A settlement agreement does not extinguish the creditor's right to enforce a judgment after a stipulated time bar lapses.

Siti Norma Yaakob JCA:

On 27 August 1988, the respondent entered judgment against the appellant and two others for the sum of RM567,922.24 and costs in Penang Civil Suit No. 23-228-86. The appellant had guaranteed the payment of money due from the principal debtor, Polite Enterprise Sdn. Bhd., or which the appellant was a director at the material time.

In 1990, in an effort to settle the judgment sum as well as other debts due to the respondent, two related companies of the parties representing their respective interests got together and executed two settlement agreements. The first is a sale and purchase cum joint venture agreement dated 22 June 1990 ("the first settlement agreement") entered into between Ever Point (M) Sdn. Bhd. ("Ever Point"), a related company of the appellant with Ladang Dahan Setia Sdn. Bnd. ("Ladang Dahan"), a related company of the respondent.

Under that first settlement agreement, Ever Point agreed to sell two pieces of land free of encumbrances to Ladang Dahan for a consideration of RM3.3 million. In turn, Ladang Dahan undertook to develop the property into a housing estate with the net profits to be shared between them. The other terms of the first settlement agreement which are relevant are the arrangements to utilise part of the proceeds of sale amounting to RM2.5 million to redeem the properties which had been charged to MUI Finance Berhad, with the balance of RM800,000 and the other benefits to be derived from the development of the property, to be assigned by Ever Point to the respondent for the purpose of setting part of the debts due to the respondent from a list of debtors whose names appear in the first schedule to the first settlement agreement. Amongst that list is Polite Enterprise Sdn. Bhd. whose indebtedness stood at $1,006,178.77 and against whom judgment had already been entered together with the appellant.

In pursuance of the expressed intention to assign the balance of the proceeds or sale and the profit sharing of the joint venture as stated in the first settlement agreement, Ever Point executed the second settlement agreement with the respondent two weeks later wherein, Ever Point assigned all its rights and benefits under the first settlement agreement to the respondent.

That was on 4 July 1990, and two and a half years later, the respondent issued a bankruptcy notice, the subject matter of this appeal, dated 15 January 1993, against the appellant demanding payment of RM372,149.64, being the balance of the judgment sum. A credit for RM195,772.60 was given and that amount came from the balance of the proceeds of sale that was agreed to be paid out to the respondent under the terms of the first settlement agreement.

The appellant's response to the bankruptcy notice was to file two applications to have it set aside. The first is his affidavit affirmed on 2 September 1993, filed pursuant to r. 95 of the Bankruptcy Rules 1969 ("the Rules") wherein he averred that he has a counterclaim, set-off or cross demand against the amount claimed by the respondent on the basis that the second settlement agreement serves as a settlement of the sum due on the judgment sum.

The second application is his summons in chambers dated 11 July 1994 filed under r. 18 of the Rules and supported by his affidavit affirmed on 8 July 1994, wherein he relied on grounds other than the existence of a counterclaim, set-off or cross demand as averred to in his first application.

Both applications were heard by the senior assistant registrar who dismissed both applications and this was confirmed by the judge on appeal. We are now asked by the appellant to consider whether the latter decision has been correctly made.

In the court below, objections were taken as to whether:

(1) the appellant had raised a valid counterclaim in his first application filed