Department of Official Assignee in Malaysia

The Department of Official Assignee in Malaysia is one of the departments under the control and management of the Prime Minister’s Department with twenty-one (21) branches situated in towns where there is a High Court and the headquarters is located in Putrajaya. [1]

The development of bankruptcy law in Malaysia is governed by the Bankruptcy Act 1967 (hereinafter referred to as “the Act”) which is derived from the English Bankruptcy Act 1883 that governed the trade and commerce in England. The English Bankruptcy 1883 was adopted and modified in accordance with the local needs. The Act 1967 has been amended a few times and the most recent amendment was on March 2000 and came into force on 1.10.2003. [2]

With the coming into force of the Bankruptcy (Amendment) Act 2003, the head of the Department of Official Assignee Malaysia who was formerly known as Official Assignee is now known as the Director General of Insolvency (hereinafter referred to as “the DGI”). The change of the title has no effect to his dual functions and responsibilities in the administration of the estates of the bankrupts and companies in liquidation. [3]

The position of Official Assignee

After 2003 amendments, Official Assignee is known as Director General of Insolvency. The term DGI includes the Directors of Insolvency, Deputy DGI, Senior Assistant DGI and Assistant DGI and others officers to assist the DGI in carrying out the purposes of this Act. [4] In Singapore, there is an office known as a private trustee who can be appointed as administrator of the bankrupt estates other than the Official Assignee. It seems to be an alternative to the bankrupt in choosing the administrator of his estate.

Appointment of the Official Assignee

The DGI is an officer appointed by the Minister in the Prime Minister’s Department. [5] The Minister shall appoint the DGI and its officers amongst the members of the Judicial and Legal services. [6] While in Singapore, the Official Assignee is appointed by the Minister for Law. [7] The Minister is also empowered to appoint other officers or to assign duties to other officers for the purpose of carrying into effect the provisions of the Act. [8]

In the case of Re Sassoon Ezekiel [9] , the court allowed the Assistant Official Assignee to appear on behalf of the Official Assignee in a judgment debtor summons issued against the Official Assignee on the basis that the Bankruptcy Rules allowed an Assistant Official Assignee to ‘appear as agent of the Official Assignee in all matters. Under the general rule of law, a principal may appoint an agent to act for him.

On the other hand, in the case of Official Assignee v. Solomon [10] the court held that an Assistant Official Assignee is authorized to sign pleadings in a civil suit on behalf of the Official Assignee. The agency principal is no longer relevant given the present definition of Official Assignee under. [11]

In the case of Perwira Habib Bank Malaysia Berhad v. Goh Eng Hwa [12] where an order of sale has been granted against the property of the debtor, the order cannot be challenged by the debtor on the ground that it is an ex parte hearing if the DGI was present at the hearing

Malayan United Bank Berhad v. Lai Chong Kong [13] it should be noted however that the making of the Receiving Order does not vest any estate or interest of the debtor’s property in the DGI. The DGI is not in a position, at that stage, to bring or defend action on behalf of the estate of the debtor.

Role and Official Name of the Official Assignee

Role of Official Assignee

Official name of Official Assignee

As interim receiver of a debtor’s property [14]

The DGI / Official Assignee of the Property of (name of bankrupt), a Bankrupt [15]

As receiver and trustee of the estate of a bankrupt

The Official Assignee of the Estate of (name of Bankrupt), a Bankrupt

As trustee of the estate of a deceased debtor [16]

The DGI / Official Assignee of the property of (name of deceased ), a Deceased Insolvent [17]

Role of the Official Assignee

The role of the Official Assignee can be categorized into the following:- [18]

Before Bankruptcy Order

After Bankruptcy Order

The Official Assignee may sue or be sued, hold property, enter into contracts and do all things necessary in the execution of his duties by these official names. [19] The Official Assignee in Singapore empowers to delegate in writing all or any of his powers or functions to any person [20] but the private trustee cannot exercise this delegation power. [21] The Official Assignee may also revoke the delegation at any time

Role of the Official Assignee before Bankruptcy Order

i. Hearing of Bankruptcy Petitions (“the BP”)

The Official Assignee assisted the court with the hearing of the BP by checking bankruptcy papers before the hearing and attending at the hearing to advise the court as to whether the papers were in order, and also to give his views on any legal or procedural matter that arose during the hearings, as required by the court. The positions in Malaysia and Singapore in this matter are almost the same. But in Singapore, pursuant to the Official Assignee’s Practice Circular No. 1 of 1997 ‘Cessation of Official Assignee’s Presence at the BP hearings’, the Official Assignee has ceased attending hearings of the BP unless the court requires his attendance.

ii. Service of court papers on the Official Assignee

The solicitors should serve the following court papers on the Official Assignee:

