1.

Can the executors wind up an estate if the money in the estate is lesser than the
value owed to creditors? Will it make a difference if the executors have taken a view
on affidavit that the estate has x number of shares in a company (but now shares
disposed of). Are executors compelled to sue for these lost shares?

Firstly, the three legislation that provides for the administration of an insolvent estate are
namely,

1. Civil Law Act Section 4(1), (CLA)

(1) In the administration by any Court of the assets of any deceased person whose
estate proves to be insufficient for the payment in full of his debts and
liabilities, and in the winding up of any company under any law from time to
time in force relating to companies, whose assets prove to be insufficient for the
payment of its debts and liabilities, and the costs of winding up, the same rules
shall prevail and be observed, as to the respective rights of secured and
unsecured creditors, and as to debts and liabilities provable, and as to the
valuation of annuities and future and contingent liabilities respectively, as are in
force for the time being, under the law of bankruptcy, with respect to the estates
of persons adjudged bankrupt.

2. Insolvency Act Section 122, (IA)

122. (1) Unless the context otherwise requires, “creditor” in this section means one or
more creditors qualified to present a bankruptcy petition as in this Act provided.
(2) Any creditor of a deceased debtor whose debt would have been sufficient to
support a bankruptcy petition against the debtor had he been alive, may present to
the court a petition in the prescribed form praying for an order for the
administration of the
estate of the deceased debtor according to the law of bankruptcy.
(3) The Director General of Insolvency may present to the court a petition in the
prescribed form praying for an order for the administration in bankruptcy of the
estate of any deceased
debtor.

The Courts recognise that the Deceased is capable of dying insolvent, in such circumstance,
CLA provides that the rules of the law of bankruptcy would apply the same in the
administration of an insolvent estate. The IA recognizes the right of creditors to petition for
the administration of an insolvent estate while the PAA set out the guideline in administering
the estate of an insolvent.

The law in Malaysia does not expressly confer the right to petition for an order for the
administration of the insolvent estate. However, in regard to the duties of administrator in
an insolvent estate, Chin & Sons Realty Sdn Bhd v Lee Choy Wan [2007] 1 LNS 270 provides
that
 “8. Section 68(2) of the Probate and Administration Act 1959 (the Act), 1959 provides
that:-

“...the personal representatives shall pay all such funeral, testamentary and
administration expenses, debts and other liabilities as are properly payable
thereout...”

Section 69(3) of the Act provides that:-

“Where the estate of a deceased person is solvent his estate shall be applicable
towards the discharge of the funeral, testamentary and administration expenses,
debts and liabilities payable thereout...”

The grant of letters of administration and sections 67, 68 and 69 of the Probate and
Administration Act 1959 (the Act) provide that the executor is, amongst other
things, to pay out of the estate the debts and other liabilities as are payable.
Payable debts must in law be the just or lawful debts of the deceased.”

Even before probate is extracted, the Executor may, “(x )Present a petition in bankruptcy as
executor or testator's creditor or to wind up a limited company before probate ” as held in
the case Of Juita Latip v. Abdul Wahab Jong & Anor [2012] 10 CLJ 463.

In Ligar Fernandez v Eric Claude Cooke [2002] 5 MLJ 177, the Court set forth the principal
duties of an executor,

“The principal duties of an executor are to get in the assets of the deceased, to
pay his debts, to pay the legacies given by the will, and to distribute the assets.
If a testator appoints the same person his executor and his trustee, which is usual
nowadays, then that person acts as executor when he performs executorial duties,
and thereafter while he continues to hold the property he is a trustee thereof.
However, even though he thus becomes a trustee, his capacity as executor still
remains, in so far as he may be called upon at any future time to deal in his capacity
as executor with any assets which may subsequently be discovered in the estate.”

Therefore, the law does not restrict the Executor in carrying out his duties to pay the
Estate’s debts via applying for an insolvency administration pursuant to Section 69 of
the PAA of the estate to pay off his debts.

UK position: In the UK,

The UK expressly provides for the executor to apply for an insolvency administration order
(IAO) under the Administration of Insolvent Estates of Deceased Persons Order 1986
(AIEDPO86) (no equivalent in Malaysia).

here a person dies before a bankruptcy petition has been presented, a petition for an
insolvency administration order can be presented to the court by;
 1. a creditor or creditors jointly,
2. the deceased's personal representative,
3. a temporary administrator (within the meaning of Article 38 of the EC Regulation on
Insolvency Proceedings),

4. a liquidator appointed in proceedings by virtue of Article 3(1) of the EC Regulation on

Insolvency Proceedings,
5. where the deceased entered into a voluntary arrangement, the supervisor of that
arrangement or a creditor bound by it,
6. the official petitioner, where the deceased person was subject to a criminal
bankruptcy order.

