Litigation and Dispute Resolution

With the growing popularity of short term rentals, many countries are looking at regulating short term accommodation/rentals. Platforms such as Airbnb or Booking.com make it easier for property owners to list their properties and allow tourists and visitors a diverse range of accommodation options. However, there have been complaints as the influx of tourists and visitors, particularly in residential areas, led to noise pollution, traffic congestion, and other disturbances that impact the quality of life for long-term residents. In response to this, the Penang State Government introduced the guidelines for short term accommodation imposing strict conditions on how properties can operate within residential buildings, ensuring that the rights and safety of permanent residents are not compromised. Airbnb has also launched its Guide to Responsible Hosting in Buildings, which provides hosts with resources and best practices to ensure they operate within the legal and community standards. In this article, Partner, Jeyakuhan Jeyasingam, looks at the key aspects of Penang’s Guidelines and Airbnb’s Guide and its impact on the market.

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Birth, old age, sickness and death – these are the inevitable stages in human life.

The legal procedure after a person’s death can be complex, especially when a person dies intestate, or without leaving a will.

There are clear advantages to having a will. It allows the person making the will to choose their beneficiaries, determine how assets are to be distributed, and to appoint an executor to administer the estate.

On the other hand, when a person dies intestate, assets will be distributed in accordance with the Distribution Act 1985 and a court-appointed trustee or executor will administer the estate. This more cumbersome process may give rise to assets being distributed in a way that is not in accordance with the deceased person’s wishes, or family disputes.

That said, there are certain distributions that are considered distinct from a deceased’s inheritable estate. This article explores the distribution of insurance benefits and Employment Provident Fund (“EPF”) upon the death of an insured person or EPF member, respectively, in Malaysia.

Insurance

In Malaysia, monies under insurance policies do not form part of the deceased’s estate. This is to protect the interests of the insured’s spouse and children in the policy against a claim by any creditor of the insured.

This is provided for in section 23(1) of the Civil Law Act 1956:

23.  Moneys payable under policy of assurance not to form part of the estate of the insured

(1) A policy of assurance effected by any man on his own life and expressed to be for the benefit of his wife or of his children or of his wife and children or any of them, or by any woman on her own life and expressed to be for the benefit of her husband or of her children or of her husband and children or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not so long as any object of the trust remains unperformed form part of the estate of the insured or be subject to his or her debts.

The relationship between the insurer and the insured (or the “deceased” for the purpose of the article) is a contractual one (see the Federal Court decision in Malaysian Assurance Alliance Bhd v Anthony Kulanthai Marie Joseph (suing as a representative of the estate of Martin Raj a/l Anthony Selvaraj, deceased) [2010] 4 MLJ 749).

Therefore, upon the death of the insured, the terms of the insurance contract will take effect – all monies payable under the insurance policy will then be paid to the named nominee in accordance with the insurance policy and the Financial Services Act2013 (“FSA 2013”).

The payment of policy monies is not automatic. The nominee must make an application to the insurer, notifying of the death of the insured and accompanied by proof of death. Upon receipt of such claim, the insurer shall pay the policy monies to the nominee. However, if the nominee fails to claim the policy monies within 60 days of the insurer becoming aware of the death of the insured, the insurer shall immediately notify the nominee in writing of his/her entitlement to claim the policy monies. Where the insurance company has been made aware of the death of the policy owner and notified the nominee of their entitlement, and within 12 months the nominee has failed to claim the policy monies, the insurer shall proceed as though no nomination was made.

In situations where the insured did not make any nomination in the policy, the insurer shall pay the policy monies to the lawful executor or administrator of the estate. Where the insurer is satisfied that there is no lawful executor or administrator of the estate at the time of payment, the insurer may pay the policy monies to the deceased’s spouse, child or parent in accordance with the Distribution Act 1958.

Therefore, insurance policy holders are advised to take necessary steps to nominate the intended recipients of the policy monies. This ensures that after the death of the insured, the policy monies will be paid to the intended recipient.

It is also advisable for the nominee to make the insurance claim as soon as possible after the death of the insured to ensure efficient payment of the policy monies.

It must be noted by virtue of section 25 of the Civil Law Act 1956, the nature of nomination varies for Muslim policy owners (also known as takaful participant). The nominee of a Muslim policy owner can either be an executor or a beneficiary of the takaful benefits. If a person is nominated as an executor, he/she will take the takaful benefits only as an executor and must distribute the monies in accordance with Faraid laws. However, a nomination for a nominee to be a beneficiary under a conditional hibah (granting ownership of property from one party to another without any consideration) [1] shall have the effect of transferring ownership. The takaful benefits payable to the nominee upon the death of the insured person shall be transferred to the named nominee.

