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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(COMMERCIAL DIVISION)
WINDING-UP PETITION NO: 28NCC-60-01/2014
URBAN DOMAIN SDN. BHD
v.
PINS OSC & MAINTENANCE SERVICES SDN. BHD.
GROUNDS OF JUDGMENT
The Petition
Enclosure 1 is the Petition filed by the Petitioner dated 27.1.2014
pursuant to section 218 (1)(i) of the Companies Act 1965 (CA).
The Petitioner prays for the following:
“ (i)
that PINS OSC & Maintenance Services Sdn. Bhd. (Company No.
723800-A) be wound up under the provisions of the Companies
Act, 1965;
(ii)
that Chong Chuan Long (NRIC No. 710625-10-5475) [Approval
No. 2681/01/14 (J/PH)] of CL Chong & Co., Chartered
Accountants of 12-1A, Jalan Perdana 4/3, Pandan Perdana,
55300 Kuala Lumpur be appointed as the Liquidator of the
Respondent Company;
(iii)
that the remuneration of the Liquidator of the Respondent
Company shall be on a time-cost basis or as provided under the
Companies Act, 1965 and the Companies (Winding-Up) Rules,
1972 and be paid out of the assets of the Respondent Company;
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(v)
that the costs of this Petition be taxed by the proper officer of the
Court and be paid out of the assets of the Respondent Company
to your Petitioner; and
(vi)
such other reliefs as deemed reasonable and appropriate by this
Honorable Court.”.
The Affidavits
(i)
Affidavit verifying the Petition by Dr. Haji Ahmad Kamal Bin
Zakaria dated 20.2.2014 (“Petitioner Affidavit Number 1”).
(ii)
Affidavit in Reply affirmed by Zadey Che Wan on behalf of
the opposing contributory, Perak Integrated Network Services
Sdn. Bhd. (“PINS”) dated 24.3.2014 (“Opposing Contributory
Affidavit Number 1”).
(iii)
The Affidavit to oppose the Winding up affirmed by
Muhammad Noor Aswadi Bin Arawi on behalf of the opposing
creditor Sumber Bayu Enterprise dated 25.3.2014 (“Opposing
Creditor Number 1 Affidavit”).
(iv)
The Affidavit to oppose the Winding up affirmed by Ong Boon
Poh on behalf of the opposing creditor Sutera Impian Sdn.
Bhd. dated 25.3.2014 (“Opposing Creditor Number 2
Affidavit”).
(v)
The Affidavit to oppose the Winding up affirmed by Ahmad
Zulkifli Bin Hj. Samsudin on behalf of the opposing creditor
Productive Plus (M) Sdn. Bhd. dated 25.3.2014 (“Opposing
Creditor Number 3 Affidavit”).
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(vi)
The Affidavit to oppose the Winding up affirmed by Harisun
Binti Kassim on behalf of the opposing creditor Inovatif
Jentayu Sdn. Bhd. dated 26.3.2014 (“Opposing Creditor
Number 4 Affidavit”).
(vii) Affidavit in Reply to Opposing Contributory Affidavit Number
1 affirmed by Dr. Haji Ahmad Kamal Bin Zakaria dated
27.3.2014 (“Petitioner Affidavit Number 2”).
(viii) Affidavit in Reply to all four opposing creditors’ Affidavit
affirmed by Dr. Haji Ahmad Kamal Bin Zakaria dated
28.3.2014 (“Petitioner Affidavit Number 3”).
(ix)
Affidavit in Reply affirmed by Zadey Che Wan’s dated
3.4.2014 (“Opposing Contributory Affidavit Number 2”).
(x)
Affidavit in Reply to Opposing Contributory Affidavit Number
2 affirmed by Dr. Haji Ahmad Kamal Bin Zakaria dated
17.4.2014 (“Petitioner Affidavit Number 4).
