Case Commentary – Mohd Kamal v United Overseas Bank & Other Appeals

JUDGMENT DEBTOR SUMMONS – A PITFALL TO AVOID

A case note on the Federal Court case of MOHD KAMAL BIN OMAR V UNITED OVERSEAS BANK (M) BHD AND OTHER APPEALS [2018] MLJU 600

Introduction

The Federal Court in the case of Mohd Kamal bin Omar v United Overseas Bank (M) Bhd and Other Appeals [2018] MLJU 600 had the occasion to consider an interesting issue of whether the making of an order on a judgment debtor summons pursuant to the Debtors Act 1957 for the satisfaction of an original Judgment by instalments may constitute a variation to the said original Judgment.

The Federal Court held that it would.

Background Facts

The Judgment Creditor (“JC”) had in the case obtained a final judgment against the Judgment Debtor (“JD”) for the sum of RM 79,804,851.04 (“Original Judgment”).

As part of their effort to execute the Original Judgment, the JC chose to commence a Judgment Debtor Summons (“JDS”) filed pursuant to the Debtors Act 1957 against the JD, which was allowed by the Senior Assistant Registrar (“SAR”) who heard the application. Dissatisfied with the decision of the SAR, the JD lodged an appeal to the High Court Judge who allowed the JD’s appeal in part and ordered that: –

1. the JDS order made by the SAR requiring the JD to pay the sum of RM 3,520,000.00 forthwith to the JC be set aside; and
2. the JDS order that ordered the JD to pay a monthly instalment of RM 5,000.00 to the JC until full settlement, and also to pay the JC costs of RM 4,000.00 remained unchanged,

(hereinafter referred to as the “JDS Order”).

The JD failed to fully comply with the JDS Order leading to the JC filing a Bankruptcy Notice (“BN”) against the JD founded on the Original Judgment. The JD subsequently filed an application to set aside the BN relying on inter alia the ground that the JC cannot commence bankruptcy action against the JD based on the Original Judgment as the JC had already obtained the JDS Order against the JD.

At the High Court

The application to set aside of the BN was first heard by the SAR who dismissed the application. On appeal to the High Court Judge, the Judge too agreed with the JC and dismissed the JD’s appeal.

On the issue of whether the JC can commence a bankruptcy action against the JD based on the Original Judgment when the JC had already obtained the JDS Order against the JD, the High Court held: –

“24. ……the JC can proceed to issue the BN for bankruptcy proceeding as under s. 3(1) (i) of the Bankruptcy Act 1967 (“BA”), a judgment creditor who has obtained a final order against a judgment debtor for any amount and execution thereon had not been stayed, was entitled to commence a bankruptcy proceeding against the judgment.”

At the Court of Appeal

Dissatisfied with the decision of the High Court, the JD appealed to the Court of Appeal. The Court of Appeal again dismissed the JD’s appeal on inter alia the following grounds: –

“36. ……since execution is not prevented nor stayed with the issuance of the JDS Order, then the JC has met the requirements for the committal of an act of bankruptcy under section 3(1)(i) of the Bankruptcy Act 1967 namely, the Judgment is a final one, the JD had failed to comply with the BN and more pertinently, the execution of the Judgment is not stayed. 

37. Since the JD has committed an act of bankruptcy, therefore, it follows that the BN is valid and there are no merits in the application by the JD to set aside the BN. 

38. As section 8 of the Debtors Act 1957 provides that an order for the payment of instalment payments shall not be a bar to proceedings in execution save and except to the extent that the court shall so direct, it is to be noted that, when the Court granted the JDS order, there was no direction from the Court as to the extent of any permissible execution proceedings pursuant to this said section, i.e. there was no limitation nor conditions set out on execution in the JDS Order.”

At the Federal Court

The JD appealed to the Federal Court. Leave to appeal was granted by the Federal Court to the JD on the following question of law: –

“Whether the making of an Order on a Judgment Debtor Summons pursuant to the Debtors Act 1957 for the satisfaction of an original Judgment by payment of instalments, constitutes a variation or modification of the said original Judgment, thereby barring the presentation of a Bankruptcy Notice founded on an original said Judgment having regard to the decisions in Montgomery & Co v de Blumes [1898] 2 QB 420 and Re H.A. Pereira [1932] MLJ 112?”

In gist, the Federal Court held that:

1. the making of the JDS Order had resulted in the modification of the Original Judgment; and
2. it follows that the BN which was based on the Original Judgment was not valid and ought to be set aside.

In coming to its decision, the Federal Court considered and accepted as good law the following English and Malaysian cases which held that an original judgment can be modified or varied by an subsequent order made under a JDS: –

1. Montgomery & Co. v De Bhumes [1898] 2 QB;
2. Re H.B. [1904] 1 KB 94;
3. Re H.A. Pereira Ex Parte Pagor Singh (Bhagat Singh) [1932] MLJ 112;
4. Datuk Mohd Saribin Datuk Haji Nuar v Norwich Winterthur Insurance (M) Sdn Bhd [1992] 2 MLJ 344;
5. Ahna Lana Velathan v Vina Chinniah & Anor (1939) 8 MLJ 34; and
6. Kuna Sockalingam Mudaliar v Yang Saripah & Anor (1954) 20 MLJ 11.

The Federal Court also disagreed with the JC’s contention that the JC are entitled to commence any form of execution available to them and can pursue different mode of execution concurrently against the JD. The Federal Court reasoned that the JDS under PART III of the Debtors Act 1957 is a special provision which allows the JC for recovery or payment of money by instalments or otherwise and that the fact that the JC had chosen to proceed to enforce the JDS Order, the JC has to comply with the provisions provided under the Debtors Act 1957.

Further, in response to the JC’s submission that section 8 of the Debtors Act 1957 provides that an order for payment of instalments of a judgment debt shall not be a bar to proceedings in execution, the Federal Court held that section 8 is only applicable to the execution proceedings under the Debtors Act 1957 and does not extend to bankruptcy proceedings in the instant appeal before the court.

Conclusion

In conclusion, the Federal Court in the Mohd Kamal bin Omar case held that an order made by the court under a JDS application filed pursuant to the Debtors Act 1957 does have the effect of modifying an original Judgment. As such, it is of utmost importance that all judgment creditors are mindful of this case when deciding on the most suitable choice of proceedings to take to execute a judgment.

Written by HAROLD TAN & PAN YAN TENG

For further enquiries, please contact:
HAROLD TAN (harold@hlplawyers.com)
PAN YAN TENG (yanteng@hlplawyers.com)