Employees Provident Fund

The distribution of EPF mirrors that of insurance policies. The contributions and interest do not form any part of the deceased’s estate, and upon the death of the deceased, it shall remain separated from the deceased’s other assets (How Yew Hock (Executor of The Estate of Yee Sow Thoo, deceased) v Lembaga Kumpulan Wang Simpanan Pekerja [1996] 2 MLJ474). If nomination was made, the fund will then be payable to the nominee.

Section 54 (1A) of the Employees Provident Fund Act 1991 provides that the EPF member may make nomination for the purpose of payment of credit after the death of the member. When a nomination is made, it has the effect of appointing an individual or institution to receive and oversee the EPF savings in the event of one’s demise. A nominee would then be entitled to the nominated portion of the deceased’s EPF savings.

However, where the EPF member dies without first nominating a beneficiary, the member’s next-of-kin is entitled to make a claim for the monies in the savings. This includes:

• the member’s widow/widower, children (or their guardian);
• parents, or siblings for married members; or
• parents or siblings for unmarried members.

If the deceased left a will with a residuary estate clause (a clause that disposes of assets that have been overlooked or are left over), then the EPF savings will form part of the residuary estate of the deceased EPF member and shall be distributed in accordance with his or her express wishes. If a grant of probate or letter of administration has been taken out for the deceased’s estate, the executor or administrator may then act accordingly to apply for the withdrawal of the savings for the benefit of the named beneficiaries or the next-of-kin, as the case may be.

The amount varies according to when the application is made: [2]

In the event of one’s untimely demise, EPF savings may serve as an assurance that the deceased’s next-of-kin are financially cared for. For easy and convenient withdrawal upon death, all EPF members are highly encouraged to make nominations of beneficiaries early on.

Earlier this year, EPF clarified that where there is more than one beneficiary nominated and one of them dies, then only the portion that was bequeath to the deceased beneficiary will be invalid. If the EPF member failed to update his/her nomination before they died, then the surviving beneficiaries will receive their portion accordingly. However, if the member has named only one beneficiary and the beneficiary dies, then the nomination will be deemed void until a new beneficiary is nominated. [3]

Commentary

Other than making nominations for your insurance policies and EPF, it is important to remember that when creating wills and testaments, insurance policies and EPF savings are not to be included as assets.

The separation of both insurance and EPF from the estate of a deceased are restrictions created by lawmakers for the purpose of public policy, ensuring that loved ones are provided for upon the death of an insurance policy owner or EPF member. Hence, one should not consider insurance policies and EPF credits as a part of one’s inheritable assets.

If you have any questions or require additional information, please contact Jeyakuhan Jeyasingam or the partner you usually deal with at Zaid Ibrahim & Co (in association with KPMG Law).

This alert is for general information only and is not a substitute for legal advice.‍

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[1] “Managing Hibah” (My Government) <https://www.malaysia.gov.my/portal/content/27730> accessed 11 June 2024.

[2] “Helping Loved Ones in Times of Need” (EPF) <https://www.kwsp.gov.my/member/account-centre/death> accessed 11 June 2024.

[3] “Chain Messages on Nomination” (EPF) <https://www.kwsp.gov.my/w/chain-email-on-nomination> accessed 11 June 2024.

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We make our friends; we make our enemies; but God makes our next-door neighbour. - Gilbert K. Chesterton

Interrelationship of Law and Society – The rule of Rylands v Fletcher

As humankind progressed from a nomadic hunter-gatherer existence to an agrarian society, and subsequently, toward an industrialised civilisation, a common feature emerged. We found ourselves living in increasingly close proximity. This led to the concept of “urbanisation”.

With increased human proximity, any actions gone awry have a higher risk of affecting our neighbours adversely. Common examples include dust, noise pollution, fallen trees, or fires-spreading whereas incidents which are less typical may be the escape of water or chemical substances causing floods or pollution.

When something does happen and it affects others, then these inconveniences may be actionable on a case-to-case basis under negligence, nuisance, rule of Rylands v Fletcher, or a combination of any of the above.

One of the main distinguishing factors under the Rylands v Fletcher rule is the requirement for an accumulation of dangerous substance which constitutes an unusual use of land. Once this has been established and there has been foreseeable damage due to the escape of the substance, the liability attributed to the defendant is of a strict nature,[1] i.e., the absence of fault or blame worthiness is immaterial.

Strict or selective liability?

