Damai Bistari Sdn. Bhd V Azme Bin Idris

  

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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

 

(COMMERCIAL DIVISION)

 

SUIT NO: D-24 NCC-18-2010

 

BETWEEN

 

DAMAI BISTARI SDN. BHD. – PLAINTIFF

 

AND

 

AZME BIN IDRIS – DEFENDANT

 

JUDGMENT

 

1. On 22/1/10, the Plaintiff filed an Ex-Parte Summons In Chambers (Enclosure 3) for an order of injunction under Order 29 and Order 92 rule 4 of the Rules of the High Court 1980 (RHC 80) and Section 25 of the Courts of Judicature Act 1964 to inter alia, restrain the Defendant from filing and presenting a Winding Up Petition against it.

 

2. A sealed copy of the Originating Summons and Summons In Chambers with the Affidavit In Support were served on the Defence Counsel and Enclosure 3 was heard inter partes.

 

3. The Plaintiff is a housing developer and the Defendant is one of its purchasers. The brief facts of the case are that on 16/1/08 the Plaintiff had obtained an order of Court to hold a meeting to approve a Scheme of Arrangement pursuant to Section 176 of the Companies Act 1965 with its creditors including the Defendant. Effectively the Order of Court dated 16/1/08 restrained the Defendant from commencing any Winding Up action against the Plaintiff.

 

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4. Accordingly, a meeting was held on 18/3/08. On 16/5/08 the Plaintiff obtained an Order of Court sanctioning the Scheme of Arrangement. Pursuant to the Scheme, Creditors of the Plaintiff including the Defendant were restrained from taking action against the Plaintiff for damages arising from the late delivery of vacant possession of their premises. Further, according to the Scheme of Arrangement, the Creditors including the Defendant had to postpone their claim for damages until the end of 2010.

 

5. However, on 15/9/09 the Defendant successfully obtained an Order of Court to exempt himself from the said Scheme of Arrangement. The Plaintiff did not appeal against the said order to the Court of Appeal.

 

6. Following the order of exemption, the Defendant on 11/1/10 obtained judgment against the Plaintiff in the Kuala Lumpur Sessions Court Case No 52-39012-2007 for the sum of RM 37,048.00 together with interest and costs.

 

7. The Plaintiff has filed an appeal against the said Sessions Court decision to the High Court and has applied for a stay of execution of the said judgment.

 

8. However, as the Plaintiff did not obtain an order for the stay of execution of the said judgment by 12/1/10, the Defendant issued a notice under Section 218 (1) (e) of the Companies Act 1965 demanding payment of the judgment sum.

 

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9. Sometime towards the end of 2009, the Plaintiff deposited a sum of RM 121,520.56 into Court to oppose a Winding Up Petition presented by another creditor. The payment was made voluntarily by the Plaintiff and not by an order of court, to show that the Plaintiff is solvent.

 

10. Counsel for the Plaintiff contended that the Plaintiff ought not to pay the Defendant, although he had been exempted from the Scheme of Arrangement, as this will make him a “preferred creditor”. Further, Counsel for the Plaintiff raised the question of whether the Plaintiff would be in contempt of court by making payment to the Defendant in preference to other Creditors. Counsel for the Plaintiff also contended that in the event other purchasers came to know of the Defendant’s demand for payment, it will create dissatisfaction among the purchasers and will give the impression that the Plaintiff is acting in an unfair manner.

 

11. Counsel for the Defendant argued that as there is a valid judgment granted by the Kuala Lumpur Sessions Court which judgment has not been set aside on appeal and as there is no order for a stay of execution proceedings, the Defendant can lawfully demand payment of the judgment sum from the Plaintiff. Counsel also contended that there is no serious question to be tried in this case and that the balance of convenience lies in favour of the Defendant and as such the Summons In Chambers should be dismissed with costs.