Bankruptcy Petition: to serve a copy of the BP on the Official Assignee,

Other bankruptcy papers: to serve all other bankruptcy papers on the Official Assignee not less than 2 days before the hearing in case if court requires him to attend,

Appeal papers: to serve all appeal papers at least 7 days before the hearing

iii. Appointment as interim receiver

The court may appoint the Official Assignee as the interim receiver of the debtor’s property at any time after the presentation of the bankruptcy petition and before the making of the bankruptcy order. [22] The purpose of the appointment is to protect and preserve the property of the debtor, pending the hearing of the BP. [23]

In practice, such appointments are not common in bankrupt. One possible reason could be that most debtors facing bankruptcy proceeding do not have assets that are in need of protection. Furthermore, the date for hearing the BP are now expeditiously heard and disposed of by the court. [24]

The appointment of the interim receiver which lies at the instance of the debtor himself or his creditors is equivalent to the appointment of a provisional liquidator in winding-up proceeding. [25]

Role of the Official Assignee after Bankruptcy Order

i. Administration of bankruptcy estates

The Official Assignee is vested with the property of a bankrupt and is constituted the receiver of the bankrupt’s property upon the making of the bankruptcy order. [26] The Official Assignee generally has discretion in the day-to-day administration of bankrupts’ estates. [27] The position in Singapore, the Official Assignee is the trustee of bankruptcy estates in cases where a private trustee had not been appointed. [28] The Official Assignee also become the trustee when the appointment of the private trustee fails to take effect or when a private trustee has been removed, or has vacated or resigned from his office and no new trustee has been appointed to fill the vacancy. [29]

ii. Prosecution and enforcement actions

Part VII of the Act on Fraudulent Debtors and Creditors provides the general offences of the debtors and creditors and also prescribed elsewhere in the Act, such as s.61 (3) [bankrupt’s statement of affairs], s.38 (1) (b) [bankrupt to submit accounts], s.38 (1) (a)-(c) [disabilities of bankrupt]. The Official Assignee has the power to confiscate the passport or other travel document of bankrupts and the power to seize bankrupts property. [30] The positions of Singapore Official Assignee are the same in this matter with Malaysia Official Assignee but these powers of Official Assignee are not exercisable by private trustee.

Despite their financial predicament, some bankrupt are still living beyond their means and concealing their assets from being detected and taken possession by the Official Assignee. Because of this, the Official Assignee had given a wide power in to investigate and prosecute the bankrupt for contravening the said laws and this power is to be exercised by the Official Assignee personally. [31]

The Official Assignee also empowered to appoint fit and proper persons to be investigation officers who shall have all the powers of a police officer to investigate offences committed under the Act or the Penal Code such as cheating the creditors, which carries imprisonment sentence.

iii. Discharged of bankrupts

The Official Assignee had a power to discharge a bankrupt by issuing a certificate in case where five years have lapsed since the commencement of bankruptcy. [32] No minimum sum has been prescribed. The Official Assignee is not required to give any reason if he decides to discharge a bankrupt. In Singapore under section 125 of the Singapore Bankruptcy Act provides that the Official Assignee has the power to discharge a bankrupt by issuing a certificate in cases where five years have lapsed since the commencement of bankruptcy and debt proved in bankruptcy do not exceed S$500, 00 or such other sums as may be prescribed.

In the previous section 33B (1) of the Act, it is stated that the Official Assignee is required to give his reasons for discharging the bankrupt using his discretion. Among the reasons to discharge the bankrupt are that the bankrupt cannot be located, old age, serious illness and the most important are cases where the bankrupt has made contribution though small to his estate to reduce the debts. Many creditors are not satisfied with the reasons given even though nothing much can be done especially in cases that have been administered for a long time and no asset can be realized for the benefit of the estate. [33]

Therefore, the amendment to section 33B (1) now, gives the Official Assignee the discretion to discharge without giving any reason and in the event the creditors object, the burden of proof that the discharge order should not be granted is placed on the creditors who objected. [34]

Maintenance of Statutory Account and Fund

i. Bankruptcy Estates Account [35]

The Official Assignee has to pay into the account all moneys received by the Official Assignee in respect of the bankrupt proceedings. He has to maintain the account with such Bank as the Minister of Finance shall direct but before the Minister makes any direction, the account may be kept with the Treasury. In Singapore, [36] it is the duty of the Official Assignee to maintain an account and pay into the account all moneys received by him under the Singapore Bankruptcy Act including deposit received from petitioners, deposit for interim receivership, moneys received during the administration of the bankruptcy estate, money received from private trustees and unclaimed and undistributed moneys. He can maintain the account with such Bank as he thinks fit. It seems that the Official Assignee in Singapore had given full power in administering the account of the bankrupt.

