TUTORIAL 3 QUESTION 1

On 3.3.2016 Oriental Bank Bhd.(OBB) obtained Judgment in Default against Tom in the Kuala
Lumpur High Court for USD 250,000/- together with interest and costs. Tom did not apply to
set aside the default judgment.

On 5.5.2016 OBB filed and served a Bankruptcy Notice on Tom. Tom ignored the Bankruptcy
Notice which was served on him personally. OB converted the said judgment sum into RM as
at the date of the judgment.

On 3.6.2016 OBB filed and served a Creditor’s petition together with an affidavit verifying the
petition on Tom. The Creditor’s Petition was dated 2.6.2013 while the affidavit verifying the
petition was dated 2.6.2016 and was attested by a solicitor from Kuching, Sarawak. The
Creditor’s Petition is fixed for hearing at the Kuala Lumpur High Court on 4.7.2016.

Tom intends to set aside the Bankruptcy Notice and oppose the Creditor’s petition on the
following grounds:
(i) The judgment in default is not a final judgment
(ii) The bankruptcy notice is irregular because OBB converted the judgment which was in
USD into RM as on the date of the judgment rather than on the date of the bankruptcy notice.
(iii) The creditor’s petition is defective because of the affidavit verifying the petition was
affirmed prior to the presentation of the creditor’s petition.
(iv) The creditor’s petition is defective because it was affirmed by a solicitor in Kuching,
Sarawak.
(v) The affidavit verifying the petition is insufficient to prove the debt. The debt must be
proved again at the hearing of the petition.

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Advise Tom on the viability of the grounds.

The first ground that Tom would like to set aside the bankruptcy notice and oppose the
creditor’s petition is the judgement in default is not a final judgement.

According to R.89 of Insolvency Rule 2017 (IR), bankruptcy notice issued by the court shall
be served by the creditor who has obtained final judgement against the debtor. According to
S.3(1)(i) Insolvency Act 1967 (IA), before a bankruptcy notice can be served, the creditor
must obtained a final judgement or final order against the debtor. According to Re Udos ak
Rigging exp Seabanc Kredit Sdn Bhd,1 a judgment in default is not a final Judgment.
However, judgment in default becomes final judgment if it was not set aside by the judgment
debtor after 30 days.

In the current case, OBB obtained JID against Tom on 3/3/2016 but Tom did not apply to set
aside the default judgement, he further ignored the notice served him personally on 5/5/2016.
Thus the JID became a final judgement.

In short, Tom will not be able to oppose the petition on this ground as the JID has now turn
into a final judgement.

The second ground will be the bankruptcy notice is irregular because OBB converted the
judgment which was in USD into RM as on the date of the judgment rather than on the date
of the bankruptcy notice.

In the case of Wong Li Fatt William v Haidawati Bte Bolhen,2 the court held that the rate
of exchange should be taken at the date of judgement and not at the time of loss. In Re Kang
Chong Yeow; ex p Mivan Far East Sdn Bhd, 3 it was stated the exchange rate should be rate
on the date of the judgment.

1
[1994] 3 MLJ 383
2
[1994] 2 MLJ 497
3
[2001] 3 MLJ 98

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As per the above cases, OBB converting the amount on the date of judgement is correct with
the rate of exchange being on the date of judgement as well.

Thus the bankruptcy notice is regular.

The third ground is that the creditor’s petition is defective because the affidavit verifying the
petition was affirmed prior to the presentation of the creditor’s petition.

According to R.105 Insolvency Rule 2017 (IR), a Creditor’s Petition shall be verified by
affidavit. Affidavit and petition must be sworn together or day after. In Re Ho Weng Keong
ex p Marketlink (M) S/B, the Insolvency Act or Rules did not require the affidavit verifying
the creditor’s petition to be affirmed and filed after petition. Furthermore, there is no statutory
provision imposing 6 months limitation for the affidavit to be affirmed.

In the current case, R.105 of IR only mentions that the creditor’s petition shall be verified by
affidavit. In the present circumstances, it stated that the affidavit verifying the petition was
affirmed, it is valid under Re Ho Weng Keong as the court in this case held that there is no
limit which restrains the creditor petition to be affirmed and filed after petition petition. This
is also in line with Re Mohd Sharif Sape whereby such defect which is that affidavit
verifying the petition should done first before filing the filing the creditor's petition can be
curable under Section 131 of Insolvency Act as it was applied and laid in the above cases.

Hence, the creditor's petition is not defective because the affidavit verifying the petition was
affirmed prior to the presentation of the creditor’s petition.

The fourth ground is the creditor’s petition is defective because it was affirmed by a solicitor
in Kuching, Sarawak.

R.101 of the Insolvency Rules (IR) provides that the requirement that bankruptcy petitions
must be attested with a witness being a Solicitor or Federal Counsel or Magistrate or DGI or
Registrar. When it comes to witnessing by a Solicitor, it is established that a Solicitor
registered and in practice in Peninsular Malaysia cannot attest a petition from Sabah and
Sarawak and vice versa. In Lie Kok Keong v Tang Container & Service S/B, the
judgement debtor had appealed against the decision to uphold the order of the SAR to not
strike out the
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creditor’s petition. The judgement debtor’s principle ground of appeal was that the petition
was not dated and the signature did not comply with the requirements of Rule 101. The court
held that there was no evidence to support the claim that the signature was attested by a
solicitor in Kuching.

In the current case, the creditor’s petition had to be attested and affirmed by a solicitor from
the Peninsular Malaysia. This is due to the fact that the hearing was fixed in the High Court at
Kuala Lumpur. From the facts however it was attested and affirmed by a solicitor from
Kuching, Sarawak which does not comply with the R.101 of the IR.

Hence, the creditor’s petition is defective because it was affirmed by a solicitor in Kuching
Sarawak.

The fifth ground is the affidavit verifying the petition is insufficient to prove the debt. The
debt must be proved again at the hearing of the petition.

According to S.6(2) of the IA, the court at hearing shall require proof of the debt of the
petitioning creditor; the act of bankruptcy or, if more than one act of bankruptcy is alleged in
the petition, some one of the alleged acts of bankruptcy; and if the debtor does not appear, the
service of the petition, and if satisfied with the proof may make a bankruptcy order in
pursuance of the petition. In the case of Affin Credit S/B v Dato Hj Raun D Jalil
Atmasumarto, the respondent argues that the appellant had not complied with S.6(2) of the
Bankruptcy Act 1967 which requires the appellant to prove his debt at the hearing. It was
held that the word shall that appeared in the act was not mandatory for the petitioning creditor
to prove the debt again through cross examination at the hearing, especially when the
affidavit verifying the petition was never challenged. The court held that inquiry into the
validity of the debt could not be done at the stage of the bankruptcy petition but should have
been raised at the execution stage.

From the authorities above mentioned, it is not mandatory to prove the debt again at the
hearing of the petition but only directory and not mandatory. The facts show that the affidavit
verifying the petition is being challenged. Due to this there is a possibility that the petition is
defective and as such as long as it is still at the execution stage, there may be the need to
prove the debt again.

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Therefore, although the affidavit verifying the petition is sufficient to prove the debt, the debt
may need to be proved again at the hearing of the petition because the affidavit was
challenged.