Per: Dannio Bin Yahya(K/P: 850902-71-5007) … Penghutang PenghakimanEx Parte: Affin Bank Berhad … Pemiutang Penghakiman

  

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DALAM MAHKAMAH TINGGI DI KUALA LUMPUR (BAHAGIAN DAGANG)

 

TINDAKAN KEBANKRAPAN NO.: 29NCC-920-02/2015

 

Per: DANNIO BIN YAHYA

 

(K/P: 850902-71-5007) … Penghutang Penghakiman

 

Ex Parte: AFFIN BANK BERHAD … Pemiutang Penghakiman

 

GROUNDS OF DECISION

 

Azizah Nawawi, J:

 

Application

 

[1] Enclosure (9) is the Judgment Debtor’s (JD) application pursuant to section 97 of the Bankruptcy Act 1967 (BA 1967), to stay all proceedings before this Court pending disposal of the Judgment Debtor’s action to set aside the Consent Judgment dated 17 May 2010 vide Kuala Lumpur Civil Suit No.: 22NCVC-212-04/2015.

 

The Salient Facts

 

[2] The JD was a director and a guarantor to Market Asia Link Sdn Bhd (“MAL”). At all material times, this company was involved in the supply of Bunkers business, the sale and purchase of maritime fuels.

 

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[3] Malaysian International Shipping Corporation (“MISC”) was MAL’s main customer. Since 2005, numerous contracts were entered into between MAL with MISC for the bunkering services to MISC’s vessels.

 

[4] Upon the request by MAL, Affin Bank Berhad, the Judgment Creditor (“JC”) had granted various facilities totalling to the amount of RM 123 million for the purpose of financing the sale and purchase of Bunkers fuel by MAL to MISC.

 

[5] Upon entering into a contract with MISC, MAL would apply to the JC for drawdown of the Bankers Acceptance facilities together with the supporting documents authorized by MAL’s Managing Director and Chief Executive officer named Mr. Yahya Bin Mohd Khalid (the JD’s father). Once the drawdown application is approved, the JC will disburse the monies into MAL’s account for its use in purchasing the relevant Bunkers for supply to MISC.

 

[6] These financial facilities were guaranteed by the JD, Yahya (his father) and Shun Yuet Mui (the JD’s mother), vide Letters of Guarantee dated 13.10.2005, 28.2.2006, 13.9.2006, 6.2.2007, 5.9.2007, 10.12.2007 and 7.7.2008.

 

[7] However, the JD claimed that between 16.10.2008 to 7.11.2008, there were a total of 46 unauthorized applications made by MAL for release of funds under the said facilities which automatically rendered the guarantee agreement not enforceable.

 

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[8] MAL then commenced an action vide Shah Alam High Court Civil Suit No.: 22-2056-2008 (“MAL’s suit”) against the JC for breach of duties resulting in the release of the funds to MAL under the unauthorized applications and for failure and/or negligence by the JC to ensure the applications made were genuine.

 

[9] On the other hand, upon default in repayment of the facilities, the JC commenced an action against MAL and the guarantors vide Kuala Lumpur High Court Civil Suit No.: 22-1229-2009 (“JC’s suit”) claiming for the total sum of RM54, 246, 817.63 and RM30, 757, 000.00 to recover the outstanding facilities.

 

[10] The said suits were resolved after MAL withdrew its suit against the JC when the latter agreed to consider the proposed restructuring of the facilities. Thereafter, a consent judgment (“the consent judgment”) in the JC’s suit was entered for the outstanding sums due under the said facilities.

 

[11] The JC contended that the parties also agreed that the consent judgment will not be enforced until 30 June 2010, to allow MAL and its directors to put forward the proposed restructuring of the facilities to the JC.

 

[12] However, when the restructuring of the facilities failed to materialize, the JC instituted this bankruptcy proceedings against the JD premised on the consent judgment.

 

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[13] After the service of the Bankruptcy Notice on the JD, the JD, together with Shun Yuet Mui, who has been adjudged bankrupt, then filed an action vide the Kuala Lumpur High Court Suit No.: 22NCVC-212-04/2015 to set aside the consent judgment.

 

[14] The JD then filed this present application in order to stay all bankruptcy proceedings before this Court pending the disposal of the setting aside action in Suit 22NCVC-212-04/2015.

 

The JD submission

 

[15] It is the submission of the JD that the signing of the consent judgment was made pursuant to the representation that this was part of a settlement arrangement and that the judgment itself will not be executed.

 

[16] The JD further submitted that the settlement was made prior to a criminal proceeding against his father, Mr. Yahya bin Khalid and he was subsequently acquitted of the charges.

 

[17] In the Kuala Lumpur Suit No.: 22NCVC-212-04/2015, the JD is trying to establish that the fraud was not committed solely by the former employer of MAL but with the assistance from JC’s employees

 

[18] The JD submits that there are special circumstances in this case because the fraud was also committed by employees of the JD. Added to that, the JD submits that the signing of the consent judgment was made pursuant to representations that the

 

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judgment will not be executed. In any event, there was no execution of the consent judgment for more than 4 years, since 2010.

