Pioneer Sun-Mix Concrete Sdn Bhd V. Pembinaan BYT Sdn Bhd [2007] 1 LNS 693 High Court (Kuala Lumpur).
Judgment of Dato’ Jeffrey Tan (Federal Court Judge) when his Lordship was sitting as a judge of the High Court of Malaya at Johor Baru as follows;
Only one issue was raised to oppose this petition for an order under section 218 of the Companies Act 1965 (Act)
Mr Liew Ten Sang for the Respondent contended that the said section 218 notice (see enclosure 2 exhibit B) was defective on account of the fact that it did not specify the particular circumstance under which it was issued. Mr Yong Chee Kong for the Petitioner replied that a section 218 notice could only be issued under section 218(1)(e), and that the said section 218 notice was identical to the section 218 notice that was held as valid and good by the former Federal Court in Sri Hartamas Development Sdn Bhd v. MBF Finance Bhd [1992] 1 CLJ 303 (Rep); [1992] 1 CLJ 637; [1992] 1 MLJ 313.
Mr Yong then cited the case of Malaysia Air Charter Co Sdn Bhd v. Petronas Dagangan Sdn Bhd [2000] 4 CLJ 437; [2000] 4 MLJ 657, and submitted that the court should give a liberal interpretation to section 218(2).
Section 218(1) of the Act specifies 11 circumstances in which a company may be wound up by court. One such circumstance is where “the company is unable to pay its debts”. And in relation only to that circumstance, section 218(2)(a) provides that a company shall be deemed to be unable to, pay its debts if “a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred ringgit then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorised requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor”. Section 218(2)(a) is only pertinent to circumstance (e), towards proof of only that circumstance, Other than circumstance (e), a section 218 notice has nothing to do with any of the other circumstances in which a company may be wound up by court. Since it is so self-evident that a section 218(2) notice can only relate to circumstance (e), there is no merit whatsoever in the argument that the instant notice was bad by reason that it did not specify the particular circumstance.
Since no other grounds were advanced to resist this petition and there is no reason not to do so, it is hereby ordered that the Respondent be wound up. It is further ordered that the Official Receiver be appointed the provisional liquidator of the Respondent.
Only one issue was raised to oppose this petition for an order under section 218 of the Companies Act 1965 (Act)
Mr Liew Ten Sang for the Respondent contended that the said section 218 notice (see enclosure 2 exhibit B) was defective on account of the fact that it did not specify the particular circumstance under which it was issued. Mr Yong Chee Kong for the Petitioner replied that a section 218 notice could only be issued under section 218(1)(e), and that the said section 218 notice was identical to the section 218 notice that was held as valid and good by the former Federal Court in Sri Hartamas Development Sdn Bhd v. MBF Finance Bhd [1992] 1 CLJ 303 (Rep); [1992] 1 CLJ 637; [1992] 1 MLJ 313.
Mr Yong then cited the case of Malaysia Air Charter Co Sdn Bhd v. Petronas Dagangan Sdn Bhd [2000] 4 CLJ 437; [2000] 4 MLJ 657, and submitted that the court should give a liberal interpretation to section 218(2).
Section 218(1) of the Act specifies 11 circumstances in which a company may be wound up by court. One such circumstance is where “the company is unable to pay its debts”. And in relation only to that circumstance, section 218(2)(a) provides that a company shall be deemed to be unable to, pay its debts if “a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred ringgit then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorised requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor”. Section 218(2)(a) is only pertinent to circumstance (e), towards proof of only that circumstance, Other than circumstance (e), a section 218 notice has nothing to do with any of the other circumstances in which a company may be wound up by court. Since it is so self-evident that a section 218(2) notice can only relate to circumstance (e), there is no merit whatsoever in the argument that the instant notice was bad by reason that it did not specify the particular circumstance.
Since no other grounds were advanced to resist this petition and there is no reason not to do so, it is hereby ordered that the Respondent be wound up. It is further ordered that the Official Receiver be appointed the provisional liquidator of the Respondent.
