Jamaludin Bin Ismail V Nokia (M) Sdn. Bhd.

  

Download PDF Here

THE HIGH COURT OF MALAYA AT KUALA LUMPUR

 

(COMMERCIAL DIVISION) SUIT NO: D-28-363-2009

 

JAMALUDIN BIN ISMAIL V

 

NOKIA (M) SDN. BHD. GROUNDS OF JUDGMENT

 

Enclosure 6 is the Respondent’s Application for an Order that the winding up Petition be struck off under O 18 r. 19 of the Rules of the High Court 1980 and/or under the inherent jurisdiction of the Court. The Application is supported by an Affidavit affirmed on 29.7.2009.

 

The grounds for the Application:-

 

1) there is no cause of action pleaded against the Respondent;

 

2) the Petitioner is not entitled to the relief claimed; and

 

3) the Petition has been filed for collateral purposes.

 

Brief Facts

 

In a winding up of a company the persons who may present an petition for winding up is provided under section 217 (1) of the Companies Act 1965 namely,

 

a) the company;

 

i

 

b) any creditor, including a contingent or prospective creditor, of the company;

 

c) a contributory or any person who is the personal representative of the deceased contributory or the trustee in a bankruptcy;

 

d) the liquidator;

 

e) the Minister pursuant to section 205 or on the ground specified under section 218 (1) (d);

 

f) Bank Negara Malaysia if it is a licensed institution;

 

g) Bank Negara Malaysia in the case of a company which is licensed under Insurance act 1996;

 

h) The registrar on the ground specified in section 218(1) (m) or (n).

 

Section 218(1) of the same Act list out the circumstances a Company may be wound up by an order of the Court if –

 

“… (a) the company has by special resolution resolved that it be wound up by the Court;

 

(b) default is made by the company in lodging the statutory report or in holding the statutory meeting;

 

(c) the company does not commence business within a year from its incorporation or suspends its business for a whole year;

 

2

 

(d) the number of members is reduced in the case of a company (other than a company the whole of the issued shares in which are held by a holding company) below two;

 

(e) the company is unable to pay its debts;

 

(f) the directors have acted in the affairs of the company in their own interests rather than in the interests of the members as a whole, or in any manner whatsoever which appears to be unfair or unjust to other members;

 

(g) an inspector appointed under Part IX has reported that is of opinion –

 

(i) that the company cannot pay its debts.; or

 

(ii) that it is in the interest of the public or

 

shareholder..

 

(h) when the period, if any, fixed for the duration of the

 

company by the memorandum or articles expires or the event, if any, occurs…

 

(i) the court is of the opinion that it is just and equitable that the company be wound up;

 

(j) the company held a license under the Banking and Financial Institutions Act 1989 or the Islamic Banking Act 1983 and that license has been revoked or surrendered;

 

3

 

(k) the company has carried on Islamic banking

 

business…..in contravention of the Islamic

 

Banking Act 1983 or the Banking and Financial Institutions Act 1989, as the case may be;

 

(l) the company has held a license under the Insurance Act 1966 and –

 

(i) the license has been revoked ;

 

(ii) Bank Negara has petitioned for its winding up….

 

(iii) an order under paragraph 59(4)(b) of the Insurance Act 1966 has been made.

 

(m) the company is being used for unlawful purposes..

 

(n) the company is being used to any purpose

 

prejudicial to national security….”

 

On 21.5.2009 the Petitioner filed a Winding Up Petition against the Respondent (Enclosure 1). In his Petition the Petitioner, inter alia, alleged the following:-

 

1) The Petitioner is denied fair and adequate participation in the Respondent since he was instrumental in establishing the Respondents business in Malaysia.

 

2) The Petitioner contends that he will not obtain a fair and equitable value of his interest and efforts into the Respondent.

 

4

 

3) The Petitioner is unhappy with the Valuation Report prepared by Messer Howarth as the purported value of the Petitioner’s share in the respondent was not taken into account.

 

4) The Respondent is a Company incorporated in 29.10.1984.The principal activity of the Respondent includes the implementation and rollout of telecommunication network Infrastructure projects such as PCN turnkey project with Sapura Digital in 1995 and various other business ventures with companies such as Telekom Malaysia. The Respondent obtained MSC status on 28 April 1998.

 

The Petitioner’s Petition is based on section 218(1) (i) of the Companies Act 1965 in particular that it would be just and equitable for the Company to be wound up.

 

The Respondent in its application to strike out the Petition contends the following:-

 

1) The Petitioner has failed to demonstrate any of the situations exists in the Petition.

 

2) The Petitioner presented the Winding Up Petition for his own collateral purpose in an attempt to create leverage for the Petitioner to obtain more money.

 

3) At the time when the Government Contracts were procured the Petitioner was an employee of the Respondent and thus it was within the Petitioner’s scope of work.

 

5

 

The Respondent in the Affidavit in Support averred that the Winding Up Petition is premised on the following:-

 

1) The Petitioner has been denied fair and adequate value for

 

his participation in the Respondent.

 

2) The Petitioner is unhappy with the Valuation Report as the purported value of his one share is said to be worth RM127.72.

