(i) Determine acts of bankruptcy that have been committed.

Support your
answer with relevant authorities. (20 marks)
The act of bankruptcy is a precondition to the presentation of a bankruptcy petition.

Section 3(1) of the Insolvency Act 1967 provides for situations amounting to an act of

bankruptcy in which a debtor may commit.

One of the situations amounting to an act of bankruptcy is when the debtor gives

notice to any of his creditors that he has suspended or that he is about to suspend payment of

his debts. This is as laid down in Section 3(1)(g) of the Act. In Re K Mohd Ibrahim & Co

[1940] MLJ 90 the debtor gave notice to his creditor stating that he was unable to pay its

debts in full and call for a creditor’s meeting. The court ruled that the giving of the notice

amounts to an act of bankruptcy. Furthermore, in Re Friedlander [1884] 13 QBD 471 the

notice must be given formally and deliberately and with intention of giving the notice.

In our case at hand, it is submitted that an act of bankruptcy has been committed when

Anad wrote a letter to all his suppliers and financiers that he will not be able to pay the firm's

debt and is considering for settlement. The request for settlement means Anad could not pay

the debt in full. Thus, applying the law in Re K Mohd Ibrahim, the giving of notice that the

debtor could not pay its debt in full amounts to an act of bankruptcy. Moreover, it is

submitted that the notice is a valid notice because it was given by Anad formally and

deliberately through letters to all his creditors.

Another situation amounting to an act of bankruptcy is when the officer charged with

the execution of a writ of attachment or other process makes a return that the debtor was

possessed of no property liable to seizure as stated in Section 3(1) (j) of the Act. In Re Peter

Wong [1959] MLJ 27 a creditor’s petition was presented upon the sheriff’s return that the

debtor had no property liable to seizure under a writ of seizure and sale. The debtor filed an
affidavit to challenge the act of bankruptcy. He claimed that he had goods in stock worth a

small fortune and was interested in a big housing scheme. Consequently, the creditor’s

solicitor testified orally that at a meeting between himself and the debtor 6 days after the

sheriff’s return, the debtor has confirmed that he had no assets as he had sold them all

previously and applied proceeds in part payment of his debts. Based on the evidence. The

court was satisfied that the return was correct and therefore, granted bankruptcy order against

the debtor.

In our case at hand, Dye Sdn Bhd, in an action obtained a Sessions Court's order for

seizure and sale against the firm. However, the report by the bailiff upon execution showed

that there was no property liable for seizure. Applying the law, it is submitted there is an act

of bankruptcy committed as the firm which is a debtor has no property liable for seizure.

In conclusion, there are two acts of bankruptcy that have been committed. Firstly,

under s3(1) (g) of the Act when Anad wrote a letter to all his suppliers and financiers that he

will not be able to pay the firm's debt and is considering for settlement. Secondly, under s3(1)

(j) of the Act when the firm as a debtor has no property liable for seizure. As acts of

bankruptcy have been committed, the creditors or the debtor himself can make the

presentation of a bankruptcy petition.

determining who are debtors under the bankruptcy laws, we must refer to several provisions

in the Insolvency Act.

Who is a debtor? This can be referred to Section 3(3) of the Insolvency Act stated

the word “debtor” in this Act shall be deemed to include any person who at the time when the

act of bankruptcy was done or suffered by him:

(a) was personally present in Malaysia;

(b) ordinarily resided or had a place of residence in Malaysia;

(c) was carrying on business in Malaysia either personally or by means of an

agent; or

(d) was a member of a firm or partnership which carried on business in

Malaysia.

Moreover, Section 5 of the Insolvency Act laid down the conditions on which

creditor may file for bankruptcy petition. Section 5(1) states that a creditor shall not be

entitled to present a bankruptcy petition against a debtor unless:

(a) the debt owing by the debtor to the petitioning creditor, or if two or more creditors

join in the petition the aggregate amount of debts owing to the several petitioning

creditors, amounts to *fifty thousand ringgit;

(b) the debt is a liquidated sum payable either immediately or at some certain future

time;
 (c) the act of bankruptcy on which the petition is grounded has occurred within six

months before the presentation of the petition; and

(d) the debtor is domiciled in Malaysia or in any State or within one year before the

date of the presentation of the petition has ordinarily resided or had a dwelling house

or place of business in Malaysia or has carried on business in Malaysia personally or

by means of an agent or is or has been within the same period a member of a firm or

partnership which has carried on business in Malaysia by means of a partner or

partners or an agent or manager.

The question arise is can the debtor be someone living abroad or a foreigner? The

answer to this question is affirmative as can be referred to Section 3(3) and Section 5(1)(d) of

the Act. This means the debtor must fall within the definition of debtor and is domiciled in

Malaysia or has residential or business links in Malaysia.

In case Re Em Abdullah & Co, Ex Parte Henry Waugh & Co [1938] MLJ 130,

the bankruptcy jurisdiction extends to person who was not present in Malaysia at the time of

the act of bankruptcy committed as the act may be committed through his agent unless such

act is a personal act and has not been authorized by him.

In Re James Kuok Khoon Huai; Ex P Lim & Tan Securities Pte Ltd [2001] 3

MLJ 321 the burden of proving that at the relevant time the judgement debtor was not

domiciled in the federation or in a State in the terms of Section 5 (1)(d) is on the judgement

debtor. In order to succeed in establishing a domicile of choice, there must be both the fact

and the intention of acquiring a domicile of choice. The two essential elements are residence

and the requisite intention to reside permanently for an indeterminate period in the host

country.
 Furthermore, on the issue of domicile, in Algemene Bank Nederland NV v Loo

Choon Yow [1989] 2 MLJ 258, issue before the Court was whether LCY was a debtor for

the purpose of s. 3(3) of the Singapore Bankruptcy Act.

