In Re:Malaya Sibuku; Ex P: Kaya Karisma Sdn Bhd [2021] 5 CLJ 403, various submissions were advanced by a judgment debtor (“Debtor”) in an appeal against the Senior Assistant Registrar’s (“SAR”) decision in granting leave to the judgment creditor (“Creditor”) to commence bankruptcy proceedings against the Debtor.
 
The issue before the Court was whether a corporate principal debtor must be dissolved (and not just wound up) in order to satisfy the Court that all modes of execution and enforcement have been exhausted, before leave to commence bankruptcy proceedings against a guarantor  can be granted under s.5(4) read with s.5(6) Insolvency Act 1967 (“IA 1967”)
 
Background Facts
 
In a separate suit, the Debtor and Elvis Maidin Ebrahim (“co-guarantor”) were held liable under a director’s guarantee and indemnity for defaults amounting to RM2,808,221.75 which were incurred by Dunggon Jaya Sdn Bhd (“Borrower”). Shortly after, the Borrower was wound up and the co-guarantor was adjudged bankrupt. Subsequently, the SAR granted the Creditor leave to commence bankruptcy proceedings against the Debtor. The Debtor then appealed against the SAR’s decision.
 
High Court Findings
 
In reaching its decision, the Court analysed past authorities dealing with a similar issue;
 
In the Federal Court case of Hong Leong Bank Bhd v Khairulnizam Jamaludin [2016] 7 CLJ 335, the appellant was deemed to have exhausted all avenues for the recovery of the debt when the principal debtor was adjudicated bankrupt. Subsequently in Hong Leong Bank Bhd v Ong Moon Huat & Another Appeal [2018] 1 LNS 1612, the Court of Appeal did not require the liquidation of the principal debtor’s assets to be completed prior to the grant of leave. In Per: Lim Sow Hoon; Ex Parte: Malayan Banking Bhd [2018] 1 LNS 1611 the High Court stated that the Creditor must have exhausted all modes of execution and the borrower must be either adjudicated bankrupt or wound up.
 
The Court also referred to various provisions under the Companies Act 2016 (“CA 2016”) in support of the proposition that the Creditor has no other avenue of recovering the debt against the Borrower, if the Borrower being a corporate debtor has been wound up, given that–
 

1. Upon appointment of a liquidator, all the company’s assets vest with the liquidator – s.483 CA 2016;

2. Any attachment, sequestration, distress or execution already in force becomes void – s.472(3) CA 2016; and

3. Any attempts at recovering the debt would be prohibited by reason of the law against undue preference – s.528 CA 2016

The Court noted that the co-guarantor had been adjudicated bankrupt and the bankruptcy order still subsists, which meant the Creditor could not claim against him. The Court also opined that had Parliament intended that a corporate debtor must be dissolved pursuant to s.5(4) IA 1976, it would have explicitly legislated so, which was not the case. In the circumstances, the Court was satisfied that the Creditor had exhausted all avenues of recovering the debt and accordingly dismissed the appeal and reaffirmed the SAR’s decision.
 
Significance
 
This case reaffirms the position in regard to the grant of leave for commencing bankruptcy proceedings against guarantors. A creditor must show that it has exhausted all available avenues of recovering a debt. It is worth highlighting at this juncture that upon an examination of the decision of Malaya Sibuku and past authorities, this is easily satisfied once the borrower is wound up or adjudicated bankrupt.