Background
The nominal capital of the Respondent Company is RM100,000.00
divided into 100,000 ordinary shares of RM1.00 each. The amount
of the capital paid up or credited as paid up is RM100,000.00. The
objects for which the Respondent Company was established are as
contained in the Memorandum of Association,
(i)
to carry on business, and to act as merchants, general
traders, commission agents, carriers, or in any other
capacity, in Malaysia or elsewhere, and to import,
export, buy, sell, barter, exchange, pledge, make
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advance upon, or otherwise deal in goods, produce,
articles and merchandise;
(ii)
to carry on the trade or business of builders and
contractors for construction work of any kind and for the
demolition of any structure; and
(iii)
to carry on the business of an investment company and
for that purpose to acquire and hold either in the name
of the company or in that of any nominee shares, lands,
buildings, stocks, debentures, debenture stock, bonds,
notes, obligations and securities issued or guaranteed
by any company wherever incorporated or carrying on
business.
The initial shareholders of the Respondent Company were two
individuals by the name of Salasiah Binti Mohd Said (NRIC No.
720125-10-5750) and Asiah Binti Osman (NRIC No. 600123-106294) who each held one (1) shares in the Respondent Company.
Pursuant to Shareholders Agreement dated 21.5.2007 (SA) entered
between the Petitioner on one hand and a company known as
Perak Integrated Network Services Sdn. Bhd. (Company No.
522474-U) (“PINS”) on the other hand, PINS subscribed 50,000
ordinary shares of RM1.00 each in the Respondent Company
which is equivalent to 50% of the paid-up capital of the Company
whilst the Petitioner subscribed 49,998 ordinary shares of RM1.00
each in the Respondent Company and purchased from the then
shareholders of the Respondent Company 2 ordinary shares of
RM1.00 each, which in total is equivalent to 50% of the paid-up
capital of the Respondent Company.
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The SA sets out the terms of the agreement between the Petitioner
and PINS with regard to the organization, management and
operation of the Respondent Company. The SA also specified
the relationship between the Petitioner and PINS shareholders
of the Respondent Company. A Management Agreement dated
21.5.2007 (MA) was entered between the Petitioner and PINS,
the Respondent Company and another company known as PINS
Capital Sdn. Bhd. (Company No. 732370-P) (“PINS Capital”).
Pursuant to the MA, the Respondent Company was appointed
to undertake and perform works and services forming part of
the works agreed to be exclusively undertaken by PINS under a
Concession Agreement entered into with the Kerajaan Negeri Perak
Darul Ridzuan (“the Concession Agreement”). In the Concession
Agreement the construction services and maintenance services are
described as follows:“ (a) Construction services which inter alia involved the following:
(i)
Monitoring the construction of telecommunication towers and
new broadcasting/broadband structure (“Infrastructures”) in
the State of Perak,
(ii)
Identifying sites for the location of the Infrastructure and
negotiating with landowners on the rental terms;
(iii) Ensuring
the
construction
of
the
Infrastructures
in
accordance with specifications prescribed by the operators
of telecommunication and broadband services namely
Maxis Broadband Sdn Bhd, Celcom (Malaysia) Berhad
and Digi Telecommunication Sdn Bhd (collectively as “the
Operators”);
(iv) Making payment of all upfront capital costs and related
expenses for the construction and completion of the
Infrastructures; and
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(v)
Making payment of all agreed liquidated damages to the
Operators in the event PINS and/or the Respondent
Company is/are made liable for the payment of agreed
liquidated damages pursuant to the terms of a Licence
Agreement dated 1.6.2006 entered into between PINS
and the Operators vide which PINS licensed the use of
the Infrastructures to the Operators (“Licence Agreement”).
(b)
Maintenance services which inter alia involved the following:
(i)
Ensuring the satisfactory maintenance of Infrastructures in
accordance with the terms of the Licence Agreement;
(ii)
Assisting PINS in liaising with the Operators regarding the
construction and maintenance of the Infrastructures and with
the Malaysia Communications And Multimedia Commission
(“MCMC”) and other relevant bodies or authorities on
licensing compliance and other issues;
(iii) Assisting PINS in all negotiations with the Operators;
(iv) Assisting PINS to observe and performs PINS’ obligations
under the Concession Agreement, the Licence Agreement
and the tenancy agreements with the landlords of sites on
which the Infrastructures will be erected;
(v)
Assisting PINS in resolving any dispute between PINS and
the State Government and /or the Operators;
(vi) Making payment of all agreed liquidated damages to the
Operators in the event PINS is made liable for the payment
of agreed liquidated damages pursuant to the terms of the
Licence Agreement; and
(vii) Ensuring the efficient management of day to day operations
of the construction, completion and maintenance works of
the Infrastructures;
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(c) One Stop Centre services which inter alia involved the following:
(i)
Acting as facilitator for the compliance submission for
location and construction of new Infrastructures on behalf of
the State Government and telecommunication providers with
other state agencies or other relevant authorities;
(ii)
Carrying out surveillance of maintenance works including
repair and safety audit of the Infrastructures; and
(iii) Maintaining and creating a database for the collection of
data on Infrastructures in the State of Perak for the purpose
of information sharing with the State Government. ”.