The justification for strict liability was elaborated in the case of inception  ­̶  he who for his own purposes brings unto his lands and keeps there anything likely to do mischief must keep it at his peril.[2] In Rylands v Fletcher, the defendants had employed independent contractors to construct a reservoir on their land. While digging on the lands, the contractors found disused mines that they failed to seal properly. As a result, water flooded through the mineshafts into the plaintiff’s mines on the adjoining property.

As the activities of storage and accumulation of substances caught under the rule of Rylands v Fletcher by themselves are already potentially risky, it is only fair and right that such activities conducted intentionally and deliberately comes with a high price. This is reflected through the assignment of strict liability.[3]

The rule’s reasoning is easily relatable due to empathy towards the innocent victims. However, it is increasingly difficult for the rule to remain operative given the developments in judicial stance and concern that the rule is overly harsh towards defendants who may be similarly blameless.

Firstly, the creation of several defences and exceptions by the judiciary effectively restricts and restrains the applicability of the rule to a certain extent.

Secondly, the adjudication in Cambridge Water Co Ltd v Eastern Counties Leather plc[4] provides that the foreseeability of the type of damage is a prerequisite to liability. This appears to be an attempt to attribute a certain extent of culpability to the rule.

Thirdly, ever since the occurrence of industrial and scientific evolution, lands have been increasingly used for industrial processes. Gone are the days where land was used primarily for agricultural activities and human habitation. Advances in science and technology not only reduced instances of land used for natural purposes, but also mitigated previous reservations on using land for artificial or non-natural purposes.

There is no exception to the rule that every rule has an exception. - James Thurber

Types of Defences

Default of the plaintiff

If the damage is caused by the plaintiff’s own action or wrongdoing, he will not be compensated. In Ponting v Noakes,[5] the plaintiff's horse died after nibbling on some poisonous vegetation near the defendant's boundary. The English court held that the defendant was not liable for the horse’s own intrusion and action. Where the plaintiff is contributorily negligent, however, section 12 of the Civil Law Act 1956 will apply.

Consent of the plaintiff

In Malaysia, where the plaintiff had agreed to the non-natural use of land, he has no right of action unless he is able to prove negligence. This was seen in the case of Sheikh Amin bin Salleh v Chop Hup Seng,[6] which is in line with the English case of Kennard v Cory Bros & Co Ltd.[7]

Implied consent may also be raised if a tenant of the premise, allows the condition of adjoining premises to become such that the likelihood of an escape under the Rylands v Fletcher rule is probable, as decided in the English authority of Kiddle v City Business Properties Ltd.[8]

It is important to note that implied consent cannot be presumed just because the occupied land is situated near or adjacent to a premise where dangerous substances are accumulated on a daily/ordinary basis.[9] Similarly, occupation of a land in proximity to inherently dangerous and unsafe state of affairs or installations does not equate to implied consent.[10]

All of the above are not contradictory as the defence is only available within the context of a tenant-landlord relationship rather than just neighbours or tenants who are renting from the same landlord, as ruled in the case of Humphries v Cousins.[11] Parties who are neighbours are not deemed to have consented to inherently dangerous activities just by way of proximity.

Common benefit

Where the source of the danger is maintained for the common benefit of the plaintiff and the defendant, the rule under Rylands v Fletcher will not be established. This is by analogy similar to the defence of consent.

In the English cases of Carstairs v Taylor[12] and Dunne v North Western Gas Board,[13] the defendants were found to be not liable, subject of course, to the defendants’ non-negligence.

However, commentators no longer regard this as a defence. It is submitted that perhaps common benefit ought to be considered only as a factor in determining whether the plaintiff has consented to the risk of damage. This would eliminate common benefit as an independent defence and include it as an element of consent.[14]

Act of third party

The defendant is not liable where the escape of accumulated substance is due to an unforeseen act of a third party, provided that there is no negligence on the part of the defendant. In the English Court of Appeal case of Perry v Kendricks Transport Ltd, the court held that the basis of the defence is the absence of any control by the defendant over the acts of a stranger on his land.[15]

Notwithstanding that, a cause of action would succeed if the plaintiff could show that the act that caused the escape was one that the owner could have contemplated and taken reasonable precautions against. In Hale v Jenning Brothers,[16] the proprietor of a chair-o-plane was held liable for the escape of a chair caused by a passenger’s tampering that resulted in the plaintiff suffering severe injuries, whereas in North Western Utilities Ltd v London Guarantee & Accident Co Ltd,[17] the construction of a storm sewer beneath the defendant's underground gas pressure main caused it to crack and destroyed the hotel by fire.

