend of at least 50% is paid, as the JD allegedly committed an offence by filing his SOA twenty-seven

days late.

Paragraph 33(6)(m) of Act 360 provides that— “the bankrupt's assets are not of a value equal to fifty ringgit per centum of the amount of his unsecured liabilities, unless he satisfies the court that the fact that the assets are not of a value equal of fifty ringgit per centum of his unsecured liabilities has arisen from circumstances for or in respect of which he cannot justly be held blameable.”. [Emphasis added]

In the present case, the debts/outstanding sums owed by the JD to JC stood at RM101,464,321.82 as at 28.01.2020 and the amount of debts admitted by the JC is RM95,959,230.06. The amount of the JD’s estate is RM5,208.59 and equivalent to 0.0033% whereas the amount repaid by JD from October 2020 to Jun 2024 is only RM3,900.00 (see paragraph 16 of DGI’s report at page 4 of Enclosure 13). Hence, the JC argued that the JD’s application for discharge should be dismissed.

It is not denied by the Parties that the JD has failed to fulfil the requirement for dividend payment of not less than 50% under subsection 33(4) of Act 360. Subsection 33(4) of Act 360 provides that where it is proven to the satisfaction of the Court that the bankrupt has committed an offence under the Act, the Court shall, unless there are special reasons warranting a different decision, either refuse the discharge or suspend the operation of the discharge order until a dividend of not less than fifty per cent has been paid to the creditors.

In this regard, I refer to the case of Dato’ Lim Huah Leong V. Engtex Marketing Sdn. Bhd. (supra), the Court of Appeal in allowing the Appellant's appeal and overturning the High Court's decision ruled that while the DGl’s report is crucial in a discharge application, individuals should have the opportunity for a fresh start if discharged. The Court of Appeal found the two (2) reports by the DGI in that case to be comprehensive, addressing the appellant's conduct, creditor objections, and financial history. It rejected creditors' claims of insufficient investigation, confirming the DGI had properly examined the appellant's properties, travel approvals, and financial dealings. The Court of Appeal decided that— “[36] Whilst we agree that the DGl's report is pivotal in a discharge application, in the interest of justice, in appropriate cases, an individual should not remain a bankrupt and he should be able to make a fresh start as soon as he is discharged by the court. In allowing a discharge, the court must be very cautious in balancing between the interest of the bankrupt as an individual and the interest of the public and commercial reality at large. In this regard, we are mindful of the fact that a discharge can easily be abused especially in cases where the DGI has failed to carry out proper and complete investigation into the affairs of the bankrupt. [37] This now brings into focus the pertinent issue here: whether the DGl's report in the instance case is brief and incomplete? [38] We have deliberated on the complaints meted out by the creditors. With respect, we find that these complaints are devoid of any merits. We are of the view that the complaints by the creditors had been fully investigated as contained in the DGl's reports. We find there is nothing lacking in the DGl's reports that would render it incomplete. The DGl's reports took into consideration of the following: a. the appellant's conduct and affairs during the bankruptcy and the bankruptcy proceedings; b. the history of the appellant's application and the creditors' objections; c. the history and reasoning of the appellant's applications to travel outside the country; d. the fact that it has been 12 years since the appellant was adjudged a bankrupt; e. that, as at 2 December 2013, the DGI had not received any notice of objection against the application for discharge despite having sent the notice to creditors by way of registered post on 22 November 2013; and, f. the particulars of the properties of the appellant and how those properties were utilised to satisfy the debt. [39] After perusing the DGI’s reports in order to ascertain the veracity of the complaints of the creditors we found that: …. [40] Thus, we are of the view that the learned High Court Judge misdirected herself in law when she imposed a more onerous consideration as regards the DGl's report. In this instant case, the DGI had prepared two reports for the court, on the face of which are comprehensive. It is our view that when the DGI in his report raises no objection to the application for discharge by the appellant, the court should grant the discharge unless the opposing creditor can show cogent reasons why the DGl's report should not be accepted. [41] The role of the DGJ is statutorily prescribed and it involves administrating the estate of the bankrupt including a thorough investigation of the debtor's affairs for the purpose of making a report for the court and to find out whether if there is any evidence of any offence under the Penal Code and the Act. From the reports submitted in this case, one can see that the DGI had performed his statutory duties as required by law. The DGI had also found no impropriety in the appellant's conduct. In this case, for the reasons discussed above, we are unanimous that the prima facie proof of the appellant's conduct and affairs including his conduct during the proceedings under his bankruptcy in the DC l's report remains unrebutted ... .. [54] Similarly in the present case, based on s 33 of the Act, it would appear that if a bankrupt is not guilty or in breach of any of the matters as aforesaid, then the court is empowered to discharge the bankrupt unconditionally taking into account the facts and circumstances of the case. This reasoning in our considered view is the true purpose, intent and scheme of the discharge provisions of the Act. Thus, the issue is whether in the circumstances, it is fair to grant the appellant a discharge of bankruptcy. Presently, the appellant is 61 years of age. During the period of the bankruptcy, he had conducted himself in a manner which in the opinion of the DGI was "good and satisfactory". Admittedly, the appellant may have breached some provisions of the Act but the reality is that it was not serious enough for the DGI to cite him for contempt of court. We take cognisance of the fact that the bankruptcy was brought about not by the appellant's extravagant living but rather being caught up during bad economic times as he was a guarantor to a loan. He should be given a second chance. (emphasis ours).”. [Emphasis added]

Therefore, applying the above authorities to the present application, I agreed with the JD’s submission that the SAR erred in law by imposing an unduly onerous standard in assessing the DGI's reports. The findings and recommendations of the DGI ought to be accorded considerable weight unless the JC is able to advance cogent and compelling reasons to displace them. In the present case, no such evidence has been adduced by the JC.

