DALAM MAHKAMAH PERSEKUTUAN MALAYSIA
(BIDANGKUASA
RAYUAN)
RAYUAN SIVIL NO.
03-2-2004 (W)
BETWEEN
BUNGSAR
HILL HOLDINGS SDN BHD ... APPELLANT
DR.AMIR
FARID DATUK ISAHAK ... RESPONDENT
(In the matter of Civil
Appeal No. W-03-72-1996
in the Court of Appeal
Malaysia at Kuala Lumpur
Dr. Amir
Farid Datuk Isahak ... Respondent)
CORAM: STEVE
SHIM LIP KIONG - CJ (SABAH &
SARAWAK)
SITI NORMA YAAKOB -
FCJ
ABDUL HAMID MOHAMAD -
FCJ
JUDGMENT
The Respondent debtor, had been a partner with two other doctors in a
partnership called “Poliklinik Kotaraya”.
The Respondent had a 35% share in the partnership. In 1989, a dispute arose between the partners leading to the
filing of several civil suits in court.
On 13 March 1990, the High Court appointed two interim receivers
and managers to manage the partnership pending final settlement of the
dispute. The receivers were, inter alia,
authorized by the court to pay each
of the partners a monthly allowance of RM4,000.00.
On 30 November 1990, the Appellant
obtained summary judgment pursuant to
Order 26A, Rule 1 of the Subordinate Courts Rules’ 1980 against the Respondent
for the sum of RM 32,095.41 together with interest thereon at the rate of 8%
per annum from 1 November 1988 to the date of full payment and RM 2,033.50
costs.
On 12 May 1993, a bankruptcy notice was
issued.
On 10 November 1993, the partners entered into a settlement
agreement which, inter alia, provides for the appointment of interim receivers
and managers “to receive and manage the affairs of the Practice pending the
disposal of the Civil Suits ….” and for the sale of the partnership.
On 31 January 1994, the bankruptcy notice was served on the
Respondent by way of substituted service which was not disputed.
On 29 July 1994, a creditor’s petition was filed. It was also served by way of substituted
service on 11 May 1995. The creditors
petition was heard by the Senior Assistant Registrar on 27 June 1995. The Respondent did not appear nor contest the
petition. Receiving and Adjudication Orders (“R.O. & A.O.”) were made.
On 10 January 1996, by a summons-in-chambers, the Respondent
applied to set aside and annul the R.O and A.O. on the sole ground that arising
from the dissolution of the partnership, monies would become due and payable to
him upon the completion of the liquidation of the affairs of the partnership by
the liquidator. (More will be said about
this later). The application was made
pursuant to section 105 of the Bankruptcy Act 1967 (“the Act”).
On 10 June 1996, the Senior Assistant Registrar dismissed the
application. On appeal to the
Judge-in-Chambers, on 7 September 1996, the learned Judge set aside the R.O.
and A.O. The order of the learned Judge
was confirmed by the Court of Appeal on 20 March 2003.
On 21 June 2004, this court granted leave to the Appellant to appeal on the following questions:
“(1) whether
the words “where the court is ... satisfied by the debtor that he is able to
pay his debts or that for other sufficient cause no order ought to be made, the
court may dismiss the petition.…” in Section 6 (3) of the Bankruptcy Act 1967,
would apply to a situation where the debtor, although being properly served,
never appeared before the court at the hearing of the Creditor’s petition and
therefore could not have satisfied the court that he was able to pay his debts
at the relevant date?
(2)
whether
the words “ought not to have been adjudged a bankrupt” in Section 105 of the
Bankruptcy Act 1967 is only applicable to cases of procedural or substantive
defect in the making of the Adjudication Order and Receiving Order (“AO” and
“RO”)?
(3)
whether
in law the court can annul and rescind the AO and RO pursuant to Section 105 of
the Bankruptcy Act 1967 when the debtor has not paid as at the date of the
application and has not alleged that his only source of payment of his debts is
an asset which would be put to an end by his bankruptcy?
(4)
whether
a bankrupt’s solvency is a material consideration in an application for
annulment pursuant to Section 105 of the Bankruptcy Act, and if so, the point
of time at which the debtor should have been able to settle his debts?
