[This is the first part of a two-part article on joint liability and personal insolvency law:  See Part-2 here]

A family company failed to pay its employees’ provident fund contributions. Its two directors, siblings, were sued with it, and all three agreed to pay.

They paid some of it. About RM90,857 stayed unpaid.¹Lembaga Kumpulan Wang Simpanan Pekerja v Edwin Cassian Nagappan [2021] 7 CLJ 823 (FC) [4]–[7]. The creditor was the Employees Provident Fund Board; the consent judgment was dated 24 April 2013 and recorded arrears of RM133,697 against the family company and its two directors.

The creditor picked one director, Edwin, and served him with a bankruptcy notice for the whole balance.

Edwin objected. He owed half, he said. His sibling owed the rest.

The High Court agreed with him. So did the Court of Appeal. Two courts reached the same arithmetic, and the debt was cut in two.²Edwin Cassian (n 1) [8]–[13]. Both courts below followed Sumathy Subramaniam v Subramaniam Gunasegaran [2018] 2 CLJ 305 (CA).

Then the Federal Court did the sum again, and got a different answer.

THE DEBT THAT WILL NOT BE HALVED

The word at the centre of the quarrel is ‘joint’. It sounds like sharing, and that is the trap.

Think of a dinner bill signed by two friends. The restaurant does not ask each for half. It may ask either for the whole. How the friends divide it afterwards is their business, settled over coffee and some mutual reproach.

The Federal Court said as much, in law and not in restaurants. A joint promise is one promise made by two or more people. Each is liable for all of it. Who bears what, as between themselves, is a separate matter.³Edwin Cassian (n 1) [16]–[20], [28]–[29]. The Court distinguished joint liability (one promise, several promisors), several liability (separate promises) and joint and several liability (one joint obligation and as many several obligations as there are promisors).

Parliament had said it first. The Contracts Act 1950 lets the promisee ‘compel any one or more of the joint promisors to perform the whole of the promise’, unless the parties agreed otherwise.⁴Contracts Act 1950 (Act 136), s 44(1), as set out in Edwin Cassian (n 1) [24]. The paying promisor’s claim for contribution operates between the promisors and does not touch the creditor: [28].

Why had the courts below gone astray? The Federal Court put its finger on it. They had mixed up two ledgers. One records what the creditor may demand. The other records what the debtors owe each other.⁵Edwin Cassian (n 1) [32], disapproving the reasoning in Sumathy (n 2).

THE COURT THAT DISAGREED WITH ITSELF

The Edwin story has a second chapter, and it is the more curious one.

Another bench of the Court of Appeal had met the same problem. A costs order of RM50,000 had been made against Fong and four others. The creditor served a notice on Fong alone, for the whole sum. The High Court held he was not indebted for that amount.

On appeal, the Court of Appeal examined a long line of cases and reached a view that differed from Sumathy. Then it dismissed the appeal anyway. Sumathy was a decision of the same court, and the court regarded itself as bound.⁶Kejuruteraan Bintai Kindenko Sdn Bhd v Fong Soon Leong [2021] 5 CLJ 1 (CA) [73]–[74] (appeal dismissed, no order as to costs); see also Edwin Cassian (n 1) [34]–[35], where the Federal Court called the judgment ‘meticulous and comprehensive’ and concurred with its reasoning. The court regarded itself bound under the rule in Young v Bristol Aeroplane Co Ltd [1944] KB 718.

It is a rare sight: a court that knows the road is wrong and keeps to it, because the map says so. The Federal Court, with respect, then redrew the map.

Judges in that position deserve some sympathy. Doubting a precedent is easy. Obeying it while saying so plainly takes character.

A RULE THAT SEEMS TO SAY NO

A careful reader will now point to a rule.

