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PART A
1. Disc Discus uss s thre three e (3) (3) situ situat atio ion n whic which h would ould cons consti titu tute te an act act of bankruptcy under Section 3(1) of the bankruptcy Act 1967. (b)
Fraud raudul ule ent con conv veyan eyanc ce of pr proper opertty It must be with fraudulent intention and it can be inferred from surroundi surrounding ng circumsta circumstances nces even if the transferee transferee gave valuable valuable consideration. Re Anson ycle ! "otor #or$s % The debtor sold his house to his wife & months before he was made ban$rupt. The court satis'ed that the wife had given valuable consideration but she shared her husbands intention to defraud his creditors. The ourt held that the sale give rise to an act of ban$ruptcy. ban$ruptcy.
(h )
*er of of co composition Re +ong "un heong % the ourt e,plained in this case that an act of ban$ruptcy is committed if the debtor has made an o*er that is not followed by registration of a deed of arrangement.
(-)
o pr property li liable to to se sei/ure An act of ban$ruptcy ta$es place when the e,ecuting o0cer ma$es a return that the debtor was possessed of no property liable to sei/ure. Re Peter #ong #ong % reditors Petition was presented upon the sheri*s return that the debtor had no property liable to sei/ure under #rit of 1ei/ure and 1ale. The debtor 'led and a0davit to challenge the act of ban$ruptcy and claimed that he still has some fortune. 2ut3 the creditors solicitor testi'ed that the debtor had con'rmed that he has no assets as he had sold all of them and applied the proceeds in part payment of his debts. The court granted the ban$ruptcy orders against the debtor.
. Discuss how how a bankrupt bankrupt can obtain obtain a dischar!e dischar!e of his bankruptcy bankruptcy.. Section 33 " #rder of $ourt (4) A ban$rupt may be ad-udged ban$rupt ban$rupt at any time3 and the court shall appoint a day for hearing of application. (5) A ban$ru ban$rupt pt may apply to the court court for an order of dis discha charg rge3 e3 at any time after being ad-udged ban$rupt
(&) Application will be served to all creditor who has 'led proof of debts and they can oppose to it by giving notice of opposition not less than & days before the hearing. (6) The court then shall ta$e into consideration a report from 78I as to the conduct and a*airs of the ban$rupt3 including a report as to his conduct during the proceedings under his ban$ruptcy. The court then may grant or refuse an order of discharge with respect to any earnings which afterwards became due to the ban$rupt. In Section 33A3 the 78I may3 in his discretion3 issue a certi'cate discharging a ban$rupt from ban$ruptcy after 9 years has lapsed since he was ad-udged ban$rupt. The notice of discharge will be advertised in a local newspaper 78I may ma$e copies of the certi'cate. Also3 78I has wide discretion in deciding on the application of discharge. Three factors to be considered namely (4) the cause of the ban$ruptcy3 (5) the age or health of the ban$rupt3 (&) the conduct of the ban$rupt Re Ah +ang: The principal debts have been settled leaving only the interest owed. And the ban$rupt already ;< years old which not li$ely to be gainfully employed. Thus3 the court held that it was against the public policy to chain a person to ban$ruptcy when it did not serve anyone any good.
Section 33%3 before issuing the certi'cate3 78I shall serve on the creditor a notice of his intention of issuance and the creditor may ob-ect within 54 days from the date of service of notice and state the grounds. o ob-ection and no ground considered as no ob-ection. If the ob-ection is re-ected by 78I3 the creditor may apply an order from the court to prohibit the 78I from issuing the certi'cate. The court shall hear both the 78I and the ban$rupt before ma$ing an order on the application.
3. Di&erentiate between a 'eceiin! #rder and an Adudication #rder. 1. *ntroduction R is an order of the court re=uiring the 78I to ta$e possession of a persons property. A is made when the court is satis'ed that a person cannot pay his debts3 it will allow the 78I to distribute his property amongst his creditor.
. Status of debtor
>pon receiving the R3 the ban$rupt is not yet a ban$rupt as the status is achieved after A
3. +osition of D,* 1ection ? states that 78I acts as protector of debtors asset upon receiving R. @owever3 in @isham3 1obri ! +adir v im hau 1eng3 where the debt is not provable in ban$ruptcy3 the R does not a*ect the creditors claim 2ut after receiving A3 his property is vested in 78I and becomes divisible among creditors as stated in 1ection 56(6). Also3 the ban$rupt is sub-ected to the control of his personal a*airs and property to 78I. @e is re=uired to produce documents relating to his a*airs as re=uired under 1ection &? (4) 2A.