(5)
whether the words of Section 105 (1) of the
Bankruptcy Act 1967, “whether in the opinion of the court a debtor ought not to
have been adjudged bankrupt…” apply to the sole ground advanced by the
Respondent that he had monies tied up somewhere but could not satisfy the
judgment debt when the Adjudication and Receiving Orders were made without paying
the judgment debt that remains outstanding?
(6)
whether
the Court of Appeal can take notice of developments since the making of the
order by the High Court Judge, which demonstrate that the Applicant misled the
High Court into exercising his discretion in his favour?”
A number of arguments was
raised before us. I propose to deal with
them point by point.
Scope of the
discretion under section 105 (1)
Section 105 (1) of the Act provides :
“105 Power of court to annul adjudication in certain cases
(1) Where in the opinion of the court a debtor
ought not to have been adjudged bankrupt, or where it is proved to the
satisfaction of the court that the debts of the bankrupt are paid in full, or
where it appears to the court that proceedings
are pending in the Republic of Singapore for the distribution of the bankrupt’s
estate and effects among his creditors under the bankruptcy or insolvency laws
of the Republic of Singapore and that the distribution ought to take place in
that country, the court may annul the adjudication”
That the jurisdiction of the court to annul a bankruptcy order
under section 105(1) is discretionary is without doubt. All authorities referred to say the same
thing. However, the question is the
scope of the discretion.
Learned counsel of the
Appellant argued that the sub-section was only applicable to cases of
procedural and substantive defect in the making of the R.O and A.O. Secondly, he argued that the relevant date at
which the debtor should have been able to settle his debts ought to be the date
of the hearing of the creditor’s petition.
Other points regarding the exercise of the discretion under that
sub-section will be discussed later.
On the first point, i.e. whether section 105 (1) only applies to
cases of procedural and substantive defects, the learned Judge, following In re Hester: ex parte Hester (1889)
Vol. xxii QBD 632, held that the scope of section 105 (1) is much wider. For convenience, I shall reproduce the
passages quoted by the learned Judge from the judgments of Cave J and Charles
J. at pages 633 and 636 of the report.
Per
Cave J.
“The language of s. 35 is somewhat
vague, and I think it was intentionally left vague, in order that the Court may
be able to do full and complete justice.
I do not think it was intended that the application should be made on
purely technical grounds, which might or might not have been successful at the
time when the order was made, but that the words were meant to apply to larger
objections - more equitable objections – such, for instance, as that the matter
cannot be successfully worked out in bankruptcy, that the objects of the law of
bankruptcy cannot be sufficiently attained by an adjudication, and that there
are reasons why, in the interest of all the creditors, and without detriment to
the public, the adjudication may be annulled.
I think the section gives the Court a very wide discretion.”
Per Charles J.
“These words undoubtedly are very wide, and many grounds can be conceived upon which the Court might come to the conclusion that a debtor ought not to have been adjudged bankrupt.”
The learned Judge in the instant appeal
then said:
“After hearing submissions, I came to
the conclusion, in line with the statements from In re Hester that I have quoted, that the discretion of the court
under subsection (1) of section 105 to annul an adjudication on the grounds
that the debtor ought not to have been adjudged bankrupt is very wide, that the
exercise of the discretion is not confined only to cases involving purely technical
grounds but that the discretion is meant to be exercised on the broader and
weightier grounds of justice and equity.
The words “ought not have been adjudged bankrupt” suggest
that the court may look back to review the situation and consider, in all the
circumstances, whether the debtor deserved to have been adjudged bankrupt. The adjudication may have been faultless
procedurally but the court may annul it if it is not fair or equitable that the
debtor should have been adjudged bankrupt.”
The Court of Appeal too cited the same passage from the judgment of Cave J cited by the learned J and reproduced above. Even though the Court of Appeal did not say so in so many words, undoubtedly it agreed with the learned Judge.
Let us look at that sub-section
closely. There are three instances when
the court may annul the adjudication.