A First Supplemental Management Agreement dated 27.5.2007
was subsequently executed between the Petitioner, PINS, the
Respondent Company and PINS Capital (“1st Supplemental
Management Agreement”). The 1st Supplemental Management
Agreement provides for the fees to be paid by PINS to the
Respondent Company for the works and services under the MA.
It is contended that PINS breached the MA as well as the
1st Supplemental Management Agreement by failing to pay to
the Respondent Company the fees which it had agreed to pay
pursuant to the 1st Supplemental Management Agreement.
The Petitioner then filed a derivative action on behalf of the
Respondent Company in Kuala Lumpur High Court Suit No. 22NCC
-1041-07/2012 (“the Suit”) against PINS and another party being
one Dato’ Seri Dr. Abdullah Fadzil Che Wan, who is a director of
both the Respondent Company and PINS. The Respondent
Company was made the 1st Defendant in the Suit. On 26.9.2013 the
Court in the Suit gave judgment in favor of the Petitioner against
PINS.
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The Petitioner contends that the Respondent Company has not
been trading since its functions under the MA and/or the 1st
Supplemental Management Agreement were taken over completely
by PINS. The Petitioner further contends that the Respondent
Company does not have, at present, any employee. Due to the
abovementioned reason, it is contended by the Petitioner that the
reasons as stated above had caused the substratum of the
Respondent Company to disappear and the foundational purpose of
the Respondent Company’s incorporation to come to an end. It is
therefore contended that it is just and equitable to wound up the
Respondent Company.
The Grounds
It is the contention of the Petitioner that it is just and equitable for
the Respondent to be wound up on the following grounds:1.
The substratum of the Respondent and the purpose of
the incorporation of the said Respondent no longer
exists.
2.
The sole purpose that the 2 shareholders took equity in
the company no longer exists.
3.
The 2 shareholders are involved in pending litigation.
4.
The 2 directors of the Respondent, that is, Dr. Haji
Ahmad Kamal bin Zakaria and Dr. Abdullah Fadzil
Che Wan, can no longer get along. Both cannot
continue to participate together in any form of business
enterprise.
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Parties opposing the Petition
A total of 5 parties opposed the Petition, PINS (opposing
contributory) as well as 4 others creditors,
(i)
Sutera Impian Sdn. Bhd.;
(ii)
Productive Plus (M) Sdn. Bhd.;
(iii)
Sumber Bayu Enterprise; and
(iv)
Jentayu Sdn. Bhd.
The Petitioner’s Submissions
The Petitioner and PINS (the opposing contributory) are the 2
equal shareholders in the Respondent Company. Dr. Abdullah
Fadzil Che Wan was nominated by PINS as a director and Dr. Haji
Ahmad Kamal bin Zakaria was nominated by the Petitioner as a
director. Dr. Abdullah Fadzil Che Wan holds 90% shares of
PINS and 45% of the Respondent.
Pursuant to the SA, the parties had agreed that the purpose of the
Respondent is to provide construction services, maintenance
services and OSC services as defined in the Management
Agreement entered between the Petitioner and
PINS dated
21.5.2007. PINS then appointed the Respondent to provide the
aforesaid services.
Dr. Abdullah Fadzil Che Wan opposed the Petition through PINS.
It is argued by the Petitioner that no solicitor was appointed to
represent the Respondent as no Board of Directors meeting was
called due to the dispute.
