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2022 MarsdenLR 141
COURT OF APPEAL PUTRAJAYA
KEMACAHAYA DEVELOPMENT SDN BHD – Appellant
Versus
PYWATEC (M) SDN BHD & ANOR AND ANOTHER APPEAL – Respondent
[Civil Appeal No: B-02(A)-1726-09/2021 & B-02(A)-1727-09/2021]
The court affirmed that a liquidator's refusal to consent to property transactions must be based on thorough documentation of proof of ownership and payments, especially in cases involving related party transactions.
Headnote:(A) Companies Act 1965 – Section 279 – Appeal against decision of liquidator – The appeals concern the refusal of the liquidator to consent to the sale of properties developed under a Master Title, where the respondent claimed beneficial ownership. The High Court Judge previously ruled in favor of the respondent, but the appeals court reversed this decision based on lack of sufficient evidence of payment and related party transactions. (Paras 9, 30, 71)
(B) Liquidator's Role – The court emphasized that a liquidator's decisions in the liquidation process should not be interfered with unless deemed unreasonable or absurd. (Paras 29, 71)
(C) Proof of Ownership – The court found the absence of documentation proving payment of purchase prices sufficient for the liquidator to refuse consent, reinforcing the need for thorough verification in related party transactions. (Paras 43, 70)
Facts of the case: Two appeals arise from winding-up proceedings against a developer and proprietor of a property project. The respondent claimed beneficial ownership of 81 properties but was met with a refusal from the liquidator for lack of proof of payment. (Paras 5, 7, 26)
Findings of Court: The appeals were allowed, overturning the HCJ's decision as the liquidator’s refusal to consent was found reasonable. (Paras 71, 72)
Issues: Whether the respondent proved ownership of properties sold without individual title and the legitimacy of the liquidator’s refusal to grant consent. (Paras 15, 30)
Ratio Decidendi: The court held that the liquidator's role is to ensure adequate verification of ownership and payment before granting consent for property sales, especially in related party transactions. (Paras 30, 71)
Result: Appeals allowed, HCJ's decision set aside. (Paras 72)
JUDGMENT
Introduction
[1] There are 2 appeals heard before the Court. Documents and issues involved are the same and both appeals emanate from the decision of the High Court Judge (HCJ) made on 1 September 2021.
[2] Appeal 1726 is the appeal by the Liquidator of Kemacahaya Development Sdn Bhd (Developer). Appeal 1727 is the appeal by the Liquidator of Syarikat Kemacahaya Sdn Bhd (Proprietor). The respondent here is the 2nd respondent as both the 1st respondents in the appeals were removed as parties. They were the Petitioners in the winding up.
[3] Parties have prepared 1 set of submissions and relied on the documents filed in appeal 1726.
[4] We allowed both appeals and give our reasons as follows.
Background Facts
[5] The Developer was the developer of a mixed development project held under a freehold Master Title GM 515 Lot 13158 (the Land). The Proprietor is the registered proprietor of the Land and had granted the Developer the right to develop the Land. The Developer and the Proprietor are related companies with common directors and shareholders.
[6] On 10 December 2012, the Developer was wound up followed by the Proprietor on 9 November 2016. When the Developer was first wound up, the Official Receiver was the provisional liquidator and was replaced by Datuk Tee Guan Pin (Datuk Tee) on 1 November 2016. Datuk Tee was the liquidator for the Proprietor on its winding up. Effective 16 January 2019, Augustine TK James replaced Datuk Tee and became the Liquidator for the Developer and the Proprietor.
[7] The respondent says it purchased 81 units of the properties built on the Land including a car park, (the properties) at various points in time. Subsequently, the respondent entered into a Sale and Purchase Agreement dated 25 February 2020 with Ascent Resources Holdings Sdn Bhd (Ascent, Ascent SPA). Pursuant to Ascent SPA, the respondent agreed to sell and Ascent to purchase the properties for the purchase consideration of RM35 million. Clause 3.1.2 Ascent SPA requires the respondent to obtain the written consent or approval of the Liquidator for the sale, transfer and assignment of the properties by the respondent to Ascent within a stipulated time frame. The Liquidator refused to give its endorsement and consent to the proposed sale of the properties.
[8] The respondent filed its application pursuant to s 279 of the Companies Act 1965 ( CA 1965) to reverse the Liquidator's decision not to act and inter alia to provide the confirmation of its legal and beneficial interests in the properties and sign the relevant consent/endorsement. The application was allowed by the HCJ while the appeal by the Liquidator was allowed.
HJC Decision
[9] The HCJ was of the considered view that the Deed of Assignments/Sale and Purchase Agreement between the respondent and the previous purchasers which was duly endorsed by the Developer and/or with the Proprietor's consent are sufficient documentation/evidence of the transfer of the beneficial interest to the respondent. Similarly the Deed of Assignments/Sale and Purchase Agreement between the previous purchasers and the Developer and/or Proprietor duly endorsed or the consent are sufficient evidence of the respondent's beneficial interest of the properties. The respondent was thus a bona fide purchaser of the properties.
Submissions Of The Appellants
[10] It was contended that the respondent was unable to show the Liquidator that the full purchase price had been made for the purchase of the properties. What was relied on was the endorsements by the Developer and the Proprietor and the Sale and Purchase Agreements (SPA) with the various purchasers. These could not be evidence of payment of the consideration of the properties and were insufficient to determine the respondent was the beneficial owner. The discrepancies in the purported purchases were set out. Further, the transactions were carried out by related parties.
[11] The Court should not interfere in the investigative exercise, duties and
