Mak Yew Cheong Vs Alliance Bank Malaysia Berhad

  

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DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR

 

(BAHAGIAN DAGANG)

 

DALAM KEBANKRAPAN NO. D-29-4821-08/2012

 

Ber : MAK YEW CHEONG

 

( No. K/P: 640709-10-7303)

 

Ex Parte : ALLIANCE BANK MALAYSIA BERHAD

 

( No. Syarikat : 88103-W)

 

GROUNDS OF JUDGMENT

 

Enclosure 43 is an application by the Judgment Debtor (JD) for stay of Bankruptcy Proceedings pending the disposal of case W02-(IM)(NCVC) 1277-08/2014 in the Court of Appeal between Popular Acres Sdn Bhd ( Principal Borrower) and the Judgment Creditor (JC).

 

[2] The application is opposed by the JC.

 

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Brief Background

 

[3] The JD in this case, Mak Yew Cheong is one of the guarantors of the Principal Borrower. Upon request from the Principal Borrower, the JC agreed to provide various banking facilities to the Principal Borrower to part-finance the acquisition of their Project Lands and to part-finance the construction cost of their housing project. The JD and one Lee Chan Kok (“the Guarantors”) jointly and severally agreed to pay the JC on demand, all moneys due and owing to the JC from the Principal Borrower pursuant to the letter of guarantee entered into with the JC.

 

[4] The JD’s Stay Application herein is based primarily on the fact that a binding settlement agreement has been duly formed between, inter-alia, the Principal Borrower Popular Acres Sdn Bhd and the “White Knight” i.e the JV Developer ; together with the JC to settle the liabilities of the said Principal Borrower which will thereby also eliminates the liabilities of the JC as the guarantor.

 

[5] Following from the JC’s purported breach of the binding settlement agreement; the Principal Borrower had filed a suit against the JC [KLHC Civil Suit No. 22NCVC-475-08/2013]. The JC in the said case filed an application to strike out the plaintiff’s claim (the Principal Borrower) pursuant to Order 18 of the Rules of Court 2012. The JC’s application was allowed by the learned Judge on 24th June 2014 and subsequently the plaintiff (Principal Borrower)

 

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filed an appeal to the Court of Appeal. The appeal is now pending at the Court of Appeal (Rayuan Sivil No. W02-(IM NcVC) 1277-08/2014).

 

Submission by the parties

 

[6] The JD contends that the JD’s liabilities towards the JC have

 

been discharged due to the following intervening events: –

 

i. The JC having entered into a settlement agreement on 15th April 2013 whereby the full liability of the Principal Borrower would have been fully discharged ;

 

ii. The JC having breached the settlement agreement and refused to remedy its breach when requested to do so and continues with its breach of the settlement agreement ;

 

iii. Had the JC fully complied with the terms of the settlement or remedies their default when requested to do so, the full liabilities of the Principal Borrower, and the liabilities of the JD would have been paid off and discharged accordingly with the Creditor’s Petition duly withdrawn or struck off.

 

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[7] The JD further submits that it will be unfair and unjust to punish the JD when the JC has yet to realize the security which will effectively extinguish the liabilities of the JD and further that there exists the possibilities from the outcome of the Civil Suit that both the Principal Borrower and the JD as guarantor will no longer be liable to the JC.

 

[8] Regarding the stay of proceedings, the JD has referred to the case of Re Rosli Abdul Kadir; ex parte Bank Kerjasama Rakyat Malaysia Berhad [2008] 5 CLJ 691, where it was held the standard to fulfil the “Sufficient Reason Test” laid down in Section 97 of the Bankruptcy Act 1967 ( Act 360) is lower than “ Special Circumstances Test” and the existence of “Serious Points of Laws” is held to be sufficient to grant a stay under Section 97 of Act 360.

 

[9] Meanwhile, the JC contends that there are no sufficient reasons or special circumstances raised by the JD in support of his application for these proceedings to be stayed. The consent order entered between the parties on 15th April 2013 was merely to facilitate the ongoing negotiations between the parties at that point in time. The terms of the said consent order are as follows:

 

i. The winding up petition against the principal borrower is withdrawn with liberty to file afresh ;

 

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ii. The counter claim of the principal borrower is withdrawn with no order as to costs and with liberty to file afresh.

 

[10] Since the JV Developer and/or the Principal Borrower or even the JD had failed to settle the redemption sum amounting to RM4.7 million on or before 12th May 2013 based on the receipt of redemption statement issued on 12th April 2014, the JC has the right to issue a fresh winding up petition and to issue bankruptcy proceedings to the guarantors of the Principal Borrower.

 

[11] As such, the JC submits, there is no “settlement agreement” as alleged by the JD.

 

Decision

 

[12] Section 97 of Act 360 gives power to the court to grant a stay of proceedings for sufficient reasons:

 

“ Power to stay proceedings. The court may at any time, for sufficient reason, make an order staying the proceedings under a bankruptcy petition, either altogether or for a limited time, on such terms and subject to conditions as the court thinks just.”

 

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[13] After perusing the cause papers and after taking into consideration submissions of the parties, I can see no sufficient reasons or serious points of law in this present case that warrant stay to be granted. Furthermore, an appeal does not by itself operate as a stay of bankruptcy proceedings.