Rule 89(3) of the Insolvency Rules 2017 says a creditor may not apply for a bankruptcy notice ‘against joint debtors in a final judgment or final order’ unless the debtors had carried on business jointly.⁷Insolvency Rules 2017 (PU(A) 305/2017), r 89(3). It is word for word r 91(3) of the Bankruptcy Rules 1969. The rule is also reproduced in Re Hairulzam bin Mohamad, ex p Malayan Banking Bhd [2023] 10 MLJ 833 (HC) [6].

It sounds like a door shut in the creditor’s face. It is not.

Read the rest of the sentence. If the debtors did not carry on business jointly, the creditor applies for ‘a separate bankruptcy notice against each debtor’.⁸Insolvency Rules 2017 (n 7), r 89(3).

The rule is a signpost. It points the creditor towards one notice for each debtor. A notice to Edwin alone sat comfortably inside it.

What the signpost does not say is what the separate notice may demand: the whole sum, or a share. The rule is silent. For debtors who are not partners, the Federal Court has now supplied the answer. The whole.

THE OLD ANSWER, IN ONE SENTENCE

The principle is older than the Federal Court. It is older than the Rules.

In 1895 a creditor held a judgment against several defendants, and the debtor complained that the notice did not name them all. The Court of Appeal disposed of the point briskly. Lord Esher MR called it ‘a technicality to which we ought not to listen’.⁹Re Low, ex p Gibson [1895] 1 QB 734 (CA) 736. This is not the Re Low, ex p Argentine Gold Fields [1891] 1 QB 147 which concerns separate debts; the two cases share a debtor’s name and little else. Malaysian reports have confused them.

Esher MR sat as Master of the Rolls for fourteen years, from 1883 to 1897, and his brisk way with form over substance is on show in that one sentence. Practitioners and students who want it in its own setting will find it at [1895] 1 QB 734, 736.

Then came firms, and the same question in partnership dress.

In 1934 the Court of Appeal sitting in Singapore had a judgment by consent against a firm. The notice named the firm and, by name, one partner. Was the partner’s name an intruder? The Court said no. The notice followed the judgment, and the judgment bound the partners. The order against that one partner stood.¹⁰Re Chop Kwong Fook Seng [1934] 1 MLJ 34 (Court of Appeal, Singapore: Thomas CJ (FMS), Gerahty and Mills JJ), applying Re Wenham [1900] 2 QB 698 (a notice must follow the judgment, but the members of the firm may be named in it). The Court also declined to go behind the judgment on a point the debtor had not fully put before it, because to do so ‘might cause irretrievable injustice to a creditor’.

The Malaysian High Court took the same road. A creditor may serve one of two joint judgment debtors alone, and may later serve the other. An early High Court decision to the contrary has not been followed.¹¹Dynasty Rangers Sdn Bhd v Perak Meat Industries Sdn Bhd [2002] 5 MLJ 291 (HC) 294–295 (winding-up notice served on one of two joint judgment debtors; applying Re Low, ex p Gibson (n 9) and declining to follow a contrary High Court decision). The earlier Malaysian authority is Re Balasubramaniam, ex p Annamalai [1957] 3 MC 128 (HC Kuala Lumpur, Sutherland J, 28 September 1957), which also applied Re Low. See also Re Goh Kiang Ann, ex p OCBC (M) Bhd (HC Sibu, 17 December 2024) [79]–[86].

WHEN THE DEBTORS ARE PARTNERS

Go back to the exception in rule 89(3): debtors who had carried on business jointly. In plain words, partners. For them the statute keeps its own arithmetic.

Section 98 of the Insolvency Act 1967 says that a creditor whose debt is enough to petition against all the partners of a firm ‘may present a petition against any one or more partners of the firm without including the others’.¹²Insolvency Act 1967 (Act 360), s 98 (Reprint 2024). The pre-2017 Act has ss 98–103 in the same terms, with ‘receiving order’ for ‘bankruptcy order’. See also s 3(3)(d) (a ‘debtor’ includes one who, when the act was done, was a member of a firm or partnership which carried on business in Malaysia), s 103 (proceedings by or against partners in the firm name) and Sch A r 13 (proof by a creditor owed jointly by the bankrupt partner and the others).

