Annulment of bankruptcy has retrospective effect, restoring the bankrupt's capacity to act as if no bankruptcy adjudication occurred, allowing enforcement of judgment obtained prior to annulment.

Introduction

[1] These appeals are about a business man who became a bankrupt and while he was a bankrupt, he obtained a judgment against a bank. Subsequently his bankruptcy was annulled by the court. A dispute now arises between him and the bank. The bank says that the judgment that he obtained was null and void and unenforceable being in breach of s 105 of the Bankruptcy Act 1967 (Act 360) ("the Act"). He, on the other hand argued that since his bankruptcy was annulled, the adjudication order was wiped out and put him in the same position as if there had been no adjudication. In other words, he can enforce that judgment he obtained against the bank while a bankrupt.

[2] There are two appeals before us, one against the judgment granted by the court on the substantial suit of negligence / breach of trust against the respondent (Rayuan Sivil Mahkamah Persekutuan No 02(f)-28-2009(W)/Rayuan Sivil Mahkamah Rayuan No W-02-722-2007) and the second, against the respondent's application to set aside that earlier judgment on the ground that the appellant was a bankrupt when the earlier judgment was obtained (Rayuan Sivil Mahkamah Persekutuan No 02(i)-33-2009(W)/Rayuan Sivil Mahkamah Rayuan No W-02-586-2008. These two appeals were consolidated. For the purpose of this judgment, I am referring to the facts as if there is only one appeal because the answer to the question will dispose of both appeals.

[3] The question posed before us is "Whether an annulment of an order of bankruptcy against a person (on the grounds he has paid his debt in full ) has the effect of validating any act done by him prior to the annulment which would otherwise be unlawful by virtue of the bankruptcy?"

(Emphasis added)

Facts

[4] The bankrupt is the appellant in this appeal and the bank is the respondent. The appellant filed in the High court at Kuala Lumpur on 4 March 1999 a civil suit bearing number 2-22-155-1999 against the respondent to recover a sum of RM233,155.00 with interest on grounds of the respondent's negligence and/or breach of trust. The case was only disposed of by the High court some eight years, ie, 27 July 2007 in favour of the appellant.

[5] In the meantime, on 27 March 2002 (three years after he filed his suit and five years before he obtained judgment), the appellant was adjudicated a bankrupt. While he was a bankrupt, he had gone back to Pakistan. But before he left, he gave a cheque for an amount of RM50,000 to the Lembaga Hasil Dalam Negeri ("LHDN") which was meant to be utilised towards paying off his income tax, amounting to RM45,898. It can be clearly seen that it is less than the cheque of RM50,000. Unfortunately this cheque was drawn by his company and not by him personally. LHDN rejected the cheque.

[6] After he came back from Pakistan, he discovered that he had been made a bankrupt. However, he took about six months to settle the debt with LHDN and his other creditors and on 19 October 2006 pursuant to an application made by him, his bankruptcy was annulled by the High court on the ground that he had settled his debt in full.

[7] The issue before this court is whether by virtue of his bankruptcy being annulled, the judgment that he obtained against the bank is unenforceable.

[8] The appellant relied his case on Re Keet ^[1] where Sterling LJ discussed this issue and said the effect of an annulment is to "wipe out the bankruptcy altogether, and put the bankrupt in the same position as if there had been no adjudication".

[9] I am aware that judgment in this appeal will have a wide application bearing in mind that Re Keet had been followed by our