LAW OF INSOLVENCY

AMMAR MUSTAQIM BIN ARIFF HAZNAL

TUTORIAL 1
QUESTION 1
On 24 March 2023, Honey & Co. obtained judgment in default against D for a sum of
RM234,000/-at the Melaka Sessions Court. On 15 May 2023, Honey & Co. applied for a
Request to issue Notice of Bankruptcy. On 18 Aug. 2023, Honey & Co. obtained an order to
serve the Bankruptcy Notice by way of substituted service. On 25 Sept. 2023, it was
advertised in the Malay Mail and Star newspaper, posted at D’s last known address and at the
notice board at the Melaka High Court. On 30 Oct. 2023, D applied to set aside the
Bankruptcy Notice on the grounds that :-
- the service was irregular
- the amount stated in the Bankruptcy Notice was wrong as he had paid a sum of
RM175,000/- towards full and final settlement of his judgment sum in June 2022
before he left for China.
- Since June 2022 he was working in China and was resident there with his family.
- He had no residence or bank accounts or assets of any kind in Malaysia.
Advise D on the merits of his application.

ANSWER
The first issue is whether the service of the bankruptcy notice effected by Honey & Co.
against D was irregular.
Rule 95 of Insolvency Rules 2017 provides that a bankruptcy notice shall be served in the
same manner prescribed in the Rules for the service of a creditor’s petition As for substituted
service as laid down in Rule 109(1), the court may order the service to be done by advertising
the petition in one local newspaper, by placing it on the notice board of the court premises
and any other means that the court thinks as reasonable. Rule 109(3) states that where sub
rule (1) has been carried out, the petition shall be deemed to be served to the debtor.
Applying these laws to the facts, Honey & Co. had obtained an order to serve the bankruptcy
notice by way of substituted service. Therefore, in accordance with Rule 95, the bankruptcy
notice by way of substituted service shall be served in the same manner as the service of a
bankruptcy petition by way of substituted service. On the facts, Honey & Co. advertised the
bankruptcy notice in the Malay Mail and Star newspaper on 25 September 2023, posted at
D’s last known address and at the notice board at the Melaka High Court. As such, Honey &
Co.’s service of the bankruptcy notice to D is done in line with Rule 109.
Thus, the service of the bankruptcy notice effected by Honey & Co. against D was regular.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

The second issue is whether D can set aside the Bankruptcy Notice which stated the
wrong amount.
Section 3(2)(ii) of Insolvency Act 1967 states that bankruptcy notice would not be invalidated
on the sole reason that the sum specified in the notice as the amount due exceeds the amount
actually due unless the debtor within the time allowed for payment gives notice to the
creditor that he disputes the validity of the notice on the ground of such mistake.
On the fact, D had paid a sum of RM175,000 towards the full and final settlement of his
judgment sum in June 2022 before he left for China. According to Section 3(2) (ii), the fact
that the amount stated in the Bankruptcy Notice as RM234,000 would not invalidate the
Bankruptcy Notice per se.
Thus, D cannot set aside the Bankruptcy Notice on the sole ground that the amount stated
differs from the actual amount owed.

The third issue is whether D can set aside the Bankruptcy Notice on the grounds that he
was not domiciled in Malaysia.
Section 5(1)(d) of the Insolvency Act 1967 states that a creditor can only present bankruptcy
petition if the debtor is domiciled in Malaysia; or ordinarily resides in Malaysia within one
year of the presentation of the petition; or had a dwelling house; or a place of business; or
carried business in Malaysia.
In Algemene Bank Nederland NV v Loo Choon Yow, the issue was whether the debtor was
domiciled in Singapore as he had married a Taiwanese lady and since 1985, he had been
domiciled and residing in Taiwan. He also did not own any dwelling house or a place of
business in Singapore. ‘
Regardless, the Singapore High Court granted the bankruptcy petition on the ground that the
burden of proving that the debtor falls within the definition of Section 3 is on the creditor and
on this case, the burden was discharged because the debtor’s passport and certificate show
that the debtor was a Singaporean born in Singapore.
Besides, the judgment debtor’s passport showed that there was no prove of change of
domicile. Moreover, according to Re Eu Keng Chee, if one alleges that there is a change in
domicile, there must be clear proof of a ‘fixed and settled purpose’, ‘a determination’, ‘a final
and deliberate intention’ to abandon his existing domicile.
Applying these laws to the facts, referring to Algemene Bank Nederland NV v Loo Choon
Yow, since June 2022, D was working in China and was resident there with his family and he
had no residence or bank accounts or assets of any kind in Malaysia. Until and unless D can
proof that D has changed his domicile to China, the Bankruptcy Notice is a valid and
established one, the change in residency does not equate to a change in domicile.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

In accordance with Re Eu Keng Chee, D would need to prove that he has a ‘fixed and settled
purpose’, ‘a determination’, ‘a final and deliberate intention’ to abandon his existing domicile
in order to set aside the bankruptcy notice presented by Honey & Co.
Hence, D does not have any merits to challenge the Bankruptcy Notice by Honey & Co. e
unless if he is able to prove the change in his domicile.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

QUESTION 2
Ali came to see you. He mentioned that following default in a housing loan repayment, the
lending bank has obtained and served to him teh copy of a judgment against him demanding
for full repayment amounting to RM350,000-00 within 14 days from the service of the
judgment, failing which a bankruptcy proceeding will be taken against him. He is not in the
position to make full payment as currently he is jobless.
Advise him on how to avoid the bankruptcy proceeding provided by the Insolvency Act 1967.

