Current Law Journal

272 Supplementary Series [2004] 5 CLJ

a RE CHAI MIN SIN,

EX P MBF FINANCE BHD
HIGH COURT SABAH & SARAWAK, MIRI
ABDUL AZIZ ABDUL RAHIM JC
[BANKRUPTCY PROCEEDINGS NO: 29-200-2001 (MR)]
b
25 AUGUST 2003
BANKRUPTCY: Practice and procedure - Stay of proceedings - Application
for - Exercise of court’s discretion - Whether there were special circumstances
- Whether there were sufficient grounds to grant a stay
c
This was an appeal (‘the 1st appeal’) by the judgment debtor against the
decision of the learned deputy registrar dismissing the judgment debtor’s
application for a stay of all bankruptcy proceedings pending the disposal of
an appeal (‘the 2nd appeal’) to the Court of Appeal by the judgment debtor.
The 2nd appeal was against the decision of the learned judicial commissioner
d
dismissing the judgment debtor’s appeal to set aside a sessions court decision
allowing judgment in default of appearance against the judgment debtor in
favour of the judgment creditor. The sessions court judgment was the basis of
the bankruptcy proceedings taken against the judgment debtor by the judgment
creditor. The judgment debtor submitted that the bankruptcy proceedings ought
e to be stayed until the outcome of the 2nd appeal was known and that this court
ought to grant the stay as the 2nd appeal was a bone fide appeal. The judgment
creditor, however, contended that the court had a discretion whether or not to
grant a stay and the judgment debtor could not claim a stay as of right.

f
Held:
[1] The commencement of a bankruptcy proceeding against a party who had
been ordered to pay a judgment sum was a form of execution, and for
there to be sufficient grounds for a stay, special circumstances must be
shown. In this case, the judgment debtor’s affidavit in support of the
g application for stay did not disclose any ground that gave rise to special
circumstances. The judgment debtor did not provide facts or evidence to
show how he would suffer irreparable damage or be prejudiced. Hence, it
was impossible for the court to form a reasonable opinion as to whether
the grounds raised to get the order for stay were sufficient or not. Mere
h allegations were not enough and the fact that there was an appeal pending
was also not a sufficient ground to grant a stay. (pp 276 h & 277 d-g)
[Appeal dismissed.]

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[2004] 5 CLJ Re Chai Min Sin, ex p MBf Finance Bhd 273

Case(s) referred to: a

Ming Ann Holdings Sdn Bhd v. Danaharta Urus Sdn Bhd [2002] 3 CLJ 380 CA
(foll)
Minister of Labour, Malaysia v. Chan Meng Yuen & Another Appeal [1992] 2 MLJ
337 SC (refd)
Re a debtor (No 44 of 1978), ex p the Debtor v. Chantry Mount and Hawthorns
Ltd [1979] 3 All ER 265 (refd) b
Re Chor Saw Onn, ex p Tan Jiak Chye [1999] 7 CLJ 119 HC (refd)
Re Khoo Kay, ex p Tan Jiak Chye [1999] 6 CLJ 637 HC (refd)
Re Noble (a bankrupt), ex p The Bankrupt v. The Official Receiver and Anor [1964]
2 All ER 522 (refd)
Re Tan Ah Poi, ex p Multi Purpose Finance Bhd [1999] 2 CLJ 694 HC (refd)
c
Re Walter Su, ex p United Malayan Banking Corp Bhd [1987] 1 MLJ 44 (refd)
See Teow Guan & Ors v. Kian Joo Holdings Sdn Bhd & Ors [1997] 2 CLJ 299
CA (refd)
Legislation referred to:
Bankruptcy Act 1967, ss. 6(4), 97
Bankruptcy Rules 1969, r. 137 d

Bankruptcy Rules 1952 [UK], r. 179

Other source(s) referred to:
Halsbury’s Laws of England, 3rd edn, vol 2, pp 310-311
For the judgment debtor - Tai Choi Yu; M/s Tai Choi Yu & Co e
For the judgment creditor - Louis Achuk; M/s Kadir Wong Lin & Co

Reported by Suresh Nathan

JUDGMENT
f
Abdul Aziz Abdul Rahim JC:
This is an appeal by judgment debtor against the decision of the learned deputy
registrar dismissing with costs the judgment debtor’s summons-in-chambers (encl.
18) application for stay of all bankruptcy proceedings before the High Court
pending the disposal of the appeal to the Court of Appeal by the judgment
g
debtor against the decision of the learned Judicial Commissioner Dato’ Sulaiman
bin Daud (as he then was) dated 4 October 1997 dismissing the judgment debtor
appeal to set aside a Session Court decision in Summons No 52-312-97
(allowing judgment in default of appearance against the judgment debtor in
favour of the judgment creditor). The judgment of the Sessions Court is the
basis of the bankruptcy proceedings taken against the judgment debtor by the h
judgment creditor.
As to the power of the court to grant a stay, reference is made to s. 6(4) and
s. 97 of the Bankruptcy Act 1967 (Act 360) Rev. 1988) which are reproduced
below: i

