Name : Rabiatul Saniah Binti Che Soh

Class : LWSS4AY

Lecturer : Dr. Syuhaeda Aeni Mat Ali

Question 1a – Whether any action can be taken regarding the storage space
rented by Aswad

The issue is whether Director General of Insolvency could disclaim the storage space
rented by Aswad as an onerous property based on its nature of unprofitable property?

Pursuant to Section 59(1) of Insolvency Act 1967, the Director General of Insolvency
(DGI) may exercise his power to disclaim in bankruptcy any onerous property.
However, the bankrupt’s obligation or commitment are transferred to DGI if he decided
does not disclaim the onerous property. Onerous property may be in nature of any
estate or land of tenure burdened with onerous covenants, partially paid-up corporate
stocks, non-profitable contract and any other property that is unsaleable or not readily
sealable. Often times, a commercial lease will be frequently become onerous as it
contains an obligations to pay rent and maintain the property. The rationale or purpose
behind the disclaimer in bankruptcy any onerous property by DGI is to discharges from
all personal liability in respect of the property disclaimed as from the date when the
property vested in him. However, there are two (2) conditions of bar on disclaimer of
lease property as specified under Section 59(3) and 59(4) of Insolvency Act 1967.
Section 59(3) of Insolvency Act 1967 prohibits DGI to disclaim the lease except in
defined circumstances when all parties interested in the property agree to such
disclaimer. Whereas 59(4) of Insolvency Act 1967 prohibits DGI to disclaim if he has
received a written request asking him to decide whether to disclaim or not, and DG
has not indicated his desire to do so within 28 days.

During year 1938 in the case of Re Karuppiah, he became a tenant of premises and
has been in the job ever since. However, the bankruptcy proceedings was started and
Receiving Order (RO) was made against him on April 1961 which he was adjudges
bankrupt subsequently on 21 August 1961. On the next day, Official Assignee (OA)
served a notice of intent to disclaim the lease for the premises on the Applicant
(landlord of the aforementioned premises) which he later served a notice of disclaimer
on 2 September 1961. The landlord requested a court order forcing the insolvent
Karuppiah to relinquish vacant possession of the subject property. The court held that
the disclaimer of the lease by OA was in order disclaimer and in accordance to the
law. So, the right of a bankrupt’s wife and children to remain on premises disclaimed
by the OA is tied up with the bankrupt’s right to remain on the premises. Upon,
disclaiming the tenancy, the bankrupt had no right to remain on the property any
longer. By implication neither was the wife nor the children entitled to remain on the
property.

In the present case, DGI has found out that Aswad rented a storage space at
CubeSpace, a self-storage facility belonging to Sammi for RM300 per month. By
applying the law to the case, a self-storage facility rented by Aswad can be categorised
as one of the onerous property. Often time, Aswad must pay the rental fees to Sammy
as a part of non-profitable contract which the tenured burdened with onerous
covenants. In fact, the self-storage facility also is one of the unsaleable property since
Aswad is rent the storage facility with Sammy. Thus, DG may by notice in writing can
exercise his power to disclaim the property. Also as decided in the case of Re
Karuppiah, Aswad required to vacant possession of the self-storage facility as he has
no right remain on the property any longer.

In conclusion, by applying to the principle of Section 59(1) of Insolvency Act 1967,

DGI can disclaim the self-storage facility rented by Aswad as an onerous property
based on its nature of unprofitable property.
Question 1b – The status of the Clubhouse upon Aswad’s bankruptcy

The second issue is whether the status of Aswad as one of the trustees of the Cinta
Heath & Recreation Club will be pass to DGI upon Bankruptcy Order (BO)?

Pursuant to Section 105(1) of Insolvency Act 1967, it is clearly stated on the

description of a bankrupt property divisible among the creditors. Usually after the
Bankruptcy Order (BO), the property is vested on the DGI. However, there are some
property will and will not be transferred to the DGI. Section 48 of Insolvency Act
1967 has further categorised on the property that will or will not pass to DGI upon the
BO. As for the property that will not pass to DGI upon BO, Section 48(1)(a)
Insolvency Act 1967 has further specify three (3) items that will not pass to DGI upon
BO. Firstly, the property held by the bankrupt on trust. It means that any property held
by a bankrupt on trust for another and trading sold cannot pass to DGI upon BO. In
fact, little trading tools of the profession used to earn a living, modest wear apparel
and clothing which is not too extravagant, bedding and other accessories of himself
and his family worth not more than RM5,000 will not passed to the DGI. Furthermore,
the DGI will examine the bankrupt’s own income or money used for subsistence. The
amount to be left to the bankrupt is up to DGI’s discretion. The rationale is to supply
the bankrupt’s fundamental household necessities while preserving some dignity and
comfort. And as for the tool of his trade, it can allow the bankrupt to continue making
money and living in his instrument of trade.

Meanwhile, Section 48(1)(b) Insolvency Act 1967 has further specifies on three (3)
category of property that divisible among bankrupt creditors and shall be pass to DGI
upon BO. One of the property is all the property belonging to or is vested in the
bankrupt between the bankruptcy commencement date and the discharge date. Apart
from that, any property that was acquired by or vested in the bankrupt between the
commencement date and discharge date and also the property with a reputable owner
also shall be pass to DGI upon BO.