First, when in the opinion of the court a debtor ought not to have been
adjudged bankrupt. Secondly, where it is proved to the satisfaction of the
court that the debts of the bankrupt are paid in full. Thirdly, where it appears to the court that
proceedings are pending in the Republic of Singapore for the distribution of
the bankrupt’s estate and effects among his creditors under the bankruptcy or
insolvency laws of the Republic of Singapore and that the distribution ought to
take place in that country.
Obviously, it is only the first limb that is relevant in this
case.
I shall now look at the case law. First, I shall look at In re Hester: Ex parte Hester (supra). In that case, the debtor did not appeal
against the receiving order, but later applied to rescind it on the ground that
all his creditors consented to the rescission.
The Registrar of the County Court who heard the application refused to
rescind the receiving order.
On appeal to the Divisional Court, the
Divisional Court, consisting of Cave J. and Charles J. dismissed the
appeal. The appeal to the Court of
Appeal was also dismissed. In other
words, the application to rescind the receiving order was dismissed. I think the principles laid down by the case
is as stated in the headnote :
“The Court has jurisdiction
to rescind a receiving order, even though no scheme of arrangement or
composition has been proposed by the debtor under the provisions of s. 18 of the
Bankruptcy Act, 1883. But the exercise
of the jurisdiction is a matter of discretion, and the order will not be
rescinded as a matter of course because all the creditors consent to the
rescission. The Court will consider all
the circumstances of the case, the interests of the general body of creditors,
and the interests of the public, and will be guided by the provisions of s. 35
as to the annulment of an adjudication of bankruptcy.”
It is to be noted that the headnote in (1889) Vol xxii QBD 632 which reports both the judgments of the Divisional Court and the Court of Appeal and the headnote found in (1886-1890) All E.R. (Reprint) 865 which only reports the Court of Appeal judgment are exactly the same. Besides what Cave J (Divisional Court) had said which has been quoted above, Charles J. who sat with Cave J. had this to say :
“In the present case the debts of the
person against whom this receiving order was made have not been paid in
full. Is it a case in which, if he had
been adjudged a bankrupt, the Court would say that he ought not to have so
adjudged? These words undoubtedly are
very wide, and many grounds can be conceived upon which the Court might come to
the conclusion that a debtor ought not to have been adjudged bankrupt. For example, if there was no sufficient
petitioning creditor’s debt, or no act of bankruptcy, or if it turned out that
the adjudication had been obtained for some sinister purpose, that is, some
purpose foreign to the administration of bankruptcy law; all these are grounds on
which the Court might be of opinion that the debtor ought not to have been
adjudged bankrupt. But it is argued that
the mere fact of the consent of all the creditors having been obtained to the
rescission is sufficient. Ex parte Leslie (2) decides that it is
not; and the same principle was acted on in In
re Gyll (3), and by the Court of Appeal in In re Dixon and Cardus. (4)”
It is to be noted that the examples
given by Charles J cover both technical and non-technical grounds. An example of a non-technical ground given by
the learned Judge is, “if it turned out that the adjudication had been obtained
for some sinister purpose, that is, some purpose foreign to the administration
of bankruptcy law”.
All the three judges in the Court of
Appeal in that case made no mention whether the provision covers only technical
defects. However, the fact that they
considered that consent by the creditors is by itself sufficient for the court
to annul the receiving order (in that case), shows that they did not read the
provision as confining only to technical defects at the time of making the
order.
The judgment of the Supreme Court in Sama Credit & Leasing Sdn. Bhd. v. Pegawai Pemegang Harta Malaysia
(1995)2 CLJ 368,was cited to us. In that
case, the Official Assignee applied to set aside the R.O and A.O. on the ground
that the debtor had already been declared a bankrupt by another petition.
The Senior Assistant Registrar refused the application. The learned Judge of the High Court reversed
the Senior Assistant Registrar’s decision and set aside the R.O. and A.O. The Supreme Court allowed the appeal to the
effect that the application for the annulment of the second R.O. and A.O. was
refused. Chong Siew Fai F.C.J. (as be
then was), who delivered the judgment of the Court, specifically said that the
first limb of section 105 (1) was the relevant one in that case. However, no mention was made in the judgment
whether the provision covers technical defects only or otherwise.