However, academicians have argued that the legal doctrine upon which the cases ought to have been decided is mistaken as such cases involve common negligence and should not be classified as Rylands v Fletcher cases.[18] The reasoning is that the Rylands v Fletcher rule is a strict liability tort and therefore any negligence – as in breach of duty of care – on the part of the defendant is irrelevant in determining liability.[19] It should not matter that the defendant could or could not have reasonably foreseen the act of the stranger.

Act of God

An act of God refers to circumstances that are beyond anyone’s control which cannot be foreseen or guarded against. This defence will apply for natural disasters that is not within the foresight of the defendant.[20] Examples includes extraordinary rainfall, high wind and high tide tsunami, lightning, earthquakes, cloud burst and tornadoes.

Nonetheless, in situations where such natural disaster can be foreseen, the defence will not apply. In Kwan Sun Ming v Chak Chee Hing, it was held that in a towage contract, a storm must be expected and would have to be guarded against. For a storm at sea to be regarded as an act of God, it would have to be a storm that could not have been reasonably foreseen.[21]

It can be deduced that the objection against the defence for an act of a third party would similarly apply here since both are events with randomised probability beyond control. The Rylands v Fletcher rule is a strict liability tort and therefore it should not matter that the defendant could or could not have reasonably foreseen the act of God.

Statutory authority

Sometimes statutes, like section 95 of the Street, Drainage and Building Act 1974, affords state authorities or officers with immunity and exempts them from liability.  Whether they are exempted or not, and to what extent, is a question of statutory interpretation. For instance, sections 5, 6 and 7 of the Government Proceedings Act 1956 relating to proceedings by and against the Federal Government and the Governments of the States have been relied upon to establish legal actions against officers and vicariously, the government.

We must not look at a past incident with the spectacles from the future. - Lord Denning

Foreseeability of damage

The general tenor of Justice Blackburn's statement of principle Cambridge Water Co Ltd v Eastern Counties Leather plc is that knowledge, or at least foreseeability of the risk, is a prerequisite of the recovery of damages under the principle.[22]

What is unclear is whether it is only the kind of damage that needs to be foreseeable or that the escape must be foreseeable too. Lord Goff, in holding that the seepage of the chemical through the factory floor into the earth and subsequently into the water was unforeseeable, seemed to suggest that the escape too, need be foreseeable.[23]

In Malaysia, there is yet to be any case which relates specifically to the question regarding which element does foreseeability pertain to – the type of damage or the possibility of escape, but cases often quote the English judgment in verbatim, i.e. “it could not possibly have foreseen that damage of the type now complained of might be caused.”.

In Projek Lebuh Raya Utara-Selatan Sdn Bhd v Kim Seng Enterprise (Kedah) Sdn Bhd, the Court of Appeal stated that liability arose only if the defendant knew or ought reasonably to have foreseen that those things might, if they escaped, cause damage.[24]

Many academicians have also submitted that if the escape must also be foreseeable, the notion that the rule in Rylands v Fletcher connotes with it a strict liability would no longer hold true.[25] There will no longer be any element that is independent from the establishment of blameworthiness. The accumulation of dangerous substance which constitutes an unusual use of land, the foreseeability of type of damage and the foreseeability of escape will all be associated with fault. In Ellison v Ministry of Defence, it was suggested that it is only the type of damage and not the escape that must be foreseeable.[26]

What would be a nuisance in Belgrave square would not necessarily be so in Bermondsey. – Lord Justice Thesiger

Non-natural use of land

The judiciary has managed to keep up with the times when it comes to the development of the rule in Rylands v Fletcher. The case of Rainham Chemical Works v Belvedere Fish Guano[27] ruled that the use of land to build a factory for the manufacture of explosives was a non-natural use in 1920, but later in the 1940s, the House of Lords refused to consider itself bound by the same finding in light of the industrial activities during war time.[28]

Whether the use of the land is non-natural is a question of fact – factors such as time, location and ordinary activities of mankind must be taken into consideration.[29] Since storage of ammunitions is not a non-natural use of the land during wartime, the legal regime will not provide protection. Plaintiffs will have to resort to the tort of negligence, which is a separate cause of action with its own technicalities.