Where the petition is presented by a creditor or personal representative the court must be
shown that it is reasonably probable that the estate is insolvent before an insolvency
administration order will be granted.

In Re Estate of Platon Elenin (aka Boris Abramovich Berezovsky); Subnom Lockston Group Inc
v Wood [2016] 1 WLR 2091, the UK Courts held that legal framework in the administration of
an insolvent estate.

“10 There are three ways in which the insolvent estate of a deceased person may be
administered. First, if a bankruptcy order has been made, or a creditor’s bankruptcy
petition has been presented, before the date of death, the proceedings continue,
unless the court otherwise orders, as if the debtor were alive, with the small number
of modifications to the Insolvency Act 1986 (“the Act”) specified in Schedule 2 to the
1986 Order: see article 5. Secondly, in the case of death before the presentation
of a bankruptcy petition, the estate may be administered in bankruptcy on the
making of an IAO. In such a case, a large number of the provisions relating to
bankruptcy in the Act apply, but with significant modifications: Article 3 of the
1986 Order. Thirdly, the estate may be administered otherwise than in bankruptcy, in
which case, subject to very limited exceptions, article 4(1) of the 1986 Order.”

Is an executor compelled to sue for lost shares?

In regard to the scope of what an action an executor can commence after the death of the
deceased, all cause of action section 59 provides that the executor may exercise the same
power of the decease for all surviving cause of action including the initiation of bankruptcy
proceedings. This was accepted and upheld in Khor Boon Hoch (trading as Jiann Wei
Foundry) v Tong Beng Han (in the capacity as executor of the estate of Tang Kah Choo,
deceased) [2016] 8 MLJ 664 where the Court held,

“[30] In this regard, I noted that s 59 of the Probate and Administration Act 1959
provides as follows:
 59 Rights of action of personal representative

Subject to any other written law, a personal representative has the same powers to
sue in respect of all causes of action that survive the deceased, and may exercise the
same power for the recovery of debts due to him at the time of his death as the
deceased had when living.

Hence the judgment creditor in his capacity as the executor of the estate of Tang Kah
Hoo may commence any legal proceeding including the initiation of bankruptcy
proceedings to recover the debt due to the deceased: see also Khoo Kay Hock v E J
Ketting [1978] 2 MLJ 57 (FC).”

2. Do beneficiaries have to discharge executors of their duties?

Generally, executors cannot be compelled to act specifically for a cause of action on behalf
of an Estate. Otherwise, the only legal obligations an executor ought to carry out are
provided in Section 67,68 and 69 of the PAA. In this regard, if the beneficiaries are unsatisfied
with the action/inaction of the executor, the beneficiaries may apply to Court pursuant to
section 34 of the PAA for the revocation of the probate.

In Ligar Fernandez v Eric Claude Cooke [2002] 5 MLJ 177, the Court set forth the principal
duties of an executor, the court explained the rubrics of Section 34,

“The reliefs sought by the plaintiff here is two pronged. One is for the revocation of
the probate and the other is for the removal of the defendant as executor and
trustee under the will. The first relief is provided by statute under s 34 of the Probate
and Administration Act 1959 ('the PAA') which states:

Any probate or letters of administration may be revoked or amended for any

sufficient cause.

In Damayanti Kantilal Doshi & Ors v Jigarlal Katilal Doshi & Ors [1998] 4 MLJ 268, it
was held by the Court of Appeal that 'the phrase "sufficient cause'' has not been
defined, but the courts have always considered the welfare and interests of the
beneficiaries of an estate as the paramount criterion in deciding whether or not there
is sufficient cause to interfere. This is strictly an objective test'. The Court of Appeal
had applied the same test as relied upon by an earlier Federal Court decision in Re
Khoo Boo Gong, decd Khoo Theng Seong v Teoh Chooi Ghim & Ors [1981] 2 MLJ 68.

Mr TS Marbeck, learned counsel for the plaintiff, had referred to the definition of
'sufficient cause' according to Black's Law Dictionarywhich defined it as:
Such cause as to hold the defendant to answer charges is reasonable or probable
cause or that state of facts as would lead a man of ordinary caution to
conscientiously entertain a strong suspicion of defendant's guilt. (Emphasis added.)

Learned counsel had argued, and I accept, that applying the objective test, all that is
needed is for the plaintiff to adduce sufficient evidence to raise a strong
suspicion of the defendant's inaction, want of diligence and honesty, or a
conflict of interest situation or inability to act to invoke this court's jurisdiction
under s 34 of the PAA and allow the reliefs sought. The allegations for
consideration are thus, a question of facts to be determined by this court on an
objective test.”