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 Current Law Journal
274 Supplementary Series [2004] 5 CLJ

a S. 6(4) When the act of bankruptcy relied on is non-compliance with a

bankruptcy notice to pay, secure or compound for a judgment debt, the Court
may if it thinks fit stay or dismiss the petition on the ground that an appeal
is pending from the judgment.

and
b
S. 97 Power to stay proceedings:

The Court may at any time, for sufficient reason, make an order staying the
proceedings under a bankruptcy petition, either altogether or for a limited time,
on such terms and subject to conditions as the court thinks just.
c
In this appeal, the counsel for judgment creditor, Mr. Louis Achuk, submitted
a written submission. But the counsel for the judgment debtor, Mr. Tai Choi
Yu, did not. In any case the counsel for the judgment debtor/appellant submitted
that he had only one ground to raise in the appeal that is the judgment
debtor’s appeal against the Judicial Commissioner Dato’ Sulaiman bin Daud
d (as he then was) is still pending before the Court of Appeal and therefore the
bankruptcy proceedings before this court ought to be stayed until the outcome
of the appeal is known. On the same point, counsel for the judgment debtor/
appellant further submitted that the court ought to grant the stay because the
appeal before the Court of Appeal was a bona fide appeal. To support his
e argument, the counsel for the judgment debtor/appellant, Mr. Tai, cited a
passage at para 590 of Halsbury’s Laws of England 3rd edn vol. 2 at
pp. 310-311 which states the English position as to principles applicable for
stay of bankruptcy proceedings in England. Mr. Tai also referred to two English
cases. The first case is Re a debtor (No. 44 of 1978), ex parte the Debtor v.
f Chantry Mount and Hawthorns Ltd [1979] 3 All ER 265 which held that
r. 179 of the English Bankruptcy Rules 1952 does not in itself prevent a
receiving order being made where an appeal was pending, although normally
the court would stand over the application to make the receiving order where
there was a bona fide appeal against refusal to set aside a bankruptcy notice
g
which was being pursued with diligence.
Rule 179 of the English Bankruptcy Rules 1952 is in pari materia with our
r. 137 of the Bankruptcy Rules 1969 and it states as follows:
A receiving order shall not be made against a debtor on a petition in which
the act of bankruptcy alleged is non-compliance with a bankruptcy notice
h
within the appointed time where such debtor has applied to set aside such
notice until after the hearing of the application or where the notice has been
set aside or during a stay of the proceedings thereon; but in such case the
petition shall be adjourned or dismissed as the court thinks fit.

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[2004] 5 CLJ Re Chai Min Sin, ex p MBf Finance Bhd 275

In my view the above rule does not prevent a court from making a receiving a
order where there is an appeal pending. My understanding of the said rule is
that if the debtor has applied to set aside the bankruptcy notice within the period
specified in the notice for the debtor to satisfy the judgment sum or where a
stay of proceedings had been granted, then a receiving order should not be made
against the debtor. In my view the above rule does not change the settled law b
that the granting or non granting of a stay of a bankruptcy proceedings pursuant
to s. 6(4) and s. 97 of the Act is the discretion of the court. The judgment
debtor cannot claim a stay as a matter of right. This is also the position in
England. This can be seen from the footnote at p. 310 to the passage in
Halsbury’s cited by Mr. Tai above. In fact the note goes further, by referring c
to an English case of Re French, Ex parte French, to comment that if the
registrar in the exercise of his discretion, refuses a stay, his decision will not
be interfered with on appeal, unless the discretion was wrongly exercised.
The second case cited by Mr. Tai for the debtor/appellant is Re Noble (a
bankrupt), Ex parte The Bankrupt v. The Official Receiver and Anor [1964] d
2 All ER 522 which also applied the same principle that the receiving order
ought not to be made if the registrar was satisfied the appeal was bona fide.
But in that case the receiving order was set aside because the court found that
the basis for the bankruptcy proceedings did not exist. For that reason the
appeal was said to be bona fide although in that case the court eventually e
dismissed the appeal on other grounds.
On the part of the judgment creditor’s learned counsel, Mr. Louise Achuk
submitted that the court has a discretion whether or not to grant a stay and
that the judgment debtor cannot claim a stay as of right. He cited the case of
Re Walter Su, Ex parte United Malayan Banking Corp. Bhd [1987] 1 MLJ f
44. In that case also, Mohammed Dzaiddin J (as he then was) held that the
mere fact that an appeal is pending over the judgment is not sufficient ground
for staying the proceedings upon petition. The learned judge also held that the
court will not enquire into the validity of a judgment debt unless there is
evidence that the judgment had been obtained by fraud or collusion, or that g
there has been some miscarriage of justice. The same principle was followed
in later cases that come after Re Walter Su (see Re Khoo Kay Ex-parte Tan
Jiak Chye [1999] 6 CLJ 637; Re Tan Ah Poi, Ex p Multi Purpose Finance
Bhd [1999] 2 CLJ 694; Re Chor Saw Onn, Ex p Tan Jiak Chye [1999] 7
CLJ 119 and the Court of Appeal decision in Ming Ann Holdings Sdn Bhd v. h
Danaharta Urus Sdn Bhd [2002] 3 AMR 2867).

