American International Assurance Bhd V Coordinated Services L Design Sdn Bhd

  

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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

 

(COMMERCIAL DIVISION)

 

ORIGINATING SUMMONS NO: D-24NCC-93-2009

 

In the matter of Orders 7 and Order 92 Rules 4 of the Rules of the High Court 1980

 

And

 

In the matter of section 223 and 243 (1) of the Companies Act 1965

 

And

 

In the matter of COORDINATED SERVICES L DESIGN SDN BHD (NO. SYARIKAT 462754-H)

 

And

 

In the matter of the Order date 27th April 2009 delivered by the High Court of Kuala Lumpur vide Companies (Winding-Up) No: D1-28-26-2009

 

BETWEEN

 

AMERICAN INTERNATIONAL ASSURANCE BHD (Company No.: 790895-D) ..PLAINTIFF

 

AND

 

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COORDINATED SERVICES L DESIGN SDN BHD

 

(Company No.: 462754-H) …DEFENDANT

 

BEFORE THE HONOURABLE JUDGE Y.A. DR. HAJI HAMID SULTAN BIN ABU BACKER

 

IN CHAMBERS

 

JUDGMENT

 

This is my judgment in respect of the plaintiff’s application in essence to set aside an order of the High Court in a different suit where the court ordered a stay of the winding up proceedings pursuant to section 243 of Companies Act 1965 (CA 1965). The prayers inter alia reads as follows:

 

1. A declaration that the Order dated 27.4.2009 obtained at Kuala Lumpur High Court Companies Winding-Up No: D1-28-86-2001 was obtained in breach of and/or ultra vires section 243(1) of the Companies Act 1965 and is therefore void and of no effect.

 

2. A declaration that the Order dated 27.4.2009 obtained at Kuala Lumpur High Court Companies Winding-Up No: D1-28-86-2001 was obtained in excess of and/or without the jurisdiction of the winding-up court and is therefore void and of no effect.

 

3. A declaration that the Order dated 27.4.2009 obtained at Kuala Lumpur High Court Companies Winding-Up No: D1-28-86-2001 was obtained in breach of the rules of natural justice and is therefore void and of no effect.

 

4. Consequent to any or all of the declarations above, the Order dated 27.4.2001 obtained at Kuala Lumpur High Court Companies Winding-Up No: D1-28-86-2001 be set aside.

 

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Brief facts

 

1. The defendant was wound up by an order of court on 23.10.2001. However the court had on 27.4.2009 granted a stay of the winding up order. And that order reads as follows:

 

“A DA LA H DIPERINTAHKAN bahawa Perintah penggulungan terhadap syarikat Responden bertarikh 23 hb Oktober 2001 di gantung samasekali dan bahawa segala urusniaga dan perjanjian-perjanjian yang telah dimasuki oleh syarikat Responden dari tarikh permulaan penggulungan, iaitu 05 hb Februari 2001, sehingga tarikh Perintah ini disahkan. ”

 

2. The plaintiff is an insurance company and complains that (i) after the winding up order had been granted the defendant had obtained from the plaintiff a fire insurance policy from 10.5.2002 to 9.5.2003 and thereafter the policy was renewed from 10.5.2003 to 9.5.2004 (ii) the defendant made a claim under the policy on 4.4.2004 (iii) thereafter the plaintiff through their loss adjuster found out that the company has been wound up at the material time the insurance policy was procured. In consequence, the plaintiff had repudiated liability and refunded the premium but the defendant had refused to accept the premium and threatens to institute legal proceedings.

 

Preliminaries

 

3. It is clear that the plaintiff is making this application to evade liability in respect of the policy, on the ground that the policy was procured after

 

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the order of winding up. Both counsels did not address me on the issue whether a company is debarred from taking insurance policy or any other steps to protect the assets of the company or acts beneficial to the company. Just because the company has been wound up does not mean any of the transaction during the material time or transaction after the winding up cannot be sustained. It all depends on whether the act is for the benefit of the company which is essential in the process of winding up. Just because the winding up order has been granted does not mean all activities in the company must freeze immediately. And that does not also mean that all activities of the company must be done only by the liquidator. For example, paying water bill, electricity bill, payment of petrol expense and so many other things which need to be done to sustain the company as a going concern or at least until the liquidator comes into direct control of the activities of the company. At times it may take days or months for the liquidator to take control and even if he has taken control it does not mean that he cannot direct or seek assistance from the directors, employees etc. of the company to continue with the role in a limited sense to wind up the company in a prudent manner without much loss to the value and asset of the company. What a prudent liquidator will want these people to do is to ensure that the liability of the company is not increased, at the expense of creditors or contributories etc.