 

The JC submission

 

[19] In opposing this application, the JC submitted that the main ground raised by the JD, that there is a pending related matter to set aside the said consent judgment, does not constitute special circumstances in warranting a stay of the bankruptcy proceedings.

 

Findings of the Court

 

[20] This application is premised on section 97 of the BA 1967, which reads:

 

“ 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.”

 

[21] Section 97 of the BA 1967 was considered in the case of Re THANGARAJOO VYRAN; Ex P DENKO INDUSTRIAL CORPORATION BHD [2013] 1 CLJ 286, where the court applied the principle in the case of Re Rosli Abdul Kadir; Ex P Bank Kerjasama Rakyat Malaysia Bhd [2008] 5 CLJ 691 that the ‘sufficient reason’ in section 79 is a lower threshold than the

 

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‘special circumstances’ test in an ordinary application for stay of execution of a judgment pending appeal.

 

[22] In Re Rosli Abdul Kadir (supra), Justice Ramly made a distinction between the statutory words ‘sufficient reason’ in section 97, and the words ‘special circumstances’, which are not derived from statutes, but is a creation of the Court. In view of the distinction, His Lordship held that the test for applications under section 97 and stay of execution of judgment pending appeal cannot be the same. In paragraph [21], His Lordship concluded:

 

“[21] In conclusion on this issue, the Court finds that the test to warrant the Court’s discretion to grant or refuse the application is for the judgment debtor to show ‘sufficient reason’ and not ‘special circumstances’. Thus the Judgment Debtor’s burden is to prove ‘sufficient reason’ is much lighter than to prove ‘special circumstances’.’’

 

[23] Applying the above principle, the issue then is whether the JD has adduced sufficient reasons for a stay of his bankruptcy petition. The JD gave two (2) main reasons for the stay of his bankruptcy petition:

 

(i) that there is a pending suit to set aside the consent judgment dated 17.5.2010 in Suit 22NCVC-212-04/2015; and

 

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(ii) that there was an agreement not to execute the consent judgment.

 

[24] Having considered the submission of the parties, I am of the considered opinion that the pending suit to set aside the consent judgment does not amount to sufficient reasons for a stay of the JD’s bankruptcy petition. A consent judgment is an agreement between the parties with the superadded command of the court, and the Courts have always taken the position that parties cannot simply resile from a consent judgment, which must be given its full effect. In Tan Geok Lan v La Kuan @ Lian Kuan [2004] 3 MLJ 456, the Federal Court held as follows at page 472:

 

“[15] …. a consent judgment or order is not the less a contract, and subject to the incidents of a contract, because there is superadded command of the court, and its force and effect derives from the contract between the parties leading to, or evidenced by, or incorporated in, the consent judgment or order. A consent order must be given its full effect…”

 

[25] In another Federal Court case of Ganapathy Chettiar v Lum Kum Chum & Ors, Meenachi v Lum Kum Chun& Ors [1981] 2 MLJ 145, the Federal Court said in held (1):

 

“(1) an order by consent is evidence of a contract between the parties and is binding on all parties to the order all the more so, where there is not the slightest question of any mistake as to facts or law;”

 

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[26] On the face of the consent judgment, the parties have voluntarily entered into the consent judgment, and the parties had been represented and advised by solicitors. There are no allegations of any mistake of facts or law with regards to the consent judgment. The suit seeking to set aside the consent judgment seems to be premised on the criminal acquittal of the JD’s father, the Managing Director of MAL by the Session Court. But then again, the issue of fraud was already raised in the MAL suit, which was subsequently withdrawn. Therefore, I am of the considered opinion that the pending suit to set aside the consent judgment does not amount to sufficient reasons for a stay of the JD’s bankruptcy petition.

 

[27] With regards to the JD reliance on the case of Re Rosli Abdul Kadir (supra), where the Court has allowed the stay application, the bankruptcy proceedings are based on a judgment entered in default of appearance, not a consent judgment. With regards to the case of Re Thangarajoo Vyrant (supra), the court has allowed the stay application on the basis that there were serious points of law and fact to be ventilated before the Court of Appeal. In this case, the Bankruptcy Notice is based on a judgment which is pending appeal in the Court of Appeal.

 

[28] On the second issue raised by the JD, that there was an agreement not to execute the consent judgment, the same was denied by the JC. This is supported by the JC’s letter dated 20.4.2010, whereby the JC has agreed to grant time indulgence not to enforce the consent judgment until 30.6.2010, or for such extended period, to enable the borrower MAL to conclude the

 

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proposed restructuring plans. These terms were accepted by the JD in his letter, exhibited as “ABB – 3”. Thus, there is no merit in the JD’s contention that parties have agreed not to execute the consent judgment.

 

[29] Premised on the reasons enumerated above, the JD’s application is dismissed with costs.

 

(AZIZAH BTE HAJI NAWAWI) JUDGE

 

HIGH COURT MALAYA (Commercial Division) KUALA LUMPUR

 

Dated: 6th May 2016

 

For the Judgment Creditor : Poh Choo Hoe

 

Messrs Shook Lin & Bok Kuala Lumpur.

 

For the Judgment Debtor : K H Chong

 

Messrs K H Chong & Associates Kuala Lumpur.

 

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