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 Current Law Journal
276 Supplementary Series [2004] 5 CLJ

a So what are sufficient grounds which the court may consider in exercising its
discretion to grant a stay order. In the first place I do not think that it is wise
or possible to list all the possible grounds that can be considered sufficient to
grant a stay. I think each case has to be decided on its own facts guided by
the established principles which have been settled by the authorities. As a guide
b I may quote from the passage in Ming Ann Holdings’ case above where Justice
Abdul Hamid Mohamad JCA at p. 2868 says:
On the authorities, it would appear that it is a unanimous view that whether
or not a stay of execution pending appeal should be granted, it an exercise
of discretion by the court based on established principles. It further appears
c from the weight of authorities that special circumstances must be special, not
ordinary, common or usual circumstances that goes to the execution of the
judgment and not to the validity or correctness of the judgment or merits of
the appeal. It is a common view that merits of appeal (or correctness or
validity of the judgment) does not amount to special circumstances.

d From the above passage it can be culled that for a ground to be considered
sufficient, it must also show special circumstances. For example the grounds
must convince the court that if the stay order is not given the execution of the
judgment will result in gross injustice to the party against whom the judgment
was made. It is not sufficient to say that there is merit in the appeal or the
e appeal would likely be successful.
The grounds which are considered sufficient and showed special circumstances
must be apparent from the affidavit in support of the application for stay, (see
the Supreme Court case of Minister of Labour, Malaysia v. Chan Meng Yuen
and Another Appeal [1992] 2 MLJ 337).
f
Mr. Tai for the judgment debtor/appellant submitted that the principle of special
circumstances, as elaborated in Ming Ann’s case is applicable only to stay of
execution. But for stay of bankruptcy proceedings the principle applicable is
bona fide appeal. It is true that Ming Ann’s case was concerned with the stay
g of execution. So was the case of Seow Teow Guan [1997] 2 CLJ 299, a Court
of Appeal decision which was considered in Ming Ann’s case. The question is
should there be any different in principles applicable between a stay of execution
and a stay of a bankruptcy proceedings? Both have the effect of depriving the
successful party the fruits of the litigation, albeit temporarily. To me it makes
no difference. In my view a stay is a stay regardless whether it is in respect
h
of execution or a bankruptcy. In fact I would go a step further and suggest
that the commencement of a bankruptcy proceeding against a party who has
been ordered to pay a judgment sum is a form of execution. Therefore the
principles applicable should be the same.

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[2004] 5 CLJ Re Chai Min Sin, ex p MBf Finance Bhd 277

Thus, in my view the ground of bona fide appeal may be classified as one of a
the categories of special circumstances that may be considered by the court in
order to grant or not to grant a stay in the same manner as the Court of Appeal
said in Ming Ann’s case as regard the ground that the appeal will become
nugatory if a stay is not allowed. In that case the Court of Appeal said there
is no new ground such as nugatory; it is one of the grounds that need to be b
considered under the heading of special circumstances. In my view the ground
of bona fide appeal, to qualify as special circumstance, must reach the level
of Re Noble where the court found as a matter of fact that the basis of the
bankruptcy proceeding is non-existent.
In this case, before me, the judgment debtor/appellant affidavit of Chai Min c
Sin affirmed on 1 July 2002 in support of judgment debtor’s application for
stay did not disclose any ground that can be considered sufficient or gives rise
to special circumstances. The affidavit averred only to the fact that the judgment
debtor is appealing against the High Court Order dismissing judgment debtor’s
appeal to set aside the judgment of the Sessions Court and that the appeal is d
pending. In addition, the judgment debtor also averred in the said affidavit that
if the stay is not granted it will render his appeal to the court of appeal, if
successful, nugatory and he will suffer irreparable damage and prejudice.
However the judgment debtor did not provide the facts or the evidence in the
said affidavit to show in what way he would suffer irreparable damage or that e
he would be prejudiced. In the absence of such evidence or facts it will be
impossible for the court to form a reasonable opinion as to whether the grounds
raised to get the order for stay are sufficient or not. Mere allegations without
sufficient facts or evidence to support such allegations are not enough.
Furthermore, in this case the appeal to the Court of Appeal is against the f
decision of the learned Judicial Commissioner in dismissing the appeal by the
judgment debtor to set aside the default judgment entered by the sessions court
in favour of the judgment creditor/respondent. One would therefore give
sufficient credit to the trial judge that he had considered all aspects of the
appeal before he decided to dismiss it. In that circumstance, one cannot assume g
that the decision of the learned judge is wrong. In any case, the fact that there
is an appeal pending is not sufficient ground to grant a stay. Therefore to go
further on this point would mean going into the merits of the appeal which
this court should refrain from so doing.
h
In the circumstances, I dismiss the appeal with costs.

CLJ