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2021 MarsdenLR 1014
HIGH COURT MALAYA SHAH ALAM
RE: ALMANA ENGINEERING (M) SDN BHD (ENCL 7)
[Originating Summons No: BA-28JM-12-07/2021]
The court denied leave for proceedings against a company under judicial management, reinforcing the moratorium under the Companies Act to facilitate rehabilitation and prevent undermining judicial management objectives.
Headnote:(A) Companies Act 2016 – Section 410 – Companies (Corporate Rescue Mechanism) Rules 2018 – Rule 40 – Leave to commence proceedings during judicial management – No leave granted for WH Electrical Marketing (M) Sdn Bhd to continue Suit 267 against the Applicant as it contradicted the objectives of rehabilitating the company under distress. (Paras 3.1, 7, 9)
(B) Judicial management – Purpose and principles – The court must balance the legitimate interests of creditors and consider whether granting leave undermines the purposes of judicial management. (Paras 4-6)
Facts of the case: The Applicant entered into a contract with WH Electrical Marketing (M) Sdn Bhd and owed RM8,710,716.09 as of 23 June 2021, leading to a suit filed by WHEMSB against the Applicant. The court reviewed the application for leave to continue the suit during judicial management proceedings.
Findings of Court: The monetary claim of RM8,303,497.49 does not require proprietary enforcement and can be managed within the judicial management process. (Paras 7, 8)
Issues: The key issues revolved around whether leave for proceedings would disrupt the judicial management objectives and whether the statutory moratorium under s 410 applies. (Paragraph 10)
Ratio Decidendi: The court concluded that allowing the suit would be counter to the rehabilitation objectives and the automatic moratorium provision, indicating that leave is not granted lightly. (Paras 9, 10)
Result: Application dismissed with costs against WH Electrical Marketing (M) Sdn Bhd.
JUDGMENT
Introduction
[1] Enclosure 7 is the WH Electrical Marketing (M) Sdn Bhd Notice of Application dated 30 July 2021 pursuant to r 40 of the Companies (Corporate Rescue Mechanism) Rules 2018, s 410 (c) of the Companies Act 2016 and/or the inherent jurisdiction of this Honourable Court for the following orders:
(1) WH Electrical Marketing (M) Sdn Bhd ("WHEMSB") diberi kebebasan untuk meneruskan Mahkamah Tinggi Kuala Lumpur Guaman No WA-22NCC-267-06/2021 terhadap Almana Engineering (M) Sdn Bhd (Pemohon") berhubung dengan semua dan/atau prosiding-prosiding sampingnya;
(2) kos permohonan ini harus dibayar oieh Almana Engineering (M) Sdn Bhd; dan (3) relif ianjutan dan/atau lain-iain yang dianggap adil dan patut oieh Mahkamah Yang Mulia ini."
Brief Facts Of The Case
[2] The facts of the case may be summarised as follows:
2.1 The Applicant contracted with WH Electrical Marketing (M) Sdn Bhd for the delivery and supply of electrical goods and related items.
2.2 Based on WH Electrical Marketing (M) Sdn Bhd Statement of Account dated 31 July 2021 the sum owed by the Applicant to WH Electrical Marketing (M) Sdn Bhd as of 23 June 2021 is RM8,710,716.09.
2.3 On 11 June 2021, WH Electrical Marketing (M) Sdn Bhd has initiated a suit at Kuala Lumpur High Court vide Suit No: WA-22NCC-267-06/2021 (Suit 267") against the Applicant, Lee Wei Chiek and one Ong Bon Hoo to claim for the sum of RM8,303,497.49 as at 28 October 2020.
2.4 Suit 267 was fixed for case management on 25 June 2021 and 14 July 2021. The Statement of Defence was filed in July 2021.
2.5 On 13 July 2021, Applicant filed encl 1.
2.6 On 23 July 2021, WH Electrical Marketing (M) Sdn Bhd has filed a Notice of Application (Encl 5) to intervene and oppose encl 1.
2.7 On 30 July 2021, WH Electrical Marketing (M) Sdn Bhd filed encl 7.
2.8 So much for the facts.
The Relevant Provision Of The Law
[3] The provision of the law applicable are as follows:
3.1 Rules 40 of the Companies (Corporate Rescue Mechanism) Rules 2018.
"Notice of application
40. (1) Every application in Court as specified in paragraph
39(2)(b) shall be made by the applicant by way of notice of application in Form 23 of the First Schedule and served on the relevant parties by the applicant not less than three clear days before the date of hearing specified in the notice of application.
(2) No application made under sub rule (1) maybe served out of time on the relevant parties unless with the leave of the Court.
(3) An application for leave to serve a notice of application out of time shall be made exparte."
3.2 Section 410 (c) of the Companies Act 2016 ;
"(c) No other proceedings and no execution or other legal process shall be commenced or continued and no distress may be levied against the company or its property except with leave of the Court and subject to such terms as the Court may impose."
3.3 Order 92 r 4 Rules of 2012.
"inherent powers of the Court (O 92, r 4)
4. For the removal of doubt it is hereby declared that nothing in these Rules shall be deemed to limit or affect the inherent powers of the Court to make any order as may be necessary to prevent injustice or to prevent an abuse of the process of the Court."
The Principles Governing The Application For Leave To Commenced Or Continued Proceedings Against A Company Placed Or Has Applied To Be Placed Under Judicial Management
[4] Courts also have through their decision devised themselves certain guidelines or principle for leave to commence proceedings against a company placed under judicial management. There are several examples of such cases.
(a) In the English case of in re Atlantic Computer System [1992] Ch 505, the Court of Appeal opined as follows (at p 541-543):
....There is one final matter to which we now turn. In the course of argument, we were invited to give guidance on the principles to be applied on applications for the grant of leave under s 11. It is an invitation to which we are reluctant to accede, for several reasons: first, Parliament has left at