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A dispute arose between the Respondent and PINS with regard to
non-payment of fees by PINS to the Respondent. It is contended
by the Petitioner that PINS breached the MA and the first
Supplemental Agreement when it failed to pay the fees to the
Respondent. The Petitioner filed a derivative action on behalf of
the Respondent against PINS and Dr. Abdullah Fadzil Che Wan
vide 22NCC-1041-07/2012. On 26.9.2013 the High Court gave
judgment in favour of the Petitioner and the Respondent against
PINS. However, the said suit is now pending appeal to the Court
of Appeal.
It is further contended that the Respondent has not been
operational since it was taken over by PINS in 2011 and that
the Respondent currently does not even have any employee.
The Petitioner further argued that all the allegation by PINS and
the 4 creditors in respect of the same priority payments are without
merit.
The Law
Section 218(1) of the same Act list out the circumstances a
Company may be wound up by an order of the Court if:“ (a) the company has by special resolution resolved that it be wound
up by the Court;
(b)
default is made by the company in lodging the statutory report or
in holding the statutory meeting;
(c)
the company does not commence business within a year from its
incorporation or suspends its business for a whole year;
(d)
the number of members is reduced in the case of a company
(other than a company the whole of the issued shares in which
are held by a holding company) below two;
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(e)
the company is unable to pay its debts;
(f)
the directors have acted in the affairs of the company in their own
interests rather than in the interests of the members as a whole,
or in any manner whatsoever which appears to be unfair or unjust
to other members;
(g)
an inspector appointed under Part IX has reported that is of
opinion:-
(h)
(i)
that the company cannot pay its debts.....; or
(ii)
that it is in the interest of the public or shareholder.....
when the period, if any, fixed for the duration of the company by
the memorandum or articles expires or the event, if any,
occurs..........;
(i)
the court is of the opinion that it is just and equitable that the
company be wound up;
(j)
the company held a license under the Banking and Financial
Institutions Act 1989 or the Islamic Banking Act 1983 and that
license has been revoked or surrendered;
(k)
the company has carried on Islamic banking business...in
contravention of the Islamic Banking Act 1983 or the Banking and
Financial Institutions Act 1989, as the case may be;
(l)
the company has held a license under the Insurance Act 1966
and:(i)
the license has been revoked;
(ii)
Bank Negara has petitioned for its winding up...
(iii) an order under paragraph 59(4)(b) of the Insurance Act 1966
has been made...
(m) the company is being used for unlawful purposes......; and
(n)
the company is being used to any purpose prejudicial…”.
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Lord Wilberforce in Ebrahimi v. Westborne Galleries [1873] AC
360 (cited with approval in Tien Ik Enterprise Sdn. Bhd. & Ors v.
Woodsville Sdn. Bhd. [1995] 1 LNS 99; [1995] 2 AMR 1033) at p.
379 observed,
“ …The foundation of it all lies in the words “just and equitable” and,
if there is any respect in which some of the cases may be open to
criticism, it is that the courts may sometimes have been too timorous
in giving them full force. The words are a recognition of the fact
that a limited company is more than a mere legal entity, with a
personality in law of its own; that there is room in company law
for recognition of the fact that behind it, or amongst it, there are
individuals, with rights, expectations and obligations inter se which
are not necessarily submerged in the company structure. That
structure is defined by the Companies Act and by the articles of
association by which shareholders agree to be bound. In most
companies and in most contexts, this definition is sufficient and
exhaustive, equally so whether the company is large or small. The
“just and equitable” provision does not, as the respondents suggest,
entitle one party to disregard the obligation he assumes by entering
a company, nor the court to dispense him from it. It does, as equity
always does, enable the court to subject the exercise of legal rights
to equitable considerations: considerations, that is, of a personal
character arising between one individual and another, which may
make it unjust, or inequitable, to insist on legal rights, or to exercise
them in a particular way. It would be impossible, and wholly
undesirable, to define the circumstances in which these considerations
may arise. Certainly the fact that a company is a small one, or a
private company, is not enough. There are very many of these where
the association is adequately and exhaustively laid down in the
articles. The super imposition of equitable considerations requires
something more, which typically may include one, or probably more, of
the following elements:
(i)
an association formed or continued on the basis of a personal
relationship, involving mutual confidence - this element will
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often be found where a pre-existing partnership has been
converted into a limited company;
(ii)
an agreement, or understanding, that all, or some (for there may
be “sleeping” members), of the shareholders shall participate in
the conduct of the business;
(iii) restriction upon the transfer of the members’ interest in the
company so that if confidence is lost, or one member is
removed from management, he cannot take out his stake and
go elsewhere. It is these, and analogous factors which may
bring into play the just and equitable clause, and they do so
directly, through the force of the words themselves.”.
