IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION)
COMPANIES (WINDING UP) NO: D-28NCC-39-2010
In the matter of LADY BODYLINE LINGERIE SDN BHD (Company No: 465713-V)
In the matter of Section 218 1(e) of the Companies Act, 1965
TNG HOCK SIANG … PETITIONER
(NRIC No: 540207-10-5991)
LADY BODYLINE LINGERIE SDN BHD
(Company No: 465713-V) … RESPONDENT
GROUNDS OF DECISION
This was a Petition to Wind-Up the Respondent Company on the ground of inability to pay its debt under Section 218(1) (e) of the Companies Act, 1965. I dismissed the Petition with costs. There was an earlier application under Enclosure 11 in relation to leave to file an Affidavit in Opposition. I allowed that application in Enclosure 11.
The sequence of events and the grounds for both are set out below herein.
The Sequence of Events
Enclosure 11 , the application by the Respondent, is sought the court’s leave for the Respondent to file an affidavit to oppose the Petitioner’s Winding-Up Petition outside the period prescribed by Rule 30 of the Winding-Up Rules. The Winding-Up Petition itself was filed on 15.1.2010, and given a hearing date of 18.3.2010. The Petition and its Affidavit Verifying Petition were personally served by the Petitioner’s solicitors on the Respondent on 23.2.2010. The Respondent filed the Notice of Intention to Appear on Petition on 2.3.2010, that is to say well within the time allowed by the Winding-up Rules. On the hearing date, namely 18.3.2010, counsel for the Respondent informed the court that the Respondent had filed an application to extend time to file an Affidavit to Oppose the Petition the day before, namely on 17.3.2010, and this Summons in Chambers had yet to be extracted and served. On this date, counsel for the Respondent informed the court the Respondent needed to be supplied with a copy of a Sale and Purchase Agreement between the Petitioner and a Director of the Respondent, one Encik Zuhdi bin Yussof, for it to file the Affidavit in Opposition. The Affidavit in Support of the application to extend time to file an Affidavit in Opposition was filed by Encik Zuhdi himself. To quote the relevant paragraphs:
“6. The Respondent denies paragraph 5 of the said Petition and further contends that the Respondent is not indebted to the Petitioner for the sum of RM 245,000.09.
7. In furtherance to the above, the Respondent avers as follows:
i. The said post dated cheques were issued by the Respondent to the Petitioner pursuant to the Sale and Purchase Agreement (i.e to purchase the Respondent’s business) which was entered into between the Petitioner as a vendor and me and Fazilah binti Alhadi as purchaser.
ii. Via the said agreement, the Petitioner being the sole shareholder in the Respondent agreed to sell his entire share in the Respondent to me and Fazilah, and we also agreed to purchase it from the Petitioner subject to the terms and conditions agreed upon.
iii. The parties agreed that the purchase price shall be paid by instalment by post dated cheques. As such, the said post dated cheques were issued by the Respondent on behalf of me and Fazilah for the payment of the purchase price.
iv. Subsequently, due to the Petitioner’s fraudulent misrepresentations in the said agreement, we had terminated the said agreement and instructed the Respondents bank to stop payment for all cheques issued to the Petitioner…”
Even on this hearing date, counsel for the Petitioner submitted to this court that the Winding-Up Petition was based on the dishonour of cheques drawn by the Petitioner and had nothing to with the Sale and Purchase Agreement, and that being so, the Petitioner was opposing the application to extend time.
It is necessary to note at the outset that the Winding-Up Petition was not based on any non-payment of a judgment sum, but grounded purely on the dishonour of the cheques, and the failure to pay the amounts represented by the cheques within the statutory period mandated under Section 218(1) of the Companies Act, and hence the Respondent was allegedly deemed unable to pay its debt under Section 218(1)(e) of the Act.
As noted above, Encik Zuhdi purported to explain why these cheques were dishonoured by reference to misrepresentations made by the Petitioner in the Sale and Purchase Transaction, and that was the reason why the Bank was instructed to stop payments on these cheques.
In the circumstances, and mindful that the Summons in Chambers had yet to be extracted and served, I allowed the Respondent’s application to adjourn the hearing of the Petition to 1.4.2010.
On this adjourned date, Respondent’s counsel informed this Court the Summons in Chambers had just been extracted and served on the Petitioner’s solicitors, and he had yet to receive the copy of the Sale and Purchase Agreement which he had requested from the Petitioner. Petitioner’s counsel confirmed being served with the Summons in Chambers only on 29.3.2010, and therefore requested for time to file an Affidavit in Reply to oppose the application to extend time. Since the last adjournment, the Respondent had filed the Affidavit in Opposition on 30.3.2010. Counsel explained his client had no alternative except to rely on the correspondence between the Respondent’s solicitors and the
Petitioner’s solicitors in support of its claim, in the absence of the Sale and Purchase Agreement which had earlier been requested for and not supplied.
I adjourned the hearing of the Petition to 26.4.2010 to hear Enclosure 11 and to mention Enclosure 1.
The Petitioner filed his Affidavit in Reply on 19.4.2010. See the Affidavit in Reply affirmed by Tng Hock Siang (Enclosure 13). The reply was short and basically said the failure to file the affidavit opposing the Petition within the prescribed time before the hearing of the Petition was fatal, and secondly, the Sale and Purchase Agreement was irrelevant. The relevant paragraphs are paragraphs 7 to 8. The Petitioner submitted the Respondent’s application to extend time was therefore frivolous and baseless.
The Petitioner did not see it fit to either explain or deny the circumstances that led to the payment by post-dated cheques.
The Applicable Law on extension of time to file Affidavit in Opposition.