All that the Court said was this :
“The powers to rescind and to annul a
receiving order and an adjudication order are discretionary and the principles
governing the exercise of the discretion are, broadly speaking, the same. See In
re a Debtor (No. 446 of 1918) [1920] 1 KB 461 @ 465 applied in Re a Debtor (No. 12 of 1970) ex p. the Official Receiver v. The Debtor [1971]
1 AER 504. All the relevant facts and
circumstances must be considered.”
The judgment seems to turn on the provisions of section 8 (1)
and section 49 (1), (2). The court held that section 8 (1) did not prohibit the
making of a second or subsequent R.O. and A.O.
However, in my view, looking at the ground i.e. whether a second R.O.
and A.O. could be made, it appears to be technical in nature. In my view this case is not of much
assistance to us on this point.
In Re: Yap E. Boon (1933)
Vol 11 S.S.L.R. 217, R.O. and A.O. were made against the debtor. An application was made, not by the debtor,
but by United Engineers which, subsequent to the making of the R.O. and A.O.
was ordered to pay a certain amount of money to the Official Assignee under the
then section 103 (similar to the present section 105 (1)) to annul the R.O. and
A.O on the ground that the debt to the petitioning creditor was not in
existence on the date the act of bankruptcy was alleged to have been
committed. The Court of Appeal, held :
“When Receiving and Adjudication Orders
have been made against a debtor at the instance of a creditor whose debt was
not in existence at the date of the act of bankruptcy relied on, no receiving
and adjudication orders will be made; and if such orders have been made they
will be annulled; as the Court has no to refuse to act consider such orders if
wrongly made.”
The R.O. and A.O. were set aside. In his judgment, Terrell J said this :
“In cases,
however, falling under the first part of the section” (now first limb of
section 105 (1) – added) “it is to be assumed that the order of adjudication
was not properly made. There must have been some defect and the debtor “ought
not to have been adjudged bankrupt.”
On the issue under
discussion, the authors of the Halsbury’s Laws of England, Fourth Edition
Reissue, Volume 3(2) has this to say:
“599. Orders which ought
not to have been made. A bankruptcy
order made in proceedings which are an abuse of the process of the court, or
foreign to the purposes of bankruptcy law, may be annulled, as may also an
order made under a defective petition which has not been amended before the
making of the bankruptcy order, or upon evidence relating to the debtor which
turned out to be untrue, or where the debtor was dead at the time when
bankruptcy proceedings
were
taken against him, or where the debtor
was a minor and the debt was not enforceable against the debtor. The grounds on which the order ought not to
have been made must have been existing at the time the bankruptcy order was
made.”
From the cases referred to above, it appears that only Terrel J
in Re: Yap E Boon (supra) talked about “There must have been some defect
…..” which seems to suggest technical defects.
But, it must be remembered that the ground for the application for
annulment in that case, i.e. that the debt was not in existence on the date the act of bankruptcy was alleged to
have been committed, was itself a “technical defect” if proved to be true.
On the other hand, even
if we put aside the general observations of Cave J and Charles J in In re
Hester: ex-parte Hester (supra) and look at the examples given by them and
also in Re:Yap E Boon (supra) and by the learned authors of Halsbury’s
Laws of England (supra), it appears that
the scope of discretion under section 105(1) is not only limited to technical
defects, e.g. defective service of the bankruptcy notice and/or the creditor’s
petition or that there was no debt due or that no act of bankruptcy was
committed. Opinion is unanimous that
abuse of process of the court is a ground for annulling the R.O. & A.O
under the first limb of section 105(i).
I think, abuse of process of the court may or may not be a “technical
defect”. So, I am of the view that that
the provision should not be read to cover only technical defects, but it is
wider and includes other “legal grounds” like abuse of the process of the court
(this is only an example). However, I do
not think that it should be stretched too far to cover extraneous “moral” or
“equitable” grounds. It has to be a
legal ground as the court is only concerned with the law.
