Can a Judgement Creditor be sued for making a Judgement Debtor a bankrupt, if the latter has settled his debt during Bankruptcy proceedings.

Mohamed Yusop Bin Abdul Wahab v. American Express (M) Sdn Bhd
[2002] 6 MLJ 507

In this case, the High Court was required to determine whether the plaintiff’s cause of action against the defendant for negligently making him a bankrupt was tenable in law.

 

The plaintiff alleged that the defendant had negligently and/or in bad faith made him a bankrupt based on a judgment debt he owed the defendant. This was in spite of the fact that he had settled the judgment debt half way through the bankruptcy proceedings. The plaintiff said he had suffered losses as a result of this and claimed damages.

 

On the 4th of April 2000, the defendant filed an application to strike out the plaintiff’s claim on the ground that the latter’s cause of action against the former was not tenable in law. On the 25th of August 2000, the learned Senior Assistant Registrar allowed the defendant’s application. As the plaintiff was dissatisfied with the Senior Assistant Registrar’s decision, he appealed to the High Court Judge.

 

 

The High Court Judge dismissed the appeal and held that:-

 

1. The plaintiff’s claim against the defendant for negligently making him a bankrupt was not a cause of action recognisable in law. The only recognised torts would be the tort of malicious prosecution and the tort of an abuse of process. However, in this case the plaintiff had not pleaded either of these torts. At any rate, it was not disputed that at the time the defendant commenced bankruptcy proceedings against the plaintiff, the judgment debt was actually due. There was thus no malice since the plaintiff was in fact indebted to the defendant when the bankruptcy proceedings were commenced. In the circumstances, it was a plain and obvious case for striking out as the plaintiff’s claim was unsustainable.

 

2. The plaintiff had filed this suit only against the defendant and not against the latter’s solicitors. Thus, any allegation of a duty of care that was allegedly owed by the defendant’s solicitors was totally misconceived.

The decision in the Mohamed Yusop Case is noteworthy because it sets out the following propositions of law, namely:-

 

  • Mere negligence in the use of a legal process cannot establish a legal cause of action and the only recognized actions in law would be that of malicious prosecution and the tort of an abuse of the process of the court. In support of this proposition, the High Court Judge applied the principles of law distilled in Ng Ah Ho v. Hong Leong Finance Bhd [1996] MLJU 364 and Business Computers International Ltd v. Registrar of Companies & Ors [1987] 3 WLR 1134.

 

In the Ng Ah Ho Case, the defendant had after commencing proceedings and obtaining judgment, presented a bankruptcy petition against the plaintiff. However the action was somehow settled in the course of the bankruptcy proceedings. The defendant proceeded to obtain the adjudication and receiving orders against the plaintiff. As a result the plaintiff filed a suit and claimed that he was wrongfully made a bankrupt and sued the defendant for damages. The learned judge in the Ng Ah Ho Case held that since neither malicious prosecution nor the tort of an abuse of process had been pleaded, the plaintiff’s claim was not grounded upon any accepted cause of action and was doomed to failure. Further, in the English case of Business Computers International, Scott J (at p. 1138) said that “It is implicit in the decision that the commencement of bankruptcy proceedings or the presentation of a winding up petition cannot found an action in damages unless associated with malice.

 

  • A solicitor acting for a client in a civil case owes no duty of care to the opponent either in litigation or in non-contentious business. In support of this proposition, the High Court Judge referred to the following English cases, namely Al-Kandari v. JR Brown & Co [1988] QB 665; Gran Gelato Ltd v. Richcliff (Group) Ltd & Ors [1992] Ch 560; Ross v. Caunters [1980] Ch 297; Clarke v. Bruce Lance & Co [1988] 1 WLR 881 and White & Anor v. Jones & Anor [1995] 2 AC 207.

 

The Court of Appeal in the Al-Kandari Case affirmed the general rule that a solicitor does not normally owe any duty of care to the opposing party in hostile litigation. This is because such claims could lead to endless re-litigation. Where a solicitor in advising his client who is engaged in a litigation where the respective parties attempt to achieve the best result for themselves, that solicitor can act without regard to the other party’s interests.

 

In the Gran Gelato Case, the plaintiffs proposed to purchase an underlease from Richcliff. Therefore, before entering into the contract, the plaintiffs’ solicitors sent enquiries on whether there were any rights affected by the headlease which could inhibit the enjoyment of the underlease. The second defendants, who were Richcliff’s solicitors, mistakenly replied “not to the lessor’s knowledge.” There were, in fact, redevelopment break clauses in the headlease which could have caused the underlease to determine prematurely. Although Richcliff was found to be liable for this misrepresentation, its solicitors were not. Nicholls VC upon applying the tripartite test of foreseeability, proximity, and whether it was just and reasonable to impose a duty of care, refused to make the solicitors liable because it was not just and fair to find against them when the principal was also liable.

 

Sir Robert Megarry in the case of Ross v Caunters (at p.322A-B) aptly said: “In broad terms, a solicitor’s duty to his client is to do for him all that he properly can, with, of course, proper care and attention... The solicitor owes no such duty to those who are not his clients. He is no guardian of their interests. What he does for his client may be hostile and injurious to their interests; and sometimes the greater the injuries the better he will have served his client.” These passages were cited with approval by the Court of Appeal in Clarke v. Bruce Lance & Co at p. 887D-F and by Farquharson LJ in White & Anor v. Jones & Anor at p. 231E-H.

 

 

 

By Loo Peh Fern ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 

 
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