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2021 MarsdenLR 3815
HIGH COURT MALAYA KUALA LUMPUR
UNITED SECURITIES SDN BHD (IN LIQUIDATION) – Appellant
Versus
UNITED OVERSEAS BANK LIMITED & ORS – Respondent
[Suit No: WA-22NCC-682-12-2019]
Legal entitlement to surplus funds in liquidation must be determined within the context of winding-up proceedings of the holding company, not by the liquidators of the subsidiary.
Headnote:(A) Companies Act 1965 – Section 237(3) – Jurisdiction and forum non conveniens – Plaintiff's winding-up proceedings and entitlement to surplus funds from liquidation of City Centre Sdn Bhd – Court of Appeal reversed previous High Court order allowing surplus funds to be transferred to UOB Nominees – Court found that legal entitlement under Loan Agreement must be determined in USSB's winding-up proceedings, not CCSB – UOB Nominees' position as mere nominee of UOB Singapore does not confer entitlement to surplus funds. (Paras 13-20, 25-28, 39, 148)
(B) Liquidation proceedings – The Committee of Inspection is to be consulted regarding disposal of company assets during liquidation, emphasizing the duty of the liquidator to act with the committee. (Paras 34, 116)
Facts of the case: USSB was wound-up, and its liquidators sought court directions regarding the entitlement to surplus funds from CCSB's liquidation, contested by UOB Singapore and its nominees. USSB claimed these funds should not be paid to UOB Nominees. (Paras 1-4, 10-20)
Findings of Court: UOB Nominees does not have rights to the surplus funds as it merely holds shares as a nominee, while the rights under the Loan Agreement must be addressed in USSB's proceedings. The court dismissed the applications by UOB Singapore, affirming the need for proper proceedings to determine entitlements. (Paras 39-40, 146-150)
Issues: The main issues were whether UOB Nominees was the rightful contributory of CCSB and how surplus funds derived from CCSB's liquidation should be distributed among creditors. (Paras 12, 20)
Ratio Decidendi: It was held that the determination of entitlement to surplus funds must occur within the context of USSB's winding-up proceedings, as it encompasses the overall rights and liabilities of the involved parties, emphasizing the importance of the Committee of Inspection's role in such proceedings. (Paras 39-40, 116)
Result: The court dismissed UOB Singapore's applications and allowed USSB's case to proceed, reinforcing that these determinative issues must be resolved within the Malaysian court framework. (Paras 148-150)
JUDGMENT
Introduction
[1] The plaintiff company, United Securities Sdn Bhd ("USSB") was wound-up on 30 January 2007. This writ action was filed by the liquidator of USSB ("USSB's Liquidators") to determine the rights and entitlements of the parties under a Loan Agreement dated 17 December 1982 ("Loan Agreement") and the Debenture executed pursuant thereto to facilitate actions to be taken by USSB's Liquidator under the winding-up proceedings of USSB. In fact this action is a sequel to a decision of the Court of Appeal which will be set out below briefly.
[2] Interlocutory applications filed during the course of the proceedings which is the subject matter of this grounds of judgment are-
(a) Enclosure 54 - an application by Equiticorp Holdings Ltd to intervene in this writ action under O 15 r 6 (2) (b) of the Rules of 2012 ("RoC 2012") ("Application to Intervene"). This Court allowed the Application to Intervene and Equiticorp Holdings Ltd ("Equiticorp") added to this writ action as the seventh defendant. The second defendant, UOB 2006 Nominees (Tempatan) Sdn Bhd ("UOB Nominees") appealed;
(b) Enclosure 56 - an application by UOB Overseas Bank Limited ("UOB Singapore") pursuant to O 12 r 10 (7) of the RoC 2012 to stay this action pending disposal of an action filed by UOB Singapore in Singapore ("Singapore OS") on the ground of forum non conveniens ("Application for Stay of Forum"). On 1 October 2020 this Court dismissed encl 56 ("Order 1 October 2020"). UOB Singapore appealed against the said order; and
(c) Enclosure 127 - another UOB Singapore's application under s 73 of the of Judicature Act and/or O 92 of the RoC 2012 to stay the execution of the Order 1 October 2020 ("Application for Stay of Execution"). On 2 November 2020 the said application was dismissed. UOB Singapore appealed.
[3] There was also an application to intervene filed by one Chan Siew Mei, the Receiver of USSB (enclosure 14). The said application was opposed to by USSB and supported by UOB Singapore. This Court allowed encl 14 and the Receiver of USSB is added as the sixth defendant. No appeal was filed against the said decision.
[4] This grounds of judgment deals with the three applications mentioned in para 2 above.
Salient Facts
[5] In 1982 USSB obtained a loan in the sum of USD 18,700,000.00 ("Loan") which is equivalent to RM 43,850,000.00 at that time from Overseas Union Bank Limited ("OUB Limited"). The purpose of the Loan was to purchase 2.5 million shares amounting to 50% equity in a company known as, City Centre Berhad which was subsequently converted to a private company City Center Sdn Bhd ("CCSB"), the third defendant.
[6] Pursuant thereto the Loan Agreement was executed and in consideration of the said loan, USSB executed the Debenture whereby a charge was created in favour of OUB Limited over the shares purchased ("CCSB Shares') and all other assets of USSB.
[7] Pursuant to the term of the Debenture the CCSB Shares were registered in the name of UOB Nominees, which is the nominee company of OUB Limited.
[8] OUB Limited then merged into UOB Singapore, the first defendant herein. UOB Singapore took over among others, all of OUB Limited's rights and interest in OUB Limited's loan including the Loan, Loan Agreement and Debenture.
[9] CCSB was wound-up on 25 April 2000 and the current liquidators, ie the fourth and fifth defendants ("CCSB's Liquidators") were appointed to replace the Official Receiver. On 12 May 2017 the CCSB's Liquidators sold 16 parcels of CCSB's land located in Kuala Lumpur ("CCSB's Lands") for RM 516,275,200.00 which were received by CCSB's Liquidators. After accounting for all the liabilities due and payable by CCSB, including the liquidation costs, the CCSB's Liquidators anticipated they will have a liquidation surplus of approximately RM 434,000,000.00 ("Surplus Funds").
[10] On 18 September 2017, the CCSB's Liquidators filed an application under Kuala Lumpur High Court Post (Winding-Up) No. WA-28PW-127- 09/2017 under s