Ramly J (as his Lordship then was) in Eng Man Hin @ Ng Mun
Heng & Anor v. King’s Confectionery Sdn. Bhd. [2005] 8 CLJ
77; [2006] 4 MLJ 421 said,
“ The court is of the view that it is not sufficient for the Petitioners to
allege a mere intention in order to discharge their evidential burden.
The Petitioners have the burden to prove the followings:
(1)
That the 1st Respondent Company is an ‘Ebrahimi’ type of
company or a quasi-partnership company;
(2)
That there is in existence a specific identifiable legitimate
expectation that the petitioners are entitled to the alleged
sharing of management control; and
(3)
That there has been a breach of this agreement or
understanding relating to this legitimate expectation which
according to established principles of equity, the court finds
it just and equitable to restrain.
An ‘Ebrahimi’ type of company is a ‘quasi-partnership’ company having
the following three elements, namely:
(i) An association formed or continued on the basis of a personal
relationship involving mutual confidence;
(ii) An agreement or understanding that all or some of the
shareholders shall participate in the conduct of the business; and
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(iii) Restriction upon transfer of the members interests so that if
confidence is lost or one member is removed from management,
he cannot take out his stake and go elsewhere.
(See the decision of Lord Wilberforce in Ebrahimi v. Westbourne
Galleries Ltd [1973] AC 360 at p 370).
It is an established principle of law that the courts will subject
the exercise of legal rights to equitable considerations in given
circumstances. There is no universal formula to determine the
circumstances under which the courts will do so. Lord Wilberforce in
Ebrahimi’s case, provided an illustrations as to the circumstances
whereby the courts will do so. The case for giving effect to equitable
considerations must be made in each instance and it is not sufficient
simply to assert that the company is small or private, for in many cases
the basis of the relationship will be adequately and exhaustively laid
down in the Articles of Association of the company. If it is so defined
by the Articles of Association or supplemented by a shareholders'
agreement, then there is little room for founding further legitimate
expectation beyond those outlined in the documents, (see also
Company Law by Farrar (3rd Ed, 1991 at pp 464 - 465).”.
Abdul Malik, J in Gulf Business Construction (M) Sdn. Bhd. v.
Israq Holding Sdn. Bhd. listed out the illustrations for ‘just and
equitable’ as follows,
“ What is just and equitable would vary from case to case. Thus, a
company may be wound-up where it is just and equitable that the
company should be wound-up. So many reasons can be advanced to
wind-up a company under the just and equitable principle, and the
following illustrations would suffice:
(a)
where the substratum of the company has gone;
(b)
where the company’s main object for its existence has lapsed;
(c)
where the principal object of setting up the company can no
longer be achieved;
(d)
where the company’s only business is ultra vires the company;
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(e)
where the company is carrying on its business at a loss and the
remaining assets of the company are insufficient to pay its debts;
(f)
where there is no reasonable hope of ultimate profit for the
company;
(g)
where the relationship of the parties in the company has broken
down irretrievably;
(h)
where there is a lack of confidence among the shareholders that
threaten the very existence of the company; and
(i)
where the winding-up of the company would open the door to
investigate the misconduct of the directors or promoters of the
company).”.
