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2022 MarsdenLR 421
COURT OF APPEAL PUTRAJAYA
SRI RAM MS SARMA – Appellant
Versus
UNITED OVERSEAS BANK (MALAYSIA) BHD – Respondent
[Civil Appeal No: W-03(IM)(NCC)-88-10/2019]
Compliance with Section 5(2) of the Insolvency Act is not required if the creditor does not provide security, and res judicata prohibits raising previously unaddressed issues in bankruptcy appeals.
Headnote:(A) Insolvency Act 1967 – Section 5(2) – Bankruptcy proceedings – Creditor's Petition (CP) valid even without compliance with Section 5(2) as no security was provided by the Judgment Debtor (JD) besides a guarantee – Res judicata applies as JD did not raise the issue in prior applications. (Paras 9, 12, 19, 30, 34)
(B)
Right to be heard – JD claimed deprivation of right to be heard in bankruptcy proceedings; however, ample opportunities were provided throughout the bankruptcy process. (Paras 30, 32)
(C)
Consolidation of debts – Jurisprudence allows banks to combine accounts to ascertain indebtedness; rights of consolidation upheld. (Paras 27, 34)
Facts of the case:
The Judgment Creditor (JC) filed a bankruptcy notice against the JD who failed to secure loans for Saron Facilities and Benteng Facilities. The CP was issued and subsequently appealed.
Findings of Court:
The High Court Judge (HCJ) found no appealable error in allowing JC's appeal and affirmed the decision.
Issues
: Whether non-compliance with Section 5(2) was fatal to the CP and if JD had the right to be heard.
Ratio Decidendi:
The court ruled that JC was not required to comply with Section 5(2). The JD had ample opportunity to present his case, and res judicata applied as JD did not raise relevant issues timely.
Result:
JD's appeal dismissed with costs.
JUDGMENT
Introduction
[1] On 3 October 2019, the High Court Judge (HCJ) had allowed the appeal of the Judgment Creditor (JC) against the decision of the Deputy Registrar (DR) which dismissed the Creditor's Petition dated 4 May 2017. The Adjudicating Order and Receiving Order dated 3 October 2019 (AORO) was entered against the Judgment Debtor (JD).
Background Facts
Saron Facilities
[2] The JC had granted banking facilities to Saron Holdings Sdn Bhd (Saron). As security for the facilities, the JD had executed a guarantee in favour of the JC. The JD did not give any other security to secure the Saron Facilities. Saron and the JD defaulted in the repayment of the Saron Facilities which led to a civil suit filed. On 17 December 2013, the JC obtained judgment against them both for RM1,731,249.35 calculated as at 17 July 2013 with interests and costs (Saron Judgment). Saron has since been wound up.
[3] On 30 December 2015, the JC issued a Bankruptcy Notice (BN) against the JD for the entire outstanding sum under the Saron Judgment. On 12 February 2016 the BN was served on the JD for which there was no compliance and thereby an act of bankruptcy had been committed. On 4 May 2017, the Court issued the Creditor's Petition (CP). The CP was served on the JD on 24 July 2017.
[4] The above are not disputed facts.
[5] There were various attempts to challenge the bankruptcy action. These were an application filed on 19 February 2016 to set aside the BN, a notice filed on 28 July 2017 to oppose the CP and an application filed on 31 July 2017 to set aside the CP. All the applications were dismissed as were the appeals to the Judge in Chambers.
[6] On 5 January 2018 the JD filed an application to stay the bankruptcy action which was dismissed on 7 May 2018. The DR proceeded to hear the CP and dismissed it on 30 August 2018. The JC filed an appeal to the Judge in Chambers which was allowed. Hence this appeal before us.
Benteng Facilities And Personal Overdraft (OD) Facilities
[7] At around the same time as the Saron Facilities, the JC granted banking facilities to Benteng Timur Sdn Bhd (Benteng). The JD too executed a guarantee in favour of the JC but did not give any other security to secure the Benteng Facilities. The above scenario as in the Saron Facilities happened, as in a default and a judgment sum was obtained for RM12,991,357.11. The JD has not paid the judgment sum.
[8] The JD also borrowed monies under a personal OD from the JC. The JD gave charges over his lands as security. A default similarly ensued where the JC sought to enforce its rights as chargee. This time, on 10 July 2014, the JD filed its 2014 OS seeking declaratory orders in relation to the JC's rights as chargee as to the redemption sum. The 2014 OS was dismissed on 28 July 2016 as was the appeal to the Court of Appeal on 13 December 2017 and leave to the Federal Court was likewise dismissed on 17 May 2018.
Decision Of The HCJ
[9] The HCJ had allowed the JC's appeal premised on there being no requirement for compliance with s 5(2) Insolvency Act 1967 ( IA ) as the JD had not given any security for the Saron Facilities. Further, res judicata applied as the JD could have but did not raise the issue of s 5(2) in its application to set aside the CP, its appeal to the Judge in Chambers and its application to stay the CP.
The JD's Appeal
[10] The thrust of the JD's appeal is three-fold, namely:
(a) that the CP was defective for non-compliance with s 5(2) IA ;
(b) that the HCJ had failed to uphold the principles of audi alteram partem when it disallowed the JD from exhausting all arguments relating to the defective CP; and
(c) that the HCJ had erred in the interpretation and application of res judicata and principle of estoppel per rem judicatum.
[11] We shall now deal with the issues as raised by the JD.
Application Of Section 5 (2) IA
[12] Firstly, we do not think there is any dispute that if s 5(2) IA is not complied with, this will be fatal to the CP. In M Hashimi bin Ibrahim v.
