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2013 MarsdenLR 690
FEDERAL COURT, PUTRAJAYA
PILECON REALTY SDN BHD – Appellant
Versus
PUBLIC BANK BERHAD & ORS – Respondent
[Civil Appeals No: 02-71&72-2011(W), 02-73&74-2011(W)]
Secured creditors must realize their security within six months of a winding-up order to claim interest, as established under Section 8(2A) of the Bankruptcy Act 1967.
Headnote:(A) Bankruptcy Act 1967 - Section 8(2A) - National Land Code 1965 - Interpretation of creditor rights in company liquidation - Court considers restriction of secured creditor's entitlement to interest post-winding up if not realizing security within six months (Paras 1, 33, 49).
(B) Legal principles - Rights of secured creditors are proprietary and personal, but must adhere to statutory timelines to claim interest (Paras 22, 27).
(C)
Facts of the case:
The bank provided a loan secured by property to a company that defaulted and was placed in liquidation; the bank sought interest after failing to sell the property within required timeframe (Paras 4, 48).
Findings of Court:
The bank’s right to interest ceased as it did not realize its security within six months, as mandated by the Bankruptcy Act (Paras 49, 51).
Issues: Whether Section 8(2A) restricts secured creditors’ rights in a company winding-up scenario; whether interest accrues post-winding up without timely realization of security (Paras 1, 2, 3).
Ratio Decidendi: The court affirmed that Section 8(2A) applies in liquidation, limiting interest rights if creditors delay realization of security within six months (Paras 46, 49).
Result: Appeals dismissed; cross-appeals allowed with costs (Para 51).
| Table of Content |
|---|
| 1. interpretation of bankruptcy act sections. (Para 1 , 1 , 2 , 3) |
| 2. details surrounding the loan and winding-up proceedings. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13) |
| 3. high court's ruling on interest after winding-up. (Para 14 , 15 , 16 , 17) |
| 4. appellant's stance on creditor rights. (Para 18 , 19 , 20 , 21 , 22) |
| 5. respondent's argument regarding interest entitlement. (Para 23 , 24 , 25 , 26 , 27 , 28) |
| 6. court's analysis of the legislative intent and implications of s 8(2a). (Para 30) |
[1] Public Bank Berhad ("the bank") obtained leave on 9 November 2011 to appeal to the Federal Court against the whole of the decision of the Court of Appeal dated 13 September 2011 on the following questions of law:
1. Whether the statutory right of a chargee under the National Land Code 1965 to rely on his security to obtain full satisfaction of the indebtedness owed to him, is restricted by s 8(2A) of the Bankruptcy Act 1967 where:
(i) such security is provided by a company which is later wound up under the provisions of the Companies Act 1965 ; and
(ii) the security was not realised within six months of the winding up order;
2. Does s 8(2A) of the Bankruptcy Act 1967 apply in a company liquidation situation where the secured creditor relies on his security for full satisfaction?
[2] Pilecon Realty Sdn Bhd ("Pilecon Realty") had also, on the same date, 9 November 2011, obtained leave to cross-appeal to the Federal Court against part of the decision of the Court of Appeal dated 13 September 2011 on the following question of law:
"Whether a secured creditor is entitled to any interest in respect of its debts after the making of a winding up order if it does not realise its security within 6 months from the date of the winding up order."
[3] The issue for determination in this case is, what is the interpretation to be given to s 8(2A) of the Bankruptcy Act 1967 (subsequently referred to as "the BA").
Background
[4] The background facts are as follows: The bank granted a banking facility of RM20 million to Transbay Ventures Sdn Bhd ("Transbay") upon terms as set out in a Loan Agreement dated 26 June 1998. The facility was secured by a charge over a piece of land, ie HS (D) 256676, PTB 20214, Bandar Johor Bahru, Negeri Johor Darul Takzim ("the said property") belonging to Transbay vide Presentation No 32284/98 Jilid 4296 Folio 31 dated 26 June 1998 ("the charge") in favour of the bank. The terms of the charge provides that the prescribed interest "shall be payable until full settlement" (cls 2 and 30).
[5] Transbay defaulted in repaying the said loan. The bank then instituted Kuala Lumpur High Court Suit No D3-22-2239-2001 against Transbay to recover the sums then outstanding. Judgment was entered against Transbay on 22 August 2003.
[6] Vide High Court Johore Bahru Originating Summons No MT2-24-493- 2002 the bank, as chargee, obtained an order for sale of the said property to be sold by way of public auction on 7 October 2003.
[7] The bank had also, vide High Court Kuala Lumpur Winding Up Petition No D7-28-13-2005, on 7 January 2005, applied to wind up Transbay. Transbay was wound up vide order dated 27 January 2006.
[8] Ooi Woon Chee (the 1st respondent) and one Gan Ah Tee were then appointed as liquidators of Transbay. Gan Ah Tee however resigned as a liquidator, which resignation was accepted by the Court on 27 July 2007. Ong Hock An (the 3rd respondent) was then appointed in his place to act jointly and/or severally with Ooi Woon Chee (jointly referred to as "the liquidators").
[9] The liquidators took steps to realise the only property of value of Transbay, ie the said property. The said property was not sold by way of public auction pursuant to the order for sale dated 7 October 2003 but by way of a tender exercise. Arising from a tender exercise, BSEL Waterfront was the successful bidder of the said property. A sale and purchase agreement was then executed between the liquidators and BSEL Waterfront on 22 July 2008 ("the SPA
