A guarantor remains liable despite payments made by a principal debtor, reinforcing contractual obligations outlined in the guarantee and relevant sections of insolvency law.

JUDGMENT

Nadzarin Wok Nordin JC:

(Enclosure 38)

Appeal

[1] In the appeal at encl 38 (Appeal), the Judgment Creditor (JC) is appealing against the decision of the Learned Senior Assistant Registrar (SAR) given on 2 August 2021 ordering the dismissal of the JD's application for the Adjudication and Receiving Order (AORO) against the JD (encl 1) be dismissed and annulled in accordance with s 105(1) of the Insolvency Act 1967 with no order as to costs.

[2] Enclosure 1 was premised on the ground that the amounts owed to the JC have been settled in full and that there are sufficient funds in the JD's estate to settle any amounts owed to the JC including the costs of the Director General of Insolvency (DGI).

Background Facts

[3] On 30 October 2009, Judgment was entered against Judgment Debtor for the sum of RM519,146.97 and RM133,759.11 together with the interest and cost.

[4] The borrower Salem High Country Sdn Bhd (the Principal Debtor) formally known as Meridien Travels Sdn Bhd was wound up on 29 January 1999.

[5] Proof of General Debt form was filed by the JC on 23 April 2003 for the sum of RM991,058.96 against the borrower.

[6] On 23 July 2018, the Judgment Creditors sold a property held by a third-party charge at a reserved price of RM4,560,300.00.

[7] On 26 November 2018, after the sale of the property mentioned above, the JC filed a Proof of General Debt (POD) form against JD as guarantor for the sum of RM2,118,245.07.

[8] The DGI has rejected the POD on 3 February 2020.

[9] The JC's appeal to the High Court was dismissed on the 29 September 2020.

Judgment Debtors Submissions

[10] It was argued by the JD that the guarantee signed by her was a contract to perform the promise or discharge the liability of the Principal Borrower to the JC and that the debt owed to the JC was paid in full from the proceed of sale of property provided by Salem High Country Sdn Bhd, the Principal Borrower.

[11] The JD thus submits that if the debt of the Principal Borrower has been paid, there are no more monies due to the JC and the Guarantee should accordingly be discharged.

[12] It is also submitted by the JD that the JC's POD has been rejected by the DGI wherein the Court of Appeal has on 29 November 2021 now overturned the decision of the High Court and allowed the appeal against the said rejection of the POD.

Judgment Creditors Submissions

[13] The JC submits that:

(i) Enclosure 1 is premature as the JD still owes the JC;

(ii) Enclosure 1 does not comply with s 105(1) of the Insolvency Act 1967

(iii) it has always been the JC's stand that that the JD as a guarantor cannot obtain the benefit of or take advantage of the Third-Party Charge to escape liability as a guarantor for the Facility;

(iv) the JD has been trying to delay the bankruptcy proceedings filed by alleging irrelevant issues whilst awaiting for the JC to sell the property under the Third-Party Charge;

(v) all of the prior JD's applications and appeals have been dismissed before the AORO was recorded only confirms the fact and the present laws that the JD cannot obtain the benefit of or take advantage of the Third-Party Charge;

(vi) the JD as the guarantor has a more extensive liability than the Principal Borrower;

(vii) the JC is entitled to prove for the balance of the amounts due to them;

(viii)the rejection of the POD is wrong in law and that the Court of Appeal had allowed the appeal by the JC on the same.

Court's Findings

[14] Firstly, this Court will deal with whether encl 1 was wrong in law and does not comply with s 105(1) of the Insolvency Act 1967 which reads:

"(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 t