PEMIUTANG PENGHAKIMAN EWE SAW LEE PENGHUTANG PENGHAKIMAN DATO' SRI ANDREW KAM TAI YEOW

Case Significance

A pointed statement against the tactical use of interlocutory applications to stall a creditor's petition: where the underlying judgment is indisputable, a Bankruptcy Court will not look behind it, an out-of-time set-aside application breaching rule 19 of the Insolvency Rules 2017 does not justify adjourning the petition, and such challenges should be heard at the petition itself.

This High Court decision at Kuala Lumpur concerns two appeals in a bankruptcy matter and addresses the misuse of tactical interlocutory applications to delay a creditor's petition. The judgment creditor had obtained a final judgment against the judgment debtor for RM2,167,029.52, all appeals being exhausted so that the judgment stood indisputable, and had presented a creditor's petition. The court reiterated that a Bankruptcy Court cannot look behind a judgment except in very limited instances such as fraud, collusion or a miscarriage of justice — none alleged here — so that any challenge to the petition could only be on procedural or technical grounds. The petition nonetheless provoked a series of adjournments and tactical interlocutory applications, including a stay application and a notice of intention to oppose, and, at the eleventh hour before a pivotal hearing, an application to set aside the petition. The first appeal was by the judgment creditor against the Deputy Registrar's decision to adjourn the hearing of the petition rather than proceed, on the basis that the set-aside application had been filed. The court held that the adjournment was wrongful, given the abusive, last-minute nature of the set-aside application and the requirement in rule 19 of the Insolvency Rules 2017 for service not less than eight clear days before the hearing, and it allowed that appeal with costs of RM1,500. It followed that the Deputy Registrar had been correct subsequently to dismiss the set-aside application, so the judgment debtor's appeal against that dismissal was dismissed with costs of RM5,000. In a postscript, the court observed that interlocutory challenges to bankruptcy proceedings before a creditor's petition should, except in special circumstances, be taken at the hearing of the petition itself, aligning bankruptcy practice with the approach taken in winding-up. In a postscript the court lamented the unhealthy practice, common where the underlying debt is a judgment debt and all civil appeals have been exhausted, of filing successive interlocutory applications to stave off bankruptcy orders, and endorsed aligning bankruptcy practice with the settled approach of the winding-up courts.