 

3) The Petitioner has been denied fair and adequate participation in the Respondent.

 

4) The Petitioner has never signed any Memorandum of Understanding which states that the Respondent is part of the Management Team.

 

The Law

 

In the case of Buildcon-Cimaco Concrete Sdn Bhd v. Filotek TradingSdn Bhd [1999] 4 CLJ 135 Abdul Hamid Mohamed J (as he then was) succinctly stated that,

 

“…The strongest argument against the application of the RHC 1980 is the provision of O. 1 r. 2(2), of the RHC 1980 itself. Besides, the Companies (Winding-up) Rules 1972 provides its own scheme of procedure for a s 218 winding-up petition which is more simplified of procedure for a s 218 winding-up petition which is more simplified and geared for speedy disposal. RHC 1980, for example, provide for appearance (conditional and unconditional), discoveries, interrogatories, judgment in default of pleading, summary judgment (O. 14), striking out of pleadings (O. 18 r. 19), summons for direction

 

6

 

and setting down for trial. Hearing date is only given after the directions made in the summons for direction are complied with and the case has been set down for trial. Perhaps because of these requirements which take some time to be complied since the filing of a writ, that procedures for judgment in default of pleading, summary judgment and the striking out of the writs and pleadings are provided, for quick disposal in clear-cut cases. The scheme under the Companies (Winding-up) Rules 1972 is different. When the petition is issued out of court, a hearing date is given straight away.

 

Whatever has to be done, e.g. service, advertisement, compliance with r. 32, will have to be done before the hearing date. The court is supposed to hear the petition straight away on the date fixed for hearing, the very first time it comes up before it. If everything is done as scheduled, the petition is heard on the date first fixed for hearing. That is what the rules envisage. In the circumstances, there is no necessity for provision for judgment in default, summary judgment or striking out the pleading or trial on issues. I am of the view that that is the reason why the Companies (Winding-up) Rules 1972 do not provide for such procedures. They are not necessary. Furthermore, more often than not, resort to O. 18 r. 19 of the RHC 1980 in a winding-up proceedings results in the delay in the hearing of the petition. The application is usually filed one or two weeks before the date fixed for the hearing of the petition. Application is made for it to be heard first, supposedly, to save the court’s time. In reality, it delays the hearing of the petition. Whenever there is such an application, inevitably, the hearing of the petition is delayed. Not only will the petition be adjourned for the application to be heard first, but if dismissed, there will be an appeal to the higher court(s).”

 

7

 

There are strong views expressed by our courts of the undesirability to adopt a striking out procedure in a winding up petition under s. 218 of the Companies Act 1965 since it could cause further delay rather than expedite the disposal of such matter.

 

In the case of Maril-Rionebel (M) Sdn Bhd & Anor v. Perdana [ 2001]

 

4 MLJ 187 the Court held that an application made pursuant to O. 18 r. 19 of the RHC to strike out a petition presented under s. 218 of the Act is undesirable and should be discouraged. Justice Abdul Hamid Mohamad JCA (as he then was) described such application as,

 

“One of the most abused procedures adopted in winding up proceedings is the application to strike out petition under O 18 r 19 of the Rules of the High Court (‘the RHC’) and / or the inherent jurisdiction of the court.”

 

Justice Richard Malanjum JCA (as he then was) in Tan Kim Hor & Ors. v.Tan Heng Chew & Ors [2003] 1 CLJ 634 said,

 

“In our view the use of that procedure in such winding up proceeding produces only delay in the adjudication of the matter. Of course we are not saying that it is totally inapplicable. There may be an instance where such a petition is obviously unsustainable for want of cause of action or that it is plainly vexatious or frivolous or even an abuse of process. In such a case O. 18 r. 19 could be resorted to. “

 

When dealing with the striking out application the Court must determine whether the just and equitable principle is sustainable based upon the averments found in the petition. The Court cannot conduct a trial by affidavits and take into account irrelevant considerations such as alternative remedies.

 

8

 

In a striking out application the Court will dismiss an action summarily only if it is a plain and obvious case. In Lee Nyan Choi v. Voon Noon [1979] 2 MLJ 28 Lee Hun Hoe CJ (Borneo) at page 29 observed that,

 

“The power to dismiss an action summarily without permitting a party to trial is a drastic power and should be exercised with utmost caution. The power of summary procedure should only be resorted to on plain and obvious cases.”

 

The Federal Court in Roslan bin Abdullah v, New Zealand Co. Ltd.[1981] 2 MLJ 324 and in Golden Century Development Sdn Bhd v Ganhoe & Anor [1983] 1 MLJ 86 referred to the English case, AG of Duchy of Lancaster v. L & NW Railway Co. [1892] 3 Ch 274 and

 

observed that summary procedure,

 

“….can only be adopted when it can clearly be seen that a claim or answer is on the face of it ‘obviously unsustainable’.”

