Bankruptcy (Part 1)

You’re working and earning a multi thousand ringgit salary. You’re on top of the world and feel that you can buy whatever you want. You have expensive taste, so you buy expensive cars, drink Starbucks every day, dress fancy, look fancy, take herbs, botox, the works! Then, recession hits! You lose your job. Those credit card bills become due, but you can’t pay! Soon you get letters of demand from the banks, the letters culminate on fine day into what is called a “Bankruptcy Notice”, and this notice seems so important its served on you personally. You read it and see an itemised account of what you owe with a demand that you pay up within 7 days, or else a “Bankrupcty Petition” would be pleaded against you in court. Those days pass. The very next day the bailiff comes and serves on you a “Bankruptcy Order” and then takes all your property, your home, and you are left, desperate and broke, with nothing.

This article attempts to set out the processed involved when bankruptcy is resorted to in the enforcement of judgments in Malaysia. Written with an emphasis on the debtor (who are, after all the majority of those involved in bankruptcy cases) the starting point in an execution involving bankruptcy up to the granting of a Bankruptcy Order will be laid and discussed. Reference will be made in particular to the provisions of the Bankruptcy Act 1967, being such an Act governing insolvency of the individual in Malaysia. Small scale references to the Debtors Act 1957 would also be made as well.

On with the discussion. The Bankruptcy Act 1967, or Act 360 of the Laws of Malaysia, came into force on 30 September 1967. The Act follows the approach of the repealed English Bankruptcy Act 1914 in the regulation of individual insolvency matters. The British rewrote that law in their own jurisdiction with the passage of the Insolvency Act in 1986, which simplified the whole process a great deal, much to the delight of their creditors. Here in Malaysia however, the old approach remains.

The whole process begins when a would be debtor commissions what is called an “Act of Bankruptcy”. This act takes the forms proscribed under section 3(1) of the Act. A cusory glance at these reveal that it is mostly common sense doings, such as attempting to transfer property to evade the payment of debt, the intentional delaying of creditors, the failure of the officer fails to find any property of his to seize in order to satisfy such debt, etc, but the most common relied upon could be none other then 3(1)(i), where a final judgment, together with a bankruptcy notice, is served upon the debtor, and the debtor fails to pay the quantified amount therein within 7 days (excluding the day of service of the notice vide Re Fadzil Bin Othman [1994] 2 MLJ 474). Should such days pass without the debtor doing anything, then he has committed an Act of Bankruptcy. He can avoid this by  filing a claim for a counterclaim, set-off or cross demand. A counterclaim and set-off is a claim against the creditor for something that could not be established during the trial which led to the final judgment (more on this later, defined by Order 15 rule 12 of the Rules of the High Court 1980) whereas the cross demand is of such a nature that it equals or exceeds the amount of the judgment debt (Re a Bankruptcy Notice (1934) Ch 431). For these to succeed it must be quantified first as held in Sovereign General Insurance Sdn Bhd v Koh Tian Bee [1988] 1 MLJ 304 and secondly as held in Re A Debtor [1983] 3 All ER 545 it must be put forward in good faith and have a reasonable probability of success.

Thereafter a creditor would present before the High Court what is known as a Bankruptcy Petition. This is a petition to ask the Court to ajudicate that the debtor has failed to pay his debts and should therefore be made a bankrupt. Upon receipt of such a petition, the court would grant what is called a Recieving Order (that is an order that all properties of the debtor be vested in the Director General of Insolvency) and an Ajudicating Order that deems the debtor to be a banktrupt. The two orders together are known as a Bankruptcy Order. To know more about these Orders and who the Director General of Insolvency is, stay tuned for the next part of this series on bankruptcy.

A lawyer files a RM160 million suit against the Bar Council

A practising lawyer has filed a RM160 million lawsuit against the Bar Council today for not allowing him to use their premises for the launch of his book, ‘Presumed Guilty’. He claims it violates Article 8 of the Federal Constitution violating his right to be treated equally.

His earlier work, ‘No Intention To Kill’, was in fact launched there last year, and from my own experiance doing practical work in the Shah Alam Court complex, was widely avaliable everywhere, including that complex. 

The Bar Council, according to the report by The Star newspaper, is investigating this work for possible conflicts with the Legal Profession (Publicity) Rules 2001, the Legal Profession (Practice and Etiquette) Rules 1978 and Bar Council Rules and Rulings 2008. 

I myself have not read his works, but seeing them made me think we might finally have our very own Malaysian John Grisham, something to be encouraged, not stifiled.

The full report is avaliable here.