The debt that is enough against all is enough against one. Not a share of it. The debt.

The Partnership Act 1961 uses the very word that troubled Edwin. Section 11 makes every partner liable ‘jointly … for all debts and obligations of the firm incurred while he is a partner’; after his death his estate is also severally liable. For wrongs, section 14 says something stronger: ‘jointly with his co-partners and also severally’.¹³Partnership Act 1961 (Act 135) (Reprint 2006), ss 11 and 14. Section 14 as set out in Venu Nair & Anor v Public Bank Bhd [2017] 5 MLJ 529 (CA) [21], where the majority held the partners liable jointly and severally for a wrong, under ss 7, 8, 12 and 14, and that Act 135 prevails over O 77 of the Rules of Court 2012; Mary Lim JCA dissented.

A High Court has held that the word did not help the debtor. Judgment was entered against two persons who ran a joint business. The creditor served a notice on one. She said section 11 made the liability joint and not joint and several, so that a notice on one alone was bad. The court disagreed. Section 11 does not govern how a judgment is enforced; the creditor may proceed against one, who may then claim contribution from the other.¹⁴Re Latifah bt Abu Hassan, ex p AMY Travel Service Sdn Bhd [2008] MLJU 264 (HC Kuala Lumpur, Kang Hwee Gee J, 12 May 2008). The grounds are short, and they do not state the sum the notice demanded, so they do not show whether it was for the whole of the judgment sum.

Rule 89(4) looks at the notice. Where the judgment is ‘against a partnership’ and the individual partners were not served with the writ, it ‘cannot be used to found a bankruptcy notice against a partner without leave of the court’.¹⁵Insolvency Rules 2017, r 89(4), word for word r 91(4) of the Bankruptcy Rules 1969. Which court gives leave has been disputed. Kumpolan Kemajuan Raya Sdn Bhd v Faidz Darus [1996] 5 MLJ 35 (HC) held that it is the court that gave the judgment, where the partner may dispute liability. Kasturi Kesveren Balasamy v RUI Development Sdn Bhd [2015] 4 CLJ 94 (HC Ipoh, SM Komathy JC, 31 March 2015) disagreed: only the High Court may grant leave under r 91(4) of the 1969 Rules, and leave given by the court that had given the judgment was a nullity, not a curable irregularity. In Re Ong Keh Keong, ex p Pan Malaysian Enterprises Sdn Bhd (in liquidation) [2022] 10 MLJ 435 (HC Kuala Lumpur, Azlan Sulaiman JC, 12 April 2022) [40], where the rules require leave it is mandatory and must be obtained first in time.

Read it the other way and the sense is plain. A partner who was served needs no leave. The rule does not say so in terms. Where leave is needed, the courts have not agreed on which court gives it.

One more rule is worth a line. Rule 217 treats service on one partner at the firm’s principal place of business as service on all. Whether that reaches a bankruptcy notice, which the Act says must be served personally, I have found no decision.¹⁶Insolvency Rules 2017, r 217 (word for word r 217 of the 1969 Rules); Insolvency Act 1967, s 3(2).

None of this is new. When the next case was decided, the whole of this machinery had been in force for a quarter of a century.

THE CASE OF THE MISSING AFFIDAVIT

In 1994 the High Court in Kuala Lumpur set aside a bankruptcy notice served on one of three judgment debtors. The judgment had ordered the three, in the judge’s words, to pay together. The creditor argued that they were partners in a firm, and that it had already taken execution against the other two, who had been made bankrupt.¹⁷Yeo Ah Wang lwn United Malayan Banking Corporation Bhd [1995] 1 AMR 38 (HC Kuala Lumpur, Shaik Daud J, 18 August 1994), judgment in Bahasa Malaysia with the reporters’ English translation; the reporters record that the creditor appealed to the Supreme Court (SCCA No 03-44-94), and I have found no report of the outcome. The year is 1995. A citation of it as ‘[1991]’ in some later reports is a slip.