Issues:
Whether threatened winding up petition was an abuse of process of court which had no chance of success but would instead cause irreparable harm to company as a going concern.
Whether threatened winding up was not bona fide but for the ulterior purpose of preventing the company from recovering its dues from SM.
Held, allowing the application for the interim injunction:
(1) The plaintiff’’s application for a Fortuna injunction was allowed as D1’s proposed petition to wind up D2 not only had no prospect of success but would irreparably damage D2 as a going concern (see para 52).
(2) The facts clearly showed that D2 was at all material times a going concern making good pre-tax net profits and therefore it was not to D1’s interest as a shareholder and director of D2 to wind up the company. D1’s threat to wind up D2—made only after the plaintiff had filed the instant OS for a derivative action — was an abuse of process of court as it was to achieve the collateral purpose of denying D2 of the commissions due to it from Sutera Matra in which D1 had a proprietary and pecuniary interest. Clearly, D1’s interest to wind up D2 was not bona fide but an afterthought (see paras 35, 38, 40 & 50–51).
(3) D1 did not come to court with clean hands, yet he sought to invoke the equitable jurisdiction of the court to wind up D2 on ‘just and equitable’ grounds. Besides holding 50% of the shares in D2 he was also a director and shareholder of Sutera Matra which held up the payment of commissions that were payable to D2. D1 was clearly in a position of conflict of interest and was acting to D2’s detriment. It was untenable for D1 to argue that D2 would not be prejudiced if it was wound up as D2’s liquidator could pursue the claim against Sutera Matra (see paras 33–34, 36 & 39).
(4) The court did not find any legitimate grounds for D1 to assert that the relationship between himself and the plaintiff had so completely and irretrievably broken down that they could no longer work together to manage D2 and that it was just and equitable that D2 should be wound up. Their relationship might have soured or they might be at loggerheads but to say that it was completely impossible to mend their relationship for the sake of D2 was premature (see para 42).
Whether threatened winding up petition was an abuse of process of court which had no chance of success but would instead cause irreparable harm to company as a going concern.
Whether threatened winding up was not bona fide but for the ulterior purpose of preventing the company from recovering its dues from SM.
Held, allowing the application for the interim injunction:
(1) The plaintiff’’s application for a Fortuna injunction was allowed as D1’s proposed petition to wind up D2 not only had no prospect of success but would irreparably damage D2 as a going concern (see para 52).
(2) The facts clearly showed that D2 was at all material times a going concern making good pre-tax net profits and therefore it was not to D1’s interest as a shareholder and director of D2 to wind up the company. D1’s threat to wind up D2—made only after the plaintiff had filed the instant OS for a derivative action — was an abuse of process of court as it was to achieve the collateral purpose of denying D2 of the commissions due to it from Sutera Matra in which D1 had a proprietary and pecuniary interest. Clearly, D1’s interest to wind up D2 was not bona fide but an afterthought (see paras 35, 38, 40 & 50–51).
(3) D1 did not come to court with clean hands, yet he sought to invoke the equitable jurisdiction of the court to wind up D2 on ‘just and equitable’ grounds. Besides holding 50% of the shares in D2 he was also a director and shareholder of Sutera Matra which held up the payment of commissions that were payable to D2. D1 was clearly in a position of conflict of interest and was acting to D2’s detriment. It was untenable for D1 to argue that D2 would not be prejudiced if it was wound up as D2’s liquidator could pursue the claim against Sutera Matra (see paras 33–34, 36 & 39).
(4) The court did not find any legitimate grounds for D1 to assert that the relationship between himself and the plaintiff had so completely and irretrievably broken down that they could no longer work together to manage D2 and that it was just and equitable that D2 should be wound up. Their relationship might have soured or they might be at loggerheads but to say that it was completely impossible to mend their relationship for the sake of D2 was premature (see para 42).