Being your own lawyer

By Bhag Singh

In court, one can always represent oneself. Beware, however, that it could be an uneven playing field.

In these times of economic downturn, it appears that more cases will be filed on account of loans taken and other financial obligations assumed.

When sued, not everyone is able to have the services of a lawyer. Without legal aid or the services of a pro-bono lawyer, it can be costly to engage counsel. In such circumstances, presenting one’s own case is an option.

A foreign paper reports that in the United States, more people are representing themselves in court. This has not only caused congestion but also raised questions of how just the outcomes are or can be.

Similarly, individuals here are likely to begin representing themselves if this is not already happening. Yet there does not appear to be a mechanism or system in place that can effectively help them.

As such, most of the time they are unprepared for the legal procedures. Unless guided, they are likely to fail to bring and present the right documents or evidence. In consequence, it is likely that they will fare poorly whatever the merits of their case.

Faced with such a situation, an individual can resort to various bodies that provide legal aid. However, this may be limited to giving advice or it may cover representation in court, depending on the nature of the problem, the individual involved and the provider of the assistance.

Except for criminal cases where a death sentence is involved, there is no firm assurance of obtaining legal assistance in terms of representation in court. This is particularly so in the case of civil disputes.

The Government has a Legal Aid Bureau, and the Bar Council also provides legal assistance.

However, where such assistance is available, there are usually limitations. This is because a person may be deemed eligible for the facility only if he passes a means test in terms of his assets and income.

Quite apart from litigation in the ordinary courts such as the Magistrates Court or Sessions Court, there are also situations where a person is required to appear personally and present his case whether making a claim or resisting one.

There are also special tribunals where a person may make a claim. In such instances, the aggrieved person may have the option or be limited to presenting the claim himself. In this case, the procedures are kept simple and formalities minimal.

Another example is where a complaint is made to the Industrial Relations Department following a person’s dismissal which he perceives to be unjustified. The complainant will be seeking to be reinstated in his position.

In such a case, there is no adjudication but merely steps to mediate and reconcile the parties. Yet it does constitute making a decision with somewhat serious consequences.

At first glance, it may appear that keeping lawyers out is a good idea. There will be no legal fees, and the matter can be kept simple and dealt with quickly.

However, this may not always be for the good of the individual. This is because the entity which he claims against will necessarily be represented by an officer. That person may be legally qualified and experienced in handling such matters. This, in a way, creates an uneven playing field.

Given the nature of the complaints that such tribunals or bodies deal with, the disadvantage to the individual may be ameliorated by the role played by the presiding officer in the light of the procedures involved.

On the other hand, when it comes to litigation in the ordinary courts, an individual is in a somewhat different situation when he appears himself. This is because there are more technicalities and procedures involved which need to be complied with.

In some countries, there are “self-help” centres in the courts where facilities exist to aid and guide such people. In some cases, court lawyers or the court staff provide help to the individual.

However, this is more likely, and the assistance more effective, if extended to litigants in relation to specific areas such as claims for debts, landlord tenant disputes and other areas where the issues are uncomplicated.

Like most parts of the world, we have not moved very far in this direction. Thus it is not always possible or practical for the court to guide the individual or assist him. Many people who cannot afford a lawyer or are not qualified for legal aid and find dealing with the procedures too daunting, just give up and let matters take their course.

This is certainly not an ideal situation. Organisations that provide legal aid could hold “information” sessions for the public to brief them on claims. A more detailed discussion of how such situations could be dealt with should come next.

(Copyright in this article vest with Bhag Singh and is reproduced here for non-profit study.)

Quotable law quotes

  1. If there were no bad people, there would be no good lawyers. – Charles Dickens
  2. The trouble with law is lawyers. – Clarence S. Darrow
  3. When men are pure, laws are useless; when men are corrupt, laws are broken. – Benjamin Disraeli
  4. A successful lawsuit is the one worn by a policeman. – Robert Frost
  5. The law isn’t justice. It’s a very imperfect mechanism. If you press exactly the right buttons and are alsolucky, justice may show up in the answer. A mechanism is all the law was ever intended to be. – Raymond Chandler 
  6. The magistrates are the ministers for the laws, the judges their interpreters, the rest of us are servants of the law, that we all may be free. – Marcus T. Cicero
  7. In law, nothing is certain but the expense. – Samuel Butler
  8. The wise know that foolish legislation is a rope of sand, which perishes in the twisting. – Ralph W. Emerson

Some of Asia’s weirdest laws

After days of serious posting, we thought we might mark Reading Law‘s comeback with a list of some of Asia’s weirdest laws. Sit back and laugh silly!

