By K. C. Vijayan, Law Correspondent

A MALAYSIAN bank has failed in its attempt to bankrupt a Singaporean man who stood as loan guarantor for a $287,000 debt incurred in Malaysia 18 years ago.

Malaysian-based AmBank (M) Berhad sought to bankrupt Mr Raymond Yong after he failed to settle the debt for underwriting loans to two Malaysian firms.

In throwing out the bank's case, the Court of Appeal ruled that AmBank needed to have a valid judgment in its possession that could be enforced in Singapore.

Although the bank obtained a judgment in Malaysia against Mr Yong in 1988, it applied to register the judgment for enforcement here only in 1994.

For almost 12 years after that application, AmBank took no steps to enforce the judgment. The time lapse made the judgment invalid for enforcement by the time the bank applied to make Mr Yong a bankrupt in 2006, said the court.

The application could not therefore proceed without the bank seeking permission from the court - a procedure known as seeking leave of the court.

The deadline for a valid judgment to be enforced is six years and after this time period, the applicant has to return to court and explain why it delayed the case for so long.

Only if the court is convinced will it give leave for the claim to be pursued.

The bank did not do so but argued that its claim, having been registered in Singapore, was 'capable' of being enforced and that it did not have to ask for 'leave from the court' to take bankruptcy action against Mr Yong.

AmBank's lawyers also said the referred rules of court did not apply to bankruptcy proceedings.

The Court of Appeal in the grounds for its decision published yesterday rejected the bank's claim.

The court also noted that this was the first time the relevant section, 61(1)(d) of the Bankruptcy Act, had been interpreted by the courts here.

Justice V.K. Rajah said it did not follow that a foreign debt was converted to a local debt because a foreign judgment is converted to a Singapore judgment.

This means that foreign debts are to be treated as foreign debts and the relevant section of the Bankruptcy Act applies.

The court explained that applying for leave to start bankruptcy proceedings meant the bank could then explain why it had taken so long to take Mr Yong to court.

But the Judge of Appeal also made clear that if the debtor could show he had been misled by the creditor's inaction, it would be 'highly unlikely' the bank would succeed in convincing the court to obtain leave to pursue its bankruptcy claim.

Justice Rajah said the bank must seek the court's leave to make this claim on Mr Yong, especially since bankruptcy is a 'draconian' move and very detrimental to the status of those made bankrupt.

He also said the court was adopting this approach to put into effect Parliament's intention of giving 'some added protection against foreign creditors commencing bankruptcy applications based on foreign debts'.

This article was first published in The Straits Times on January 29, 2009.