Mohamed Dzaiddin FCJ:

This appeal is concerned with the interpretation of s. 218(2)(a) of the Companies Act 1965 (the Act) which reads as follows:

(2) A company shall be deemed to be unable to pay its debts if

(a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred ringgit then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorized requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor;

Leave to appeal was granted by this court to the appellant on 20 March 2000 for the determination of the following questions of law:

(a) Whether section 218(2)(a) of the Companies Act 1965 is to be interpreted literally and strictly or widely and liberally.

(b) In the event it is the literal and strict interpretation that ought to be adopted whether the section 218 Notice must quantify and specify the exact and actual sum due as at the date of the demand and leave no further sums/amounts to be calculated/quantified or ascertained by the recipient of the notice.

Background

The brief facts of the case are these. On 18 October 1989, the respondent obtained a judgment in default of appearance against the appellant in the Kuala Lumpur High Court for a sum of RM334,118.79 together with interest thereon at the rate of 8% per annum from 28 October 1988 until date of payment. The appellant made no effort to have the said default judgment set aside. Then on 16 October 1991, the respondent's solicitors served on the appellant a statutory notice of demand pursuant to s. 218 of the Act which reads as follows:

To:

Malaysia Air Charter Company Sdn. Bhd.

Suite 16-02, 16th Floor

Wisma SPK

Jalan Sultan Ismail

50250 Kuala Lumpur

TAKE NOTICE that you are now required to pay to us as Solicitors for Petronas Dagangan Sdn Bhd or secure or compound to the satisfaction of Petronas Dagangan Sdn Bhd the judgment sum of $334,118.79 together with interest thereon at the rate of 8% per annum on all outsanding sums from the 28th day of October 1988 until the date of realisation and the sum of $225.00 costs being judgment obtained against you at the Kuala Lumpur High Court KOD No. D2-23-2714-88 within three (3) weeks from the date of receipt of this Notice, failing which you shall be deemed to be unable to pay your debts and appropriate action will be taken for the Winding-Up of Malaysia Air Charter Co. Sdn. Bhd.

Dated: 16 October, 1991.

Sgd.

Solicitors for Petronas Dagangan Sdn Bhd

On 27 February 1992, the respondent presented a petition for winding-up the appellant on the ground that the sum demanded in the notice had not been paid by the appellant. It was at this stage that the appellant disputed the validity of the s. 218 notice. On 6 May 1996 the High Court ordered that the appellant be wound up. However, by consent, the winding-up order was stayed pending an appeal to the Court of Appeal.

In the Court of Appeal, the argument on behalf of the appellant on the validity of the respondent's s. 218 notice was two-fold. First, it was submitted that the demand under s. 218(2)(a) required "the sum so due" to be clearly specified and quantified and that no sum whatsoever ought to be left to be calculated or ascertained by the recipient of the notice. Failure to do so would result in the statutory notice being invalid. Secondly, the sum demanded by the respondent, namely, "the judgment sum of RM334,118.79 together with interest thereon at the rate of 8% per annum on all outstanding sums from 28 October, 1988 until the date of realisation" was in excess of what was actually due, and therefore the notice was invalid and did not raise the presumption under the said section.

The Court of Appeal, in dismissing the appeal, held that the failure to quantify the actual sum due in the s. 218 notic