Coming back to the ground
in this application i.e. the Respondent was able to pay his debt. This may not be strictly a technical
ground. But, in my view, it is a “legal
ground” that falls under the ambit of the discretion under the provision. Indeed, it is one of the grounds provided by
section 6 as a factor that the court should consider in deciding whether or not
to make a receiving order.
In conclusion, it is my
view that the ground forwarded in this case does fall within the ambit of the
first limb of section 105(1).
The relevant date for consideration
Learned counsel for the Appellant argued that the material date to consider whether the Respondent was able to pay the debt or not ought to be the date of the hearing of the creditor’s petition. Lest it may be confused with the second limb, it should be noted that this argument was made under the first limb, i.e. whether the R.O. and A.O ought to have been made because, as alleged by the Respondent, he was able to pay the debt. This issue becomes relevant as we have held that the first limb covers a much wider scope than technical grounds only. The second limb, on the other hand, talks about “where it is proved to the satisfaction of the court that the debts of the bankrupt are paid in full.” The second limb is not applicable in this case as the debt has not been paid in full, until now.
From the judgment of the learned Judge, it appears quite clearly that the material date considered by him was the date of adjudication, which in this case is also the date of hearing of the creditor’s petition i.e. 27 June 1995. The following are extracts from his judgment :
“On the date of adjudication, 27
June 1995, the debtor had an interest in the partnership business which was
more than sufficient to pay off his debt to the petitioning creditors…..” - page 52 of the appeal records. (Emphasis added).
At page 55 of the appeal records, the learned Judge again
said :
“On that premise, I came to the
conclusion that the debtor ought not to have been adjudged bankrupt because, at
the time he was adjudged bankrupt, he was a person who was able to pay his
debts, which is a ground under subsection (3) of section 6 for refusing a
petition...” (emphasis added)
And again, on the same page :
“On the facts that I have summarized, I
was of opinion that the debtor was, at the time of the adjudication,
able to pay his debts.”(emphasis added)
Again, at page 58 of the Appeal Records
:
“I was of the view that the debtor
ought not to have been adjudged bankrupt because, on the facts existing at
the date of the adjudication, there was sufficient cause why no order ought
to be made, which is another
ground in subsection (3) of
section 6 for dismissing a petition. The
debtor was solvent.”(emphasis added)
In the circumstances, this argument ought
not to have been forwarded because that was what the learned Judge did: he
considered the Respondent’s ability to pay his debt or solvency or insolvency
as at the date of adjudication which was also the date of the hearing of the
creditor’s petition.
That, in my view, is the correct date for
consideration. First, it should be noted
that in the first limb of section 105 (1) the words “ought not to have been
adjudged bankrupt” are used. It denotes
past tense. On the other hand, in the
second limb, the words “the debts of the bankrupt are paid in full”
which denotes the present tense, are used.
Similarly, in the third limb, the present tense “are pending” is
used. This clearly indicates that the
material date for consideration, in the case of the first limb, is a date in
the past which, logically is the date of adjudication.
Courts
in Malaysia have held the same view.
This is clear from the judgment of Terrell J. in Re: Yap E Book (supra) :
“It will be
seen that the section is divided into two parts. The Court may annul the adjudication either
(a)
when
the debtor ought not to have been adjudged bankrupt. This clearly refers to circumstances in
existence at the date of the
bankruptcy
petition, as for instance, that the debtor was
not carrying on business in the jurisdiction, or that he had never been served,
or that the petitioning creditor had no provable debt, etc – or
(b)
that
the debts have been paid in full. This
equally clearly refers to something that has happened after the date of
the adjudication order. In the latter
case there is no dispute that the adjudication order was properly made in the
first case but owing to subsequent payment in full of his debts the bankrupt in
entitled to apply for annulment in lieu of discharge, and be put in the same
position as if he had never been adjudged." (emphasis added)
The Supreme Court in Sama Credit & Leasing Sdn. Bhd. (supra) said :
“One of
the ways a bankruptcy may be disposed of is by annulment. Section 105 (1) of the Act provides, inter
alia, two situations under which annulment may be granted:
(1)
when
in the opinion of the Court the debtor ought not to have been adjudged
bankrupt; or
(2)
where
the debts are paid in full.
