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2021 MarsdenLR 1136
HIGH COURT MALAYA SHAH ALAM
RE: LIM BENG GUAN (ENCLS 6)
[Originating Summons No: BA-28JM-11-08/2020]
A judicial management application may be struck out if it fails to disclose a reasonable cause of action and lacks sufficient details for rehabilitation prospects of the company.
Headnote:(A) Companies Act 2016 – Section 405 – Rules of Procedure 2012 – O 18 r 19 – Judicial management application – Application for striking out the originating summons for judicial management was granted as it disclosed no reasonable cause of action; the Applicant failed to provide sufficient details on the company's rehabilitation prospects – The judgement highlighted principles regarding striking out applications under O 18 r 19, emphasizing that such applications may be allowed when claims are plainly unsustainable. (Paras 5, 6.1.1, 6.1.2).
Facts of the case: The Applicant, a creditor, initiated a judicial management application for an investment holding company facing winding-up petitions, but failed to substantiate claims for rehabilitation.
Findings of Court: The application lacked a reasonable cause of action and the court deemed it to be an attempt to delay proceedings.
Issues: The court assessed whether the case warranted a striking out order due to lack of basis for the judicial management order.
Ratio Decidendi: Insufficient details were provided to show that the company could be rehabilitated or that there was any public interest.
Result: Application to strike out the originating summon was granted. (Paras 3, 6.2.1)
JUDGMENT
Introduction
[1] Enclosure 6 (BA-28JM-9-08/2020) is a Notice of Application filed by Roti-Roti International Sdn Bhd pursuant to O 18 r 19 (1) (a) of the Rules of 2012 for an Order, inter alia that the Originating Summons (Ex-Parte) dated 24 August 2020 (encl 1) filed by Lim Beng Guan for Roti-Roti International Sdn Bhd be placed under Judicial Management be struck out.
Brief Facts
[2] The facts of the case may be summarised as follows:
2.1 The Applicant is a creditor of Adventure Driven Sdn Bhd ("ADSB") of RM2,227,488.05 being loans that were made to or payments made on behalf of the ADSB;
2.2 ADSB was incorporated on 23 November 2018 and essentially ADSB is an investment holding company. The directors and shareholders of ADSB are the Applicant and Mr Chen Khai Voon. Each of them hold one share in ADSB. The only asset of ADSB is its 1,000,001 shares in Papparich Gorup Sdn Bhd ("PGSB").
2.3 Mr Chen Khai Voon also holds the remaining issued shares of 999,999 shares in PGSB. PGSB is involved through its various subsidiaries including in particular Papparich Malaysia Sdn Bhd ("PMSB") as restaurant operators and franchisors. The subsidiaries of PMSB are as follows:
(a) Roti-Roti International Sdn Bhd ("RRI") was incorporated on 21 April 2006. The issued capital of the RRI is RM200,002.00. The amount of the capital paid up is RM200,002.00
(b) NY Food Sdn Bhd ("NYF") which also a wholly owned subsidiary and is involved in the business of operating a central kitchen and food distribution centre: and
(c) Roti-Roti Manufacturing Sdn Bhd ("RRM") in which PMSB holds 80% of the shares and which is involved in the manufacturing and distribution of beverage in particular coffee.
2.4 ADSB is a special vehicle incorporated to acquire the shares of one Tan Theng Liang in PGSB. The acquisition price was RM36,000,000.00 and was funded by a loan from OCBC Bank Berhad and advances from Mr Chen Khai Voon and the Applicant.
2.5 OCBC Bank initiated a suit to recover its loan granted to ADSB as ADSB defaulted in its repayments.
2.6 The spill over of the dispute with Mr Chen Khai Voon has resulted in the entire business of PGSB and PMSB to come to a complete standstill or almost a standstill. ADSB is also in deadlock position.
2.7 On 15 May 2020, two (2) winding up petition were presented against PGSB and Roti-Roti Malaysia Sdn Bhd ("RRM") filed by Mr Chen Khai Voon who is one of PGSB's creditor and contributory and hearing date for both winding up petition were fixed on 21 September 2020.
2.8 On 22 May 2020, Agathisfour Sdn Bhd who is one of the PGSB creditor and contributory filed a winding up petition against PGSB under petition number BA-28NCC-234-05/2020 and the hearing of the petition was also fixed on 21 September 2020
2.9 Subsequently, on 24 August 2020 the Applicant who is both a contributory and a creditor of PMSB filed this originating summon for judicial management.
So much for the factual background.
Issues To Be Determined
[3] Issue for determination is:
(a) whether this is a plain and obvious case that can warrant a striking out order to be made.
The Relevant Provision Of The Law
[4] The law applicable is as follows:
4.1 Order 18 r 19
Striking out pleadings and endorsements (O 18, r 19)
(1) The Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement, of any writ in the action, or anything in any pleading or in the endorsement on the ground that:
(a) it discloses no reasonable cause of action or defence, as the case may be;
(b) it is scandalous, frivolous or vexatious;
(c) it may prejudice, embarrass or delay the fair trial of the action; or
(d) it is otherwise an abuse of the process of the Court, and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.
Analysis And Findings
[5] It is a trite law that a striking out application may be allowed when it is manifestly clear that a claim or defence is prima facie plainly or obviously unsustainabl