ANSWER
Based on the Ali’s situation, it can be recommended for Ali to enter into a voluntary
arrangement with the lending bank in order to avoid the bankruptcy proceeding.
Under S.2A of Insolvency Act,a voluntary arrangement is defined as a composition in
satisfaction of a debtor’s debt or a scheme of arrangement of a debtor’s affairs. This
arrangement allows an individual debtor to enter into an arrangement - negotiate or propose a
structured plan to settle his debt - with his creditor at any time prior to being declared a
bankrupt.
A debtor may propose a voluntary arrangement to his creditors at any time between
commencement of bankruptcy proceedings and before being adjudged a bankrupt. It is an
opportunity to work out with his creditors a proposal for the settlement of his debts either in
full or part over a period of time.
Some of the advantages of entering into a voluntary arrangement includes Ali being protected
from all legal proceedings against the debtor from bankruptcy petition and no legal
proceedings against the debtor except with permission from the court.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

QUESTION 3

Can a Judgment creditor issue a bankruptcy petition against the following persons?

i) Siti, is an 18 year old student, pursuing a Foundation in Law course in one of

ANSWER
The issue is can Judgement creditor issue bankruptcy petition against Siti?

S. 2 Insolvency Act 1967 (IA 1967) provides social guarantor is a person who does not profit
and essentially provides a guarantee for an education loan, hire-purchase transaction for
personal or non-business use, or a housing loan for personal dwelling.
s.3 (3) Insolvency Act 1967 states that debtor is the one who was personally present in
Malaysia; or ordinarily resided or had a place of residence in Malaysia. S 5(1)(d) IA 1967
provides the debtor is domiciled in Malaysia or in any State or within 1 year before the date
of the presentation of the petition has ordinarily resided in Malaysia.
S 5(1)(a) IA 1967 further states that a creditor shall not be entitled to present a bankruptcy
petition against a debtor unless the debt owing by the debtor to the petitioning creditor,
amounts to RM 100,000. Under S 2 of Insolvency (Amendment) Act 2020, there is
modification to the amount of indebtedness to RM100, 000 w.e.f. 1.9.2021.
Siti is domicile in Malaysia, fall under s.3 (3) Insolvency Act 1967 and satisfied S 5(1)(d) IA
1967. Therefore, Siti is a debtor and judgement creditor may issue bankruptcy petition
against Siti. Judgement creditor cannot issue a bankruptcy petition against Siti as the
outstanding bills is only RM 36,000, did not exceed RM 100,000 according to S 5(1)(a) IA
1967.
If the outstanding amount is RM 120,000, under S 2 of Insolvency (Amendment) Act 2020,
the judgement creditor can issue a bankruptcy petition against Siti’s mother in which the
amount exceeding RM 100,000 threshold.
In conclusion, judgement creditor issue bankruptcy petition against Siti if the amount is RM
120,000 but they cannot issue bankruptcy petition when the amount is only RM 36,000.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

ii) Vlad Wallachia, is an officer at the embassy of Xanadu, and has been living in
Kuala Lumpur since September 2014. He enjoys the good life and often spends
beyond his means. He has outstanding credit card bills amounting to RM
56,000. (Or RM156,000)

ANSWER
The issue is can Judgement creditor issue bankruptcy petition against Vlad Wallachia, who is
an officer at the embassy of Xanadu?
Diplomatic corps enjoy immunity unless there is a waiver or immunity under the Diplomatic
Privileges (Vienna Convention) Act 1966. In R v Madan, it was stated that the court had no
jurisdiction until that immunity had been waived.
S 5(1)(a) IA 1967 further states that a creditor shall not be entitled to present a bankruptcy
petition against a debtor unless the debt owing by the debtor to the petitioning creditor,
amounts to RM 100,000. Under S 2 of Insolvency (Amendment) Act 2020, there is
modification to the amount of indebtedness to RM100, 000 w.e.f. 1.9.2021.
S 5(1)(c) IA 1967 further states that the act of bankruptcy on which the petition is grounded
has occurred within 6 months before the presentation of the petition. s.3 (3) Insolvency Act
1967 debtor in relation to an act of bankruptcy includes one who was personally present in
Malaysia; or ordinarily resided or had a place of residence in Malaysia. Besides, S 5(1)(d)
IA 1967 provides the debtor is domiciled in Malaysia or in any State or within 1 year before
the date of the presentation of the petition has ordinarily resided in Malaysia
Judgement creditor cannot issue bankruptcy petition against Vlad Wallachia, who is an
officer at the embassy of Xanadu because he is diplomatic corp enjoying immunity.
However, judgement creditor can issue bankruptcy petition where there is a waiver or
immunity under the Diplomatic Privileges (Vienna Convention) Act 1966 and supported by
R v Madan.
Where Vlad Wallachia has lost his immunity as diplomatic corps, judgement creditor cannot
issue bankruptcy petition where he has outstanding credit card bills amounting to RM
56,000, did not exceed RM 100,000 based on S 5(1)(a) IA 1967 and based on S 2 of
Insolvency (Amendment) Act 2020, if the amount is RM 156,000, judgement creditor can
issue bankruptcy petition against Vlad Wallachia.

