Transactions executed in the twilight period prior to winding-up are void if not in good faith or supported by valuable consideration.

The Appeal

[1] The appellant in the present appeal before us, Silver Corridor Sdn Bhd was the defendant at the High Court. The 1st respondent, Gallant Acres Sdn Bhd (under liquidation and acting by the liquidator) was the 1st plaintiff, while the 2nd respondent, Kepong Development Sdn Bhd, was the 2nd plaintiff there.

[2] Before the High Court, the plaintiffs (the respondents herein) sought for declaratory orders that various sale and purchase agreements in respect of 12 shop lots constructed or to be constructed by the 1st plaintiff, as the developer be declared invalid, void and of no effect pursuant to s 293 of the Companies Act 1965 ( CA ) read together with ss 52 and/or 53 of the Bankruptcy Act 1967 (BA) and that the shop lots were still vested with the liquidator of the 1st plaintiff.

[3] The present appeal is against the decision of the Court of Appeal given on 31 March 2014 affirming the decision of the High Court dated 20 September 2013 granting declarations as prayed for by the plaintiffs. In this judgment the respective parties shall be referred to as they were in the High Court.

Factual Background

[4] The 1st plaintiff was a licensed housing developer under the Housing Developers (Control and Licensing) Act 1966. The 2nd plaintiff was the registered owners of a piece of land originally held under HS (D) 79275, PT No 564, Mukim Batu, Kuala Lumpur W/P, which was later subdivided into:

(a) Geran No 47407 Lot No 58072; and

(b) Geran No 47408 Lot No 58073.

[5] The 2nd plaintiff decided to construct a low cost housing scheme on the land and to relocate as well as to resettle squatters found on the land. For that purpose, a joint-venture agreement dated 30 December 1999 (the JVA) between the 1st and 2nd plaintiffs were entered into whereby the 1st plaintiff agreed to develop the land under two phases - Lot No 58072 for first phase and Lot No 58073 for second phase respectively. Phase 1 consisted of three blocks of 16 stories each comprising a total of 540 units of low cost apartments and 12 units of shop lots. Phase 2 would have 396 medium cost apartments and 12 units of shop lots. The 1st plaintiff developed the first phase sometime between late 2000 to early 2001, but the development was abandoned when the 1st plaintiff was wound-up.

[6] The 1st plaintiff, being commercially insolvent, was wound-up by an order of Court on 5 March 2008, on a winding-up petition filed by one South Engineers Sdn Bhd The winding-up petition was filed on 18 December 2007. Initially the Director General of Insolvency (DGI) was appointed as the liquidator of the 1st plaintiff. Later, by an order of Court dated 7 April 2009 one Subramanian a/l A V Sanker of Hals Associate (PW1) was appointed as the liquidator in place of the DGI. The present action was brought by the said liquidator in the name and on behalf of the 1st plaintiff.

[7] With the winding-up of the 1st plaintiff, the development of the first phase was abandoned and the second phase never took off the ground.

[8] During verification exercise conducted by the liquidator, to verify the purchasers of units of the development, the defendant claimed to be the purchaser of all the 12 units of shop lots constructed or to be constructed on the first phase. In support of its claim, the defendant produced (12) sale and purchase agreements (SPAs), all respectively dated 19 September 2006 for all 12 shop lots. The defendant claimed that it had paid to the 1st plaintiff in full the purchase price of RM120,000.00 for each of the 12 s