China

1. You may only have one child, or you will have to pay a fine.

2. To go to college you must be intelligent.

Phillipines 

1. Cars whose license plates end with a 1 or 2 are not allowed on the roads on Monday, 3 or 4 on Tuesday, 5 or 6 on Wednesday, 7 or 8 on Thursday, and 9 or 0 on Friday from 7:00 AM.

South Korea

1. Traffic police are required to report all bribes that they receive from motorists.

Singapore

1. Bungee jumping is illegal.

2. The sale of gum is prohibited.

3. Failure to flush a public toilet after use may result in very hefty fines.

4. f you are convicted of littering three times, you will have to clean the streets on Sundays with a bib on saying, “I am a litterer.

5. It is illegal to pee in an elevator.

Thailand

1. It is illegal to leave your house if you are not wearing underwear.

2. You must wear a shirt while driving a car.

3. You must pay a fine of $600 in Thailand if you’re caught throwing away chewed bubble gum on the sidewalk.

4. No one may step on any of the nation’s currency.

Turkey

1. All married women must get their husband’s permission if they wish to have a job, they must live wherever the husband wishes to reside, and they must forfeit all jointly held assets upon divorce from her husband.

Source: http://www.dumblaws.com

Elements of a valid cause of action

Jim Carey as a lawyer in the 1997 film Liar Liar. The truth is few things give us lawyers a high more then a successful day in court.

Jim Carey as a lawyer in the 1997 film Liar Liar. The truth is few things give us lawyers a high more then a successful day in court.

To sue, or not to sue. That is a question that ponders the mind of the practising lawyer day by day. But, the truth really is, that few things delight lawyers more than having the opportunity to sue. Litigating, besides being part of the lawyer’s source of bread and butter, also gives the opportunity for the lawyer to hone his literary and oratory skills, and nothing gives a better high then a successful day in court.

But before one can even sue, one needs to bear in mind the procedures involved. And none is a procedure more important then having a valid cause of action.

A cause of action has been defined in various cases from being “every fact which is material to be proved to entitle the plaintiff to succeed” in Cooke v Gill (1873) LR 8 CP 107 to “every fact which it would be necessary to support his right to the judgment of the court” in the case of Read v Brown (1888) 22 QBD 128.

Some instances of questionable causes of action might make the subject matter clearer in the following cases. In Taib bin Awang b Mohamad bin Abdullah [1983] 2 MLJ for example, the plaintiff was convicted in the Kadi’s court and he appealed. But before his appeal could be heard he commenced an action for malicious prosecution and it was so held that since the appeal has yet to be heard, and the issue had yet to be disposed of, how could malicious prosecution be established? The cause of action was therefore premature. In the case of Sio Koon Lin v SB Mehra [1981] 1 MLJ 225 the plaintiff commenced an action for recovery of arrears that where in fact not yet due at the time of the claim. Needless to say the claim was thrown out. A similar situation occurred in Simetech (M) Sdn Bhd v Yeoh Cheng Liam Construction Sdn Bhd [1992] 1 MLJ 11.

A valid cause of action also depends on other factors, such as whether the claim would be made within the proscribed time. Malaysia’s general statute of limitations is the Limitation Act 1953. Section 6(1) of the Act says that action for breach of contract or a tort are six years from the date on which they accrue.

The case of Sivapira v Lim Yoke Kong [1992] 2 MLJ 381 illustrates the principle that a limitation period may not be used to aid fraud, or the enforcement of the equitable maxim that equity will not allow a statute to be used as an instrument of fraud. In this case the plaintiff was knocked down by the defendant on a motorcycle on the 1st day of April 1977, and then the plaintiff’s solicitors sought to identify the defendant’s insurers but to no avail until the 28th day of March 1984, that is, when the six year limitation period had passed. The defendant predictably alleged that the claim was time barred. The High Court held that the defendants had wilfully concealed themselves from the knowledge of the plaintiff and thus the case came under fraud as defined in section 29 of the Act. The plaintiff’s claim therefore, was not time barred after all. It must be noted at this point that failure to add a party to the action does not come within section 29 of the Act as illustrated in the English case of RB Policies v Butler (1950) 1 KB 76 where the theif of a car stolen in 1940 was only identified that year and so the claim was time barred.