The operative provision is of course Rule 30(1) and (2) of the Winding-Up Rules which specify:
“(1) Affidavit in Opposition to a Petition that a company may be wound up shall be filed and a copy thereof served on the Petitioner or his solicitor at least seven days before the time appointed for the hearing of the Petition.
(2) Any Affidavit in Reply to an affidavit filed in opposition to a Petition (including a further Affidavit in Support of any of the facts alleged in the Petition) shall be filed within three days of the date of service on the Petitioner of the Affidavit in Opposition and a copy of the Affidavit in reply shall be forthwith served on the opposing Petitioner or his solicitor.”
The issue was whether the requirement under Rule 30(1) was mandatory in nature and admitted of no exceptions, or subject to the exercise by the court of some discretion to extend time. The decision of the Court of Appeal in Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank Bhd  3 CLJ 485 was cited by Petitioner’s Counsel in Support of his stand, together with two other decisions, namely Anvest Corporation Sdn Bhd v Wong Siew Choong Sdn Bhd  3 CLJ 317 and Eastool Industries Sdn Bhd v Getfirms Electronics (M) Sdn Bhd (No 1)  6 CLJ 151.
At page 491 of the report in Crocuses & Daffodils, the Court of Appeal stated:
“By their words and expression, r. 30(1) is mandatory in nature and as such the learned judge was correct when he refused to admit all four Affidavits in Opposition for noncompliance of that particular rule. ..”
In Eastool Industries, the High Court adopted a strict view of this requirement and agreed with the submission that a “failure to comply with r. 30(1) of the Companies (Winding-Up) Rules 1972 was fatal and was not a mere irregularity…and was not capable of being rectified by the court under rules 193 and 194 …” (at page 165)
Anvest Corporation, a Court of Appeal decision, adopted a similar strict position, but this was a case where no Affidavit in Opposition was filed on the facts.
In Crocuses & Daffodils, no reference was made to Rules 193 and 194, and the facts of the case show very clearly there was inordinate delay, with the court observing that the service of all the Affidavits on the Bank had clearly and blatantly contravened the mandatory time requirement of r.30(1). This was also a case where the Petitioner had a judgment in hand obtained on 4.7.1991, where the original hearing date of the Petition was 24.9.1992. It would therefore seem that there could be no excusable reason why the affidavits had to be filed out of time.
On the facts of this instant case, however, there was no court judgment to enforce, and the reason why the Bank was asked to stop payment on the cheques needed to be explored further. The Winding-Up Petition itself was premised purely on the dishonour of the cheques, with no attempt presently on the part of the Petitioner to explain the circumstances leading to the attempted payment by the cheques.
In such circumstances, it would have be unduly strict and mechanistic to insist on a rigid adherence on r. 30(1), whilst ignoring rules 193 and 194, particularly r. 193 which also clearly states:
“The Court may, in any case in which it shall see fit extend or abridge the time appointed by these rules or fixed by any order of the Court for doing any act or taking any proceeding.”
The “time appointed” mentioned refers to “by these rules”, and as such even the requirement of r. 30(1) should be read as conditioned by this saving proviso. In this regard I am of the same view with the judgment of Kang Hwee Gee J (as his Lordship then was) in Zaibar Auto (Malaysia) Sdn Bhd v Cosmic Angle Travel & Tours Sdn Bhd (No 2)  10 CLJ 701, with whose judgment I respectfully agree.
Acknowledging that Winding-Up proceedings were drastic in nature and consequence and would invariably spell the legal and economic demise of a company when allowed, I was of the view that where there were circumstances shown by the Respondent company that it had plausible grounds to oppose the Petition, it would not be right to adopt a purely mechanistic approach to the issue of time limits, and completely ignore the discretion of the court to do right and justice. The circumstances on the facts of the case were exceptional.
In these circumstances I allowed the Respondent’s application for extension of time to file its Affidavit in Opposition and granted an order in terms of prayers (1) and (3) of Enclosure 11. I then proceeded to hear the Petition proper on 8.7.2010, which I dismissed with costs of RM 3000.00 to be paid by the Petitioner to the Respondent Company within one month from the date of this order.
No Debt Substratum
After having the advantage of being fully appraised of the background facts, particularly the two affidavits by the Respondent, I found the Winding-Up Petition to have been filed without a proper
substratum of an underlying debt which could be seen as owing by the Respondent. On the contrary, the Respondent company itself was the very subject matter of a Sale and Purchase of shares where the Petitioner was the vendor of the shares of the Respondent company. The post-dated cheques issued by the company were a mode of payment. The purchasers stopped payment on the cheques when they allegedly realised there had been a material misrepresentation on the part of the Vendor/Petitioner. The Petitioner filed this Winding-Up Petition based purely on the post-dated cheques. I was of the view this course of action was abusive of the court’s process. It had nothing to do with any underlying debt, and the Petitioner was seeking to wind-up the company essentially because he had not been paid as vendor for the sale of the shares in the Respondent company to the purchasers. This would be a proper subject matter for an ordinary civil action, not a Winding-Up Petition. The proper parties to this dispute had to be the vendor (the Petitioner) and the purchasers, and the proper forum an ordinary civil action. For these reasons, I dismissed the Winding-Up Petition with costs.
( MOHAMAD ARIFF BIN MD. YUSOF ) HAKIM MAHKAMAH TINGGI DAGANG NCC 3 KUALA LUMPUR
Dated 8th July 2010.
For the petitioner: Nor Akhfa bt Jalal
Messrs. Abd. Aziz Chen & Co
For the respondent: Nazri Hussin
Messrs. Nik Nazri & Wan