PEMIUTANG PENGHAKIMAN AFFIN ISLAMIC BANK BERHAD PENGHUTANG PENGHAKIMAN NG CHEE KAE

Case Significance

Reinforces, for a non-social guarantor pursued after the principal debtor's winding-up, that leave under section 5 of the Insolvency Act 1967 and the 'exhausted all means' requirement were satisfied, and that an out-of-time set-aside application with no substantive defence to a subsisting judgment debt cannot succeed.

This High Court decision at Johor Bahru is a companion bankruptcy appeal, in which a second guarantor challenged a bankruptcy notice and creditor's petition arising from the same failed financing, and it fails on the same grounds of time bar and want of merit. The judgment debtor was a guarantor of financing facilities granted by the judgment creditor, Affin Islamic Bank Berhad, to a principal debtor company, Travelers Tours Malaysia Sdn Bhd, which was wound up on the bank's petition in January 2023. Having obtained the court's leave in June 2023 to proceed against the guarantor, as a guarantor other than a social guarantor, under section 5(3) to (6) of the Insolvency Act 1967, the bank issued a bankruptcy notice founded on an earlier judgment in default; the guarantor's failure to comply within time gave rise to an act of bankruptcy and, in turn, the creditor's petition. The guarantor applied to set aside the notice and petition. The court held that the application to set aside the bankruptcy notice had been filed outside the mandatory seven-day period under section 3(1)(i) of the Insolvency Act 1967 and rules 92 and 93 of the Insolvency Rules 2017, and was therefore incompetent and time-barred. It further held that the bank had "exhausted all means" as required by section 5(4), the evidence showing that action against the guarantor followed only after the principal debtor's default was confirmed through winding-up, and that the guarantor's assertions to the contrary were speculative and unsupported. Applying Re Lim Sow Hoon; Ex parte Malayan Banking Bhd, it held that a bankruptcy notice or petition will be set aside only on clear evidence of abuse of process or a prejudicial defect, and that the guarantor had disclosed no substantive defence — no counterclaim, set-off or challenge — to a debt founded on a valid, subsisting judgment. The court dismissed the appeal, affirmed the Senior Assistant Registrar's decision, and awarded costs of RM5,000 to the bank.