Chapter 7 - Challenging Creditor's Petition

Question 1

CHALLENGING CREDITOR’S PETITION

Overview

Answer 1

1) General ways to challenge CP
2) Difference between the two
3) Hearing CP challenge
3) Challenging CP by showing cause
4) Challenging CP by setting-aside or striking out
5) Grounds to challenge CP

Question 2

CHALLENGING CREDITOR’S PETITION

General ways to challenge CP

Answer 2

Dato’ Seri Teong Teck Leng v Jupiter Securities Sdn Bhd:

CP may be challenged in two ways:

1) Show cause - r.116:

• file a notice in Form 45;
• the notice needs to specify the statements in the petition which he intends to deny or dispute.

2) Set-aside petition - r.17:
- For example such as for non-compliance with the rules regarding the petition.

Question 3

CHALLENGING CREDITOR’S PETITION

Difference between both ways to challenge CP

Answer 3

Dato’ Seri Teong Teck Leng v Jupiter Securities Sdn Bhd:

1) Show cause:
- with regards to the substantive content of the petition;
2) Set-aside:
- with regards to procedural requirements of the issuance of the petition.

“showing cause is like filing a statement of defence, and setting-aside is like striking-out under O.18, r.19”

Question 4

CHALLENGING CREDITOR’S PETITION

Hearing CP challenge

Answer 4

Dato’ Seri Teong Teck Leng v Jupiter Securities Sdn Bhd:

• there should be no separate hearing to challenge CP:
• challenge on CP should be considered at the hearing of CP.
• i.e. statement of defence is not heard separately from hearing the claim.

Question 5

CHALLENGING CP BY SHOWING CAUSE

Overview

Answer 5

1) the law

2) the procedure

Question 6

CHALLENGING CP BY SHOWING CAUSE

The law

Answer 6

r. 116:

- lays down procedure where debtor intends to show cause.

Question 7

CHALLENGING CP BY SHOWING CAUSE

The procedure

Answer 7

Dato’ Seri Teong Teck Leng v Jupiter Securities Sdn Bhd:

• File a notice in Form 45;
• Notice must specify the statements in the petition which he intends to deny or dispute;
• Serve the notice to the petitioning creditor 3 days before day of hearing the petition.

Question 8

CHALLENGING CP BY SETTING-ASIDE OR STRIKING-OUT

Overview

Answer 8

1) The law

2) The procedure

Question 9

CHALLENGING CP BY SETTING-ASIDE OR STRIKING-OUT

The law

Answer 9

r. 17:

- any application must be made by summons in chambers.

Question 10

CHALLENGING CP BY SETTING-ASIDE OR STRIKING-OUT

The procedure

Answer 10

Datuk Seri Teong Teck Leng v Jupiter Securities:

• where the JD wants to apply to set-aside the CP, a summons-in-chambers has to be filed.

Question 11

GROUNDS TO CHALLEGE CP

Overview

Answer 11

1) Incurable grounds

2) Curable grounds

Question 12

INCURABLE GROUNDS TO CHALLENGE CP

Overview

Answer 12

1) Illegality
2) Invalid authority to present petition
3) Improper attestation
4) Abuse of process
5) Irregular service of CP
6) Disputes as to amount of debt

Question 13

INCURABLE GROUNDS TO CHALLENGE CP

Illegality

Answer 13

Re Haji Yahya Lampong:

• The loan was illegal because the creditor has no license to operate the bank.

Question 14

INCURABLE GROUNDS TO CHALLENGE CP

Invalid authority to present petition - law on authority to present petition

Answer 14

S.133 IA:

• Authority for corporations / mentally disordered person.
  r. 215:
• procedures on how officer of corporation should act.

Question 15

INCURABLE GROUNDS TO CHALLENGE CP

Invalid authority to present petition - example

Answer 15

2) UMW Industries Sdn Bhd v Lim Chee Hian:

-

Question 16

INCURABLE GROUNDS TO CHALLENGE CP

Improper attestation - law on proper attestation

Question 17

INCURABLE GROUNDS TO CHALLENGE CP

Improper attestation - example of improper attestation - attestation by foreign solicitor

Answer 17

Ooi Thean Chuan v Banque Nationale de Paris:

• Petition was attested by solicitor from SG;
• It was held that the witness is not qualified person;
• Petition invalid.

Question 18

INCURABLE GROUNDS TO CHALLENGE CP

Improper attestation - example of improper attestation - attestation by solicitor in Semenanjung

Answer 18

Lie Kok Keong v Tang Container & Services Sdn Bhd:

• A solicitor in S&S cannot attest to petition in Semenanjung & vice versa.

Question 19

INCURABLE GROUNDS TO CHALLENGE CP

Abuse of process

Answer 19

Chin Wee Ming v Wong Pak Hock:

• in order to prove that the proceeding was an abuse of court process, JD would have to adduce strong evidence to show that there was mala fide on the part of JC.

Question 20

INCURABLE GROUNDS TO CHALLENGE CP

Irregular service

Answer 20

Affin Bank Bhd v Abu Bakar Ismail:

• Petition was dismissed on a few grounds; one of the grounds is irregular service of the petition.

Question 21

INCURABLE GROUNDS TO CHALLENGE CP

Disputes as to amount of debt

Answer 21

Parkson Corporation Sdn Bhd v Millenium Mall Sdn Bhd:

• when a debt presented by creditor is GENUINELY DISPUTED by the debtor, it can be a ground to dismiss the petition.
• i.e. “if a creditor were to present a debt which is genuinely disputed upon substantial grounds, it would be proper for a Court to decline to wind up the company.”

Question 22

INCURABLE GROUNDS TO CHALLENGE CP

All & other grounds

Answer 22

• No debt is owing: s6(3) IA
• Debt is less than statutory amount (s.5(a) IA 1967 RM50,000.00)
• Debt is not a liquidated sum: s5(b) IA 1967
• Time barred-more than 6 years: s6(3) limitation period
• Debtor is able to settle the debt: s.6(3) IA
• Petition was filed 6 months after the act of bankruptcy: s.5(c)IA 1967
• Debtor is not within the jurisdiction, not domiciled /residing or carrying business in Malaysia: s3(3) IA 1967
• Petition is irregular: i.e. Not signed/attested: r.98 IR 2017, Officer/ company is not authorized to affirm the petition, Defects in attestation: r101 IR 2017, Bad service

Question 23

CURABLE GROUNDS TO CHALLENGE CP

Overview

Answer 23

1) Excessive demand

2) Wrong date of act of bankruptcy

Question 24

CURABLE GROUNDS TO CHALLENGE CP

Excessive demand

Answer 24

Chin Sin Lan v Delta Finance:

• when the debtor fails to give notice to dispute the amount claimed, the petition will be valid even though the demand specified was excessive.
• i.e. failure to give notice at the BN stage amounts to waiver.

Question 25

CURABLE GROUNDS TO CHALLENGE CP

Wrong date of act of bankruptcy

Answer 25

Re Ariff Sionggong ex p Arab Malaysian Finance Bhd:

• it was held that the misstatement was a mere irregularity & not fatal to the petition.