-. +osition of debtor The ban$rupt still has the choice to ma$e an o*er of composition or scheme of arrangement upon receiving the R as in 1ection 56(4). The 78I then may report the matter to the ourt as mentioned in 1ection 4?(?).
After receiving A3 debtor cannot o*er to ma$e scheme of
arrangement.
-. A petitionin! creditor shall not be entitled to coence any bankruptcy action a!ainst a social !uarantor unless he proes to the satisfaction of the court that he has e/hausted all aenues to recoer debts owed to hi by the debtor. Discuss the aboe stateent. Defnition o Social Guarantor 1ection 5 % means a person who provides3 not for the purpose of ma$ing bene't3 (a) A guarantee for loan3 scholarship or grant for educational or research purposes (b) A guarantee for a hire:purchase transaction of a vehicle for personal or non:business use (c) A guarantee for a housing loan transaction solely for personal dwelling Immunity o Social Guarantor 1ection 9(&) % A petitioning creditor shall not be entitled to commence any ban$ruptcy action against a social guarantor unless he proved to the satisfaction of the court that he has e,hausted all avenues to recover debts owed to him by the debtor3
Case- Hong Leong Bank Berha ! "hairulni#am $amaluin The creditor does not have to obtain leave of court prior to commencing a ban$ruptcy action against a social guarantor. Sec %(&) is meant to 'rotect social guarantor rom the creitor taking the easiest ay out by claiming the eaulte loans rom the guarantor irectly ithout making serious eort to get the 'ayments rom the 'rinci'al borroers* It oul be su+cient com'liance ith Sec %(&) i a creitor shos by ay o a+a,it at the hearing o creitor 'etition that he has satisfe the reuirement o Sec %(&)*
0. State and e/plain the disuali2cation of a bankrupt as proided by Section 3 of the %ankruptcy Act 1967. (4) the ban$rupt cannot maintain any action without the previous sanction of the 78I % Perwira A0n 2an$ (5) the ban$rupt shall once in every si, months render to 78I an account of all moneys and property and shall pay to the 78I amount that not necessary e,penses of maintenance of himself and his family. (&) The ban$rupt when receive money or property e,ceeds R"9<< which does not form part if his usual income3 must report and pay it to the 78I (6) The ban$rupt shall inform the 78I if there is any change in his home address (9) The ban$rupt shall not leave "alaysia without the previous permission of 78I (;) The ban$rupt shall not carry business either alone or in partnership or be a director of any company and ta$e part in the management of any company without permission of 78I. (B) And shall not carrying business on behalf of his family
6. 4aion was declared a bankrupt on the 1 st of 5uly . he Director ,eneral of *nsolency disclaied 4aion8s tenancy of a shophouse. Discuss the le!ality of the Director ,eneral
of
*nsolency8s action. 7isclaimer of onerous propertyC 4. 1ec 9D(4)C where any part of the property of the ban$rupt consists of land of any tenure burdened with onerous covenants of stoc$s3 or of shares3 unpro'table contracts or any unsaleable property3 78 may by notice in writing disclaim the property. 5. If 78 does not disclaim3 the ban$rupts commitment passes on to 78. &. 1ec 9D(?): any person that is aggrieved after the disclaimer made by the 78I3 shall be deemed to be a creditor of the ban$rupt to the e,tent of the in-ury and may accordingly prove the same as a debt under the ban$ruptcy. Re +aruppiah : 2efore +aruppiah became a ban$rupt3 he was in occupation of the premises by virtue of a contract of tenancy between him and the landlord. n his ban$ruptcy3 his rights under the contract passed to the A. 1o long as the A was the tenant and allowed the ban$rupt to remain on the premises3 the ban$rupt was entitled to do so as his licensee. #hen the A
disclaimed the tenancy3 the right to possession passed to the landlord whereupon the ban$rupts right to remain on his premises came to an end and he became a trespasser.