The winding up Court can determine whether or not there is a bona
fide dispute, consider all the evidence and finally determine whether
to order the winding up or not. In the case of Morgan Guaranty
Trust Co of New York v. Lian Seng Properties Sdn. Bhd. [1991]
1 CLJ 317 (Rep); [1991] 1 CLJ 260; [1991] 1 MLJ 95, where at p.
97 Hashim Yeop A. Sani, CJ (Malaya) said:
“ There are many tests to be applied to see whether a petitioner for a
winding-up order has locus standi. Insolvency is always a ground
relied on in a petition. Prima facie an unpaid creditor is entitled to
petition for a winding-up order against a company which fails to pay its
debt. Macpherson says that the only test which seems capable of
resolving all difficulties is that suggested by Grossman J in Re North
Bucks Furniture Depositories Ltd [1939] 2 All ER 549, namely, that the
term ‘creditor’ ‘includes every person who has the right to prove in
winding-up’. Looking at the grounds given in the petition in the instant
case it is clear to us that the petition should not have been struck out in
limine and should have been heard on its merits. This was the
approach of this court in Chip Yew Brick Works Sdn Bhd v. Chang Hee
Enterprise Sdn Bhd [1988] 1 CLJ 5 (Rep); [1988] 2 CLJ 424. The
appellant should not be prevented from pursuing its petition so that the
court would be able to consider all evidence and determine whether it
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should exercise its discretion to order winding-up or not. Relevant to
this appeal is that part of the judgment in Chip Yew Brick Works Sdn
Bhd v. Chang Hee Enterprise Sdn Bhd [1988] 1 CLJ 5 (Rep); [1988]
2 CLJ 424 which appears at p. 425:
Even where the whole amount of debt claimed is disputed, the
court can allow evidence to be adduced to enable it to consider
whether or not there was a bona fide dispute and the court is
competent to go into the evidence to consider that question for
the purpose ultimately of determining whether it should exercise
the discretion: Re Welsh Brick Industries Ltd [1946] 2 All ER
197.”.
Ramly Ali J (as he then was) in his judgment in Wong Thai Kuai
& Anor v. Kansas Corporation Sdn. Bhd. (2007) 3 LCJ 263 said
that the right to have a company wound up is a right which belongs
not to the Petitioner alone but to all the class of unsecured creditors.
His Lordship referred to the case of Pilecon Engineering Bhd v.
Remaja Jaya Sdn. Bhd. [1997] 1 MLJ 808 where the case of
Re:Crigglestone Coal Co. Ltd. [1906] 2 Ch. D 327 was referred.
Buckley J said at page 331,
“ The right ex debito justitiae is not his individual right, but his
representative right. If a majority of the class are opposed to his
view, and consider that they have a better chance getting payment
by abstaining from seizing the assets, then, upon general grounds
and upon section 91 of the Companies Act 1862, the Court gives
effect to such right as the majority of the class desire to exercise.
This is no exception. It is a recognition of the right, but affirms that
it is the right not of the individual, but of the class, that it is for
the majority to seek or to decline the order as best serves the
interest of their class. It is a matter upon which the majority of the
unsecured creditors are entitled to prevail, but on which the debtor
has no voice.”.
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In the case of Re ABC Couple & Engineering Co. Ltd. [1961] All
ER 354, the petition was opposed by a number of creditors whose
debts (disregarding those owed to the subsidiary companies of the
company) amount to £18,328 odd, that being a sum about £800
more than the debt owed to the petitioning creditors. It was said
by the learn judge Pennycuick J at p. 356 that,
“ It seems to me, however, that it must still be right, having regard to
the terms of section 346, to have regard to the wishes of the majority
of the creditors. Although those wishes may not be conclusive, they
still possess great weight, and it seems to me that, where the wishes
of the majority of the creditors are, on the face of them, reasonable,
the Court ought to follow those wishes in the absence of any special
circumstances.”.
Further, at p. 357, the judge went on to say that:
“ In all the circumstances, it seems to me that in the present case
the right course for me to take is to have regard to the wishes of
the majority in value of the creditors (disregarding the subsidiary
companies) and to refuse to make an order on the Petition.”.
In Kim Wah Theatre Sdn. Bhd v. Fahlum Development Sdn.
Bhd. [1990] 2 MLJ 511 Siti Norma Yaakob, J (as she then was)
said,
“ ....whilst continuing to recognize the Creditor’s prima facie right to a
winding up Order, there are instances where such right is subject to
the discretion provided by the language of section 221(1)A the
Companies Act 1965,....one such instances is where the Petition is
opposed by a majority of the creditors.”.