 

[14] On this point, I would like to refer to The Law of Insolvency by Ian Fletcher, in which it was stated at page 123:

 

“ It is important to note that the power to stay proceedings is once again a discretionary one, and that the mere fact that a debtor has lodged appeal against a judgment does not confer upon him the right to insist upon a stay of any bankruptcy proceedings founded upon that judgment. If the law were otherwise it would, as was observed by Lord Esher, M.R., in Re Flatau furnish an intolerable means whereby the debtor might delay the hearing of the petition, perhaps for months or even years, by embarking upon purely frivolous appeals. As it is, if the bankruptcy court forms the opinion that the appeal is without merit it may make a bankruptcy order without more ado. In proper cases however, a stay will be granted.”

 

[15] In this instant case, the ground raised by the JD for stay to be granted is solely based on the fact that there is an appeal to the Court of Appeal and in its affidavits and submission, the JD focused on stating the facts leading to the Principal Borrower’s claim against the JC and emphasised on the issue that there is a breach of settlement agreement by the JC. The said claim as

 

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mentioned earlier was struck off by the learned judge on 24th June 2014. It must be pointed out that before the consent order and the purported settlement agreement and also before the Principal Borrower filed its claim in KLHC Civil Suit NO 22NVC-475-08/2013, the JC had already obtained summary judgment against the JD and also the Principal Borrower. To date, it is not disputed that the judgment which forms the basis of these proceedings ( i.e the bankruptcy proceedings as well as the winding up proceedings) have not been set aside.

 

[16] In Re Lim Chin Suan; Ex Parte Ambank (M) Berhad [2013] 1 LNS 902, the learned Lee Swee Seng J held that:

 

“ I see no good reason to disturb the exercise of discretion of the Registrar in not to grant a stay of bankruptcy proceedings. Even in my discretion without reference to what the Registrar has decided, my decision would be still be not to grant the stay sought for by the JD. As a guarantor, the JD has no special right to demand the JC to call upon the borrower NL Properties to settle the Judgment Debt before proceeding with a bankruptcy action against the JD. Here the Judgment has not been stayed and so the JC is entitled to proceed to enforce the Judgment at all material times. There are thus no merits in the JD’s application for stay of bankruptcy proceeding and so the appeal is dismissed with costs.”

 

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[17] The case of Re Walter Su Ex parte United Malayan Banking Corp. Bhd 180 [1987] MLJ is also referred to in which the learned judge held that:

 

“ It is clear that this court has a discretion whether to stay the proceedings or not, but the debtor cannot claim a stay as a right. Where the court in the exercise of its discretion refuses to stay the proceedings, its decision will be upheld, unless it is clear that the discretion was wrongly exercised

 

The Court of Bankruptcy will not, as a matter of course, enquire into the validity of a judgment debt, but only when there is evidence that a judgment had been obtained by fraud or collusion, or that there has been some miscarriage of justice.”

 

[18] The same should apply in the instant case. There cannot be a stay as of right. There cannot be a stay just because an appeal is pending in the Court of Appeal. I also note that the consent judgment was recorded on such term with liberty to file afresh. Since the JV Developer and/or the Principal Borrower had failed to settle the sum to be paid under the Letter of Redemption II on or before 12th May 2013, the JC in my view, is at liberty to instruct its solicitors to commence a new proceeding for winding up against the Principal Debtor. As submitted by the JC, and I agree, the JC has rightfully obtained summary judgment against the JD whereby the court in granting the summary judgment had considered the affidavit evidence by both parties before establishing that the JC

 

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has a prima facie claim against the JD. The decision of the High Court in granting the summary judgment was then affirmed by the Court of Appeal.

 

[19] In the case of Patel Holdings Sdn Bhd v Estet Pekebun Kecil Sdn Bhd & Anor [1990] 2 CLJ (Rep) 611, it was held:

 

In my view the judgment had been regularly obtained. A judgment remains regular and enforceable until it is set aside by the Court. Although the plaintiffs had filed an application to set aside the judgment, the judgment remains regular and enforceable until it is set aside. Until the judgment is set aside the claim by the first defendant based on the judgment cannot be regarded as a disputed debt. It is in fact an enforceable judgment debt.

 

Conclusion

 

[20] The consent order which forms the basis of the purported binding settlement agreement was clearly entered on condition that the JC be at liberty to file afresh action against the Principal Debtor. The judgment which was obtained against the JD for failure to pay the outstanding sums due and owing to the JC is a valid and enforceable judgment that has never been stayed or set aside. Hence, the JC should not be stopped from enforcing its rights. I am satisfied that there is no sufficient reason raised by the JD that

 

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warrants a stay of proceedings herein. Hence I dismiss this application in enclosure 43 with cost.

 

DATO’ ZALEHA BINTI YUSOF JUDGE

 

HIGH COURT OF MALAYA KUALA LUMPUR

 

Dated: 24th November 2014

 

For the Judgment Creditor: Tang Kat Meng; Messrs Tang & Lee

 

For the Judgment Debtor: Farah Najiha; Messrs Shaikh David Raj

 

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