In British Celanese Ltd v AH Hunt (Capacitors) Ltd, the court refused to adjudge the manufacturing and storage of electrical and electronic components on a factory situated in an industrial area planned and laid out for the purpose of accommodating manufacturers in the year 1964 to be a special use of land.[30]

In Mason v Levy Auto Parts of England, the utilisation of land for the storage of spare parts for vehicles and other combustible materials was held by the judge to be non-natural because of three factors, one of it being the character of the neighbourhood.[31]

However, Lord Goff said in Cambridge Water Co Ltd v Eastern Counties Leather plc that “the storage of substantial quantities of chemicals on industrial premises should be regarded as an almost classic case of non-natural use”.[32] Malaysian academicians have expressed their reservations towards the statement and opine the decision to have been delivered by way of per incuriam.[33]

This was arguably settled in Transco plc v Stockport Metropolitan Borough Council where Lord Bingham made it clear that the rule will only apply to extraordinary and unusual use.[34] In line with majority of the cases mentioned above, it appears that locality is in fact a significant factor to be taken into consideration, similar to the quote under nuisance that “what would be a nuisance in Belgrave Square would not be so in Bermondsey”.[35]

Taking into consideration the Malaysian landscape, locality, custom and usual practice, the fact that city planning is mostly conducted based on functionality in most parts of the country (i.e., segregated into residential, business, and industrial areas), this would pose considerable challenge for plaintiffs as they need to establish that the use of land must be non-natural.

Commentary

The study of interrelationships explores the connections between people and system. In the context of law and society, this perspective examines how urbanization has prompted the establishment of and reforms to legal frameworks to address disruptions among neighbours in land-related matters. It emphasizes the evolving dynamics between people and the legal system in response to societal changes.

In the attempt to keep up with times, the rule in Rylands v Fletcher has been expanded gradually over the years through the evolving judicial stance and interpretation as well as introduction of defences. Unfortunately, this has led to various differing views and dissents among the judiciary.

The attribution of the element of fault increasingly blurred the lines between negligence claims and Rylands v Fletcher actions, thereby causing greater confusion and uncertainty in relation to the continued relevancy and applicability of the latter in this age and time. This phenomenon is reflected in the limited number of case authorities in this respect compared to other causes of action in Malaysia.

Some academicians have suggested for the rule to apply to instances of ultra-hazardous activities or extraordinary use of land to avoid the rule from becoming obsolete. It would be interesting to witness the fate of the rule in Rylands v Fletcher within the Malaysian landscape from hereon – whether it would fall into disuse and lead a quiet death or be revived and transformed by the judiciary to adapt with the times.

If you have any questions or require any additional information, please contact Jeyakuhan Jeyasingam or the partner you usually deal with at Zaid Ibrahim & Co (in association with KPMG Law). This article was prepared with the assistance of Viviana Goh Wen Li, a Trainee Associate in Zaid Ibrahim & Co (in association with KPMG Law).

This article is for general information only and is not a substitute for legal advice.

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[1] John Rylands and Jehu Horrocks v Thomas Fletcher (1868) LR 330 (HL).

[2] Ibid.

[3] Norchaya Talib, Torts in Malaysia (Sweet&Maxwell, 2021) p 442.

[4] Cambridge Water Co Ltd v Eastern Counties Leather plc [1994] 2 AC 264.

[5] Ponting v Noakes [1894] 2 QB 281.

[6] Sheikh Amin bin Salleh v Chop Hup Seng [1974] 2 MLJ 125.

[7] Kennard v Cory Bros & Co Ltd [1921] AC 521.

[8] Kiddle v City Business Properties Ltd [1942] 2 All ER 216.

[9] Thomas v Lewis [1937] 1 All ER 137.

[10] Prosser & Sons Ltd v Levy [1955] 3 All ER 577.

[11] Humphries v Cousins (1877) 2 CPD 239.

[12] Carstairs v Taylor [1871] LR 6 Ex 217.

[13] Dunne v North Western Gas Board [1964] QB 806.

[14] Donal Nolan and James Goudkamp, Winfield and Jolowicz on Tort (20^th edn, Sweet & Maxwell, 2020) at 16-019 and 16-027. Common benefit is not included as a defence in Christian Witting, Street on Torts (15^thedn, OUP, 2018).

[15] Perry v Kendricks Transport Ltd [1956] 1 WLR 85.

[16] Hale v Jenning Brothers [1938] 1 All ER 579.

[17] North Western Utilities Ltd v London Guarantee & Accident Co Ltd [1936] AC 108.

[18] Christian Witting, Street on Torts (15^th edn, OUP, 2018) pp 466 and 467.

[19] Supra note 3 at p 442.

[20] Dr Syed Ahmad S A Alsagoff, The Law of Torts in Malaysia (LexisNexis, 2017) p 423.

[21] Kwan Sun Ming v Chak Chee Hing [1965] 1 MLJ 236 at 237.

[22] Supra note 4.

