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2021 MarsdenLR 4203
HIGH COURT MALAYA SHAH ALAM
GANDA SELAT SDN BHD (IN LIQUIDATION) – Appellant
Versus
MPDT CAPITAL BHD – Respondent
[Originating Summons No: BA-24NCVC-1459-12-2020]
The court set aside an order as it was made in violation of statutory provisions, affecting jurisdiction and legality due to improper application against a wound-up company.
Headnote:(A) Companies Act 2016 – Sections 471(1), 486, 472(1), and 528 – Housing Development (Control and Licensing) Act 1966 – Judicial management – Application to set aside order in OS 725 was granted due to breach of relevant laws including lack of proper leave before filing the application – The joint venture agreement was declared void on grounds of lack of authority of directors and contravention of insolvency law – Breach of statutory obligation by the defendants led to illegality of the initial order. (Paras 3, 5, 11, 34, 52, 81)
(B) Jurisdiction – The High Court in OS 725 lacked jurisdiction as the application was made against a wound-up company without the liquidator's involvement or the necessary leave of the insolvency Court. (Paras 39, 46, 84)
Facts of the case: The plaintiff liquidator’s application stems from irregularities in the defendant’s application for orders granted in OS 725 against Ganda Selat Sdn Bhd, a company under winding-up proceedings. (Paras 8, 16, 20)
Findings of Court: The order in OS 725 was null and void due to procedural and substantive breaches of the Companies Act and the Housing Development Act, consequently declared invalid by this Court. (Paras 86, 89)
Issues: Key issues included the validity of the joint venture agreement entered without proper authority and whether the order in OS 725 could stand given the procedural irregularities. (Paras 34, 81)
Ratio Decidendi: The court held that the order in OS 725 could not be sustained as it was granted in breach of written law, resulting in a lack of jurisdiction and illegality. (Paras 83, 86)
Result: Order in OS 725 is set aside, and the joint venture agreement is declared null and void. (Paras 87, 89)
JUDGMENT
Introduction
[1] This is an application by the liquidator of the plaintiff, Ganda Selat G Sdn Bhd (in liquidation) to set aside an order made by the Shah Alam High Court in Originating Summons No BA-24NCVC-725-07-2020 ("OS 725") on 28 July 2020.
[2] This Court allowed the plaintiff's application and has set aside the order in OS 725.
[3] OS 725 was filed by the defendant against the wound up company (as defined below) without leave of the insolvency Court (as defined below) in contravention of s 471(1) of the Companies Act 2016 . Without the prior leave of the insolvency Court, the Shah Alam High Court lacked the jurisdiction to hear the defendant's action against the company in OS 725.
[4] Furthermore, this Court found, among others, that the JVA between the defendant and the company, contravened both the Companies Act 2016 and the Housing Development (Control and Licensing) Act 1966 . Also, the directors of the company lacked the legal capacity to enter into the JVA, since the company was under a judicial management order at the time the JVA was executed between the defendant and the directors of the company without the knowledge and consent of the judicial manager.
[5] Crucially, there was undue preference in favour of the directors of the company in the JVA. Such undue preference contravenes the most fundamental principle of insolvency law (codified in s 528 of the Companies Act 2016 ); thus, rendering the JVA fraudulent and void.
[6] These findings and others discussed in this judgment mean that the order made by the Shah Alam High Court in OS 725 was defective and was null and void on the grounds of illegality.
[7] The full grounds for this Court's decision in setting aside the order in OS 725 are set out in this judgment.
Background Facts
[8] Ganda Selat Sdn Bhd ("the company") is the developer of Sg Chinchin Residensi ("the project"), a 20-storey condominium consisting of 350 units of housing accommodation, where 149 apartment units have been sold.
[9] The project was declared as an abandoned project by the Kementerian Perumahan dan Kerajaan Tempatan ("Ministry of Housing") on 10 November 2017.
[10] The purchasers of the apartment units filed a Winding-Up Petition No WA-28NCC-216-03-2019 ("winding-up petition") at the Kuala Lumpur High Court ("the insolvency Court") on 12 March 2019 to wind up the F company.
[11] On the company's ex parte application for the appointment of a judicial manager, the insolvency Court in WA-28JM-3-07-2019 made a judicial management order on 21 January 2020 ("JMO") appointing Ong Kong Lai as a judicial manager of the company ("the JM"). With the granting of the JMO, the winding-up petition was stayed.
[12] On 5 March 2020, the JM applied to the insolvency Court to discharge himself as judicial manager of the company because (i) the company did not pay the JM's fees; (ii) although the JM had held meetings with the directors of the company on 21 January 2020 and 4 February 2020 but the directors could not give any accounts and documents to the JM to enable him to undertake his duties; and (iii) there was no prospect that the purpose/ objective of the JMO would be achieved.
[13] In his affidavit in support, the JM said one of the directors, Encik Ahmad bin Bakar, only gave him a letter from the defendant dated 22 January 2020 that suggested rehabilitation of the company. The JM averred that after considering the letter and its terms, he told Encik Ahmad that the defendant's proposal was not in accordance with the JMO and should be rejected.
[14] The insolvency Court allowed the JM's application and made the order to discharge the JMO on 19 June 2020 ("JMO discharge order").
[15] On 14 July 2020, the insolvency Court in the winding-up petition delivered the following unless order:
MAKA ADALAH DIPERINTAHKAN menurut s 469(1) Akta Syarikat 2016 bahawa kecuali (unless) jika pihak Pempetisyen-Pempetisyen dan Responden berjaya mendapatkan penyelesaian luar mahkamah pada atau sebelum 25 Augus
