Hsbc Bank Malaysia V Impressione Sdn Bhd & 2 Yang Lain

  

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MALAYSIA

 

IN THE HIGH COURT IN KUALA LUMPUR (NEW COMMERCIAL COURT)

 

SUIT NO: D-22NCC-97-2009

 

BETWEEN

 

HSBC BANK MALAYSIA BERHAD

 

(Company No: 127776-V) … PLAINTIFF

 

AND

 

1. IMPRESSIONE SDN BHD (Company No: 751099-X)

 

2. TEN SAY BOON (NRIC: 840323-07-5739)

 

3. TEN SAY KAI

 

(NRIC: 800425-14-5981) … DEFENDANTS

 

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 for summary judgment pursuant to Order 14 of RHC 1980, for a sum more than 2 million ringgit with interest costs etc.

 

Brief facts

 

1. The plaintiff has given finance facility to the 1st defendant and the 2nd and 3rd defendants have executed a guarantee. In consequence of default

 

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the plaintiff had terminated the said facilities and demanded payment which the defendant refused. Though, the defence and affidavits filed by the defendants raise various issues the learned counsel for the defendants on the date of hearing had limited their arguments to two issues which they say are triable and it reads as follows:

 

(i) The plaintiff had failed to issue a valid and proper Letter of Termination against the defendants; and

 

(ii) Section 132C (1) of the CA 1965 has been breached and/or not complied with thus rendering the banking facility agreement of RM2.0 million void pursuant to section 132C (3) of the CA 1965.

 

And that section 132C of CA 1965 reads as follows:

 

(1) Notwithstanding anything in the memorandum or articles of association of the company, the directors shall not carry into effect any arrangement or transaction for –

 

(a) the acquisition of an undertaking or property of a substantial value; or

 

(b) the disposal of a substantial portion of the company’s undertaking or property, unless the arrangement or transaction has been approved by the company in a general meeting.

 

(1) Notwithstanding anything in a company’s memorandum or articles, the directors shall not carry into effect any proposal or execute any transaction for –

 

(a) the acquisition of an undertaking or property of a substantial value; or

 

(b) the disposal of a substantial portion of the company’s undertaking or property,

 

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which would materially and adversely affect the performance or financial position of the company, unless the proposal or transaction has been approved by the company in general meeting.

 

2. I have read the application affidavits and submission of the parties in detail. I take the view that the application must be allowed. My reasons inter alia are as follows:

 

(a) On the 1st issue the defendant says the plaintiffs letter of termination is unlawful, improper and invalid as the plaintiff solicitors had stated that they were acting for HSBC Bank Malaysia Sdn Bhd and not HSBC Bank Malaysia Berhad. The defendant did not cite any authority on this point. In addition the plaintiff had by a letter clarified the typographical error. I have given much thought to this line of defence raised by the defendants and find no merit.

 

(b) On the 2nd issue, for the court to consider section 132C of CA 1965 defence, the defendants must have raised all the relevant facts to attract the said section in particular (a) or (b). General averments itself is not sufficient. In the instant case the defendants’ allegation in the affidavits only says that there is no evidence of approval of the transaction by the company in the general meeting. That itself is not sufficient to attract section 132C of CA 1965.

 

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(c) In addition section 132C of CA 1965 cannot be read in isolation. It must be read with section 20(1) which relates to ultra vires transaction. And that section clearly states:

 

No act or purported act of a company (including the entering into of an agreement by the company and including any act done on behalf of a company by an officer or agent of the company under any purported authority, whether express or implied, of the company) and no conveyance or transfer of property, whether real or personal, to or by a company shall be invalid by reason only of the fact that the company was without capacity or power to do the act or to execute or take the conveyance or transfer.

 

In the case of Public Bank Bhd v Metro Construction Sdn Bhd [1991] 3 MLJ 56, it was held that, the security given by the defendant company to the plaintiff to secure a loan to a third party was not ultra vires the objects clause of the defendant’s memorandum of association. The learned judge opined that even if the transaction was found to be ultra vires, it would have been saved by section 20 (1) of the Companies Act 1965. There are number of other cases which support this proposition [see Bumiputra Merchant Bank Bhd v Supreme-QBE Insurance Bhd [1990] 2 MLJ 247 and Executive Aids Sdn Bhd v Kuala Lumpur Finance Bhd [1992] 1 MLJ 89]

 

(d) Section 132C is not a weapon for the company or director or

 

guarantors to avoid liability and defeat transaction between the

 

company and third parties. In essence that section is meant to give

 

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protection to shareholders. That is reflected in section 13 2C (2) of CA 1965 itself. To attract the section the aggrieved person must initiate an action in court or bring an action to set aside the transaction pursuant to Specific Relief Act at the earliest opportunity. That section is not meant to be a defence for the company or director or guarantor to avoid liability and this is clearly reflected in the dominant provision to protect third parties as set out in section 20 (1) of CA 1965.

 

3. For reason stated above I allow the plaintiffs application prayers (a) and (b) with costs as set out in RHC 1980.

 

I hereby order so.

 

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

 

Judge

 

High Court (Commercial Division)

 

KUALA LUMPUR

 

Date: 9th February 2010 For the Plaintiff: Vinayaga; M/s Skrine

 

For the Defendants: Soo Pei Ping (Teh Beng Boon with her); M/s B B

 

Teh

 

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