Section 3(3) states that in this section "debtor" shall be deemed to include any person,

whether a citizen of Singapore or not:

(a) who is domiciled in Singapore;

(b) who within a year before the date of presentation of the petition has ordinarily

resided in or had a dwelling house or place of business in Singapore; or

(c) who though not himself personally within Singapore carries on business by an

agent within Singapore.

Counsel for petitioning creditor (ABN) submitted that as there was evidence before

the Court that the debtor (LCY) was domiciled in Singapore before he went abroad in 1985,

that the Court had jurisdiction in bankruptcy unless LCY adduced evidence that he had

changed his domicile at the relevant time and that since there was no such evidence before

the Court, receiving and adjudicating orders ought to be made against him.

The Court found that the passport entries show that LCY from August 1985 to

October 1988, travelled frequently in and out of the following countries viz., Hong Kong,

Japan, Malaysia, Taiwan, and Thailand. A breakdown of these trips shows that he was in

Taiwan for the following periods in each year: August to December 1985 - 4 days; 1986 -

158 days; 1987 - 226 days and 1988 to August - 183 days.

The rest of the time he spent in Hong Kong, Japan, Taiwan, or Thailand. In the

Court’s view, the passport entries prove LCY has travelled frequently in those countries in

those years. By itself, the frequency of travel does not prove a change of domicile.
 In conclusion, under the law, a debtor must be someone who falls under the definition

of debtor in section 3(3) of the Act and the criteria under section 5 of the Act. In situation

where a debtor denies having domicile in Malaysia, he must prove the fact and the intention

of acquiring a domicile of choice in other country.

(iii) Anis is Anand’s sister. She has signed a guarantee agreement for a
home loan agreement between Anand and a financier company. Anis is
worried that Anand has defaulted payment for several months and the
financier has called her that the company is considering a bankruptcy
proceeding against her. Write a legal opinion explaining Anis's position. (30
marks)

The issue is whether a bankruptcy proceeding can be made against Anand’s sister

(Anis) who is a social guarantor for Anand’s home loan when Anand defaulted in payment.

Section 2 of the Insolvency Act. The Act defines social guarantor as a person who

provides not for the purpose of making profit, the following guarantees:

a) a guarantee of a loan, scholarship or grant for educational or research purposes

b) a guarantee for hire-purchase transaction of a vehicle for a personal / non-business

use; and

c) a guarantee for a housing loan transaction solely for personal dwelling.

In our case at hand, Anis signed the guarantee agreement not for the purpose of

making profit. She agrees to become a guarantor due to the kinship she has with Anand.

However, in order to fall under the definition of social guarantor in Section 2 of the Act, Anis

must prove that she becomes a guarantee for a housing loan transaction solely for personal

dwelling. This was not stated in the facts. Assuming that the guarantee agreement is for a
housing loan solely for personal dwelling, Anis fall under the definition of a social guarantor

in accordance with the Act.

Next, for the issue whether a creditor can file a bankruptcy proceeding to a social

guarantor, this needs to be referred to Section 5(3)(a) of the Insolvency Act. Section 5(3) (a)

stated a petitioning creditor shall not be entitled to commence any bankruptcy action against a

social guarantor. This can be seen that the newly amended bankruptcy law protects the

position of a social guarantor from any bankruptcy proceedings. For the time being there is

yet a case that disputes the above proposition in court. Therefore, at the present time (and

until and unless the wording of the Act is disputed in court), it could be said that Anis, as a

social guarantor is totally immune from bankruptcy proceedings.

for a bankruptcy notice in the Form 34 or Form 35 of the Insolvency Rules 2017.

For proceedings in a partnership name, referring to Section 103(1) of the Insolvency

Act stated that any two or more persons being partners or any person carrying on business

under a partnership name may take proceedings or be proceeded against under this Act in the

name of the firm. It is important to note that we must also refer to the Rule 220 of the

Insolvency Rules 2017. Rule 220 stated no bankruptcy order shall be made towards a firm

on the name of the firm. The order must be made on the name of each of its partners. This

means, the bankruptcy notice must be filed on the name of each of its partners.

Moreover, to initiate a bankruptcy proceeding against a partnership, the partnership

must be a partnership registered under the Partnership Act 1961. This can be referred to

Section 121 of the Insolvency Act where it stated a bankruptcy order shall not be made

against any partnership registered under any Act dealing with companies.

When filing bankruptcy notice against each of the partners, the issue arises on the

liability of the partners in settling the same judgement sum. This can be referred to the Court

of Appeal case in Sumathy Subramaniam v Subramaniam Gunasegaran & Another

Appeal [2018] 2 CLJ 305. The Court stated that while the respondent may be entitled to

enter judgment for the same single sum, which the respondent did, the liability of them was
necessarily joint. The summary judgment that was entered had not specified that both

appellants were jointly and severally liable for that single sum. Where the judgment is silent

or has not specified that liability is joint and several, the liability is necessarily joint. Where

liability is joint, each of the judgment debtor shares that liability equally. The respondent had

a right to enforce only half the judgment sum against each appellant in this case. The

respondent was not entitled to enforce the full sum against both of them, certainly not at the

same time.

Besides in Lembaga Kumpulan Wang Simpanan Pekerja V Edwin Cassian A/L

Nagappan @ Marie [2020] 1 LNS 226, the court stated that due to the absent ‘jointly and

severally liable’ in the consent judgement which was the basis for the issuance of the

Bankruptcy Notice, the court held the liability of the defendants are joint.

After the Bankruptcy Notice have been served to the partners and they fail to pay the

amount due within 7 days, the creditors can then apply for creditor’s petition in Form 41 and

Form 42 of the Insolvency Rules 2017.