In this case, Aswad is one of the trustees of Cinta Health & Recreation Club and the
clubhouse which houses the club café was registered in the name of the trustees. By
applying Section 48(1)(a)(i), trust is one of the property that will not pass to DGI upon
BO. Thus, Aswad may remain his status as the trustee of Cinta Health & Recreation
Club as the trust property cannot be passed to the DGI even though Aswad was
adjudges bankrupt. In a meantime while Aswad was adjudged bankrupt, he can still
continue to make living with the café that was registered under his name as one of the
trustees.

As a conclusion, Aswad status a trustee of Cinta Health & Recreation Club can be
maintain his position as the clubhouse which houses the club café was registered in
the name of Aswad as one of the trustees could not be passed to the DGI. Thus, the
status of the clubhouse will be remain as usual as the clubhouse will not affected by
the Aswad’s bankruptcy.
Question 1c – Whether Aswad’s properties at the storage space will pass to the
Director General of Insolvency

The third issue in the present case is whether Aswad’s properties in the storage space
will be pass to the Director General of Insolvency?

The property usually vests in the DGI following the Bankruptcy Order (BO). However,
some property will be given to the DGI and some will not. According to Section
48(1)(a) of Insolvency Act 1967, the items will not pass to DGI upon BO is the
property held by a bankrupt on trust for another and trading sold cannot be pass to
DGI upon BO. Furthermore, little trading tools of the profession used to earn a living,
modest wear apparel and clothing which is not too extravagant, bedding and other
accessories of himself and his family worth not more than RM5,000 is included in the
list of property that will not passed to the DGI. Moreover, personal earning or income
of the bankrupt for subsistence subject to DG scrutiny. The portion to be given to the
bankrupt will be decided at the DG's discretion.

In the case of Yap Teck Ngian v Han Tong Kwang, the court set aside a consent
judgement made by the Official Assignee in respect of a property held by the bankrupt
as an administrator of his father’s estate.

Meanwhile, Section 48(1)(b) Insolvency Act 1967 has further specifies on three (3)
category of property that divisible among bankrupt creditors and shall be pass to DGI
upon BO. One of the property is all the property belonging to or is vested in the
bankrupt between the bankruptcy commencement date and the discharge date. Apart
from that, any property that was acquired by or vested in the bankrupt between the
commencement date and discharge date and also the property with a reputable owner
also shall be pass to DGI upon BO.

According to the case of Agroco Plantation Sdn Bhd v Besharapan Sdn Bhd &
Ors, it was decided by the court that every beneficial interest of a bankrupt passes to
the DGI with the intention of maximising their value and dividing them among the
bankrupt's creditors. The DGI then assumes the same title to the property as the
bankrupt had. When a bankruptcy filing is made, the bankrupt is no longer able to
grant good title to any of his property or make legitimate dispositions of it.
In this case, the DGI has found out the three (3) type of property belong to Aswad in
the rented storage space that is a sets of brushes and unopened paint cans for his
painting jobs, some bundle clothing items belonging to Aswad and his family members
and a safe box containing a diamond ring. By applying Section 48(1)(a) Insolvency
Act 1967, a sets of brushes and unopened paint cans for his painting jobs is one of
the listed property that will not pass to DGI upon BO. In fact, a sets of brushes and
unopened paint cans is not a big machinery which Aswad is utilised the tools to make
a living for him and also his family. As such, the tools for Aswad painting jobs will not
be passed to DGI upon BO in order for him to carry on earning an income.

Next, Section 48(1)(a) Insolvency Act 1967 also has listed on the wearing apparel
which is not too extravagant, bedding and other necessaries not exceeding RM5,000
also will not pass to DGI upon BO. By applying the law to the case, the only clothing
apparel in the storage space belong to Aswad and his family members is the bundle
clothing. Moreover, the value of the clothing is not expensive and extravagant as
Aswad only purchase the clothes from bundle shop. Since the clothing belong to
Aswad is not a luxurious and extravagant apparel, the property will not pass to DGI
upon Aswad was adjudged as a bankrupt. Thus, the bundle wear belong to Aswad
and his family will be remain and they can continue wear the cloths as a part of their
necessities. Vice versa, if Aswad own a luxurious and extravagant apparel which is
worth more than RM5,000, the clothing will be passed to DGI and will be distributed to
the creditors.

As for a safe box containing the diamond ring, Section 48(1)(a) Insolvency Act 1967
has specified on the list of property that will not pass to DGI upon BO which is including
modest wear apparel and clothing is not too extravagant and other accessories worth
not more than RM5,000. However, in this case, diamond ring can be categorized as a
luxury and extravagant other accessories that can be worth more than RM5,000.
Similar to the case of Agroco Plantation Sdn Bhd v Besharapan Sdn Bhd & Ors,
the diamond ring may pass to DGI as he can maximising the value of the diamond ring
and dividing them to Aswad’s creditors. In fact, the diamond ring is not a part of
fundamental necessities which Aswad do not need the diamond ring for his livelihood
dignity and comfort. Thus, the diamond ring will be passed to DGI and will be
distributed to the creditors.
To conclude, a sets of brushes and unopened paint cans for Aswad painting job and
also some bundle clothing items belonging to him and his family will not be passed to
DGI upon BO. However, a safe box containing a diamond ring will be vested to the
DGI and distributed to the creditors.