Therefore, in considering whether or not to allow this Petition filed
by the Petitioner, this Court must also consider the voice of the
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majority of creditors in the same class as the Petitioner, that is the
opposing creditors.
Decision and Reasons
In the instant Petition there are four opposing creditors opposing
the winding up Petition. The “just and equitable” winding up petition
is a drastic remedy, and a Court should be slow to allow such a
Petition. Winding up on just and equitable grounds is based on
equitable principles. The maxim, “he who comes to Court in equity
must come with clean hands” is therefore applicable. In assessing
whether it would be just and equitable to wind up on grounds of
the alledged deadlock, it is essential for the Court to consider who
has, in actual fact caused the deadlock.
The Privy Council (PC) in Re Semantan Estate (1952) Ltd. [1965]
MLK 238 PC Lord Donovan delivering the judgment of the PC held
that,
“ The question whether such deadlock exists makes it just and equitable
to wind up the company up is a question predominantly of fact in
each case. The principle is clear that if the Court is satisfied complete
deadlock exists in the management of the company the jurisdiction will
be exercised.”.
Lord Shaw in Lock & Amor v. John Balckwood Ltd. [1924] AC
783 PC in delivering the judgment of the Board held that,
“ ....the foundation of application for winding up on the ‘just and
equitable’ rule there must lie a justifiable lack of confidence in the
conduct and management of the company’s affairs. But this lack of
confidence must be grounded on conduct of the directors, not in
regard to their private life or affairs, but in regard to the company’s
business.”.
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The Affidavit in Support of the Petition failed to prove that the
relationship of the parties in the Respondent Company has broken
down irretrievably.
This Court must also take into consideration the views of the
opposing creditors. It is submitted that Dr. Haji Ahmad Kamal
bin Zakaria failed to ensure that the Respondent Company’s
account was properly audited. As the director of the Respondent
Company in charge of auditing the accounts of the Respondent
Company, he should have ensured the preparation of audited
accounts. It is important also in considering such a Petition, that
the Petitioner relying on the just and equitable ground must not be
the author of the breakdown in confidence between him and the
other director and/or parties based on the Petition as well as the
Affidavits filed.
Furthermore, the opposing creditors argued that the Petitioner
being a 50% contributory of the Respondent Company in a
derivative action had obtained a judgment vide High Court Civil
suit No. 22NCC-1041-07/2012. However, the appeal against the
High Court’s decision in that suit is pending in the Court of
Appeal. It is, therefore, submitted that it is premature to compel
the Respondent Company to be wound up. In the event the
Respondent Company is able to recover all or any monies under
the aforesaid case then it would not be justified to wound up
the company. The Petitioner argued that the substrantum of
the company broke down in 2011. However, the Petitioner only
filed the Petition in 2014. In the on present case there is clearly
an inordinate delay in filing the Petition on the part of the Petitioner
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which was not explained in any of the Affidavits. The delay in
filing the Petition, would mean that the Petitioner had acquiesced
the conduct of the affairs of the company.
I am of the considered view that there are insufficient facts and
evidence to conclude that mutual trust and confidence between the
directors have irretrievably broken down. Furthermore due to lack
of facts and evidence this Court cannot ascertain who is the author
of the breakdown. I have also considered the view of the opposing
creditors and guided by the authorities and principles mentioned
above I therefore conclude that it is neither just nor equitable for the
Respondent Company to be wound up.
sdg.
( HASNAH BINTI DATO’ MOHAMMED HASHIM )
Judge
High Court of Malaya
Kuala Lumpur.
15th August 2014
21
Counsels:
For the Petitioner/Appellant:
Messrs. Dennis Nik & Wong
- K.W Leong
- S. Raven
- Y.L. Chau
For the Respondent/Respondent/Opposing Contributory:
Messrs. Vicknaraj, RD Rahman Rajesh Kumar & Associates
- Subarna Paul
- R.K. Sharma
- Adam Kiob
Messrs. Amrit & Co. for Opposing Creditors
- Amrit Pal Singh
- Fuzal