Irreconcilable Differences II

Anushka Chandra discusses the sequel to "Irreconcilable Differences"

 

 

BACKGROUND

In "Irreconcilable Differences?" (published in Issue No. 2/2007 of LEGAL INSIGHTS), we had discussed two conflicting decisions of the High Court and their implications on the prevailing standard of proof for bankruptcy proceedings in the High Court.

 

The first case, Re Tan Sri Kishu Tirathrai Ex Parte Affin Bank Bhd [2007] 7 CLJ 270, was decided on 17th November 2006 (“Tan Sri Kishu’s Case”) and the second, Re Puan Sri Mona Kishu Tirathrai Ex Parte Affin Bank Bhd [2007] 7 CLJ 657, was decided on 23rd January 2007 (“Puan Sri Mona’s Case”).

 

In essence, the issue requiring determination revolves around the interpretation of section 6(2) of the Bankruptcy Act 1967 (“the Act”) and how the petitioning creditor must prove that there is a debt due as at the hearing of the creditor’s petition.

 

The relevant parts of section 6(2) of the Act provide that “… at the hearing (of the creditor’s petition) the court shall require proof of … the debt of the petitioning creditor”.

 

The High Court in Tan Sri Kishu’s Case held that the petitioning creditor’s debt must be proved at the date of the hearing of the creditor’s petition and that the verifying affidavit which is used at the time when the petition is filed is insufficient for that purpose. Conversely, the High Court in Puan Sri Mona’s Case held that the proof of debt is provided by the bankruptcy notice itself which alludes to the judgment obtained from the court.

 

The two cases were irreconcilable and required a decision of the appellate court to ascertain the prevailing position.

 

On 17th December 2007, Dato' Vincent Ng JCA delivered the judgment of the Court of Appeal in respect of the appeal filed by Affin Bank Berhad against the decision of the High Court in Tan Sri Kishu’s Case. This article discusses the decision of the Court of Appeal in Affin Bank Bhd v Tan Sri Kishu Tirathrai [2008] 2 CLJ 448.

 

 

HIGH COURT

On 11th May 2005, the senior assistant registrar made a receiving order and adjudication order against the judgment debtor, Tan Sri Kishu Tirathrai.

 

The judgment debtor’s appeal against the registrar's decision was allowed by Abdul Halim Abdullah JC on 16th October 2006. The learned judge accepted the judgment debtor’s contention that section 6(2) of the Act clearly provides that the petitioning creditor must prove his debt at the hearing of the creditor’s petition and that the affidavit verifying the petition which exhibited the judgment is insufficient and cannot be relied on to prove the debt.

 

 

COURT OF APPEAL

In the Court of Appeal, the petitioning creditor, Affin Bank Berhad, contended that the judgment obtained against the judgment debtor is prima facie evidence of the debt owed by the judgment debtor.

 

The Court of Appeal allowed Affin Bank Berhad’s appeal and in doing so, set aside the High Court Judge’s Order and reinstated the orders issued by the senior assistant registrar.

 

The Court of Appeal held that the word “shall” in section 6(2) of the Act should be liberally interpreted in the context of bankruptcy proceedings and be construed as directory rather than mandatory in nature. Accordingly, it is not a mandatory requirement for the petitioning creditor to prove the debt again through cross examination at the hearing of the petition, especially when the affidavit verifying the petition was never challenged and there was no material before the court to challenge the affidavit.

Dato' Vincent Ng, JCA also held that the court below should have abided by the decision of the Supreme Court in Sovereign General Insurance Sdn Bhd v Koh Tian Bee [1988] 1 CLJ 155 which precludes a judge from going behind a judgment which has not been set aside or stayed.

 

The Court held that the respondent’s case was further weakened by section 3(2)(ii) of the Act which provides that “a bankruptcy notice … shall not be invalidated by reason only that the sum specified in the notice as the amount due exceeds the amount actually due unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the ground of such mistake.” As the respondent had failed to give any notice to dispute the amount in the bankruptcy notice within the time prescribed, he was estopped from contending that the amount claimed was erroneous.

 

According to Dato' Vincent Ng, JCA, the judge should not have relied on Re Purrett Vol. LXXIII The Law Times p. 224 as the facts in that case were different as the judgment debtor in that case had given notice of the grounds on which he challenged the petition whereas the respondent in the present case had not provided any material or iota of evidence that the debt had fallen below the statutory threshold of RM30,000 nor provided any reason to challenge the petition.

 

 

CONCLUSION

The Court of Appeal's decision affirms the practice in bankruptcy proceedings whereby the petitioning creditor is not required to prove the debt at the hearing of the creditor’s petition and may rely on the judgment and the bankruptcy notice as proof of the judgment debtor’s indebtedness unless the same is challenged by the judgment debtor. This decision has reconciled the legal position with that taken by the High Court in Puan Sri Mona's Case.

 

 

ANUSHKA CHANDRA ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 
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