Gopal Sri Ram JCA:

On 10 January 2005 we were moved in Civil Appeal No. W-02-448-2004 for interim preservation orders by way of a number of injunctions under s. 44 of the Courts of Judicature Act 1964 pending the disposal of these appeals. I do not propose to recite here the relief sought on the motion. They are not relevant. What is relevant is that we thought it best that these appeals be heard on merits as that would render the applications academic. Accordingly we adjourned the motions to 18 January 2005 and directed the appeals to be fixed on that date. Counsel on both sides on each of these appeals agreed to this course.

I must say a few words about these appeals. They all concern two orders made by the High Court striking out an originating summons for want of a cause of action. Two orders because each of the two defendants filed a separate summons to strike. The third appeal (Civil Appeal 448/2004) was unnecessarily brought. It is aimed at the consequential order by the High Court dismissing the originating process. In the ordinary way that order merges with the order striking out the process and so no separate appeal need be directed it. Now, as for the substantive appeals against the striking out orders, it is necessary to hearken to some of the factual background.

Naluri Berhad ("Naluri") is a very rich public company whose shares are listed on the Stock Exchange. At one point in time it had RM900 million in its hands. Nevertheless, the Stock Exchange designated it as a "PN 10 company". "PN 10" means Practice Note 10. It is a practice note issued by the Stock Exchange. It is aimed at companies which the Exchange considers to have an inadequate level of operations. Almost 45% of the issued and paid up capital of Naluri came into the hands of Pengurusan Danaharta Nasional Bhd ("Danaharta"). Danaharta is the statutorily incorporated company formed to rescue banks from bad debts owed them by their customers in consequence of the financial crisis that hit this country in 1997. Danaharta then appointed Special Administrators over the affairs of Naluri. Mr. Thomas who appeared for one of the respondents drew our attention to several provisions of what I will call for short, the Danaharta Act which deal with what special administrators can and cannot do. I do not propose to go through all the sections here. Suffice to say that from a reading of the provisions, these special administrators are persons with very wide powers. It appears that they can do almost anything they like with the assets of the company over which they are appointed. They need no sanction from the court to act contrary to several important provisions of the Companies Act 1965. They appear to be insulated from any consequence for their acts and omissions. But, as pointed out to learned counsel during argument, neither Danaharta nor the special administrators are parties to the proceedings. And no relief whatsoever is being claimed against them.

On 11 August 2003, Danaharta entered into an agreement with the second defendant, Atlan Properties Sdn Bhd under which it sold the latter, 220,965,222 shares in Naluri. These shares came into Danaharta's hands in its capacity as chargee. It was pursuant to the exercise of its power to sell as chargee that it made the sale to the second defendant.

Now, some of the recitals in the agreement are important. This is what they say:-

(E) On 18 April 2003 Alliance Merchant Bank Berhad on behalf of the Company [that is to say, Naluri] announced that the Special Administrators had determined that it was in the best interest of the stakeholders of the Company to proceed with a capital repayment of at least RM 690,516,320.00 on the basis of RM 1.00 for each existing share of RM 1.00 each in the Company. It was also announced that the Company had received a notice from the Kuala Lumpur Stock Exchange that the Company was determined to have an inadequate level of operations within the meaning of Practice Note No. 10/20