PART 2
1. Doctrine of 'elation %ack The principle of relation bac$ concerns the property that is available for the payment of the debt of a debtor. 1ection 5 of the 2an$ruptcy Act provides that property includes money3 goods3 things in action3 land and every description of property whether real or personal3 in "alaysia or elsewhere. 1ection 6?(5) of 2an$ruptcy Act further clari'es on the classi'cations of property which are divisible and indivisible among the creditors upon ban$ruptcy. A property which has been transferred to a third party may also be reclaimed by the creditors for their bene'ts under certain circumstances. The theory of relation bac$ on the 7irectors 8eneral of Insolvency is basically enshrined under 1ection 6B of 2an$ruptcy Act. >nder section 6B (4) of the 2an$ruptcy Act3 to determine as to whether or not a property is available to be distributed for the payment of debts3 the ban$ruptcy is deemed to have related bac$ and commenced at the time of the commission of the act of ban$ruptcy in which the receiving order is made against him. In Re +hor 2a$ +ee3 the court held that the land that the debtor had sold to his wife way below the mar$et value several months before he was ad-udicated ban$rupt amounts to a fraudulent conveyance. The court held that the ban$ruptcy deemed to have related bac$ to and commenced at the time of the fraudulent conveyance from the ban$rupt to his wife. As the fraudulent conveyance is void3 the wife did not have any rightful title to give it to the third party. Thus3 the property was used to pay bac$ the debtors debt. Further3 the ban$ruptcy is deemed to commence at the time of the commission of the 'rst act of ban$ruptcy within si, months before the presentation of the ban$ruptcy petition if there are more than one act of ban$ruptcy. In 0cial Assignee v +oh Thong huan3 the debtor sold his property for a million Ringgit "alaysia to his son si, months prior to presentation of the creditors petition against him. in recovering the property3 the court had to decide whether or not the conveyance was a fraud. The court has loo$ed into evidences such as the 'nancial standing of the 59 years old son3 his silence over the undervalue purchase price3 his $nowledge on the 'nancial di0culties of his father and the possible motive for the scheme. The court held that3 on the balance of probability3 that the conveyance was fraudulent and thus void. The property was therefore vested on the 7irector 8eneral of Insolvency and the creditors were thus entitled to the distribution of the said property. @owever3 in "ercantile 2an$ td v 0cial Assignee of The Property of @ow @an The3 o0cial assignee is not successful in claiming the land. In this case3 the ban$ submitted that at the time the act of ban$ruptcy was committed3 they had e=uitable rights to a lien in contact over the land. The court rule that A cannot claim the land although the doctrine of relation bac$ is applicable.
There are several signi'cances of the act of ban$ruptcy on the theory of relation bac$. 4. Firstly3 any commission of the act of ban$ruptcy by the debtor will help to determine the property available for payment of debts. According to 1ection 6B(4) of the 2an$ruptcy Act 4D;B3 it provides that the ban$ruptcy is deemed to have related bac$ and commenced at the time of the commission of the act of ban$ruptcy on which the receiving order is made against the debtor. 5. Also in the same section3 if more than one act of ban$ruptcy were committed3 the ban$ruptcy will be deemed to commence at the time of the commission of the 'rst act of ban$ruptcy within si, months before the presentation of the ban$ruptcy petition. It means that the property available to distribution is the property that subsist during the commission of the act of ban$ruptcy. The theory of relation bac$ is then applicable when an act of ban$ruptcy is committed by the debtor. &. The act of ban$ruptcy provided under 1ection &(4) of the 2an$ruptcy Act 4D;B also helps to protect the interest of the creditors. >nder 1ection &(4)(b) of the 2an$ruptcy Act 4D;B3 fraudulent conveyance of debtorEs property to anyone is considered as an act of ban$ruptcy. In the event where the debtor to ma$e a fraudulent conveyance of his property to anyone before he was to be ad-udged as ban$rupt3 the act of fraudulent conveyance can invo$e the theory of relation bac$ to retrieve the property from any person the fraudulent conveyance has been made3 and the property shall be vested in the 7irectorEs 8eneral of Insolvency (78I) for distribution of the property amongst the creditors. This has been illustrated in the case of Re +hor 2a$ +ee. It could be inferred that3 even though the property has been sold to a third party3 however3 if it was found that such transaction is an act of ban$ruptcy3 the property can be recovered and vested bac$ in the 78I. Impliedly3 an act of ban$ruptcy has acted as a deterrence to any fraudulent conveyance that could a*ect creditorsE interests in the property. 6. Furthermore3 an act of ban$ruptcy also could prevent third party from dealing with the property after the debtor has been ad-udged as ban$rupt. In 0cial Assignee v Tat Fatt 1hirts "anufacturers3 the respondent supplied goods to a 'rm for sale on commission. The goods were attached by the 'rmEs creditor on the ground that a partner of the 'rm had left "alaysia with intent to defeat and delay his creditors. The partners of the 'rm were later ad-udicated ban$rupt. n an appeal in respect of the respondentEs application to recover the goods3 the court ruled that as the ban$ruptcy was deemed to have related bac$ to the time the partner was supposed to have left "alaysia3 the ban$ruptcy had commenced before the attachment. Though the goods remained the properties of the respondent3 by virtue of the e=uivalent of 1ection 6?(4)(b)(iii) of the Act3 the ban$rupt was reputed owner of the goods3 and hence the respondent could not recover the goods. @ere3 the commission
of the act of ban$ruptcy has determine the property available for the distribution to pay the debts to the creditors and helps to stop the third party from claiming any rights over the property.
