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2013 MarsdenLR 2968
HIGH COURT MALAYA PULAU PINANG
THEOW SAY KOW @ TEOH KIANG SENG HENRY & ANOR – Appellant
Versus
TEOH KIANG HONG & ORS – Respondent
[Suit No: 22NCVC-83-02/2013 & 22NCVC-80-02/2013]
Important Points
Subject
Company Law - Winding Up and Insolvency
Act Referred
Headnote
(B) Courts must respect judicial comity but may dissent if earlier decisions are deemed per incuriam - Court chose not to follow Nadaraja case due to its flawed premises and lack of evidence. (Paras 76-82)
(C) Stay orders do not nullify or discontinue winding-up proceedings under s 223 CA, thereby necessitating a validation order for share transfers post-commencement of winding up. (Paras 107-117)
Facts of the case:
The shares of companies, transferred by one party to another after winding up petitions were filed, were contested. The plaintiff claimed such transfers were void under s 223 CA due to lack of validation from the winding up court. (Paras 1-3, 18-19)
Findings of Court:
The court concluded that the impugned share transfers, conducted after commencement of winding up without any validating order, were void in accordance with s 223 CA. (Paras 95, 118)
Issues: Whether share transfers conducted after the commencement of winding up without court validation violate s 223 CA and the effects of a stay order on those proceedings. (Paras 1.1, 1.2)
Ratio Decidendi: Transfers of shares after the commencement of winding up are void unless validated; the court found previous rulings insufficient and reaffirmed creditor rights. (Paras 34-95)
Result: Applications allowed; transfers of shares declared void.
| Table of Content |
|---|
| 1. validity of share transfers post-winding up. (Para 1 , 1 , 2 , 4 , 5 , 6 , 8) |
| 2. factual background of shareholding and litigation (Para 7) |
| 3. transfer of mdm tan's shares in question (Para 10 , 11) |
| 4. claim for ownership and legality of share transfers following winding-up. (Para 16 , 18 , 19 , 20) |
| 5. interpretation of s 223 ca regarding share transfers. (Para 34 , 39 , 41) |
| 6. interpretation of section 223 ca (Para 35 , 36) |
| 7. ruling on share transfers as void without validation order. (Para 72 , 96) |
| 8. conclusion and orders regarding the impugned transfers (Para 97) |
[1] The issues that arise in this case are as follows:
1.1. Whether a transfer of shares in a company after commencement of winding up (as defined in s 219(2) of the Companies Act 1965 ), that is, upon the presentation of a winding up petition in respect of that company), falls within the ambit of s 223 of the ("s 223 CA") such that vis-a-vis the company, the transfer is void, unless validated by the court. The other aspect of this issue is also whether the case of Nadaraja Muthu & Ors v. Palanisamy Ramasamy, was decided per incuriam (collectively called "first issue").
1.2. Whether a common law stay (as opposed to a stay made under s 243 of the Companies Act 1965 - "s 243 CA") of the winding up proceedings made by a court in related civil proceedings has the effect of rendering s 223 inoperative so long as the stay is extant. The other aspect of this issue is also whether the decision of the court of Appeal in The Ayer Molek Rubber Company Berhad v. Bintang-Bintang Sdn Bhd , [2013] 4 MLJ 401 which was predicated on the stay of a winding up under s 243 and therefore rendering s 223 inoperative, equally applies to a common law stay of winding up proceedings ("second issue").
[2] The first issue lies at the heart of two applications made under O 14A of the Rules of 2012 ("ROC 2012 ") namely the Notice of Application dated 17 July 2013 by Tan Sai Hong ("Mdm Tan"), the plaintiff in Penang High court Civil Suit No. 22NCVC-80-02/2013 ("Suit No. 80") which shall be referred to as "Mdm Tan's O 14A Application"(Enclosure 33) and Notice of Application dated 29/7/2013 filed by Teoh Kiang Hong ("Gary"), the 2nd defendant in Penang High court Civil Suit No. 22NCVC-83-02/2013 ("Suit No. 83") which shall be referred to as Gary's O 14A Application" (Enclosure 36). Mdm Tan's O 14A application and Gary's O 14A application shall collectively be called "the O 14A applications ". The Companies Act 1965 will hereafter be referred to as "CA ".
[3] As is apparent from the intitule, these are consolidated proceedings whereby Suit No. 80 and Suit No. 83 were consolidated by an order dated 21 June 2013. As the parties have been described differently in the two suits, there is bound to be confusion if I were to refer to the parties either as plaintiff or defendant. As such and in order to avoid confusion, I have decided to adopt the following nomenclature in describing the parties:
Nomenclature
Theow Say Kow @ Teoh Kiang Seng, Henry: 1st plaintiff in Suit No. 83 and defendant in Suit No. 80
Henry
Teoh Soo Beng: 2nd plaintiff in Suit No. 83
Todt
Teoh Kiang Hong: 1st defendant in Suit No. 83
Gary
Tan Sai Hong: 2nd defendant in Suit No. 83 and plaintiff in Suit No. 80
Mdm Tan
Juru Auto-City Sdn. Bhd. (No. Syarikat 137490-H) (dahulu yang dikenali sebagai Frontier Highway Auto City Sdn. Bhd. dan Tefatta Industry Sdn. Bhd.): 3rd defendant in Suit No. 83
JACSB
Highway Landmark Sdn. Bhd. (No. Syarikat 344772-X): 4th defendant in Suit No. 83
HLSB
Western Frontier Sdn. Bhd. (No. Syarikat 313190-Dd): 5th defendant in Suit No. 83
WFSB
Suruhanjaya Syarikat Malaysia: 6th defendant in Suit No. 83
SSM
JACSB, HLSB and WFSB
the Companies
The Background
The relationship of the parties
[4] Henry and Gary are brothers. Mdm Tan is Henry and Gary's mother. Todt is Henry and Gary's cousin. JACSB, HLSB and WFSB are private limited companies (collectively, "the Companies") that were originally used to purchase four (4) lots of la
