PEMIUTANG PENGHAKIMAN Christopher Martin Boyd PENGHUTANG PENGHAKIMAN Deb Brata Das Gupta

Case Significance

Confirms that a judgment revived on default under a settlement agreement remains the proper basis for a bankruptcy notice, and that a minor irregularity in the affidavit verifying a petition is cured by section 131 of the Insolvency Act 1967 absent prejudice.

This High Court decision in the Commercial Division at Kuala Lumpur concerns appeals in bankruptcy proceedings against the dismissal of applications to set aside a creditor's petition and a bankruptcy notice. The judgment debtor appealed against the Senior Assistant Registrar's dismissal of his applications to set aside a creditor's petition dated 5 September 2024 and a bankruptcy notice dated 24 June 2024 issued by the judgment creditor, together with the related costs orders. The debtor advanced two main grounds, one substantive and one procedural. The substantive ground was that the bankruptcy notice ought to have been premised on a settlement agreement dated 19 February 2019 between the debtor and the creditor rather than on the underlying judgment dated 8 October 2018, on the argument that the judgment had merged with, and been superseded by, the settlement. The procedural ground was that the affidavit verifying the petition, having been affirmed one day before the petition was filed, invalidated the petition. The court rejected both grounds. On the substantive ground, it held that, by the very terms of the settlement, the judgment was not extinguished or superseded but was revived upon default under a specified clause, so the bankruptcy notice was properly founded on the judgment. On the procedural ground, it held that even if the affirmation of the verifying affidavit one day before the petition was a defect or irregularity, section 131 of the Insolvency Act 1967 preserves proceedings against such defects unless substantial injustice is shown, and there was no evidence that the debtor had suffered any prejudice. Holding that both grounds failed and that the petition and verifying affidavit were valid and effective, the court dismissed the appeals with costs. The judgment is a useful statement that a judgment revived on default under a settlement remains the proper basis for a bankruptcy notice, and that a minor affidavit irregularity is cured by section 131 absent prejudice.