 

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4. The effect of the winding up order puts an end to the director’s power as envisaged in CA 1965 but does not eliminate his role as an employee of the company as the case may be to ensure that the assets of the company are safe guarded, subject only to the directions and approval of the liquidator. For example section 223 of CA 1965 does not say all acts done by the company by the directors or employees or liquidator is void. That section reads as follows:

 

Any disposition of the property of the company including things in action and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court shall unless the Court otherwise orders be void.

 

5. If the order of winding up is intended to stop any transaction or dealing in the affairs of the company, the said section will have stated so. Such a provision, if any, in commercial term will be disastrous, for, once a company is wound up the directors, employee etc must all abandon their role immediately. If that happens the assets of the company will be plundered by third parties and the liquidator will have nothing to manage or wind up. In the instant case no reasonable mind will say that the act of taking a fire insurance policy by the company by its directors or employees after the company has been wound up will not be for the benefit of the company. It is a question for the liquidator to accept or reject the transaction and if he rejects the transaction, the person who

 

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transacted may be liable or at least answerable to the liquidator, as in the case of “de son tort ”.

 

Arguments of the Plaintiff

 

6. The learned counsel for the plaintiff says (i) the stay order was obtained in breach of section 243(1) of CA 1965 (ii) is ultra vires section 243(1) of CA 1965 (iii) was obtained beyond the scope and/or excess of the power, authority and jurisdiction of the winding-up court (iv) was obtained in breach of natural justice as the plaintiff was not informed.

 

7. I have read the application, affidavits and submissions of the parties in detail. I take the view that the plaintiffs application must be dismissed. My reasons inter alia are as follows:

 

(i) I have dealt with the jurisprudence relating to stay of winding-up order pursuant to section 243 of CA 1965 in great detail in the case of Tiong Hung Ming v Kalimantan Hardwood Sdn Bhd; Weeluk Holding Sdn Bhd (Applicant) [2008] 9 CLJ 593. I do not wish to repeat the same save to emphasis that the order of a stay of winding-up, if expressed in unlimited terms, would put an end to the winding-up process and company can thereupon resume the conduct of its business and affairs as if no winding up existed at all. A perusal of the order of court will clearly show that the order was made within the power and jurisdiction of the winding up

 

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court. And that part of the order which the plaintiff complains of reads: “bahawa segala urusniaga dan perjanjian-perjanjian yang telah dimasuki oleh syarikat Responden dari tarikh permulaan penggulungan, iaitu 05 hb Februari 2001, sehingga tarikh Perintah ini disahkan ” .

 

In my view the said order cannot be said to be in excess of jurisdiction as it is a necessary order to ensure that all transaction after the winding up process has commenced and is duly validated, failing which, all steps taken in the course of winding up proceedings will be a subject matter of challenge. And that order was made with the approval of the official receiver which is an important consideration to be given after the winding up has commenced.

 

(ii) I do not think in the instant case there is any breach of natural justice, as the plaintiff knew in 2004 that the company has been wound up. The plaintiff did not make any attempt to set aside the order, or inform the official receiver to protect their interest, if any, expeditiously. In the instant case ,the official receiver has supported the application for order for stay of the winding up order.

 

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(iii) The plaintiff’s reliance on the case of Badiaddin is not helpful as the order of court was not made in breach of a statute or without jurisdiction. In essence, it cannot be said to be an illegal order or one obtained by fraud. In addition, I will say that the court will be slow in setting aside an order of court of co-ordinate and/or concurrent jurisdiction which has been validly obtained within the framework of the law and procedural jurisprudence. And I add that the terms of the instant order is one which is essential within the parameters of company’s jurisprudence.

 

8. For reasons stated above the plaintiffs application is dismissed with costs. The plaintiff to pay the defendant costs in the sum of RM10,000.00.

 

I hereby order so.

 

(Y.A. DR. HAJI HAMID SULTAN BIN ABU BACKER)

 

Judge

 

High Court (Commercial Division)

 

KUALA LUMPUR

 

Date: 24th February 2010

 

For the Plaintiff: C.K. Yeoh; M/s Ranjit Singh & Yeoh For the Defendant: Hargopal Singh; M/s Hargopal Singh & Co.

 

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