 

12. After reading the Summons In Chambers (Enclosure 3), the Affidavit Jawapan of Defendant (Enclosure 4) and the Affidavit Balasan Plaintiff (Enclosure 5), and upon hearing submissions of both counsels, I held there was no merit in the Plaintiff’s application and Enclosure 3 was accordingly dismissed with costs.

 

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13. It is trite law that where an order of court has been regularly obtained it remains valid and enforceable until it is set aside. The order for exemption of the Defendant from the Scheme of Arrangement dated 15/9/09 was obtained regularly and no appeal had been filed by the Plaintiff against the said order. In the case of Patel Holdings S/B v. Estate Pekebun Kecil S/B & Anor [1990] 2 CLJ 280 Wan Adnan Ismail J (as he was then) held:-

 

“In my view the judgment had been regularly obtained. A judgment remains regular and enforceable until it is set aside by the Court. Although the Plaintiffs had filed an application to set aside the Judgment, the Judgment remains regular and enforceable until it is set aside. Until the Judgment is set aside the claim by the First Defendant based on the Judgment cannot be regarded as a disputed debt. It is in fact an enforceable Judgment debt.”

 

14. The Defendant on 11/1/10 obtained a judgment against the Plaintiff in the Kuala Lumpur Sessions Court for the sum of RM37,048.00 together with interests and costs. The Plaintiff has filed an appeal against the said decision and applied for a stay of execution proceedings. Both the appeal and the stay application have not been heard to date.

 

15. I am of the view that the Defendant was wholly within his right to make a demand on the Plaintiff for the payment of the judgment sum pursuant to Section 218 (1) (e) of the Companies Act 1965. A judgment on the debt simply means that the debt has been proven and that there is no further bona fide dispute as to the debt. In the case of Bank Utama (Malaysia) Bhd v. GKM Amal Bhd [2000] 2 CLJ 525, Abdul Aziz J (as he was then) stated at page 528 that :-

 

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“With respect, my understanding of what is meant by disputed debt in the context of a winding-up petition is that it is a debt in respect of which it is shown, with grounds supported by evidence, that there is a bona fide dispute. A debt is not a disputed debt in that context simply because the respondent maintains that he disputes the debt. A judgment on the debt establishes in law that there is no bona fide dispute as to the debt. The judgment is good until it is set aside on appeal, and it is enforceable unless a stay has been granted. The fact that the debtor has lodged an appeal against the judgment merely means that he still disputes the debt but does not establish that the debt is bona fide disputed. The judgment has already established the contrary.”

 

16. In the case of SBSK Plantation Sdn. Bhd. v Dynasty Rangers (M) Sdn. Bhd. [2002] 2 CLJ 329 Su Geok Yiam JC (as she then was) at page 343 had this to say when considering whether a debt was due and payable:-

 

“Upon the Defendant obtaining the judgment the debt ceases to be a disputed debt. Thereafter, the question whether the debt is a bona fide disputed debt becomes a non-issue. This is so even though the Plaintiff has filed an appeal against the judgment because the filing of an appeal does not have the effect of reverting the status of the judgment debt to its original status as a disputed debt before judgment was obtained.

 

The Plaintiff here has rightly proceeded to issue a statutory notice against the Defendant pursuant to s. 218(2)(a) of the Companies Act 1965. Upon the expiration of the 21 day period as set out in the statutory notice and the judgment debt remaining unpaid, the debt becomes “due and payable” and the Plaintiff is deemed to be unable to pay its debts. Consequently, the Defendant succeeds in acquiring the status of “creditor” for

 

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the purposes of winding-up proceedings pursuant to s. 217(1)(b) and s. 218(1)(e) of the Companies Act 1965.

 

Therefore, the Defendant is entitled as of right to present a winding-up petition against the Plaintiff. ”

 

17. In the present case, the appeal against the Kuala Lumpur Sessions Court decision has not been heard by the High Court. The judgment is therefore good until it is set aside on appeal and as the Plaintiff has not obtained an order for a stay of execution to date, the judgment is enforceable by the Plaintiff.

