LAW OF INSOLVENCY

Tutorial 1
Question 2
Group : TG 7.2
 Question 2
Discuss whether leave of the court must be obtained to file
a bankruptcy action based on a judgment which is more
than 6 years old.
 Introduction
In general, once the creditor has a judgment order, the
judgment can be enforced. Enforcement orders can be
issued by court offices the creditor does not have to go
back to court for the order. Creditors have 12 years from
the date of the judgment to look for enforcement orders.
However, if the judgment order was issued 6 or more
years earlier, the creditor may have to apply to court for
leave to issue execution. Once issued, enforcement
orders are generally valid for a year and may then be
renewed.
 S. 6(3) Limitation Act 1953
An action upon any judgment shall not be brought after
the expiration of twelve years from the date on which the
judgment became enforceable and no arrears of interest
in respect of any judgment debt shall be recovered after
the expiration of six years from the date on which the
interest became due.
 S.3(1)(i) Bankruptcy Act 1967
(1) A debtor commits an Act of bankruptcy in each of the following cases:

(i) If a creditor has obtained a final judgment or final order against him for
any amount and execution thereon not having been stayed has served on him
in Malaysia, or by leave of the court elsewhere, a bankruptcy notice under this
Act requiring him to pay the judgment debt or sum ordered to be paid in
accordance with the terms of the judgment or order with interest quantified up to
the date of issue of the bankruptcy notice ... ;
 Perwira Affin Bank Bhd v Lim Ah Hee
The Federal Court held that had nothing to do with the meaning of the words execution
thereon not having been stayed in Section 3(1)(i) of the BA 1967. Rather, the issue was
whether the second limb of Section 6(3) of the Limitation Act (which, inter alia, prohibits the
recovery of interest in respect of a judgment debt after six years from the date on which the
interest became due) applied to a bankruptcy proceeding. It was in the context of Section
6(3) of the Limitation Act that the Court decided that a bankruptcy proceeding is not a writ of
execution.

Consequently, the Federal Court concluded that Lim Ah Hee was not an authority for the
proposition that leave is not required to issue a bankruptcy notice where six years or more
have lapsed from the date of the judgment or on the interpretation of the words execution
thereon not having been stayed in Section 3(1)(i) of the BA 1967.
 Ambank (M) Sdn v Tan Tem Son
On17/10/2000, the Appellant initiated a bankruptcy proceeding against Tan Tem Son at the
Johor Bahru High Court. Thereafter, several part payments were made to repay a part of the
judgment debt, as follows:
a) RM95,000.00 on 17/10/2001;
b) RM100,000.00 on 25/07/2003; and
c) RM755,000.00 on 28/11/2003.
On 20/08/2004, the 1st Bankruptcy Proceeding was set aside by a Court Order. In October
2005, the Appellant applied for leave to enforce the said Judgment, after more than 6 years
from the date of judgment. The said application was dismissed by the Deputy Registrar on
17/07/2006. The Appellant appealed to the Judge in Chambers. The said appeal was also
dismissed by the High Court Judge on 13/12/2006. Tan Tem Son still failed, refused and/or
neglected to repay the balance owing to the Appellant.
On 12/03/2007, the Appellant initiated another bankruptcy proceeding against Tan Tem Son.
On or about 12/06/2007, Tan Tem Son made an application to set aside the bankruptcy
notice in respect of the 2nd Bankruptcy Proceeding, inter alia, on the ground that leave was
not obtained to enforce the said Judgment, after more than 6years from the date of
judgment. The application was allowed by the Deputy Registrar on 25/04/2008. The
Appellant appealed to the Court of Appeal on 23/11/2009.
 Whether the phrase any person who is for the time being entitled to enforce
a final judgment in the proviso to section 3(1)(i) of the Bankruptcy Act 1967
requires the Judgment Creditor to obtain leave pursuant to Order 46 Rule
2(1)(a) of the Rules of the High Court 1980 prior to initiating a bankruptcy
proceeding based on a final judgment which has been obtained more than 6
years ago?
The phrase any person who is for the time being entitled to enforce a final
judgment in the proviso to section 3(1)(i) of the Bankruptcy Act 1967 does
not require a Judgment Creditor to obtain leave pursuant to Order 46 Rule
2(1)(a) of the Rules of the High Court 1980 prior to initiating a bankruptcy
proceeding based on a final judgment which has been obtained more than 6
years ago.
 A bankruptcy proceeding is not a writ of execution within the meaning of O.
46 r. 2 RHC1980. A bankruptcy proceeding is an action caught by the
provision under section 6(3) of the Limitation Act 1953. It is an action upon a
judgment, i.e. an action to enforce a judgment. Such being the case O. 46 r.
2 of RHC does not apply.
Since a bankruptcy proceeding is an action upon a judgment, within the
meaning of section 6(3) of the Limitation Act 1953, and limitation for bringing
the action is twelve years, a judgment creditor is entitled to enforce a final
judgment by instituting bankruptcy proceeding without the leave of the Court
within that period of twelve years.
In other words, if the judgment creditor institutes a bankruptcy proceeding (to
enforce a final judgment) within that 12 year period, he shall be deemed to
be a creditor who has obtained a final judgment or final order within the
meaning of section 3(1)(i) of Bankruptcy Act 1967.
 Further, in our view, since O. 46 r. 2 of RHC does not apply to
bankruptcy proceeding, there is no reason or justification to use it
to read into the phrase, execution thereon not having been
stayed in section 3(1)(i) of BA 1967, the implication that in
addition to there being no stay of execution by the Court, the
creditor must be in a position to issue immediate execution. The
only bar for the institution of bankruptcy proceeding is the
limitation under section 6(3) of the Limitation Act 1953.
 Dr Shamsul Bin Abdul Kadir v RHB Bank
Berhad
A consent judgment dated 10 October 2000 was entered into between the JD
and the JC whereby the JD was ordered to pay RM554,000.00 to the JC by
way of a first instalment of RM54,000.00 on or before 15 November 2000
followed by monthly instalments of RM20,000.00 each from 15 November
2000 until full settlement.
The JD failed to settle the judgment sum. Consequently, the JC issued a
bankruptcy notice for the sum of RM350,000.00 against the JD on 3 January
2011 and served the same on the JD on the following day. The JD applied to
set aside the bankruptcy notice on the ground that the bankruptcy notice was
invalid as it was issued without the leave of court pursuant to Order 46 Rule 2
which, inter alia, requires a JC to obtain leave of court in order to enforce a
judgment where six years or more have lapsed since the date of the
judgment.
 Decision of the Federal Court
The JD obtained leave to appeal to the Federal Court on two questions of law
- the first being whether it is a mandatory requirement under Section 3(1)(i) of
the Bankruptcy Act 1967 (BA 1967) for a JC to obtain leave pursuant to
Order 46 Rule 2 in order to commence bankruptcy proceedings on a
judgment debt where six years or more have lapsed since the date of the
judgment.
The Federal Court answered the above question in the affirmative and set
aside the bankruptcy notice issued against the JD. Their Lordships opined
that it was not necessary to answer the second leave question.
According to their Lordships, the appeal turned on the interpretation of
Section 3(1)(i) of the BA 1967, in particular, the words execution thereon
having not been stayed.
 The Federal Court held that a judgment creditor (JC)
who commences bankruptcy proceedings against a
judgment debtor (JD) in respect of a debt under a
judgment where six years or more have lapsed since the
date of the judgment must obtain prior leave of the court
pursuant to Order 46 Rule 2 of the Rules of Court 2012.