Shaik Daud J was not persuaded. A notice must follow the judgment, he said, and the creditor seemed to be loading one defendant with the liability of all three.

As to the partnership and the executions, counsel had said so across the Bar. No affidavit said so. And the court would not go behind the judgment to inquire, absent an allegation of fraud.

The notice fell.

Thirty years of later cases have leaned on it for the proposition that a notice for the whole sum cannot be served on one of several.¹⁸Among them Re Elamaran [2010] MLJU 1424 and Mohamed Ridzuan bin Nor Md v Export-Import Bank of Malaysia Bhd [2019] MLJU 985 (HC). Dynasty Rangers (n 11) declined to follow it. Read the report itself, and it is smaller than its reputation. It cites no authority. It does not set out the operative words of the judgment. It says nothing of shares, of halves or of thirds. The Court of Appeal in Bintai noticed the same.¹⁹Bintai (n 6) [28].

What it does record is a partnership asserted and not proved.

Would the result have been the same had the affidavit been filed? The report does not say. Status as partners is a fact that rule 89(3) itself makes relevant, and nobody appears to have tested the point.

THE DEBTOR’S SHIELD

None of this makes the debtor a pincushion.

The Court of Appeal in Sumathy had feared a creditor ‘very much overpaid’. The fear was fair. The answer was not to halve the debt but to forbid double recovery. A creditor may pursue one debtor, or the other, or both. He may not collect twice. The Federal Court was explicit. Part payment by one reduces what may be recovered from the next. Once the creditor has recouped his whole loss, there is nothing left to pursue.²⁰Edwin Cassian (n 1) [41], citing Tang Man Sit v Capacious Investments Ltd [1996] AC 514 (PC) 522. The rationale for the old rule that a judgment does not bar a remedy against a co-debtor is that a judgment is ‘still but a security for the original cause of action’ until it is satisfied: Lord Ellenborough in Drake v Mitchell, quoted at [22].

So the shield is not the number of notices. It is the rule against double recovery. A debtor who has been pursued for the whole may take comfort that the creditor can have it only once.

WHAT TO TAKE AWAY

For the creditor, five points.

First, a judgment against several debtors is a judgment for the whole against each. Do not discount your own claim to half.

Second, if the debtors are not partners, serve a separate notice on each. If they are partners, check how the judgment was framed, and whether each partner was served with the writ. If not, apply for leave first, and take care which court you ask, for the decisions differ.

Third, if you say the debtors are partners, prove it by affidavit. A statement from the Bar table is not evidence.

Fourth, demand what the judgment orders, in the judgment’s own terms, with the interest quantified.

Fifth, if the debtor is a guarantor, check whether leave is needed before you issue. In Re Goh Kiang Ann, a Sibu case, the appeal succeeded on that ground alone.²¹Re Goh Kiang Ann (n 11) (appeal allowed because no leave had been obtained under s 5(3)(b) of the Insolvency Act 1967 for a notice against a guarantor).

For the debtor, the lesson is milder and harder. Paying your half does not answer a demand for the whole. Agree with your co-debtor, in writing, who will pay what, and claim contribution afterwards if you must.

All of this concerns the people who owe. There is a second question, and it is the harder one.

What happens when it is the creditors who are two?

That is Part 2.

∞§∞

This is for general information only, not legal or technical advice. Obtain independent legal advice where needed.

Thanks to KN Geetha, TP Vaani, JN Lheela and Lydia Jaynthi of GK Legal, and Thiago Teles of Unsplash for the image.

Claude assisted with drafting; Perplexity Pro fact-checked. The views and any errors are the author’s.

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