 

18. Counsel for the Plaintiff in support of his argument for the order of injunction referred to the case of Wangsini Sdn Bhd (formerly known as Willway Industries Sdn Bhd) v Grand United Holdings Bhd [1998]

 

5 MLJ 345, where the High Court held that:-

 

“The winding-up petition filed by the petitioner was oppressive and was an abuse of the process of the court, for despite the fact that the petitioner was well aware that a scheme of arrangement under S 176 of the Act had been approved and sanctioned by the court, the petitioner had willfully and blatantly chosen to flout the clear orders of the court and to disregard the law in this respect. Once a scheme is approved and sanctioned by the court, it is binding on all parties affected by it. The binding effect of the scheme on all creditors is accorded to it by operation of law. The court has power under the Act to order the distribution of assets otherwise than in accordance with the creditors’ strict legal rights. The classic feature of a court-sanctioned scheme of arrangement pursuant to S 176 of the Act is its ability to bind the dissenting minority to the scheme. If a scheme of arrangement is proposed by a company to its classes of creditors and if a majority in numbers representing

 

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three-fourths in value of the debt approved the scheme of arrangement and it is subsequently approved by the court, the said scheme becomes binding on the company and all its creditors to whom the scheme is proposed. The scheme in the instant case was one such scheme of arrangement which had secured the approvals of the requisite statutory majority of each creditor and sanctioned by an order of the High Court. It was not open to the petitioner to pursue another cause of action that is, by way of filing a winding-up petition to pressure the respondent to pay the alleged debt. ”

 

19. With respect, I think Counsel for the Plaintiff was wholly wrong to refer to the above case of Wangsini Sdn Bhd in support of his argument that the Defendant ought to be restrained from presenting his Winding Up Petition by reason of the Court sanctioned Scheme of Arrangement.

 

20. While I do not disagree with the principles enunciated in the Wangsini Sdn Bhd case, the facts of that case can be very easily distinguished from the present case in that the Defendant herein had validly obtained an Order of exemption dated 15/9/09 from the Scheme of Arrangement, thereby freeing himself from the constraints of Section 176 of the Companies Act.

 

21. Although the Plaintiff had voluntarily deposited a sum of RM121,520.56 into Court to oppose a Winding Up Petition presented by another creditor, to show that the Plaintiff is solvent, the payment into Court had no relevance to this case. What the Plaintiff had to do was to show that it had the funds to meet the demand of the Defendant in this case. This the Plaintiff failed to do.

 

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22. Counsel for the Plaintiff expressed the fears of the Plaintiff by raising the several issues mentioned in paragraph 10 above. To my mind, those fears are unfounded as the Plaintiff would be paying the Defendant, if he chose to do so, on the basis of a demand made pursuant to a statutory notice for payment.

 

23. Considering that the Defendant had obtained an Order of exemption dated 15/9/09 from the Scheme of Arrangement and a valid judgment from the Kuala Lumpur Session Court on 11/1/10, I am of the view that there is no serious question to be tried in this case and that the balance of convenience lies in favour of Defendant.

 

24. Accordingly, Enclosure 3 was dismissed with costs of RM3,500.00 to the Defendant and Enclosure 1 was struck off with no order as to costs upon its withdrawal by Counsel for the Plaintiff.

 

25. Although Counsel for the Defendant was not required to do so, he undertook not to file the Winding Up Petition against the Plaintiff until the disposal of the application for a stay of execution by the Kuala Lumpur Sessions Court.

 

Dated 26th day of April 2010

 

sgd

 

Y.A. TUAN MAH WENG KWAI Judicial Commissioner High Court Malaya Kuala Lumpur

 

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For the Plaintiff

 

For the Defendant

 

(K) – 050310

 

Kevin Sathiaseelan (Ms Thivina Kumaran with him)

 

Messrs Kevin & Co.

 

Rajinder Singh (Clinton Gomez with him); Messrs Rajindar Singh Veriah & Co.

 

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