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2022 MarsdenLR 2321
HIGH COURT MALAYA KUALA LUMPUR
MAYBANK ISLAMIC BERHAD – Appellant
Versus
KHEE SAN FOOD INDUSTRIES SDN BHD; KHEE SAN BERHAD (INTERVENER) – Respondent
[Originating Summons No: WA-28JM-21-11/2021]
Khee San Bhd is recognized as a creditor with standing to intervene in judicial management proceedings, supported by the Companies Act 2016.
Headnote:(A) Companies Act 2016 – Section 425 – The Court allowed Khee San Bhd's application to intervene as a creditor in the judicial management proceedings, emphasizing the importance of substantiating claims and assessing the evidence before it without reliance on mere assertions. (Paras 2, 4, 6, 8, 12)
(B) Locus Standi – Khee San Bhd is recognized as a creditor and has the locus to intervene in the proceedings, reflecting the inclusive nature of the definition of the term 'creditor' under the Act. (Paras 12, 13)
Facts of the case: Khee San Bhd (KSB) applied to intervene in proceedings concerning the Respondent, which is insolvent and owes KSB RM68,934,995. The application was opposed by Maybank Islamic Berhad (MIB), citing common directors and issues of breach of trust. The Court examined various financial agreements and guarantees related to the liabilities.
Findings of Court: The Court found that the Respondent was undoubtedly insolvent, and the financial relationships must be carefully scrutinized based on evidence rather than assumptions or assertions.
Issues: The key issues were KSB's creditor status, subordination of advances, and the legitimacy of the Respondent's financial statements.
Ratio Decidendi: The Court ruled that it must rely on concrete evidence for KSB's claims rather than allegations and recognized KSB as a valid creditor with locus to intervene, supported by statutory provisions and case law interpretations.
Result: Application to intervene allowed.
JUDGMENT
(Enclosure 47)
[1] The Proposed Intervener, Khee San Bhd (KSB) has by way of encl 47 (Application) applied to this Court to intervene in the proceedings herein on the grounds that KSB is a creditor of the Respondent in the amount of RM68,934,995 as inter company owings (Amounts Owing) and that if KSB is not allowed to intervene, the rights and interest of KSB will be prejudiced.
[2] Maybank Islamic Berhad (MIB) had opposed the said Application on the following:
(i) the Respondent had defaulted in payment under the facilities granted by MIB to the Respondent where KSB stood as guarantor as well as to the other financing facilities granted by the other financiers namely HSBC, Standard Chartered Bank, Alliance Bank, OCBC Bank, OCBC AL Amin, UOB and Bank of China (Other Creditor Banks)
(ii) the Respondent is owing MIB and the Other Creditor Banks in the sum of more than RM65 Million with interest and late payment charges continuing to accrue
(iii) the Respondent and KSB have common directors and that they have been accused of committing breach of trust and breach of fiduciary duty by KSB and the Respondent
(iv) as a result of the above, the purported advances made by KSB to the Respondent must be fully investigated and cannot be accepted at face value
(v) it was agreed by KSB and the Respondent that the advances made by KSB or amount owing to KSB by the Respondent, if any, shall be subordinated to MIB's claim against the Respondent
(vi) the security documents executed by the Respondent and/or KSB in favour of the Other Creditor Banks contains express terms which provide for the agreement of KSB for its debt to be subordinated to the debts owing to the Other Creditor Banks
(vii) by reason of the above KSB has no interest in the assets of the Respondent and would not be entitled to vote on the proposal that maybe put forward by the Judicial Manager (JM) in the event the JM Application is allowed
(viii) premised on the above, KSB's application must be dismissed
[3] Applications have also been filed by creditors of the Respondent, namely HSBC, Alliance Bank, OCBC Bank, OCBC AL Amin, UOB and Bank of China to intervene and support the Judicial Management Application in encl 1 (JM Application).
[4] After hearing the respective learned counsels for the parties herein on 4 March 2022 with regards the Application, I had adjourned my decision on the same to 1 April 2022 at which I had allowed the Application herein.
[5] MIB being dissatisfied with my said decision, has lodged an appeal thereto and herewith are my written grounds in respect of my decision on 1 April 2022.
Court's Findings
[6] It is undisputed that the Respondent herein, Khee San Food Industries Sdn Bhd ("Respondent") is insolvent.
[7] In coming to my decision herein I have examined
(a) the Respondent's Financial Statements in exhibit MIB 24 of encl 2 which states 'the amount due from a subsidiary company represents unsecured interest free advances with no fixed term repayment'
(b) MIB's Letter of Offer dated 20 August 2004 in particular the Pre-Disbursement Conditions and the Subordination of amount owing to holding company/associated companies/related companies to MIB's facilities at Exhibit "MIB-2" of encl 2
(c) The Master Facility Agreement dated 29 December 2004, in particular cl 7.1 (p): whereby the Respondent undertakes with MIB from the date of this agreement until all its Indebtedness under this agreement have been discharged, it will procure and ensure that all present and future loans granted to it by any of its directors, shareholders or related companies will be subordinated to the indebtedness owing to MIB as seen in Exhibit "MIB-2" of encl 2
(d) Clause 12.1 (q) of the Facilities Agreement 29 December 2004 - at Exhibit "MIB-2" of encl 2
(e) the Letters dated 10 January 2005 issued by the Respondent and KSB in favour of MIB whereby the Respondent and KSB had irrevocably and unconditionally agree, covenant and undertake with MIB that until and unless the F