Furthermore, based on S 3(3) of IA, Vlad Wallachia is a debtor and according to S 5(1)(d) IA
1967, bankruptcy petition can be filed against Vlad Wallachia who has been living in Kuala
Lumpur since September 2014.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

iii) Mrs. Cash, is a happily married young woman who loves collecting antiques.
Recently she bought a 15th. Century black lacquer painted chest for RM45, 000
(or RM150, 000) on 3 months credit, from Antique Furnitures Sdn. Bhd.
Contrary to the credit arrangements she has not paid for it to date.

ANSWER
The issue is whether judgement creditor can issue bankruptcy petition against Mrs. Cash?

Married women as stated under s.120 IA1967, the position is same as if they were single. But
it is not the case if a married woman does not have separate property of her own based on
Re Mahmooda b Ismail.
S 5(1)(a) IA 1967 read together with S 2 of Insolvency (Amendment) Act 2020, there is
modification to the amount of indebtedness to RM100, 000 w.e.f. 1.9.2021. S 5(1)(c) IA
1967 further states that the act of bankruptcy on which the petition is grounded has occurred
within 6 months before the presentation of the petition.
Therefore, Mrs. Cash who is married woman can be issued bankrupt petition as if she is
single based on s.120 IA1967. However, if she does not have separate property for her own
self, judgement creditor may not issue petition against her based on Re Mahmooda b
Ismail.
Judgement creditor cannot issue bankruptcy petition on Mrs. Cash who bought lacquer
painted chest for RM45, 000 on 3 months credit based on S 5(1)(a) IA, as the amount does
not exceed RM 100,000. If the amount is RM 150, 000 and it was happen after 01.09.2021,
Judgement creditor can issue bankruptcy petition based on S 2 of Insolvency (Amendment)
Act 2020.
Moreover, under S 5(1)(c) IA 1967, Mrs. Cash has not paid for the painted chest to date. If it
is more than 6 months, then judgement creditor cannot present the bankruptcy petition.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

iv) Datuk Ta Da, a member of parliament for Tampin, bought a new car for
RM300,000 and has not been able to meet his car loan payments amounting to
RM36,000 over the last 5 months.

ANSWER

The issue is whether judgement creditor can issue bankruptcy petition against Datuk Ta Da?

s.3 (3) Insolvency Act 1967 debtor in relation to an act of bankruptcy includes one who was
personally present in Malaysia; or ordinarily resided or had a place of residence in
Malaysia.
Member of Parliament will not be covered by parliamentary privilege. S 5(1)(a) IA 1967
read together with S 2 of Insolvency (Amendment) Act 2020 states that a creditor shall not
be entitled to present a bankruptcy petition against a debtor unless the debt owing by the
debtor to the petitioning creditor, amounts to RM 100,000. S 5(1)(c) IA 1967 further states
that the act of bankruptcy on which the petition is grounded has occurred within 6 months
before the presentation of the petition.
Therefore, Datuk Ta Da, as Member of Parliament for Tampon, can be served with
bankruptcy petition and the petition is grounded within last 5 months, satisfying S 5(1)(c) IA
1967. However, since the amount is only RM 36,000, does not exceed threshold stating
under S 5(1)(a) IA 1967 and S 2 of Insolvency (Amendment) Act 2020, bankruptcy petition
cannot be served on him.
LAW OF INSOLVENCY
AMMAR MUSTAQIM BIN ARIFF HAZNAL
1151100066
L1/T4

v) Tok Sayang died on the 20 Sept. 2016 leaving unpaid debts in the sum of RM120,
000.

ANSWER

S. 122 IA provides death of a debtor does not invalidate bankruptcy proceedings provided it
was commenced and served during his lifetime. Petition may be stayed if debtor dies before
service of petition on him. S 122 (2) IA provides a creditor may commence bankruptcy
against the estate of a deceased debtor.
S 5(1)(a) IA 1967 further states that a creditor shall not be entitled to present a bankruptcy
petition against a debtor unless the debt owing by the debtor to the petitioning creditor,
amounts to RM 50,000. Under S 2 of Insolvency (Amendment) Act 2020, there is
modification to the amount of indebtedness to RM100, 000 w.e.f. 1.9.2021.
In applying into scenario, judgement creditor can issue bankruptcy petition against estate of
Tok Sayang who died on the 20 Sept. 2016 leaving unpaid debts in the sum of RM120, 000
based on
S. 122(2) IA. Based on S 5(1)(a) IA 1967, the threshold of RM 50,000 is being satisfied and
S 2 of Insolvency (Amendment) Act 2020 is not effective as it happened on 20 Sept 2016.