PERWIRA HABIB BANK MALAYSIA BHD.

V.
SAMUEL PAKIANATHAN A/L JABAMANICKAM
[1993] 3 CLJ 349

MEMBERS
1. Aishah Nurfitri LIA160004
2. Hanis Hazidi LIA160039
3. Nurina Haziqah LIA160109
4. Rizq Nurrqausar LIA160122
5. Shazwan Abazah LIA160128
INTRODUCTION:
TERMINOLOGY & FACTS
OF THE CASE
 UNSECURED CREDITORS
● An unsecured creditor is a creditor who is not entitled to any priority towards
settlement of a debt.

SECURED CREDITORS (AS EXPLAINED IN SEC 2)

● A person holding mortgage, charge or lien on the property of a debtor or any part
thereof as a security for a debt, but does not include a plaintiff in any action who has
attached the property of a debtor before judgement.
FACTS
PARTIES
GUARANTORS /
BANK COMPANY BOARD OF DIRECTORS

CREDITOR/ PRINCIPAL GUARANTORS/ RESPONDENT/

APPELLANT BORROWER ‘DEBTOR’ IN THIS CLAIM
PARTIES
BANK LOAN
COMPANY

SECURITIES

1- Legal charge over a land in Kedah

2- A debenture over the assets of the Principal Borrower
3- A contract of guarantee executed by the Respondent.
FACTS (CONT.)
1. The principal borrower defaulted in the repayment of the banking facilities given
by the appellant bank. The appellant bank sued on the contract guarantee which
is the THIRD security in the agreement.

2. The appellant bank had taken action to recover the loan by winding up
proceedings against the principal borrower.

3. The appellant bank now is taking action against the respondent as the guarantor
of the agreement.
GROUNDS OF APPEAL
1. The appellant contended that the learned Judge had erred in law when he held
that the respondent’s counterclaim exceeded or equal the judgment sum in the
Bankruptcy Notice

2. The appellant further contended that the learned Judge was wrong in holding
that section 5(2) of the BA was applicable and that the failure to comply with the
condition imposed by that section was fatal to the creditor’s petition
ISSUES ARISING FROM THE CURRENT CLAIM

1. Whether the Appellant Bank Creditor falls under the definition of

Secured Creditor s5(2) of Bankruptcy Act 1967.

2. Whether the Respondent Guarantor of the company falls under the

definition of Debtor s2 & s5(2) of the Bankruptcy Act 1967.

3. Counter claim by the Guarantors.

HELD AND JUDGEMENT
 The Supreme Court held that the
learned Judge had erred in law on
the interpretation of both section
3(1)(i) and section 5(2) of the
Bankruptcy Act.
HELD The two grounds of appeal relating
to these two provisions are allowed
with costs. The court also set aside
the order to strike out the
judgement creditor’s petition.
 ● In this case, the appellant Bank held security over the

JUDGEMENT property of the Principal Borrower in the bankruptcy

proceedings which were initiated against the guarantor, Mr.

(ISSUE 1 & Samuel. Mr. Samuel argued that the appellant Bank had
breached section 5(2) of the Bankruptcy Act for failing to

2) disclose the charge over the Principal Borrower’s property.

● His Lordship rejected this argument and referred to the established law in the case of Re
Rabindera Singh, where Siti Normah Yaacob J had cited the case of Exparte West. The case
stated that it is clear that the requirement to state the petitioner’s willingness to give up the
security or to give value of the security in the petition under section 5(2) only applies where the
security is supplied by the debtor himself. However, in this case, the debtor in the judgement
creditor’s petition whose liability arose as a guarantor did not provide for the security
himself but was given by the principal borrower. Therefore, it was held that the requirement
in section 5(2) did not apply.
 - This case is similar to the present appeal. The
Judge was of the view that the crucial issue was to
determine whether under Section 5(2), the

JUDGEMENT appellant bank as a petitioning creditor, was a

‘secured creditor’ under the contract of guarantee
with Mr. Samuel.
 ● In the circumstances, His Lordship was of the
opinion that the word “debtor” appearing in
both ss.2 and 5(2) must mean and should be
limited to the actual “debtor” involved in the

JUDGEMENT particular bankruptcy proceeding and should

not include any other debtors that may exist.

