Chong Siew Fai J

On 19 August 1986 the plaintiff obtained judgment against the defendant in the sum of $40,145.45 with interest at 8% pa and costs of $350.

On 6 October 1986, on the ex parte application of the plaintiff, an order was made imposing a charge with the payment of the judgment sum on 40,981 ordinary shares in Kion Hoong Organization Sdn Bhd ('the shares') registered in the name of the judgment debtor Khiing Sie Khuo.

On 16 February 1987, on the application of Syarikat Kion Hoong Cooking Oil Mills Sdn Bhd (the intervener), the intervener was allowed to intervene and the intervener, pursuant to order of court, filed a summons dated 8 April 1987 seeking to discharge the charging order made on 6 October 1986 relating to the shares or, alternatively, to rank the charging order subject to the rights and interest of the intervener by reason of a pledge in writing dated 16 January 1986 in favour of the intervener. The dispute, it will be noted, is between the plaintiff/judgment creditor and the intervener.

By consent the issues requiring determination are:

(i) Whether at the date of the charging order, ie 6 October 1986, the intervener had a beneficial interest by way of security in the shares now standing in the name of the defendant?

(ii) In deciding issue (i), the following are to be considered:

(a) Whether art 14 of the articles of association of Kion Hoong Organization Sdn Bhd gives a better right to the plaintiff's claim over that of the intervener? and

(b) Whether s 67 of the Companies Act 1965 has been contravened, and if so, what is the effect of the contravention on the intervener's security?

It has also been agreed that depending on the outcome of the determination of the issues above-stated, if the pledge to the intervener is good, the charging order will rank subject to the pledge. But if the pledge is held to be bad, the charging order will stand free of the pledge.

It has further been agreed that in arguing this application, the parties will rely on two affidavits, namely:

(a) Ung Neng Lung's affidavit made on 28 February 1987 and the exhibits annexed thereto filed in support of the intervener's application; and

(b) Kho Kwang Mok's affidavit made on 22 November 1986 filed on behalf of the plaintiff.

In the affidavit of Ung Neng Lung, the evidence, which is uncontradicted, shows that on or about 31 December 1985 the defendant Khiing Sie Khuo trading under the style of Kion Hoe Importers & Exporters was indebted to the intervener in the sum of $103,746.13, that on or about 16 January 1986 the defendant by a letter in writing (exh 'UNL 3' annexed to Ung Neng Lung's said affidavit) pledged, inter alia, the shares to the intervener as security for the payment of the said debt $103,746.13 until such time when he could pay the said debt and redeem the said shares and that the certificates comprising the shares were delivered to and deposited with the intervener. It is also in evidence that the debt remains substantially unsettled and that as at 28 February 1987 the amount outstanding was $101,492.17. In relation to the shares, the intervener therefore claims priority by reason of the pledge over the plaintiff's claim under the charging order made on 6 October 1986.

At the hearing of the application, counsel for the plaintiff cast suspicion over the genuineness of the pledge including raising doubts as to how the share certificates were delivered, pointing out by reference to the defendant's letter that the defendant was in Sibu and the intervener in Kuching. With respect, I am unable to accept such submission which is unsupported by any material challenging the evidence adduced on behalf of the intervener. As rightly pointed out by counsel for the intervener at the hearing, he was in no position to reply to the submission, and the intervener was not afforded an opportunity to answer.

In relation to the pledge, counsel for the plaintiff pointed out that no transfer was executed. With respect, the law, I think, is cl