. Annulent of '#A# aseC 7ato "ohd "uslim bin thman v 1huib 2in a/im ! Anor The annulment of ad-udication order has the e*ect of wiping out the ban$ruptcy altogether and puts the ban$rupt in the same position as if there had been no ad-udication order. 1ection 4<9(4) % The court may annul RA on the groundsC (i) where in the opinion of the court that the ban$rupt ought not to have been (ii) (iii)
ad-udged a ban$rupt where ban$rupts debt is paid in full where proceedings are pending in 1ingapore under the 1ingaporean law for the
distribution of the ban$rupts estate among his creditors and (iv) the distribution ought to ta$e place in 1ingapore. The e,ercise of that power is discretionary and this is evident from the use of the word may in the section on the power of court to annul RA. aseC Re +eet An application to annul ad-udication order on the ground that the debt has been settled cannot be allowed unless the court is satis'ed that all debts which have been actually and properly proved in the ban$ruptcy have been fully paid in cash. Re +eet is adopted in +wong Gi$ 2hd v @ah hiew Gin The Federal ourt held that the ban$rupt had failed to satisfy that his debt had been paid in full cash. Also3 where the creditor has agreed to accept a lesser sum in full satisfaction of its claim3 it may still ob-ect to the ban$rupts application for annulment. +etua Pengarah Insolvensi v 8oh Ah +ai ! Anor The court held that it is improper for a third party to settle the debts of the estate of a ban$rupt without the $nowledge of a reference to the A. nce a person is ad-udged a ban$rupt3 the conducts of his a*airs are vested in the hands of A. All matters relating to the ban$rupts estate should be dealt through A. #hatever private arrangement or transaction entered into between the ban$rupt or any third party and his creditors without reference to or $nowledge of the A is not binding on the estate of the ban$rupt.
In 4DDD3 the respondent brought an action in the @igh ourt to claim for a sum of money from the appellant for breach of contract. @e then was ad-udged a ban$rupt in 5<<5 until 5<<;. @e did not inform the trial ourt of his ban$ruptcy. The trial too$ place between 5<<6 and 5<<;3 within his ban$ruptcy period. The A also clari'ed that his o0ce was not aware of the respondents action in the @igh ourt. The respondent argued that the appellant was incompetent to maintain his action in the @igh ourt without the previous sanction of the A as re=uired under s.&?(4) (a) of the 2an$ruptcy Act. The appellant then hand argued that at the time of 'ling the action in 4DDD3 he was not a ban$rupt. The ourt held that s.&?(4)(a) are wide enough to cover both the bringing or continuing of an action already brought. The ad-udication of a party as a ban$rupt does not mean that all pending actions of that party would lapse or the ban$rupt is re=uired to withdraw the actions pending the obtaining of sanction from the A. #hat that party could not do without such a sanction was to ta$e any further step in the proceedings. The steps ta$en by a ban$rupt in a civil action without the previous consent of the A in contravention of s.&?(a) (4) are null and void unless the prior sanction of the A is obtained to maintain the action. Also3 the As previous sanction re=uired under s.&?(4) (a) is a statutory recognition of public interest and public policy considerations. It is to ensure that the ban$rupts a*airs are properly regulated and supervised by the A by way of the As previous sanction before the ban$rupt is competent to maintain an action. 1ection &?(5) then creates the o*ence of contempt of court.