The moneys in the account are invested by the Minister and any profits on the sale and dividends on investment shall be credited to the Consolidated Fund. [37] It is part of the bankrupt estate. While in Singapore, the moneys in the account are invested by the Accountant General and the income derived from such investment shall form part of the Consolidated Fund and also becomes part of the government revenue. [38]

There is an Insolvency Assistance Fund [39] introduce in Singapore as assistance to the bankrupt’s burden. The moneys in the fund will be tapped to finance proceedings on behalf of the bankrupt’s estate if the Official Assignee is satisfied that there are reasonable grounds for doing so but there are insufficient moneys in the bankrupt’s estate for such purpose. The recovery of moneys owed to the bankrupt by third parties in proceedings financed by these moneys will benefit both the bankrupt and his creditors. [40] The Official Assignee appears to have discretion on whether to apply the fund for the uses specified and the extent of its application. The fund may be applied for the following purposes: [41]

The remuneration of special managers

Payment of all cost, fees and allowances to solicitors and other person in proceedings on behalf of the bankrupt’s estate or to recover assets of the estate

Payment of costs and fees in the administration of a bankrupt’s estate

Such other purposes as may be prescribed

Duties and powers of the Official Assignee

The Official Assignee has two (2) main roles: [42]

Supervise the conduct of the debtor

Administer the debtor’s estate

i. Supervise the conduct of the debtor

The Official Assignee has the power to investigate the conduct of the Debtor, and reporting to the court stating whether there is reason to believe that the debtor has committed any act: [43]

a) Which constitutes an offence under the Act or under sections 421, 422, 423 or 424 of the Penal Code, or

b) Which would justify the court in refusing, suspending or qualifying an order for discharge.

The Official Assignee also has to make reports concerning the conduct of the debtor as the court directs or as may be prescribed [44] and taking such part as may be directed by the court or prescribed in the public examination of the debtor. [45] He is also has to take part and giving such assistance in relation to the prosecution of any fraudulent debtor or any other person charged with an offence under the Act, as the Public Prosecutor may direct. [46]

ii. Administer the debtor’s estate

The Official Assignee has the power to act as a receiver of the estate and act as manager thereof where a special manager has not been appointed. [47] He has also to raise money or make advances for the purposes of the estate, and authorizes the special manager to raise money or make advances for the like purposes in any case where in the interest of the creditors it appears necessary so to do. [48]

The Official Assignee also has the power to summon and preside at all meetings of creditors held under the Act [49] and to issue forms of proxy for use at the creditors’ meetings. [50]

He is also liable to make report to the creditors as to any proposal which the debtor makes with respect to the mode of liquidating his affairs. [51]

He also has to advertise the receiving order, the date of the debtor’s public examination and such other matters as it is necessary to advertise [52] and where the debtor has no available assets for distribution, the Official Assignee is not to incur any expense in relation to the debtor’s estate without the express directions of the Minister, [53]

The Official Assignee must also have regard to any advice given by the consultative committee and if there is a conflict between the direction of the creditors and the advice of the consultative committee, the former shall prevail. [54]

The Official Assignee also may appoint the bankrupt himself to superintend the management of the bankrupt’s property or any part thereof, or to carry on the trade of the bankrupt for the benefit of his creditors, and to aid in administering the property in any other respect in such manner and on such terms as the Official Assignee directs. [55]

In the case of Lee What Kay v. Official Assignee, Singapore [56] , it was held that the share of the debtor in partnership vests in the Official Assignee upon his adjudication. The Official Assignee does not become the partner himself. He administers the assets of the bankrupt in the partnership as an assignee.

Mechanism to control the power of the Official Assignee

i. Check and balances

Since the Official Assignee had been given the wide power in administering the estate of the bankrupt, it is important to have a legal mechanism to ensure that the power of the Official Assignee is preserved. The court, the Minister and the creditors play a crucial role to ensure that the check and balances of the power of the Official Assignee is maintained.

a) Control by Court

The Official Assignee is officer of the court. [57] Thus, the exercise of his powers, his acts, omissions and decisions, his administration of bankruptcy estates and his conducts generally come within the control of the court. Section 87 of the Act empowers the court to inquire into and take such actions it considers fit if:

i. the Official Assignee does not faithfully perform his duties,

ii. the Official Assignee does not observe the requirements imposed upon

him by the Act, the Rules or written law in respect of performance of his duties, or

iii. a creditor complains to the court in respect of (i) and (ii)

This section also empowers the court to:

i. require the Official Assignee to answer its inquiry in relation to his administration of the bankrupt estates.

ii. direct an investigation into the books and vouchers of the Official Assignee.

iii. examine the Official Assignee on oath concerning his administration of the estate.

