TUTORIAL 5 WEEK 6 CASE ANALYSIS
CASE NAME:
RE: HASHBUDIN BIN HASHIM (PENGHUTANG PENGHAKIMAN); EX-PARTE:
CITIC KA WAH BANK LIMITED (PEMIUTANG PENGHAKIMAN) v
SURUHANJAYA PERKHIDMATAN AWAM, MALAYSIA & ANOR [2009] 5 MLJ
135
FACTS OF THE CASE:
Originally the Director General of Insolvency (‘DGI’) had approved a large sum of
RM41,448,354.72 as a debt due and owing to the judgment creditor arising from a banking
facility granted to a company of which the judgment debtor had stood as guarantor. The DGI
then applied under s 42 Schedule C r 27 of the Bankruptcy Act 1967 (‘the Act’) to the senior
assistant registrar (‘SAR’) to reduce the amount proved from RM41,448,354.72 to
RM260,000. The DGI in making the application had relied on two letters written by the
solicitor of the judgment creditor which clearly indicated that they were prepared to accept
the proof of debt of RM260,000 in lieu of the sum of RM41,448,354.72. At the time of proof
of debt for the sum of RM41,448,354.72 by the DGI was issued, the DGI had no evidence
to show that a different sum had been agreed between the judgment creditor and the judgment
debtor. The judgment creditor filed the present appeal against the decision of the SAR in
allowing the DGI’s application to reduce the amount in the proof of debt. The issues arising
were: (i) whether a bankrupt can act on his own to negotiate with his creditors given that a
bankrupt has no legal status; and (ii) whether the correspondences between the judgment
debtor and the judgment creditor constitute a concluded contract which bound the parties to
reduce the initial debt of RM41,448,354.72 to a mere RM260,000.
ISSUE:
Whether bankrupt competent to negotiate settlement of debt with creditor?
JUDGEMENT:
Held, dismissing the appeal with costs: A bankrupt is competent to negotiate any settlement
of his debt with his creditor and provided that any agreement that is reached pursuant to that
negotiation is brought to the attention of the DGI for his approval, such an agreement is
perfectly valid. It was perfectly within the right of the DGI acting under s 42 Schedule C r
27 of the Act to apply to the court to reduce the amount in the proof of debt which he had
approved earlier. What the DGI was now applying for was [lsquo]to expunge or reduce
[rsquo] the amount that he had previously admitted if the DGI thought that a proof had been
improperly admitted. The letter dated 29 July 2004 from the solicitors for the judgment
creditor to the judgment debtor clearly indicated that the judgment creditor was prepared to
accept the reduced debt. The letter constituted a perfectly concluded agreement between the
judgment creditor and the bankrupt subject only to the approval of the DGI
PRINCIPLE:
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.” This provision does not preclude the bankrupt from negotiating with any
creditors without entering into any agreement, as the bankrupt had done in this case. All that
the bankrupt had done was to enter a discussion or proposal for settlement. The Director
General of Insolvency is under a duty to manage and to distribute the assets of the bankrupt
to the creditors. Even though the bankrupt initiated the settlement, but it was the Director
General of Insolvency who decided whether or not to accept the settlement.
TUTORIAL 5 WEEK 6 CASE ANALYSIS
CASE NAME:
BIG TEAM CONSTRUCTION SDN. BHD AND ORS v SEDIA GAYA SDN. BHD.
AND ORS [2010] MLJU 1603
FACTS OF THE CASE:
This is the 2nd and 3rd Plaintiffs’ (“Plaintiffs”) application for judgment against the 2nd and
3rd Defendants (“Defendants”) under Deed of Indemnity dated 12th May 1999 from
Affidavit in Support of John Tsang Shing Chi affirmed on 7th August 2009 or “Plaintiff’s
Affidavit”) based on admission from the joint Affidavit of the Defendants affirmed on 5th
November 2008 supported through the two admissions of the 1st Defendant to the 1st
Plaintiff for sums totalling RM2,056,093.90 from the following:-(a)Architect’s Final
Certificate (No. 39) for RM626,646.25 dated 17th July 2002.
ISSUE:
Whether the bankrupt is competent to maintain action without the sanction of the DGI?
JUDGEMENT:
Held, the DGI could adopt the settlement and reduce the amount of the proof of debt lodged
by the creditor who had agreed with the bankrupt’s proposal for settlement. By analogy and
taking the Richland case (supra) further if a bankrupt can maintain his action taken out before
bankruptcy then a standing instruction to serve the Writ having been given at the same time
or before he was madebankrupt, like the action itself in this Court’s view, if the standing
instruction to serve is construed as a step or proceeding, was taken by the bankrupt before
bankruptcy even if it results in service being effected on his behalf after bankruptcy.
PRINCIPLE:
There are instances of exceptions which recognize a residual discretion or power on the part
of a bankrupt to do some acts or take steps even if the party is bankrupt. For instance if an
application is filed in the action before the bankruptcy, though the application need not be
withdrawn, the bankrupt will obviously need to take the step to instruct his counsel to attend
Court or write to the Court to adjourn the application on the ground of his incapacity.