 

The principle relating to O18 r. 19(1) RHC was considered and set out in Bandar Builder Sdn. Bhd. V. United Malayan Banking Corporation Bhd [1993] 3 MLJ 36 Mohamad Dzaiddin SCJ(as he then was) said at pg 43 that,

 

“It is only in plain and obvious cases that recourse should be had to summary process under this rule (per Lindley MR in Hubbuck & Sons ltd v. Wilkinson, Heywood & Clark Ltd.) and this summary procedure can only be adopted when it can be clearly seen that a claim or answer can only be adopted when it can be clearly seen that a claim or answer is on the face of it ‘obviously unsustainable’.

 

9

 

His Lordship goes on to say that such process..

 

“..cannot be exercised by a minute examination of the documents and facts of the case, in order to see whether the party has a cause

 

of action or a defence.The court must be satisfied that there is no

 

reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable.”

 

With the above principles in mind I shall now consider the issues raised by the Parties.

 

Whether the Petitioner have locus to present this Petition.

 

The issue which this Court must first determine is whether the Petitioner has locus to present this Petition. The Petitioner came into contact with the Nokia Group in 1977 and was subsequently appointed as the agent in 1978 and was paid a token retainer fee and commission for securing contracts with the National electricity Board (NEB). The Petitioner was one of the initial directors of Nokia (M) with another person by name of Ghazali Mat Ariff.

 

The role of the Petitioner is consistent with his duties as a Director, employee and/or Consultant of the Respondent. According to the Respondent the Petitioner has been adequately remunerated for his services as he was paid a salary, director’s fees and as Consultant, a consultancy fees. The Petitioner was employed as a Director of Marketing until 28.9.2001 when he resigned. Upon resignation the Petitioner was paid a total amount RM449, 306.04 comprising of ex gratia payments, encashment of annual leave, EPF and bonuses. The Petitioner was also paid a monthly director fee of RM3, 645.00 from

 

10

 

1.10.2001. On 29.10.2001 the Petitioner was appointed as Independent Consultant to the Respondent and received Consultation Fees of RM136, 260.00 a year from the Respondent. The Petitioner was a Consultant to the Respondent until 31.10.2006.

 

Hashim Yeop Sani (CJ) Malaya in Morgan Guaranty Trust Co. of New York v. Lian Seng Properties Sdn. Bhd. [1991] 1 MLJ 95, at pg 97

 

said that,

 

“There are many tests to be applied to see whether a petitioner for a winding-up order has locus standi. Insolvency is always a good ground relied on in a petition. Prima facie an unpaid creditor is entitled to petition for a winding up order against a company which fails to pay its debt. Macpherson says that the only test which seems capable of resolving all difficulties is that suggested by Crossman J in Re North Bucks Furniture Depositories Ltd., namely, that the term ‘creditor’ includes every person who has the right to prove in winding up.”

 

In the instant case from the grounds given in the Petition the Petitioner is clearly not a creditor as there is no debt owing by the Respondent to him. The Petitioner was employed by the Respondent from 1984 as Marketing Director until he tendered his resignation on 29 September 2001 .All remunerations and incentives including bonuses were paid to him. When he became an Independent Consultant and a Director the fees were also duly paid to him. The Petitioner has not shown that there is a debt owing to him by the Respondent and therefore clearly the Petitioner does not fall under the definition of a ‘creditor’.

 

11

 

The Valuation Report

 

The Petitioner holds one (1) ordinary share out of one thousand (10000 ordinary shares in the Respondent which is equivalent to 0.1% of the ordinary shares in the Respondent. The Petitioner is unhappy with the Valuation report prepared by Messer Horwath as the purported value of his share in the Respondent was not taken into account the amount of contracts generated for the respondent and the Nokia Group and therefore has deprived the petitioner of the true value of his share in the Respondent. According to the Valuation Report the value per share is RM127.72. In other words the share is undervalue as it has not taken into account the contracts which have been awarded to the Respondent.

 

Having considered the submissions as well as the authorities cited the issue to be determined is whether the cause of action is sustainable based upon the averments found in the Petition. The evidence has been provided by way of affidavits. There is no evidence of a debt owing to the Petitioner by the Respondent. There is also no evidence of the inability to pay the debt if there is any debt owing. Furthermore there is no evidence of any mismanagement or oppression by the Respondent.

 

The main reason the Petitioner filed his Petition to wind up the Respondent is his dissatisfaction and unhappiness that his contribution to the Respondent has not be adequately rewarded as he was instrumental for procuring contracts for the Respondents and the establishment of the Respondent as a successful business entity in Malaysia. The Petitioner also contends that he is being denied fair and adequate participation in the Respondent especially since he was instrumental in establishing the Respondent’s business in Malaysia.

 

12

 

However, there is no Shareholders Agreement between the Petitioner and the Respondent which the Petitioner he admitted in his affidavit. Petitioner feels that he has been unfairly and unjustly treated by the Respondent and thus has a reasonable cause of action.

 

Having considered the Affidavits and Submissions filed by the Parties I am satisfied that there is no reasonable cause of action. Therefore the Application to strike out the Petition in Enclosure 6 is allowed with cost.

 

HASNAH BINTI DATO’ MOHAMMED HASHIM

 

Judicial Commissioner High Court of Malaya Kuala Lumpur.

 

5 July 2010

 

13

PDF Source: http://kl.kehakiman.gov.my