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2020 MarsdenLR 726
HIGH COURT MALAYA SHAH ALAM
UNIVERSAL TRUSTEE (MALAYSIA) BERHAD – Appellant
Versus
LAMBANG PERTAMA SDN BHD (ENCL 1) – Respondent
[Companies Winding Up No: BA-28NCC-821-12/2019]
A company's potential asset sales do not suffice to rebut a presumption of insolvency; the company must provide evidence of current liquidity to prove solvency.
Headnote:(A) Companies Act 2016 – Section 466(1)(a) – Winding-up petition – The Petitioner obtained a Judgment of RM269,497,900.45 against the Respondent, who failed to pay within the statutory notice period – The Respondent contended their solvency based on potential sales of shares in another company, but insufficient evidence was provided to rebut commercial insolvency. (Paras 2, 12, 20, 22)
(B)
The court applied the commercial solvency test as dictated by s 466(1)(a) of the Companies Act 2016 and concluded that the Respondent is commercially insolvent, warranting the winding-up order. (Paras 15, 20)
(C)
The court emphasized the necessity of focusing on the capability of the Respondent to settle its debts based on current financial realities rather than relying on future sale assumptions. (Paras 22, 23)
Facts of the case:
The Petitioner filed for a winding-up order after the Respondent failed to pay a significant judgment debt stemming from a 2014 lawsuit. The Respondent argued against their insolvency, citing potential asset sales.
Findings of Court:
The court found no definitive evidence supporting the Respondent's claims of solvency and confirmed that the Respondent should be wound up.
Issues
: The primary issue addressed was the Respondent's solvency and ability to pay its debts as mandated by the Companies Act.
Ratio Decidendi:
The court ruled that without compelling evidence proving the Respondent's ability to pay its debts, the presumption of insolvency stands, and a winding-up order is justified.
Result:
Winding-up petition granted.
JUDGMENT
Introduction
[1] Enclosure 1 dated 24 December 2019 is a petition for a winding-up order against the Respondent under s 466(1)(a) of the Companies Act 2016 .
Brief Facts Of The Case
[2] On 25 March 2014, the Petitioner has obtained a Judgment against the Respondent at the Kuala Lumpur High Court vide Suit No: 22NCC-623 10/2013 for the sum of RM269, 497, 900.45 as at 30 August 2019.
[3] The Respondent's appeal to the Court of Appeal against the Judgment was struck out by the Court of Appeal on 10 February 2015. There was no application for leave to the Federal Court filed by the Respondent.
[4] A statutory Notice pursuant to s 466(1)(a) of the Companies Act 2016 was served on the Respondent on 30 August 2019 at its registered office demanding for the said sum to be paid within 21 days from the date of the receipt of the notice.
[5] Twenty - one (21) has lapsed from the service of the Notice and the Respondent failed to pay the sum as demanded.
[6] Thereafter, on 24 December 2019, the Petitioner filed the winding-up Petition against the Respondent.
Issues
[7] Main issue for determination is:
(a) Whether Respondent is a solvent company and able to pay its debt.
Analysis And Findings
[8] It was contended by the Respondent that the Respondent is a company which wholly owns Idris Hydraulic Malaysia Berhad ("IHMB"). IHMB possesses a special concession license with the Government of Sabah for 100 years. The Respondent had been established as a special vehicle company to compromise and restructure IHMB's debts. There are potential buyers expressing their interest to purchases the Idris Hydraulic shares.
[9] The Respondent is presently in negotiation with Asian Global Aviation Sdn Bhd to purchase the shares of IHMB and the timber concession at a price to RM736,000,000.00.
[10] The Respondent also had received an offer to purchase the shares of IHMB at a price amounting to RM750,000,000.00 from a company known as Seruan Raya Sdn Bhd.
[11] Therefore, if the sale of its shares in Idris Hydraulic can be realized and finalised, it will be beneficial to all other Redeemable Secured Loan Stocks ("RSLSZ") holders including the Petitioner. Hence, there will be a surplus from the proceed of the sales and with the sale of its shares, the Respondent would be able to settle the amount claimed by the Petitioner in the sum of RM269, 497, 900.45.
[12] Thus, the status of the Respondent is commercially solvent based on the timber concession and the Respondent's shares in Idris Hydraulic and the statutory presumption under s 466(1)(a) of the Companies Act 2016 is rebutted.
[13] The learned counsel for the Respondent place reliance to the case Datuk Mohd Sari Bin Datuk Hj Nuar v. Idris Hydraulic (M) Bhd, [1997] 5 MLJ 377, whereby the Kamalanathan Ratnam JC (as he then was) ha this to say at p 394:
" Therefore, I hold that so long as sufficient evidence has been tendered to enable the Court to decide, I need not leave the question of the inability of a company to pay its debts to be decided only upon the hearing of the petition to wind up. I can decide this issue during the application to strike out the petition provided sufficient, cogent, undisputed evidence is before me to enable me to apply 'the overall assets and liabilities test' as opposed to 'the quick assets test'.
In the circumstances, I do reject the 'quick assets test' and hold that the proper test to be applied should be the 'overall assets and liabilities test'."
[14] The petitioner on the other hand, argues that the purported disposal of IHMB sometime in future, is no answer to the presumption of commercial insolvency that the Petitioner had established against the Petitioner pursuant to s 466(1)(a) of the Companies Act 2016 . On this, learned counsel for the Petitioner rely on the case of Sri Hartamas Development Sdn Bhd v. MBF Finance Bhd , , where the Supreme Court held as follows:
"We ourselves have noticed that the Privy Council case of Malayan Plant Pte Ltd v. Moscow Narodny Bank
