Richard Malanjum CJSS:

Introduction

[1] There are two matters before this Court for our consideration. The first is an appeal by the appellant against the decision of the Court of Appeal delivered on 25 October 2005. The second is the respective applications by two Interveners to have certain findings and comments found in the two Judgments of the Court of Appeal expunged on the grounds as contained in their respective affidavits.

[2] In respect of the appeal we have given leave to appeal on 27 March 2006 involving three questions posed for our determination, namely:

a. Whether the creation of a trust by a Company amounts to an illegal reduction of its capital?

b. Whether the test adopted by the Court of Appeal, in determining whether cl 8 of the Signage Agreement is a stipulation by way of a penalty and/or a sum named in the contract for purposes of s 75 of the Contracts Act 1950, is the correct test and/or is exhaustive?

c. Whether the Court of Appeals adverse remarks/findings in the circumstances of this case, when viewed objectively, shows a real danger of bias on the part of the Court of Appeal in the Judgment arrived at against the appellant?

Leave to intervene was also granted to the interveners on 7 March 2006.

[3] This Judgment will deal only with the first matter, that is, the appeal proper A separate Judgment will be delivered in respect of the second matter.

[4] At the outset of the hearing of the appeal proper learned counsel for the appellant intimated to us that he would proceed to deal first with the third question posed and to be followed by the first and second questions. Accordingly in this Judgment we will adopt the same sequence. But to better understand the real issues involved in the questions posed it is imperative that we should first state the background facts and basis of the decisions of the courts below.

Background Facts

[5] The appellant was formerly known as Syarikat Teratai K.G. Sdn Bhd (STKG). It only changed its name to Metramac Corp Sdn Bhd (Metramac) on 4 March 1991 after it was bought over by Metro Juara Sdn Bhd (Metro Juara).

[6] STKG and Fawziah Holdings Sdn Bhd (the respondent in this appeal) at the material time shared common shareholders and directors, namely, Dato Fawziah and her mother Maimoon Bee.

[7] In July 1986 Dato Fawziah, through her Company ST KG, bid in an open tender called by Dewan bandar raya Kuala Lumpur (DBKL) to design, construct, finance and operate in the privatization of certain roads in the Kuala Lumpur area (the concession area) and to collect the tolls for a period of 12 years. There were five other bidders including United Engineers Malaysia Berhad (UEM). STKG was at that time engaged in several other projects especially in the building of low cost flats in Kuala Lumpur and Seremban and other civil engineering works.

[8] STKG won the tender and signed the First Concession Agreement dated 20 November 1987 with DBKL (the First Concession Agreement). A material clause in the First Concession Agreement was the land rights clause, out of which arose the licensing agreement for signage rights in favour of STKG. The signage rights refer to the advertising rights through signboards and billboards etc along the concession roads to be built by STKG in the concession area.

[9] The First Concession Agreement was in the nature of a build, operate and transfer agreement wherein upon the expiry of the concession period, the roads would revert back to DBKL.

[10] It was also anticipated by DBKL that any Company operating the First Concession Agreement area would be required to raise funds from potential investors for the project.

[11] In order to assure investors that all funds invested would go into the project a separate Company focused to do the project would be desirable. After being advised by its professional financial consultants, Schroder, STKG was restructured to hive off all its non-concession businesses so that it became a one project Company.

[12] Hence, on 31 March 1988, STKG