Court outlines that a bankruptcy annulment requires creditor compliance and proper procedure under Bankruptcy Act, ensuring creditor protection.

Vernon Ong JCA:

Introduction

[1] The 1st respondent was adjudged a bankrupt on 9 January 2013. The 1st respondent's application to annul the bankruptcy order against him was dismissed with costs by the Senior Assistant Registrar (SAR). On appeal to the Judge in Chambers, the learned Judicial Commissioner (JC) set aside the decision of the SAR and annulled the bankruptcy order made against the 1st respondent. This is the Director General of Insolvency's (DGI) appeal against the decision of the learned JC.

Brief Account Of The Salient Facts

[2] The 2nd respondent, Parkway Hospitals Singapore Pte Ltd, was the plaintiff in a suit filed in the Johore Bahru Sessions Court. There were two defendants, the first was one Madam Tan Lai Huwee and the second was the 1st respondent Goh Ah Kai. Madam Tan Lai Huwee was the 1st respondent's mother who passed away on 22 June 2009.

[3] In the JB suit, Parkway Hospitals' claim was for the cost of medical treatment received by the late Madam Tan at one of Parkway Hospitals in Singapore. The 1st respondent had stood as a surety under a guarantee for the cost of the treatment.

[4] Judgment in default was obtained against both defendants in the JB suit. Subsequently, bankruptcy proceedings were taken by Parkway Hospitals against the 1st respondent. The 1st respondent was adjudged a bankrupt on 9 January 2013.

[5] Parkway Hospitals was the only party to have filed proof of debt against the 1st respondent's estate in bankruptcy.

[6] On or about 6 November 2013, one Goh Chin Wei, the grandson of the late Madam Tan, paid Parkway Hospitals the full judgment debt. By a letter of even date addressed to the DGI, Parkway Hospitals indicated as follows:

"2. We write to inform that Goh Chin Wei (NRIC No: 870728-23-5355) has paid to us in full the total amount owing by the judgment debtor/ bankrupt, Goh Ah Kai.

3. In the circumstances, we have no further claims against Goh Ah Kai and accordingly give you notice of the withdrawal of our proof of debt."

[7] The 1st respondent then filed an application to have the bankruptcy order annulled. The SAR dismissed the 1st respondent's application with costs and also ordered that Parkway Hospitals to refund to the DGI the monies paid by Goh Chin Wei in satisfaction of the judgment debt.

[8] The 1st respondent being dissatisfied with the decision of the SAR appealed to the learned JC who allowed the appeal and set aside the order of the SAR. Consequently, the Receiving Order and Adjudication Order against the 1st respondent was annulled. The DGI was also ordered to pay costs of RM5,000.00 to the 1st respondent.

Decision Of The Learned JC

[9] In his grounds of decision, the learned JC identified the DGI's two main grounds for opposing the 1st respondent's application:

i. That the 1st respondent did not settle the debt in accordance with the correct procedure and a third party is not permitted to make payment to Parkway Hospitals on the 1st respondent's behalf; and

ii. Before any annulment order can be made the DGI is entitled to realise distribution fees in accordance with the Bankruptcy (Fees) Rules 1969.

[10] Briefly stated, the findings of the learned JC on the issues may be summarised as follows:

i. The duties of the DGI as spelt out in s 71(1) of the Bankruptcy Act 1967 ('BA 1967') is to regulate the conduct of the debtor and the administration of his estate ( Behn Meyer International Trading Sdn Bhd v. Premier Design Sdn Bhd , [2012] 1 CLJ 601 );

ii. Section 38(1)(a) of the BA 1967 does not prohibit, proscribe or forbid a bankrupt or any third party from settling in f