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2018 MarsdenLR 3016
HIGH COURT MALAYA KUALA LUMPUR
HJ SAID BINAAN SDN BHD – Appellant
Versus
GETRAHOME SDN BHD – Respondent
[Companies (Winding-Up) No: WA-28NCC-685-10-2017]
The absence of a bona fide dispute over the debt suffices to grant a winding-up order against a respondent, despite claims of solvency.
Headnote:Statute Analysis: Section 465(1)(e) and Section 466(1) of the Companies Act 2016 pertain to the grounds for winding up a company on the basis of inability to pay debts. Facts of the Case: The petitioner initiated winding-up proceedings against the respondent following the respondent's failure to refund a deposit following the execution of a Joint Project Development Agreement that did not materialize.
Findings of Court:
The court found no bona fide dispute over the claimed debt of RM400,000.00 which supported the granting of a winding-up order.
Issues: The main issues included whether there was a bona fide dispute over the debt and if the respondent was unable to pay debts under statutory provisions.
Ratio Decidendi: The court concluded that no substantial grounds existed to dispute the debt based on evidence, resulting in the presumption of the respondent’s insolvency being valid.
Result: I therefore allow the winding-up petition and grant a winding-up order against the respondent.
| Table of Content |
|---|
| 1. petition for winding up due to failure to return deposit. (Para 1 , 2 , 3) |
| 2. background of joint agreements and financial transactions. (Para 4 , 5 , 6 , 7 , 8 , 9) |
| 3. arguments by both parties regarding contractual obligations. (Para 10 , 11 , 12 , 13 , 14) |
| 4. court's determination on existence of bona fide dispute. (Para 15 , 16 , 17 , 20 , 21) |
| 5. evaluation of frustration in contract law and implications. (Para 22 , 27 , 28 , 30) |
| 6. court evaluates contractual frustration. (Para 25 , 26) |
| 7. frustration defined and discussed. (Para 31 , 32 , 33 , 34 , 35) |
[1] This concerns a petition for the winding up of the respondent (documented in encl 1) on the primary basis of the failure to return a deposit payment following termination of an agreement between the respondent and the petitioner.
[2] At the conclusion of the hearing, I granted a winding-up order against the respondent, and highlighted the principal grounds for the decision. This judgment contains the full reasons for my decision.
Key Background Facts
[3] Both the petitioner and the respondent are locally incorporated private limited companies involved in the development and construction industry.
[4] It all started when the respondent was selected to be the joint development partner to develop a piece of 6.52 acres of land in Sungai Buloh owned by Kwasa Development (3) Sdn Bhd ("Kwasa Development") ("the Project").
[5] The respondent then invited the petitioner to jointly develop the Project. They thus entered into a Joint Project Development Agreement dated 27 June 2016 to develop the Project ("the Joint Project Development Agreement").
[6] For this purpose, the parties agreed, pursuant to the Joint Project Development Agreement, to form a company, known as Emerald Epitome Sdn Bhd ("Emerald"). In conjunction thereto, the parties then proceeded to execute a Shareholders Agreement on even date ("the Shareholders Agreement"), The key term from both agreements included that the respondent would hold 51% of the total issued shares and the petitioner, 49%, in Emerald. Crucially, the shares to be held by the respondent would be beneficially owned by the petitioner.
[7] Pursuant to the Joint Project Development Agreement the petitioner must pay the respondent the sum of RM2 million for the respondent agreeing to collaborate with the petitioner in the development of the Project. In accordance with the same, the one and only payment which had been received by the respondent from the petitioner was the sum of RM400,000.00 which was paid within seven days of the execution of the Joint Project Development Agreement.
[8] The parties however did not proceed to further implement the Joint Project Development Agreement. It is not disputed that Emerald did not enter into any Development Rights Agreement with Kwasa Development but had instead withdrawn from the Project. This primary purpose of the Joint Project Development Agreement was thus not fulfilled.
[9] This led to the petitioner claiming the refund of the RM400,000.00 in its solicitors' letter to the respondent dated 21 July 2017. The respondent refused. The petitioner responded by commencing the instant winding-up proceedings. The winding-up notice under ss 465(1)(e) and 466(1) of the Companies Act 2016 ("the CA ") served on the respondent went unheeded. Hence the instant hearing of the petition for the winding up of the respondent company.
Contentions Of Litigants
[10] The petition is opposed by the respondent. The respondent disagreed that the agreements between the parties had become frustrated.
[11] The respondent highlighted the fact that cl 3.1(b) of the Joint Project Development Agreement imposed on the petitioner the responsibility for the entire costs and expenses of the development and for the availability of the finances necessary for the development of the Project. Further, cl 7.1 of the Joint Project Development Agreement provided that the petitioner shall be responsible to capitalise Emerald whether in the form o
