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2022 MarsdenLR 1041
HIGH COURT MALAYA KUALA LUMPUR
MAYBANK ISLAMIC BERHAD – Appellant
Versus
SUNHOR BUILDERS SDN BHD & ORS – Respondent
[Civil Suit No: WA-22M-198-10/2016]
Annulment of bankruptcy results in the individual being treated as never having been adjudged bankrupt, hence no requirement for plaintiff to seek leave under s 8(1) for default judgment.
Headnote:(A) Bankruptcy Act, 1967 – Section 8(1) – Default judgment entered against an undischarged bankrupt without the court's leave – Application to set aside the judgment on grounds of annulment of bankruptcy – Effect of annulment on judgment clarified by court – Section 105 distinctions between discharge and annulment emphasized. (Paras 24-34)
Facts of the case:
The 2nd Defendant, an undischarged bankrupt at the time of Writ and Judgment entry, sought to set aside the Judgment after an annulment of bankruptcy on 13 June 2019. The Plaintiff's Writ was filed against all Defendants for default in loan repayment.
Findings of Court:
Annulment of bankruptcy order restores the individual's legal status as if the bankruptcy had never occurred.
Issues
: The main issues addressed included the impact of the annulment on the validity of the Writ entered against the 2nd Defendant.
Ratio Decidendi:
The court found that because the annulment rendered the 2nd Defendant as never having been bankrupt, the omission of obtaining leave under s 8(1) did not affect the legality of the judgment.
Result:
Appeal dismissed, and application for setting aside the judgment rejected. (Paras 38-42)
JUDGMENT
Overview
[1] This suit was filed and default judgment entered against the 2nd Defendant at the time when he was an undischarged bankrupt, and without the leave of the Court under s 8(1) of the (then) Bankruptcy Act, 1967 (now Insolvency Act, 1967) ("the Act"). However, he subsequently applied for and obtained an order annulling that bankruptcy, and later applied to set aside the judgment, which the Senior Assistant Registrar dismissed at first instance. I dismissed his appeal against the Senior Assistant Registrar's decision. One of the main issues in this Grounds of Judgment is the effect of annulment on the Writ and the Judgment that would otherwise have been filed in contravention of s 8(1) of the Act.
The Facts
[2] The 2nd Defendant and the 3rd Defendant were directors of the 1st Defendant and had guaranteed the repayment of banking facilities that the Plaintiff had granted to the 1st Defendant
[3] When the 1st Defendant defaulted on the repayment of the facilities, the Plaintiff demanded payment from all three Defendants and then on 21 October 2016 filed the Writ in this suit against them to recover the outstanding sums
[4] When they all failed to enter an-appearance to the Writ, on 23 November 2016 the Plaintiff entered a default judgment against all three Defendants ("the Judgment").
[5] Unbeknown to the Plaintiff, the 2nd Defendant had earlier on 29 August 2016 ie prior to the Writ and the Judgment, been adjudicated bankrupt on the petition of another creditor named OTM Group Sdn Bhd, in Shah Alam High Court Bankruptcy No: BA-29NCC-173-01/2016 ("the 2016 Bankruptcy").
[6] On 13 June 2019, on the 2nd Defendant's application under s 105 of the Act, the Adjudication and Receiving Orders in the 2016 Bankruptcy were annulled ("the Annulment Order").
[7] In July 2019, still unaware of the 2016 Bankruptcy or the Annulment Order, the Plaintiff commenced bankruptcy proceedings against the 2nd Defendant on the Judgment, and on 5 February 2020 obtained Adjudication and Receiving Orders against him ("the 2019 Bankruptcy").
[8] On 22 February 2021, the 2nd Defendant applied to set aside the Adjudication and Receiving Orders in the 2019 Bankruptcy, and on 22 September 2021, his application was allowed.
[9] On 14 December 2021 he then applied to this Court for the following orders:
(i) For an extension of time to file the application;
(ii) To set aside the Judgment as against him;
(iii) For leave to defend the action in this Writ.
("the 2nd Defendant's Application")
[10] The 2nd Defendant's main contention is that, as he was an undischarged bankrupt at the time, the Writ was filed and the Judgment entered against him, and in the absence of any the leave of the Court under s 8(1) of the Act, then the Writ and Judgment are bad in law and he is entitled to have the Judgment set aside as against him ex debito justitiae.
[11] It is to be noted that the other Defendants have not filed any application to set aside the Judgment, though in truth that fact has no bearing on the 2nd Defendant's Application.
[12] On 9 March 2022, the Senior Assistant Registrar dismissed his application, and he then appealed to me under O 56 of the Rules of , 2012 ("the Rules).
[13] it is trite law that an appeal to the Judge under O 56 of the Rules is by way of a re-hearing, (see Tuan Haji Ahmed Abdul Rahman v. Arab-Malaysian Finance Berhad, [1996] 1 MLJ 30). Thus, I reheard the 2nd Defendant's Application.
[14] The issues to be addressed and decided were:
(i) Whether the extension of time should be granted;
(ii) Whether the Judgment should be set aside; and;
(iii) Whether the 2nd Defendant should be given leave to defend the action.
Extension Of Time
[15] Under O 13 r 8 read with O 42 r 13 of the Rules, a party intending to set aside a default judgment "shall make an application to the Court and serve it on the party who has obtained the order or judgment within thirty days after the receipt of the order or judgment by him."
[16] Here the Judgment was entered