The court also empowers to review the Official Assignee’s acts, omissions or decisions in relation to his administration of the bankrupt’s estate upon the application of a dissatisfied bankrupt, creditor or any other person. [58] The court may:-

i. confirms, modify or reverse the Official Assignee’s act or decision,

ii. give such directions to the Official Assignee as it thinks fit, or

iii. make such other order as it thinks fit

b. Control by Minister

Section 70(3) provides that the Official Assignee shall act under the general authority and directions of the Minister. Those people who are not satisfied with the Official Assignee may either refer to the Minister or apply to the court. Examples of Minister’s control over the Official Assignee:

– the Minister appoint the Official Assignee [59]

– to prescribe rules under the Act [60]

c. Control by Creditors

Section 73 (1) (e) requires the Official Assignee to report to creditor on his proposals on the mode of liquidating the bankrupt’s affairs. To convene meeting of Creditors when directed by the court or when he receives a written requested from one-fourth in value of Creditors. [61]

ii. The transparency and accountability

Malaysia has placed great importance to the issue of governance. We have recognized that good public sector governance which includes aspects of transparency, accountability, efficiency and equity in the management of the nation’s resource are means to ensure sustainable economic development and improving the quality of life of the people. [62]

With regards to the power of the Official Assignee, the Official assignee should be more transparent and accountable in all their action as administrator of the estates of the bankrupt. The Official Assignee should be transparent to promote accountability and provides information for the bankrupt, creditors and the public about what they are doing.

iii. Creditor interest

It is a crucial duty for the Official Assignee to act for the interest of the creditors without stifling entrepreneurship. The court enforces a severe obligation on the Official Assignee to ensure that the interest of the creditor is preserved in all their action in administering the estate of the bankrupt. In the case of Re Kelvin Lee See Fooi, Ex P BSN Commercial Bank Malaysia Bhd, [63] Vincent Ng J in this case has ruled that to allow the discharge of a JD on the ground that the JD are unable to settle his debt in full or at least 50% of the same would make a mockery of the right to bankruptcy proceedings available to creditors, and of the provisions of law legislated to safeguard the interests of creditors. It would not only lead to a decline in business morality but would also result in great injustice to judgment creditors.

Liability & Immunity of the Official Assignee

Section 87(4) of the Act provides that the liability of the Official Assignee shall be discharged out of the Consolidated Fund. Section 87(4) states that the Official Assignee and his officers shall not be liable for any act which they have not contributed to or which they could not have averted by the exercise of reasonable diligence. This section also protects the Official Assignee and his officers from personal liability arising out of the administration of bankruptcy estates or by any act, omission or decision of the Official Assignee or under any proceedings concerning bankruptcy estates, if it is shown that they did not contribute to the liability or that the liability had been incurred despite them having acted with reasonable diligence.

In the case of Re Sassoon Ezekiel [64] the Official Assignee had made an application to the court to set aside or declare void a conveyance by the bankrupt to his wife prior to his bankruptcy. The court dismissed the Official Assignee’s application with costs to be taxed and paid by the Official Assignee. The bankrupt’s wife taxed the costs to be taxed the costs and as the Official Assignee failed to pay the costs, she applied for a Writ of Seizure and Sale against the Official Assignee. The Sheriff seized a motorcar belonging personally to the Official Assignee. The Official Assignee applied to court to set aside the WSS. The wife’s counsel argued that the Official Assignee was personally liable for the costs ordered by the court. Huggard CJ ruled that, a WSS properly lies against the Official Assignee in such a matter as this now before the court and I see no reason to set it aside.

The Official Assignee is not liable personally for anything done or intended or omitted to be done by him under the Act. Any person aggrieved by such act or omission cannot bring any legal action against the Official Assignee may apply to the court for directions in the matter. The protection from legal action extends to any person acting under the direction and control of the Official Assignee [65] but not to any other person.

In the case of Ng Ah Ho v Hong Leong Finance Bhd [1997] 3 CLJ 582, Kamalanthan Ratnam JC held that “It seems to me that pursuant to this section only the Official Assignee or persons acting under the directions of the Official Assignee are protected from a suit of this nature. Hence, this provision would not afford the defendant any protection, neither is the section applicable as the Official Assignee was not made a party to this suit”.

Prior to 29 October 1976, action could be taken against the predecessor of the DGI or his agents provided that notice should have first been given and such action had to be commenced within one year of the accruing of the cause of action. [66]

Release of the Official Assignee

The Official Assignee can be released from the position as administrator of the bankrupt estate by applying to court after the final dividend has been distributed or when a composition has been approved by the court or when the Official Assignee has resigned or has vacated