[23] Supra note 3 p 438.

[24] Projek Lebuh Raya Utara-Selatan Sdn Bhd v Kim Seng Enterprise (Kedah) Sdn Bhd [2013] 5 MLJ 360 at [120].

[25] Supranote 3 at pp 438 and 439.

[26] Ellison v Ministry of Defence (1996) 81 BLR 101.

[27] Rainham Chemical Works v Belvedere Fish Guano [1921] 2 AC 465.

[28] Read v J Lyons & Co Ltd [1947] AC 156.

[29] Ibid at 176.

[30] British Celanese v Hunt [1969] 1 WLR at 963.

[31] Mason v Levy Auto Parts of England [1967] 2 QB 530.

[32] Supra note 4.

[33] Supra note 20 at p 420.

[34] Transco plc v Stockport Metropolitan Borough Council [2004] 2 AC 1.

[35] Sturges v Bridgman (1879) 11 ChD 852.

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In our previous article, we discussed the initiatives implemented by the Government to ease the process of discharge of bankrupts. This included the conditions and procedures for discharging bankrupts with small-scale debts, as well as proposed amendments to the Insolvency Act 1967aimed at enhancing the provisions for discharge of bankrupt and the administration of a bankrupt’s estate. 

The recent enactment of the Insolvency (Amendment) Act 2023 has now come into effect, implementing the proposed amendments.  

Below, we summarize the key amendments to Malaysian insolvency law.

Additional categories of bankrupt individuals eligible for discharge

Prior to the amendment, the discharge of a bankrupt under section 33A was at the discretion of the Director General of Insolvency (DGI), with a minimum waiting period of five years from the bankruptcy order and subject to section 33B, which allowed creditors to object to the discharge. However, the recent amendment expands section 33B(2A) of the Insolvency Act to include two additional categories where creditors are not permitted to object to the discharge, namely:

1. a bankrupt who is incapable of managing himself and his affairs due to any mental disorder, as certified by a psychiatrist from any government hospital;
2. a bankrupt aged seventy years and above and in the opinion of the DGI, is incapable of contributing to the administration of his estate.

Streamlined discharge process & enhanced powers for the DGI

The Amendment Act revises section 33C governing the automatic discharge of bankrupts. Previously, a bankrupt will be automatically discharged after three years if they fulfilled specific criteria, such as reaching the targeted contribution towards their provable debt and complying with obligations related to rendering an account of money and property.

Post-amendment, the financial capability of the bankrupt is taken into consideration, and the conditions for automatic discharge under section 33C are eased. The requirement to achieve the targeted contribution towards the provable debt is replaced with the obligation to pay a sum determined by the DGI for estate administration purposes, provided that the bankrupt has fulfilled his or her obligations under the Act.

In this regard, the Amendment Act introduces the suspension of automatic discharge for up to two years if the bankrupt fails to fulfil his or her obligations. The DGI is granted the power to suspend automatic discharge for a maximum of two years if the debtor does not meet his or her obligations. Additionally, the DGI may request further information regarding the debtor's income, expected income, and properties. The suspension, as per the newly inserted section 33C(1)(b), takes effect when the DGI serves a notice to creditors who filed a proof of debt within six months before the original three-year mark.

Furthermore, in line with the ‘second chance policy’, the amendments to sections 33C and 33B(2A) are applied retrospectively to cover individuals who had been declared bankrupt before the passing of this Amendment Act.

Adoption of remote communication technology and electronic communications

To align with the judiciary's transition to remote hearings, and in line with the insertion of section 15A of Court of Judicature Act 1964, the Act has been amended to accommodate remote communication technology in the administration of bankruptcy in Malaysia.

Communication pertaining to insolvency matters, including service of notices under the amended section 130 of the Insolvency Act, 1967, may now be carried out by electronic means, where consent has been obtained to do so.

It is also pertinent to note that, prior to the amendment, the Act only allowed the DGI to hold a meeting at such a place which the DGI considers to be convenient for the majority of the creditors.  Now, meetings of creditors under amended Schedule A of the Insolvency Act may be conducted through remote communication technology, among others, video link, video conferences, or any other electronic means of communication.

Dispensation of the mandatory requirement of holding the first meeting of creditors

Previously, section 15 of the Act made it mandatory for the first meeting of creditors to be held as soon as may be after a bankruptcy order is made. The meeting is confined to consider proposals for the composition or arrangement and the mode of dealing with the bankrupt’s property.