The first situation is relevant in our
case. And, in considering whether a
receiving order ought to have been made the appellate Court would consider the
actual state of affairs at the date of the order and would, generally
speaking, not take into account matters that had occurred after that date.”
(emphasis added).
For that proposition the court relied on the judgment of Sir
Raymond Evershed M.R. in Re Dunn (a
Bankrupt), Ex. p. Official Receiver v. Dunn (1949) 2 All ER 388 (C.A.).
The position is made very clear by the authors of Halsbury’s
Laws of England Fourth Edition Reissue, Volume 3(2) at page 326-327:
“598 Grounds for annulment. The court may annul a bankruptcy order if it
at anytime appears to the court:
(1) that, on the grounds existing at the time the order was made, the order ought not to have been made; or “ ………
And in paragraph 599:
“…… The grounds on which the order ought not to have been made must have been existing at the time the bankruptcy order was made.”
I agree that the material
date for consideration whether R.O. and A.O. ought or ought not to have been
made is the date of adjudication.
Something needs to be said about Re Mat Shah bin Safuan, ex p. United Asian Bank Bhd (1991) 2
MLJ 48 and Re: Nyana Pandithan : Ex
Parte Muniamah d/o Narayanam & 6 Ors. (1994) 2 CLJ 448, both
judgments of the High Court.
In Re Mat Shah bin
Safuan (Supra), the debtor applied to set aside the bankruptcy notice
and the creditor’s petition on three grounds one of which was that the debtor
was able to pay his debt and therefore the petition should be dismissed. On this issue, the learned Judge, inter alia,
said:
“The ability
to settle any judgment debt in full under section 6 (3) of the Bankruptcy Act
1967 must be established before the act of bankruptcy is committed, i.e. before
the expiry of the seven days after service of the bankruptcy notice on the
debtor. In this case, the debtor had
already committed an act of bankruptcy and it was therefore too late at this
stage of the proceedings for him to submit that he had sufficient assets with
which he could pay the judgment debt in full.”
This view was followed in Re Nyana Pandithan; Ex Parte Muniamah d/o Narayanan & 6 Ors. (supra). In that case too the debtor, by a notice of motion applied to set aside the bankruptcy notice and the creditors’ petition and one of the grounds was that the debtor was able to pay his debts and under section 6(3) of the Act the court ought to dismiss the petition.
However, that view did not find favour with the learned judge in the instant appeal:
The learned Judge said in his judgment:
“Before a bankruptcy petition can be presented, there must have been an Act of bankruptcy. That the debtor is able to pay his debts is one of the grounds provided in subsection (3) of section 6 on which the debtor may oppose the petition. The act of bankruptcy intended in the passage cited from Mat Shah bin Safuan must be the one under paragraph (i) of subsection (1) of section 3, which is failure to settle within seven days a bankruptcy notice on a final judgment for a debt. The effect of the judgment in that case is that one of the grounds provided by subsection (3) of section 6 for opposing a petition, namely that the debtor is able to pay his debt, is not available to a debtor who has committed an act of bankruptcy under paragraph (i) of subsection (1) of section 3. Such limitation is not provided for in subsection 3 of section 6, and with respect, I do not see any justification for reading, by implication, any such limitation into it or for holding that a debtor who has neglected, or failed in his efforts, to save himself from committing an act of bankruptcy under paragraph (i) of subsection (1) of section 3 is estopped in the bankruptcy petition from showing that he is able to pay his debts.”
With respect, I agree with the view of the learned judge in this appeal. Two things must be distinguished:
(i) paying off the debt to avoid committing an act of bankruptcy that entitles the judgment creditor to file a creditor’s petition; and
(ii) being able to pay his debt as a defence against the making of the adjudication order at the hearing of the creditor’s petition.
All it means, as far as this appeal is concerned is that the relevant date to consider whether the debtor is able to pay his debt is the date of adjudication.
The exercise of the discretion
So far the learned Judge has been right on the points discussed
earlier. The next question is, on the
facts, had he exercised his discretion correctly?
