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2021 MarsdenLR 4263
HIGH COURT MALAYA KUALA LUMPUR
PER: KUAN PEK SENG; EX-PARTE: WING LUNG FINANCE LIMITED (ENCL 39)
[In Bankruptcy No: WA-29PB-401-07/2019]
The court has discretion to grant a bankruptcy discharge based on equitable factors, even if debts remain unsettled, emphasizing a second chance for bankrupts when conduct and circumstances warrant it.
Headnote:(A) Insolvency Act 1967 – Sections 33(3), 33(4), and 16 – Bankruptcy discharge – Application for discharge was initially dismissed; however, upon review, the court considered the bankrupt's long-standing status, repayment history, and conduct, ultimately granting a discharge. (Paras 19, 32, 35, 37)
(B) The court underscored the system's intent to allow bankrupts a second chance unless proven wrongdoing exists, reflecting on equitable considerations. (Paras 24, 36)
Facts of the case: The Bankrupt, Kuan Pek Seng, initially declared bankrupt for debts guaranteed over a decade ago, filed for discharge citing restructuring and debt settlement claims. (Paras 4, 10, 35)
Findings of Court: The bankrupt's conduct has been satisfactory during proceedings with payments made, and creditors had minimal objections. (Paras 26, 35)
Issues: The court considered the validity of the objections from MBB against the discharge application and the implications of the guarantees on outstanding debts. (Paras 18, 32)
Ratio Decidendi: Discharge from bankruptcy should prioritize equity and fairness while weighing the bankrupt's conduct and the creditor's claims against public policy interests. (Paras 24, 35)
Result: The initial dismissal of the application for discharge is overturned, and the bankrupt is granted a discharge.
JUDGMENT
(Enclosure 39)
[1] In the appeal before this court at encl 39, Kuan Pek Seng (Bankrupt) is appealing against the decision of the learned Deputy Registrar decision given on 30 November 2020 dismissing the application by the Bankrupt to be discharged as a bankrupt (Enclosure 1).
[2] The sole objection to encl 1 was by Malayan Banking Berhad (MBB) a creditor of the Bankrupt.
Background
[3] A judgment was obtained on 31 January 2005 (HK Judgment) against the Bankrupt by Wing Lung Finance Limited (WLF) in a civil suit filed at the High court of Hong Kong whereby the Bankrupt was a guarantor for a company known as Zhaoguyan Glass Limited.
[4] WLF then commenced an action to enforce the HK Judgment in Malaysia and bankruptcy proceedings were thereafter issued vide Creditor's Petition No D6-29-2826-208 dated 25 June 2009 (CP) where WLF managed to obtain an adjudication and receiving order against the Bankrupt on 24 May 2010.
[5] MBB had also commenced a civil suit and obtained judgment on 24 September 2007 against the Bankrupt vide Suit No.D5-22-1121-2006 at the Kuala Lumpur High court as a guarantor of Chin Foh Trading (HK) Limited for a sum of HK16,256,863.59 together with interest therein (Malaysian Judgment).
[6] As a result of the Malaysian Judgment, Chin Foh Trading (HK) Limited had arranged for a Scheme of Settlement and restructuring of the defendants companies (Scheme of Arrangement) pursuant to s 176 of the Companies Act 1965 to settle the outstanding sums and which resulted in 788,284 shares in a company known as Sumber Sebati Berhad being transferred to MBB.
[7] Chin Foh Trading (HK) Limited is wholly owned by Chin Foh Berhad of which the Bankrupt owns shares.
[8] The Bankrupt had averred In encl 1 that all dealings were done with the shareholders to avoid Chin Foh Trading (HK) Limited from being wound up and the individuals who had acted as guarantor to the same from being made bankrupts.
[9] As a result of the restructuring of Chin Foh Trading (HK) Limited, all the debts of the subsidiaries of Chin Foh Trading (HK) Limited were taken over by the holding company for the period 2008.
[10] On 10 July 2019 the Bankrupt had filed encl 1 herein for a discharge of his bankruptcy.
[11] After encl 1 was filed, a Public Examination of the Bankrupt pursuant to s 17 of the Insolvency Act 1967 had taken place on 26 June 2020 (Public Examination) in the presence of MBB before the Director General of Insolvency's (DGI) report dated 9 September 2020 was lodged and filed to support encl 1.
[12] Thereafter, MBB had on 21 August 2020 filed a notice of objection with the DGI as to encl 1.
[13] The Deputy Registrar had dismissed encl 1 on 30 November 2020 after which the Bankrupt appealed on the same to the Judge in Chambers.
[14] On 22 March 2021, this court had dismissed the Bankrupt's application to produce new evidence at the appeal before the Judge in Chambers.
Bankrupt's Submissions
[15] The Bankrupt submits that it is not in doubt that:
a) the Bankrupt was a guarantor for a debt of a company (that formed part and parcel of the Chin Foh Group)
b) consequently, whether there was then in play the implications of s 87 of the contracts Act 1950 on the guaranteed debt owed by the Bankrupt to MBB
c) MBB does not have a right to veto against an application pursued by the Bankrupt, who was made a bankrupt more then 10 years ago under s 33(3) of the Insolvency Act 1967
[16] It is also submitted by the Bankrupt that he had been made a bankrupt for more than 5 years in Malaysia and that he believes that the Judgment has been settled.
[17] The Bankrupt contends that:
i. MBB had received and accepted 789,284 shares towards settlement of the amounts owing to MBB, and as a result thereof the debt due to MBB has been settled in full and MBB should no longer have a claim against the Bankrupt
ii. the Malaysian Judgment has been set aside by the court of Appeal on 2 January 2014 which means that CF Trading Sdn Bhd and Chin Foh Berhad no longer ha