Post-amendment, the mandatory nature of the first meeting of creditors has been replaced with a discretionary power of the DGI. Nonetheless, the purpose of the section is maintained with the additional scope of any other purpose as prescribed by the Minister. The Amendment Act also replaced all references to the “first meeting of creditors” in the Insolvency Act 1967 with “meeting of creditors”.

Thus, pursuant to the Amendment Act, a meeting of creditors is no longer mandatory and will only take place upon request or when deemed necessary.

Other amendments

In addition to the above, the Amendment Act also introduces changes related to summary administration in cases where the debt is small. To provide greater flexibility in bankruptcy administration, certain monetary amounts specified in the Insolvency Act 1967 have been replaced with amounts to be prescribed by the Minister. This allows for adjustments based on prevailing economic conditions and circumstances without the need for legislative amendments.

For more information, please refer to the Insolvency (Amendment) Act 2023 and Insolvency (Amendment) Rules 2023.

Conclusion

The newly enacted amendments establish a more effective and inclusive bankruptcy administration system, aligning with the government's commitment to help bankrupt individuals secure a fresh financial start. While many are still grappling with their prior financial missteps, the enforcement of these amendments brings some relief. It is hoped that the government’s initiative to fostering bankruptcy administration will ultimately contribute to the nation’s economic development.

If you have any questions or require any additional information, please contact Khoo Kay Ping, Chuah Jo-Shua, or the Zaid Ibrahim & Co (in association with KPMG Law) partner you usually deal with. This article was prepared with the assistance of Chong Siau Fong, a Senior Associate at Zaid Ibrahim & Co (in association with KPMG Law).

This alert is for general information only and is not a substitute for legal advice.

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With the passing of a property owner, a grant of representation is required in order to deal with the property. If the property owner is a foreigner and a grant of representation has been obtained in their country of domicile, a letter of representation would first need to be recognised by the Malaysian courts before it can be enforced. This process is known as resealing letters of representation. This article will delve into the process of resealing letters of representation in Malaysia.

The resealing process in Malaysia

The law relating to resealing grant of representation can be found in Part IV of the Probate and Administration Act 1959. Section 52 allows the Malaysian High Courts to reseal both the grant of probate and the letter of administration granted by the court of probate of any Commonwealth country. This means that if the deceased’s family has already obtained a letter of representation in the country of domicile and wishes to deal with the deceased’s assets in Malaysia, they merely need to reseal the representation letter. They do not need to go through the process of applying for a grant of probate or administration in Malaysia, provided that they have already obtained a grant in a Commonwealth country.

It is important to note that in a resealing application the power of the Malaysian courts to reseal a letter of representation is discretionary. The High Court may not allow such application if it appears that the deceased was not, at the time of his death, domiciled within the jurisdiction of the court from which the grant is issued.^[1] In determining whether such seal should be affixed on a grant of probate or letter of administration, the court may require any evidence it thinks fit to determine the domicile of the deceased person.^[2]

In an application to reseal a letter of representation, while it may be common for convenience’s sake to sign a power of attorney to allow the appointed solicitors to deal with the necessary procedures, the petition for the resealing application must be filed in the executor’s name notwithstanding the existence of any power of attorney.^[3] The solicitors appointed may affirm the affidavit verifying the petition on behalf of the executor, but the petitioner must still be the executor.^[4]

In relation to the rights and obligations of the executor, the representative will only acquire the rights and obligations of a lawful executor or administrator on the date when the foreign grant of representation is resealed by the court, not from the date of the original grant.^[5] This is important to determine when the representative shall have the right to institute a suit on behalf of the estate of the deceased.^[6]

Another matter to note is that where a grant of letter of administration is concerned, similar to a fresh application for letter of administration, a security by way of bond for the administration of the estates must be placed with the courts before the court could affix the seal on such letter of administration.^[7]

Letter of representation from non-Commonwealth countries

It is also prudent to note that the Malaysian law does not recognise letters of representation obtained from a non-Commonwealth country. While there are no laws explicitly stating this, it can be inferred from the Probate and Administration Act 1959 which states that the Malaysian High Court will recognise letters of representation made in Commonwealth countries and therefore will reseal them.^[8]

It is more of a general principle as the rationale behind this is due to the reciprocal arrangement with other Commonwealth countries to recognise and enforce their grants of probates. This can also be seen in the UK by way of the Colonial Probates Act Application Order 1965 which lists all Commonwealth countries that are allowed to reseal their grants of probates in the UK.^[9]

In order to administer the deceased’s properties in Malaysia, the representative must apply for a fresh grant of probate or letter of administration in Malaysia. This application is more time consuming than resealing the letter of representation.^[10] However, in such a situation where the letter of representation was obtained in a non-Commonwealth country, a fresh grant or letter of representation will be the only option.