As has been said by the Supreme Court in Sama Credit &
Leasing Sdn. Berhad (supra):
“The
powers to rescind and to annul a receiving order and an adjudication order are
discretionary and the principles governing the exercise of the discretion are,
broadly speaking the same. See In
re a Debtor (No. 446 of 1918 [1920] 1KB 461 @ 465 applied in Re a Debtor (No.12 of 1970) ex p. the Official Receiver v. The Debtor [1971] 1 AER 504. All the relevant facts and circumstances must
be considered. Where the Court of first
instance has exercise its discretion, strong case would be required to
authorise or induce the Appellate Court to interfere. See In
re Davidson [1894] WN 210, In re Carr
[1886] 35 WR 150, Re a Debtor (No. 994 of 1935) The Debtor v. Official Receiver [1936] 1 AER 794.”
The learned Judge has narrated the facts which I have
reproduced on which he found, as a fact, that the Respondent, as at the date of
the order was made, was solvent and able to pay his debt. Considering the facts and sitting in
appellate jurisdiction, I am unable to say that his finding of fact is perverse
or not supported by evidence and that there is a valid reason for this court to
interfere. Indeed, had the Respondent
appeared at the hearing of the petition, he might, on those facts, have
satisfied the judge that he was able to pay his debt. His fault, as it were, was that he did not
appear on the date of hearing. He said he did not know about it, as both the
services of the bankruptcy notice and the creditor’s petition were done by
substituted service. Of course,
substituted service is as good, in law, as personal service. However, the fact remains that he did not
know the date of hearing of the petition, which was accepted by the learned
Judge. I have no reason to disagree with
him on that. I also have no reason to
disagree with him for the reasons given by him, that the fact that the Respondent
did not appear, in the circumstances on this case, does not disqualify him from
applying to annul the order. But a rider
must be placed. I do not say that the
fact that a debtor did not appear at the date of hearing to contest the
petition is not a factor that should be considered in an application for
annulment. It should be considered but
whether it is material or not depends on the facts of each case. However, it does not, in law estop the debtor
from applying.
The learned Judge gave
another ground why he allowed the application based on the same fact that the
Respondent was solvent. The ground is
that there was sufficient cause why no order ought to have been made, which is
another ground in subsection (3) of section 6.
This is actually an additional ground based on the same facts, as the
debtor’s ability to pay his debt is already specifically provided for. I do not disagree with him and I do not think
I need to say more as it also falls under the clause “ought not to have been
adjudged bankrupt” in section 105(1).
I do not think I need to
discuss the other questions. To
summarise I would answer the more important questions posed this way:
(a)
The
phrase “where in the opinion of the court a debtor ought not to have been
adjudged bankrupt, …” covers not only purely technical grounds like defective
service of the bankruptcy notice or the creditor’s petition but also covers
other legal grounds like an abuse of the process of the court.
(b)
While
the debtor’s “ability to pay his debt” may not be a “technical ground”, it is a
“legal ground” which falls within the scope of the said phrase;
(c)
In
the circumstances of this case, the fact that the debtor did not appear at the
hearing to contest the petition does not disqualify him from applying for the
annulment of the adjudication order pursuant to section 105(1) of the Act.
(d)
On
the facts of this case, there is no reason for this court to interfere with the
findings of fact of the learned Judge that the Respondent was solvent and was
able to pay his debt or with the exercise of his discretion.
I would dismiss the
appeal with costs and order that the deposit be paid to the Respondent to
account of his taxed costs.
My learned brother, Steve Shim Lip Kiong, C.J. (Sabah &
Sarawak) and my learned sister, Siti Norma Yaakob, F.C.J. who have had sight of
this judgment concur that for the reasons given, this appeal ought to be
dismissed with costs and the deposit be paid out to the Respondent to account
of his taxed costs.
22 March,
2005.
(DATO’ ABDUL HAMID BIN HAJI MOHAMAD)
Hakim Mahkamah Persekutuan
Malaysia.
Peguam-Peguam :
Encik
Anantham Kasinather, Encik Kamil Azman Abdul Razak (bersamanya) bagi pihak
Perayu.
[Tetuan
Skrine]
Cik
Norhafsah Bt. Hamid bagi pihak Responden.
[Tetuan
Adam & Co.]