An undischarged bankrupt must obtain prior sanction from the Director-General of Insolvency to maintain legal actions, failing which the claim is struck out due to lack of locus standi.

Background

[1] The Plaintiff, an undischarged bankrupt, was previously a practising advocate and solicitor in the High Court of Sabah and Sarawak. He was adjudicated as a bankrupt on 19 December 2022.

[2] On 19 February 2024, the 1st Defendant's newspaper, Daily Express has published an article entitled "Action on 13 Sabah Lawyers". An online version was also published on its website on the same day. In the article it was reported that thirteen Sabah lawyers have been suspended from practice since the year 2018. The Plaintiff was named as one of the thirteen.

[3] The Plaintiff sued the 1st Defendant which is the publisher of the newspaper and the 2nd Defendant, the editor of the newspaper for defamation. There were three other defendants but as at the date of hearing this application, the action against them has either been withdrawn or struck out.

Enclosure 63

[4] The present application is by the 1st and 2nd Defendants to strike out the claim pursuant to O 18 r 19(1)(b) and/ or (d) and O 92 r 4 of the Rules of Court 2012 (" ROC 2012").

[5] The grounds for the application are (i) that the Plaintiff, being an undischarged bankrupt at the time of filing the action, is incompetent to maintain it without the previous sanction of the Director-General of Insolvency ("DGI") and (ii) that the Plaintiff had in fact been suspended from practice contrary to his assertion in his statement of claim.

This Court's Decision

[6] The first ground deals with the issue of locus standi and s 38(1)(a) of the Insolvency Act 1967 (Revised 1988) ("the Act") which reads:

"(1) Where a bankrupt has not obtained his discharge:

(a) the bankrupt shall be incompetent to maintain any action (other than an action for damages in respect of an injury to his person) without the previous sanction of the Director General of Insolvency;"

[7] Decided cases have shown that when an issue arise as to a plaintiff's locus standi, it ought to be decided by the Court as a threshold issue first, that is, before considering the merits of the case. In Bumiputra-commerce Bank Berhad v. Augusto Pompeo Romei & Anor 2013 MarsdenLR 1781 ; 2025 MarsdenLR 6297 ; [2014] 6 CLJ 17 , for instance, the Court of Appeal held that a Court will not have jurisdiction to adjudicate the dispute where a party does not have locus standi to bring the action.

[8] The Court of Appeal said:

"[25] Where a party does not have the locus standi to bring an action, the Court will not have the jurisdiction to determine the issue. In the case of Luggage Distributors (M) Sdn Bhd v. Tan Hor Teng & Anor 1995 MarsdenLR 539; ; [1995] 3 CLJ 520 ; [1995] 2 AMR 969 , the Court of Appeal held as follows:

Viewed from this standpoint, the justice of a case will ordinarily lie in favour of permitting a plea of illegality to be taken for the first time on appeal because it is unjust that a party who has broken the law should succeed. Similarly, justice would, in the usual way, favour the admission of a point that goes to the jurisdiction of the trial Court because neither consent nor waiver may confer jurisdiction where none exists: and it is not in the interests of justice that a judgment of a Court lacking jurisdiction should be permitted to stand."

[9] In another case, the Court of Appeal in Shahidan Shafie v. Atlan Holdings Bhd & Anor & other appeals 2005 MarsdenLR 385 ; 2005 MarsdenLR 2370 ; held that if a plaintiff is found to lack the standing to sue, his action fails in limine an