There are limitation periods proscribed by other Acts of Parliament as well. Section 7(5) of the Civil Law Act 1956 for example states that in a dependency claim where the negligent act had caused the death of a person, the period of limitation shall be three years (a bit harsh and unfair, isn’t it?) and section 2 of the Public Authorities Protection Act 1948 provides that where public authorities act in the persuance of any public duty, the period of limitation where any action accrues shall be limited to 36 months. In the case of Lee Hock Ning v Government of Malaysia [1972] 2 MLJ 12 the non-payment of monies due under a series of building contracts entered into between the appellant and the Government of Malaysia was not in persuance of any public duty and therefore the relevant provision of the Act did not apply. In the Railways Act 1991 (which has ceased to apply to Peninsular Malaysia following the passage of the Land Public Transport Act 2010) it is proscribed that any suit involving the railway authorities shall be limited to three years.

Lastly one must consider whether one has an interest in the subject matter one sues in. The judge in the case of Government of Malaysia v Lim Kit Siang [1988] 1 CLJ 219 said that every legal system has a built in mechanism to protect its judicial process from abuse by busy bodies, cranks and other mischief makers by insisting that a plaintiff should have a special interest in the proceedings he institutes. This takes the form of a nexus between himself and the other party and is known as a locus standi. This is demonstrated clearly in the case of Atip Bin Ali v Josephine Doris Nunis [1987] 1 MLJ 82 where one woman filed a suit against a former chief minister of a certain state in Malaysia for breach of promise to marry and later discontinued the suit. The members of the political party of that former chief oddly believed that she was insulting their honour, and sued for defamation. Luckily defamation was held to be personal to the ex-minister involved, and not to the members.

Marking a milestone in witness protection: The Witness Protection Act 2009

The recently passed Witness Protection Act 2009  marks a milestone in the realm of witness protection in Malaysia. From simply watching legal serials we know that this realm in particular deserves close scrutiny, for evidence tendered by witnesses, particularly in criminal cases, are crucial to the successful disposition of a court case in a just manner. Sometimes however, witnesses might have their lives compromised in lieu of their position as bearers of evidence. Many countries around the world such as the USA and the UK have therefore established Witness Protection Programmes for these witnesses, and the passage of the Act mentioned above marks Malaysia’s own foray into the trend. This article therefore attempts to identify the Act’s features.

The long title of the Act is “An Act to establish a programme for the protection of witnesses and for other matters connected therewith.” Section 3 establishes a Witness Protection Programme (“the Programme”) to be administered by a Director General. The Director General and his subordinates are appointed by the Minister charged with the Programme under section 4 of the Act, and section 5 lays down the duties of the Director General and his minions in administering the Programme. Section 7 provides that any witness may apply to the Director General to be included in the Programme and the Director General, after considering the circumstances mentioned in Section 9 (being related to the nature of the offence in trial, the criminal record and the medical condition of the witness) later recommends to the Attorney General under Section 10 as to whether or not the said witness is fit to the programme, and subsection (4) of the section further provides that where an applicant is dissatisfied with the decision of the Attorney General he may further appeal to the Minister for reconsideration. Though not expressly said, the Minister’s decision would probably be final, for Section 23 of the Act bars judicial review of any decision made.

When a witness is successfully included in the Programme, by virtue of Section 13(1), the Director General provides for him or her certain reasonable measures for his safety and welfare. Section 13(2) further provides that such measures may include, accomodation, relocation, a new identity, remuneration, access to education and living expenses. It is also lawful for the witness to claim that his identity for the purposes of any law to be the new identity given by the Director General under Section 15(2). Section 17 makes it an offence for anyone with access to the Programme, including the Director General, to disclose the original identity of the witness once he has been given a new identity, with the punishment proscribed being prisonment for a term not exceeding 20 years. Such a offence is further reinforced in Section 26 of the Act. Under Section 26(2) it is also an offence for a witness to disclose of his own accord his own original identity or any details about how the programme operates, with the proscribed punishment being a jail term of up to 10 years.

Protection afforded to a witness terminates when any of the four circumstances mentioned in Section 16(1) arises, that are, knowingly giving false information, conduct threatening to the integrity of the Programme, the reasons for which the protection is afforded no longer exists, and when the Director General believes there is no reasonable justification for the witness to remain in the Programme. The Director General would then again recommend to the Attorney General whether to terminate the protection afforded to the witness. The witness again has a right of appeal to the Minister by virtue of Section 16(8). By virtue of Section 24, no action shall lie and no suit shall be brought against those discharging their duties under the Act in good faith or for the reasonable belief that such actions complained of were nessacary.

[The Witness Protection Act 2009 came into force on 15 April 2010 vide P.U.(B) 188/2010. – Ed]