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CLJ 2014 9 429 Jyisco
CLJ 2014 9 429 Jyisco
v.
(1) Section 8(2A) of the Act was irrelevant for the purposes of
the application herein as the section merely referred to the
bank’s entitlement to claim further interest on top of the
indebtedness as at the date of the receiving order. The section
D
does not operate as a complete bar to any realisation of the
security beyond the six months’ period under the provision.
Hence, there had been no proper judicial appreciation of the
facts and the application of s. 8(2A). (para 10)
A (4) The bank was not aware of the land acquisition in order to
have participated in the acquisition hearing. It was the
obligation of the DGI as the chargor to inform the bank of
the acquisition but the DGI had failed to do so. Hence, this
is a suitable case for the application of the doctrine of
B estoppel against the DGI. The conduct of the bank had been
so influenced by the DGI that it would be unconscionable for
the DGI to insist on his strict rights under the bankruptcy
law, even on the assumption that these rights are supportable
on the law. (paras 28 & 29)
C
(5) The provisions in the charge annexure were clear in that it
provided that all monies received as compensation should be
applied towards the discharge or repayment of monies secured
by the charge and that ‘the chargor shall and hereby declares
D that it will hold such monies as received in trust for the bank’.
Since the title to the land had been transferred to the DGI,
in was incumbent on the DGI to respect the express
contractual promise, unless the evidence was clear that the
bank had surrendered its contractual rights. The facts did not
E demonstrate an unequivocal surrender of the security by the
bank. (para 30 & 31)
(6) There had been serious errors of law and a serious failure to
appreciate the material facts to an extent that appellate
intervention was warranted. (para 32)
F
Bahasa Malaysia Translation Of Headnotes
Re Douglas Homes Qld Pty Ltd (In Liq) [1980] 3 ACLR 715 (refd) A
Surfers Paradise Investments Pty Limited (In Liq) v. Davoren Nominee Pty
Limited [2003] QCA 458 (refd)
Reported by S Barathi
C
JUDGMENT
[2] The facts of this appeal are peculiar, and counsel for the
parties (the DGI representing the bankrupt) concede that there is G
as yet no direct case authority in point in Malaysia. The proof of
debt (“POD”) filed by the bank is ambivalent on whether on its
face the bank has surrendered its security or has merely proved
for the balance outstanding after giving value or realising its
security. The facts have required us to consider in some detail the H
provisions of s. 42 and Schedule C of the Act.
[4] The bank, on the other hand, argues it is entitled to the full
B sum of the compensation since it has not surrendered its security
merely by filing the POD. The bank further argues the DGI, by
its previous conduct, should be estopped from maintaining that the
bank is not entitled to the full sum.
[6] We are of the view that this is the correct and accepted
E position in relation to the status of any compensation sum where
the property is a charged property over which the charge has not
been discharged, unless of course the bank/chargee has elected
under bankruptcy law to forego its security and claim for the total
indebtedness against the estate and assets of the bankrupt.
F
[7] Procedurally, this appeal concerns the notice of application
(encl. 19A) filed by the bank under ss. 40 and 42 of the Act and
Schedule C, para. 28 thereunder, for the following relief:
i. Satu perintah bahawa keputusan Ketua Pengarah Insolvensi
G
melalui Surat Maklum oleh Jabatan Insolvensi bertarikh 11
Disember 2011 dan 16 Julai 2013 yang menolak permohonan
Malayan Banking Berhad untuk mendapatkan semula wang
pampasan tanah berjumlah RM631,309.50 dan seterusnya
menyatakan bahawa pembahagian wang pampasan tersebut
H adalah secara pari passu kepada semua pemiutang yang telah
memfailkan bakti hutang diakas dan/atau ditukar atau diubah.
ii. Suatu perintah bahawa kos permohonan ini dan kos yang
timbul disebabkan permohonan ini ditanggung oleh Jabatan
Insolvensi …
I
436 Current Law Journal [2014] 9 CLJ
(2) This section shall not affect the power of any secured creditor to H
realize or otherwise deal with his security in the same manner as he
would have been entitled to realize or deal with it if this section
had not been passed – nor shall it operate to prejudice the
right of any person to receive any payment under or by
virtue of section 31 of the Employment Act 1955 … or any I
corresponding provisions in Sabah and Sarawak.
Malayan Banking Bhd v.
[2014] 9 CLJ Boau Yoon Fut 437
[13] The critical issue in this appeal is still the short issue
whether the bank can be assumed to have given up or
surrendered its security on the facts and on the law.
D [14] We have considered the provisions in Schedule C of the
Act, and the exact terms of the POD filed which appears on
pp. 177-182 of the appeal record, vol. 2. We have further
considered the elucidation of paras. 9 to 17 of Schedule C of the
Act in Malayan Banking Bhd v. The Official Assignee (Receivers of the
E estate of Velu Marimuthu (Bankrupt) [1993] 1 LNS 294; [1993] 2
AMR 48, as followed in K Balasubramaniam (Likuidator Bagi
Kosmopolitan Credit & Leasing Sdn Bhd) v. MBF Finance Bhd &
Anor [2005] 1 CLJ 793; [2005] 2 MLJ 201.
(1) It can stand outside the bankruptcy, and realise its security
(see para. 9); or
G (2) It can value its security and prove for the difference between
this value and the amount of its debt (see para. 11); or
(3) It can surrender its security to the DGI for the general
benefit of the creditors (see para. 10).
H
[16] To quote these express provisions:
9. If a secured creditor realizes his security, he may prove for
the balance due to him after deducting the net amount realized.
[19] The POD filed is ambiguous. It does not state expressly that
the bank is surrendering the security. Nor does it state that the
bank is attaching a value to the security, and hence proving in the
G
bankruptcy for the shortfall. Here is where the principle in the old
common law case of Moor v. Anglo-Italian Bank [1879] 10 Ch D
681, becomes very relevant. According to this authority, there is
“no rule in bankruptcy that a petitioning creditor who omits in his
petition either to give an estimate of the value of his security or
H
to state that he will be ready to give up his security for the
benefit of the creditors in the event of his debtor being adjudicated
bankrupt, thereby forfeits the benefit of his security”.
[20] The facts of this appeal also establish that the DGI did not
see it fit to respond to the bank promptly although the POD had I
been filed with an ambiguity. We agree with the bank’s argument
that the DGI is required under para. 26, Schedule C to reply
stating whether he admitted or rejected the POD in writing:
Malayan Banking Bhd v.
[2014] 9 CLJ Boau Yoon Fut 439
D
[23] The bank then wrote to the DGI and asked that the
compensation sum be paid to the bank. However, in a turn of
events, the DGI then rejected the request. The ground raised for
the rejection was that the bank had surrendered its security. This
was made known to the bank on 11 December 2011, and again
E
on 16 July 2013.
[31] All said and done, the facts here concern a banking G
transaction where primacy has to be accorded to the documentary
terms and conditions in the interest of certainty and predictability
of commercial transactions. The provisions in the charge annexure
are clear. Clause 12 governs “Government Acquisition”, and under
cl. 12.3(a), all monies received as compensation shall be applied H
towards the discharge or repayment of monies secured by the
charge, and “the chargor shall and hereby declares that it will hold
such monies as received in trust for the bank”. With respect, since
the title to the land has been transferred to the DGI, it is
incumbent on the DGI to respect this express contractual I
promise, unless the evidence is clear that the bank has
surrendered its contractual rights.
Malayan Banking Bhd v.
[2014] 9 CLJ Boau Yoon Fut 441
[34] We also set aside the orders on costs below and make no
order as to costs for this appeal.