Without a valid grant of probate or letter of administration, it would be legally impossible to deal with any of the deceased’s assets in Malaysia. All relevant authorities require a letter of representation recognized by the Malaysian Court in order to allow a purported representative to deal with the property.

Conclusion

It can be said when resealing letters of representation, there are two processes to follow depending on where the grant of probate and letter of administration were granted. If it were granted by probate courts in Commonwealth countries, then under the Probate and Administration Act 1959, the High Courts have the discretion to reseal the grant of probate and letter of administration. For non-Commonwealth countries, a fresh grant of probate or letter of administration in Malaysia would be needed in order to deal with the deceased’s assets in Malaysia.

If you have any questions or require any additional information, please contact Jeyakuhan Jeyasingam or the partner you usually deal with at Zaid Ibrahim & Co (in association with KPMG Law). This article was prepared with the assistance of Nurul Izzah Isa, a Trainee Associate in Zaid Ibrahim & Co.

­This article is for general information only and is not a substitute for legal advice.

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[1] Section 52(a) Probate and Administration Act 1959.

[2] Section 52(b) Probate and Administration Act 1959.

[3] Re Azhar Azizan Harun (As the Absolute Representative of Eleanor Dulcie Robinson) (1998) 7 MLJ 89.

[4] Ibid.

[5] Chung Kok Yeang v Public Prosecutor (1941) 1 MLJ 163.

[6] Issar Singh Son of Bhola Singh & Anor v Samund Singh Son of Mayiah (1941) 1 MLJ 28.

[7] Section 35 Probate and Administration Act 1959.

[8] Section 52 Probate and Administration Act 1959.

[9] Schedule 1 Colonial Probates Act Application Order 1965

[10] Application to reseal a letter of representation takes approximately 2-3 months, while an application for a fresh grant would take an estimated period of 4-6 months.

In recent years, the Malaysian government has taken various initiatives to revamp insolvency laws with the goal of assisting the public to cope with financial difficulties arising from the Covid-19 pandemic.

With the amendment to the Insolvency Act in 2020, the bankruptcy threshold in Malaysia is currently set at RM100,000, which was raised from the original RM50,000. This was the second increase of the bankruptcy threshold within the span of a few years, with the previous increase from RM30,000 to RM50,000 in 2017.

As it stands today, a creditor may not file for bankruptcy action against a debtor if the amount of the debt is less than RM100,000.

Automatic and faster discharge of bankruptcy?

Bankruptcy is a serious matter and has grave implications on the bankrupt individual. A discharge, in essence, is a reset button, releasing the bankrupt from his debts to allow him to start afresh.

During the Budget 2023 Presentation, Prime Minister Datuk Seri Anwar Ibrahim announced that the government is looking to further revamp the Insolvency Act 1967 to ensure that individuals who are bankrupt could be discharged more quickly.

Among the immediate initiatives to be implemented would be individuals, whose bankruptcy cases are of a debt of less than RM50,000 (small-scale debt), could be discharged by the Director General of Insolvency’s Certificate with effect from 1 March 2023.

The Guidelines, issued by the Malaysian Department of Insolvency, for the discharge of bankruptcy with small-scale debts are summarised in the table below:

For more detailed information, please refer to the Malaysia Department of Insolvency.  

The proposed amendments to the Insolvency Act 1967, which is expected to be tabled in the next parliamentary sitting in May-June 2023, if passed, would further ease the process of discharge of bankrupts. Among the amendments proposed are:

1. the setting of time limits for the filing of Proof of Debt Forms by Creditors (section 42 and Schedule C of Insolvency Act 1967) to avoid the issue of late filing which could make it difficult to discharge bankrupt individuals;
2. to make improvements to the automatic discharge provisions under section 33C of Insolvency Act 1967 so that bankrupt individuals can be discharged from bankruptcy in a shorter period or automatically;
3. to make improvements to section 42 and Schedule C of Insolvency Act 1967 by abolishing the obligation to hold the first meeting of creditors so that the bankruptcy administration can continue immediately; and
4. to add category of cases that can be discharged using the Director General of Insolvency’s Certificate, for example, bankrupt individuals aged 70 and above, for bankrupt individuals who are incapacitated because they have been diagnosed as mentally ill under the Mental Health Act 2001.

If you have any questions or require any additional information, please contact Khoo Kay Ping, Chuah Jo-Shua, Chong Siau Fong, or the Zaid Ibrahim & Co (in association with KPMG Law) partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice.

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