● Mr. Samuel was the only “debtor” in the

bankruptcy proceeding.
 - Under this case, to clothe the appellant Bank as a
“secured creditor” under section 5(2), it must be shown
that the appellant Bank was holding a mortgage, charge
or lien on the property of Mr. Samuel as a security for
the debt
- Mr. Samuel had not given any security to the bank

JUDGEMENT -
for his debt as a guarantor
The landed security and debenture were given by
Principal Borrower and none by Mr. Samuel
- The contract of guarantee executed by Mr. Samuel
was a third form of collateral or security given to
the Bank in addition to the landed charge and
debenture.
 ● Thus, the appellant bank was not a secured
creditor within the meaning of section 5(2), and

JUDGEMENT as such non-compliance with its requirement

could not be fatal to the petition.
 ● The court held that it was wrong for the learned

JUDGEMENT judge to extend the application of section 3(1)(i)

to cover all pending counterclaims irrespective
(ISSUE 3: of whether they could or could not have been
COUNTERCLAIM) filed at the hearing in which SJ was obtained.
 ● For the CC to succeed, 3 ingredients had to be
satisfied:

○ (i) The burden falls on the respondent to show, by

affidavit, that the CC must be capable of being
quantified in terms of money and the affidavit must

JUDGEMENT quantify it

○ (ii) The CC must be put forward in good faith and

must have reasonable probabilities of success

○ (iii) The affidavit must show that the CC could not

have been set up in the action in which the judgment
relied on by the creditor was obtained.
 ● Although the CC was capable of being
quantified in terms of money it had not however
been quantified.

● The probability of success of the CC had also

not been mentioned or shown in the affidavit

JUDGEMENT ● The fact that Mr. Samuel had filed the CC

before the actual hearing of the order 14
application, was not in dispute, and as such he
couldn’t now say that the CC was one which he
could not set up when the SJ was obtained within
the meaning of Section 3(1)(i)
ANALYSIS
 1. Whether the principle in this case is followed by
other cases?

- The definition of secured creditor was followed in

- M Hashimi bin Ibrahim v Asia Commercial Finance (M)

ANALYSIS Bhd [2001] 4 MLJ 67 (HC)

- Lim Koon Chow v Ambank (M) Bhd [2012] 8 MLJ 285

(HC)

- Referred to in several other Court of Appeal’s cases.

- No overruling of the principle on secured creditor
 Chan Siew Lee Jennie v Australia and New
Zealand Banking Group [2016] SGCA 23

Referred to this case in determining the

meaning of secured creditors and held that
FOREIGN
only creditors who hold security against the
JURISDICTIONS
property of the debtor need to state their
willingness to give it up before they will be
permitted to present a bankruptcy
application.
 2. Importance to determine between secured and unsecured
creditors?

- Secured creditor may deal with the security irrespective of

the bankruptcy, as the assets secured to such debts will not
form part of the assets of the bankrupt for settlement

ANALYSIS
purposes.
- A secured creditor will take priority over unsecured creditor
the bankruptcy or insolvency of the debtor.
- A secured creditor has three options in realising his debts;
a. Realise the security;
b. Surrender his security to the Director General of
Insolvency; or
c. Opt for s.5(2) Insolvency Act 1967
 3. Social Guarantor vs Other Guarantor

- Insolvency Act 1967 introduced the term social guarantor which was
previously absent in the Bankruptcy Act 1967.

- S2 IA defines social guarantor as a person who provides guarantees

for:

- A loan, scholarship, or grant for educational or research purposes;

ANALYSIS - A hire purchase transaction of vehicle for personal or non-business

use; and

- A housing loan transaction solely for personal dwelling.

• Action against social guarantor = not allowed (s5(3)(a) IA)

• Action against other guarantor = allowed with leave from court
(s5(3)(b) IA)
• All modes of execution and enforcement must have been exhausted
(s.5(4) IA)
THANK YOU