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COURT OF APPEAL PUTRAJAYA
PONTIAN UNITED THEATRE SDN BHD – Appellant
Versus
SOUTHERN FINANCE BERHAD – Respondent
[Civil Appeal No: J-02-230-2005]
[1] This appeal is against a winding-up order made by the High Court against the appellant company. The winding up was sought on the ground that the appellants were unable to pay their debts for having neglected to settle a statutory demand served on them on 13 March 2004, by the respondents under s 218(2)(a) of the Companies Act 1965. The sum demanded was RM4,288,727.52 as at 15 September 2000, being, according to the petition, the amount of a final judgment obtained by the respondents on 22 August 2003. That was the date on which was dismissed the appellant's appeal to the Judicial Commissioner (as judge in chambers) against a summary judgment for that sum given by the senior assistant registrar on the respondents' application dated 12 April 2001. The appellants opposed the petition by filing an affidavit in opposition. The respondents did not reply to that affidavit. The appellants' opposition was on four grounds, on all of which the appellants failed in the High Court. The same four grounds have been raised in this appeal.
First Ground
[2] For the first ground the appellants rely on the fact that their appeal against the judgment of the High Court of 22 August 2003, is pending before this Court and on the ruling of Rekhraj J in Solid Kitchen Sdn Bhd v. Regal Development Sdn Bhd, [1998] 6 MLJ 437; [1998] 3 CLJ Supp 409; [1998] 3 BLJ 409 and Public Bank Bhd v. Muhibbah Meridian Sdn Bhd; [2001] 1 MLJ 31; [2000] 7 CLJ 137; [2000] 3 AMR 3546 that a debt under a judgment which is under appeal cannot be said to be an undisputed debt and therefore cannot form the basis for a demand under the said s 218(2)(a).
[3] I do not agree. A demand on a company under s 218(2)(a) may be made by "a creditor.. to whom the company is indebted in a sum exceeding five hundred ringgit then due". A judgment for a sum establishes the debt, which then becomes due to the person to whom it is owed, who then becomes the creditor The sum remains due even though the debtor's appeal against the judgment is pending, because an appeal does not operate as a stay of execution. The sum must be paid unless execution of the judgment has been stayed, in which event it is no longer due. In this case there was no stay of execution of the summary judgment. The sum was therefore due when the demand under s 218(2)(a) was made. By the appellants' failure to settle the demand for three weeks after it was made they were to be deemed to be unable to settle their debts, a circumstance which constituted one of the grounds on which the appellants could be wound up. The appeal on the first ground therefore fails.
Second Ground
[4] The second ground is that the appellants had a counterclaim against the respondents for RM4.8 million, larger than the amount underlying the winding-up petition.
[5] Let me first set out the circumstances pertaining to this ground.
[6] According to the statement of claim, by a letter of offer dated 7 August 1995, the respondents offered and the appellants accepted a revolving credit of RM3.3 million, and on 14 August 1995 a loan agreement was signed, one of whose terms was that the principal and any accrued interest were payable on demand. As at 15 September 2000, the account stood at RM4,288,727.52, which comprised the principal sum of RM3.3 million and interest and other charges in the sum of RM988,727.52. A notice of demand dated 23 September 2000, was served on the appellants demanding payment of the sum of RM4,288,727.52 but the appellants failed to pay.
[7] In their statement of defence, as far as the respondents' claim was concerned, the appellants, while admitting their acceptance of the offer of the credit facility and their signing of the loan agreement, called on the respondents to prove their claim. As to the interest, the appellants raised various issues, such as that the rate at which interest was charged exceeded the agreed rate. As regards the principal sum, the appellants averred that the loan was to finance
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