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2021 MarsdenLR 2379
HIGH COURT MALAYA JOHOR BAHRU
CREDIT GUARANTEE CORPORATION MALAYSIA BERHAD – Appellant
Versus
SUPERMANIAM SELITAN – Respondent
[Bankruptcy No: JA-29NCC-1973-10-2019]
In bankruptcy proceedings, the guarantor's liability is determined by the explicit terms of the Letter of Guarantee, affirming that judicial interpretations should not alter agreed contractual obligations.
Headnote:(A) Bankruptcy Act 1967 – Section 3(1)(i) – Appeal concerning the liability of a guarantor under a bankruptcy notice – The court held that the Judgment Debtor remains liable for the full debt as stipulated in the Judgment despite the presence of multiple guarantors. The court distinguished the current case from prior cases where joint liability principles were invoked, emphasizing the terms of the relevant Letter of Guarantee. (Paras 12, 18, 19)
(B) The principle of joint and several liability is defined in the context of contractual agreements, asserting that contractual terms cannot be altered by judicial interpretation. The court reinforced its stance that it cannot unilaterally redefine liabilities outside the expressed terms of agreements made by parties. (Paras 15, 16)
Facts of the case: The Judgment Debtor was a guarantor for a loan to a company. After a judgment in default was issued against him, he sought to set aside the bankruptcy notice on claims of erroneous liability based on the involvement of multiple guarantors.
Issues: Whether the Judgment Debtor was liable for the total amount of the judgment or if the sum should be divided among multiple guarantors.
Findings of Court: The judgment sum remains binding as defined by the Letter of Guarantee, and the terms sustain the claim for the complete amount against the individual guarantor.
Ratio Decidendi: The court concluded that the explicit terms of the Letter of Guarantee dictate liability, and parties must adhere to those terms without judicial reinterpretation.
Result: Appeal allowed.
Introduction
[1] This is an appeal ("this Appeal") by the Judgment Creditor against the decision of the Senior Assistant Registrar ("SAR") in allowing the Judgment Debtor's application to set aside the Bankruptcy Notice.
The Background Facts
[2] A Judgment in default ("the Judgment") was recorded against the Judgment Debtor on 6 November 2017 for RM156,782.54 as at 29 February 2016. The Judgment Debtor in this case was the guarantor for a loan given to the borrower, one Tat Hock Industrial Sdn Bhd. The Letter of Guarantee was signed on 29 October 2001.
[3] Based on the Judgment, bankruptcy proceedings were initiated against the Judgment Debtor. A Bankruptcy Notice was filed on 17 October 2019, and on 2 December 2019, the Judgment Creditor obtained leave of court to proceed against the Judgment Debtor as the guarantor in these bankruptcy proceedings.
[4] On 28 January 2020, an application was filed by the Judgment Debtor to set aside the Bankruptcy Notice. This was allowed by the SAR on 17 August 2020. Hence, this Appeal by the Judgment Creditor.
[5] This Appeal was allowed for the following reasons.
Contentions, Evaluation, And Findings
Whether The Judgment Debtor Was Liable For The Full Amount
[6] The gist of this Appeal hinged on the issue of whether the Judgment Creditor was entitled to claim the full judgment sum stipulated in the Bankruptcy Notice.
[7] The Judgment Debtor contended that since there were five guarantors altogether, the judgment sum was inaccurate as it should have been divided equally amongst the guarantors, rendering the Bankruptcy Notice wrong in law. In doing so, the Judgment Debtor relied on several cases including In Re Dato' Dr Elamaran M Sabapathy; Ex P RHB Bank Bhd , [2011] 10 CLJ 262, Yeo Ah Wang v. United Malaysian Banking Corporation ; [1991] 1 AMR 38, and the court of Appeal case of Sumathy Subramaniam v. Subramaniam Gunasegaran , .
[8] I was unable to agree with the Judgment Debtor's contention in view of the fact that there are differences between the facts of the present case and those of Sumathy Subramaniam v. Subramaniam Gunasegaran & Anor, , in which it was stated by Mary Lim JCA (as she then was):
"Where the judgment is silent or has not specified that liability is joint and several, the liability is necessarily joint. Where liability is joint, each of the judgment debtor shares the liability equally."
[9] It is pertinent to note that in Sumathy Subramaniam, the respondent there had, on the same date, filed two separate bankruptcy notices against both of the appellants and in each bankruptcy notice, the same judgment sum together with interest and costs, were specified as the unpaid debt. As a result thereof, both of the appellants had, also on the same date, filed separate applications to set aside the bankruptcy notices, on the same ground. This was explained in the following passage:
"On 16 November 2015, the respondent filed two separate bankruptcy notices against both appellants. In each bankruptcy notice, the same judgment sum of RM291,800 together with the sum of RM14,504.85 as interest at the rate of 5% per annum and the sum of RM4,000 as costs, was specified as the unpaid debt. The total sum being RM310,304.85.
On 26 January 2016, both appellants filed separate applications to set aside the bankruptcy notices; the ground relied on however, was the same; that the sum specified therein was more than what the respondent was legally entitled to under the terms of the summary judgment. The appellants argued that given that the terms of the summary judgment did not specify that the appellants, as judgment debtors were "jointly and severally liable", the judgment debtors must then be equally liable for the judgment sum. In other words, each judgment debtor should only be liable for half of the judgment sum."
[Emphasis added]
[10] In this case, although Judgment was obtained against all five guarantors, bankruptcy proceedings were initiated against the guarantors (in