Likewise, in the instant case, the DGI prepared two (2) comprehensive reports addressing the JD's conduct, the objections raised by the JC, and the JD's financial circumstances and history. The reports demonstrate that the DGI had undertaken a thorough and extensive investigation into the affairs and conduct of the JD prior to finalising its findings, thereby discharging its statutory duties in accordance with the law. Significantly, the reports disclose no evidence of any misconduct or impropriety on the part of the JD.

Despite there is some mistake made by the DGI on the fact that the JD was adjudged bankrupt pursuant to Judgment in Default and not Summary Judgment, I am of the view the mistake is minute and did not affect the fact that JD was adjudged bankrupt vide AORO. The JD did not appeal against the Summary Judgment.

As the JD was never charged or convicted for the delay, the 50% dividend requirement was not triggered as a mandatory bar. I noted that the total dividend currently payable (approximately 0.0033%) was exceptionally low relative to the RM101 million debt, raising concerns about commercial morality.

The JD has no source of income and to the best of his ability, the JD has made the monthly payments as confirmed by the DGI. Further, it is well established that, in determining an application for discharge, the quantum of debt repaid is not a material factor to be considered by the Court unless the DGI has established that the bankrupt has committed an offence. The Courts have held that where the continuation of the bankruptcy serves no useful purpose, the bankrupt ought to be discharged.

Furthermore, the DGI has not objected to the JD's application for discharge. In those circumstances, the Court ought to grant the discharge unless the JC can establish cogent grounds for rejecting or departing from the conclusions contained in the DGI's reports. Hence, it would be unjust and inequitable for this Court to penalise the JD for any alleged deficiencies on the part of the DGI, which allegations are in any event emphatically denied.

Further, the Court of Appeal in the case of Quek Siew Eng v. Malayan Banking Bhd. [2023] 1 MLJ 99 emphasised that the mere existence of a substantial outstanding debt is not, by itself, a bar to discharge, as the objective of bankruptcy law is to ensure the fair administration of the bankrupt's estate rather than to punish the bankrupt. In that case, the appellant had been adjudged bankrupt for approximately twelve (12) years, was 61 years of age, and had conducted himself satisfactorily throughout the bankruptcy period. Taking into account his personal circumstances, including the fact that he had become bankrupt as a guarantor who was adversely affected by economic difficulties, the Court held that it was just and equitable to grant him a discharge.

In deciding the JD’s application, I also have considered that JD was adjudged bankrupt as the Borrower failed to pay the instalment payment and action taken against JD as a guarantor of the Borrower. Whether the JD's pre-bankruptcy reasons and sequence of events are relevant factors for the Court to consider in a discharge application

The JC argues that the JD's reliance on pre-bankruptcy events (such as the fairness of JC rescinding a conditional discharge) is misplaced.

Under subsection 33(3) of the Act 360, the Court's consideration is strictly limited to the DGI’s report regarding the JD's conduct and affairs during the actual bankruptcy proceedings, not how he became bankrupt.

The JC has taken more than three (3) years to respond to the request made by the JD for him to discharge his obligations and liabilities as guarantor to the Borrower under the facilities granted to the Borrower, after he has executed the SPA. The JC subsequently turned down the request with the reasons that JD failed to fulfil the Conditional Discharge and Release.

The undue delay by the JC has caused JD not able to fulfil the unreasonable request made by the JC three (3) years later as the existing director of the Borrower has refused to sign any other documents since they have signed the SPA and Letter of Indemnity on 22.09.2008 in which they have forwarded to JC earlier.

The bankruptcy was brought against JD due to mismanagement by the existing director of the Borrower causing JD to be part of the misfortune. The company search of the Borrower shows that JD is a minority shareholder of the Borrower.

Considering his age and inability to pay including the fact he had become bankrupt not due to his personal debt but as a guarantor for the facilities granted for the bona fide business of the Borrower and indebtedness was due to mismanagement by the existing director of the Borrower, JD has been adjudged bankrupt for more than five (5) years, to continue holding JD as a bankrupt would be meaningless. Therefore, I allowed the JD’s appeal against the decision of the SAR. Whether the SAR erred in dismissing the JD’s application for discharge under subsection 33(3) of Act 360

Having considered the totality of the evidence, the affidavits, the amended DGI’s report, and the applicable legal principles, I am of the view that insufficient weight was accorded to the relevant circumstances favouring discharge.

In particular, I find that—

no offence under the Act 360 had been established against the JD;

the amended DGI’s report sufficiently addressed the material matters raised;

the age, health and financial circumstances of the JD were relevant considerations; and

the continuation of the bankruptcy in the present circumstances would not meaningfully advance the administration of the estate.

Accordingly, I find that appellate intervention is warranted.

For the reasons stated above, the appeal is allowed. The JD is granted an order of discharge pursuant to subsection 33(3) of Act 360.

The decision of the SAR dated 22.08.2024 is set aside. There shall be no order as to costs. Dated 13 July 2026. Signed by: sgd …………………….. Wong Mee Ling Judge High Court of Malaya Johor Bahru Johor Darul Ta’zim. Counsel/Solicitor for the JD: Mr. Mohan Sankaran Messrs Mohan Sankaran & Associates Counsel/Solicitor for the JC: Ms. Amni Humaira Rosma Messrs Shook Lin & Bok Counsel for the Insolvency Department: Ms. Kodesviary a/p Ramanaidu