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2021 MarsdenLR 2806
HIGH COURT SABAH & SARAWAK KOTA KINABALU
S3M DEVELOPMENT (SABAH) SDN BHD – Appellant
Versus
SEJATI EDUCATION SDN BHD (ENCL 32) – Respondent
[Companies (Wining-Up) No: BKI-28NCC-108/11-2019]
The court ruled a company must demonstrate special circumstances for a stay of a winding up order, considering creditors' interests and insolvency status.
Headnote:(A) Companies Act 2016 – Section 472 – Winding up – Application for interim stay pending appeal – The burden lies on the respondent to demonstrate special circumstances to warrant a stay of the winding up order – Factors affecting discretion include the interest of creditors and compliance with statutory duties – The respondent failed to establish a case for stay as the company is commercially insolvent and unable to pay debts to the petitioner. (Paras 4, 6, 17, 20)
Facts of the case: The respondent was wound up under the Companies Act 2016, and a motion was filed for a stay pending appeal, citing potential detriment to its nursing college operations without detailed particulars.
Findings of Court: The court found no special circumstances warranting a stay; the respondent was found commercially insolvent with no evidence of its ability to pay debts.
Issues: The main issues included whether the respondent provided sufficient grounds for an interim stay of the winding up order.
Ratio Decidendi: The court highlighted that a stay is discretionary, requiring the applicant to present a positive case; the interests of creditors and commercial morality are key considerations.
Result: Motion dismissed.
JUDGMENT
[1] On 25 February 2020, Respondent was ordered to be wound up by the Court under the provisions of the Companies Act 2016 upon the petition of the Petitioner and Director General of Insolvency be appointed as the liquidator of the Respondent.
[2] By this Notice of Motion dated 1 October 2020 (Encl 32), one Thanabalan A/L Srimayan, a Director of the Respondent as the applicant and on behalf of the Respondent moved for an order that all enforcement and/or execution and/or any such further proceedings in respect of the Winding Up Order be stayed pending the disposal of the applicant's appeal to the Court of Appeal and/or Federal Court.
[3] Based on the Notice of motion, it is an application for an interim stay pending the disposal of the Respondent's/Applicant's appeal to the higher Courts. It is not an application for permanent stay.
[4] Though, a distinction has to be drawn between an interim stay pending appeal and a permanent stay under s 472 of the Companies Act 2016 , however regardless of the distinction, the burden is on the Respondent to present materials before the Court to establish that there are special circumstances for the interim stay to be granted pending appeal. See: Equiticorp Holdings Ltd v. United Securities Sdn Bhd , ; and Taman Rimba (Mentakab) Sdn Bhd v. Warrior Rubber Products (M) Sdn Bhd; Cindee Development Sdn Bhd & Anor (Contributories); [2018] 9 CLJ 407.
[5] The only ground put forth for the application by the motion for stay pending the asserted appeals is that the Respondent run a nursing college/higher institution of learning which has about 100 female students residing at 3 to 4 storeys of 9 blocks of shophouses at New World Commercial Centre Phase II, Donggongong and that the winding up would be detrimental to the Respondent and the students and to the viability of appeal without condescending on the particulars of the detriment.
[6] In my judgment, they do not amount to special circumstances for stay of execution of or proceeding under the winding up order concerned. See Ming Ann Holdings Sdn Bhd v. Danaharta Urus Sdn Bhd , ; and Kosma Palm Oil Mill Sdn Bhd & Ors v. Koperasi Serbausaha Makmur Bhd; [2004] 1 MLJ 257; [2003] 4 CLJ 1.
[7] Further in Vijayalakshmi Devi d/o Nadchatiram v. Dr Mahadevan s/o Nadchatiram & Ors, [1995] 2 MLJ 709, Dzaiddin FCJ (as he then was) in dealing with s 243(1) of the Companies Act 1965 which is the equipollent of s 492(1) of the Companies Act 2016 held that:
"(1) The granting of a stay under s 243 of the Act is discretionary and the onus is on the party seeking a stay to make out a positive or sufficient case. 7
(2) The attitude of the creditors, contributories and the liquidator is a relevant consideration.
(3) That in exercising its discretion, the Court will consider not only the interest of the creditors, but also whether it is conducive or detrimental to commercial morality and to the interests of the public at large.
(4) Last, and which by no means least, is that a stay will be refused if there is evidence of misfeasance or of irregularities demanding investigation."
[8] In Ting Yuk Kiong v. Mawar Biru Sdn Bhd , [1995] 2 MLJ 700 at p 75 and 706; [1995] 3 CLJ 136, the Court held that:
"Under the law, therefore, the granting of a stay of further proceedings of the winding up is a discretionary matter for the Court, and the onus is on the applicant to make out a positive case for a stay. In exercising its discretion, the Court has to consider certain factors and would act on certain principles which have been established by decided cases. In Re Warbler Pty Ltd [1982] 6 ACLR 526, the following principles are enumerated:
(a) The granting of a stay is a discretionary matter and there is a clear onus on the applicant to make out a positive case for a stay: Re Calgary and Edmonton Land Co Ltd (In Liquidation).
(b) There must be service of notice of the application for a stay on all creditors and contributories and proof of this (Re South Barrule State
