1. ) Awh Equity Holdings Sdn Bhd v Gmv-Borcos Sdn Bhd (WA-24NCC-629-11/2018)

AWH Equity Holdings Sdn Bhd (No. Syarikat: 666396-V)

Wan Ariff bin Wan Hamzah (No. K/P: 450625-03-5245)

Nadzru bin Azhari (No. K/P: 530720-03-5833) …Pemohon-Pemohon DAN GMV-Borcos Sdn Bhd (Dalam Likuidasi Sukarela) (No. Syarikat: 871370 - H) …Responden GROUNDS OF JUDGMENT 2 Introduction [1] The Applicants sought leave under section 451 of the Companies Act 2016 (“the Act”) to proceed with Kuala Lumpur Civil Suit No.: WA- 22NCC-82-02/2019 (“the Suit”) against the Respondent as the Respondent was placed under creditor’s voluntary liquidation on 30.6.2017. [2] At the conclusion of the proceedings, this Court allowed the Amended Originating Summons at enclosure 13. The following are the Grounds of Decision of this Court. Background The background of the matter are as follows: [3] The First Applicant is a private listed company limited by shares. It is an investment holding company. The Second Applicant is one of the directors of the First Applicant. The Third Applicant was a former director of the First Applicant. [4] The Respondent is also the First Defendant in the Suit. It is an investment holding company which is currently in creditor’s voluntary liquidation pursuant to a resolution passed during the its First Creditors’ Meeting on 30.6.2017, with the appointment of Kevin Low Ee Ming as the liquidator on 30.6.2017. Global Maritime Ventures Berhad, the Second Defendant in the Suit is a venture capital 3 investment holding company. The Third Defendant in the Suit is Bank Pembangunan Malaysia Berhad while the Fourth Defendant, Mohd Zafer bin Mohd Hashim, is the former director and president/managing director of the Third Defendant. Messrs. Ram Reza & Muhammad, the Fifth Defendant in the Suit is a law firm which represented the Respondent at all material times during the contractual negotiations and the completion of the Sale and Purchase Agreement dated 15.1.2013 (“the SPA”). The SPA is for the purchase of shares in Syarikat Borcos Shipping Sdn Bhd (“the Company”) by the Respondent/First Defendant in the Suit. [5] The First Applicant was the registered and beneficial owner of 2,925,000 ordinary shares in the Company, representing 65% of total issued and paid up ordinary shares. The Respondent was the registered and beneficial owner of 1,575,000 ordinary shares in the Company, representing 35% of total issued and paid up ordinary shares in the Company. [6]

The appellant’s claim cannot be adequately dealt with by the winding up court; and

The appellant has a prima facie case against the respondent. … [27] As to what amounts to prima facie in the context of s. 226(3) of the Companies act, in our view is simply whether there is a serious dispute between the litigants which warrant a trial to determine the truth of the combating allegations. It is not unlike the court’s approach when dealing with an application to strike out under O. 18 r. 19 Rules of Court 2012 despite the consideration that the liquidator ought not to be burdened with wasteful financial resources in defending frivolous legal actions. That consideration in our view is also a consideration for other suits not involving wound up companies as all defendants should also not be burdened with financial resources to defend frivolous legal actions.” (Emphasis added) The Applicants’case [22] It is perhaps instructive to reproduce the reliefs claimed by the Applicants in the Suit. In the amended statement of claim, the Applicants sought the following reliefs: “(1) A declaration that the First, Second and/or Third Defendants breached the express conditions of the SPA by failing to fully and effectually discharge and release the Plaintiffs from the Corporate and Personal Guarantees, post completion of the SPA; 10

A declaration that the First, Second and/or Third Defendants breached the express conditions of the SPA by failing to keep the Plaintiffs informed of its progress and/or efforts to fully and effectually discharge and release the Plaintiffs from the Corporate and Personal Guarantees, post completion of the SPA;

A declaration that the First, Second and/or Third Defendants are under an express and/or implied indemnity and/or legal and/or equitable duty to indemnify the Plaintiffs against all losses and damages suffered by the Plaintiffs, including but not limited to Maybank’s claim above;

A declaration that the First, Second and/or Third Defendants owe a specific common law duty of care in tort (as a competent investment holding company and/or investment bank and as the lawful registered and beneficial owner of the Company) to the Plaintiffs, to effectually and fully discharge the Plaintiffs from the Corporate and Personal Guarantees, post completion of the SPA;

A declaration that the First, Second and/or Third Defendants breached its specific common law duty of care in tort (as a competent investment holding company and/or investment bank and as the lawful registered and beneficial owner of the Company) to the Plaintiffs, to effectually and fully discharge the Plaintiffs from the Corporate and Personal Guarantees, post completion of the SPA;

A declaration that the First, Second and/or Third Defendants owe a specific common law duty of care in tort (as a competent investment holding company and/or investment bank and as the lawful registered and beneficial owner of the Company) to the Plaintiffs, to ensure that new Corporate and Personal Guarantees were properly executed and/or renewed with Maybank, post completion of the SPA; 11

A declaration that the First, Second and/or Third Defendants owe a specific common law duty of care in tort (as a competent investment holding company and/or investment bank and as the lawful registered and beneficial owner of the Company) to the Plaintiffs, in failing to ensure that new Corporate and Personal Guarantees, were properly executed and/or renewed with Maybank, post completion of the SPA;”

A declaration that the Fourth Defendant and/or Fifth Defendant be also personally liable to indemnify the Plaintiffs against all losses and damages suffered by the Plaintiffs, including but not limited to Maybank’s claim above;

An order for specific performance by the First, Second and or Third Defendants to indemnify the Plaintiffs against all losses and damages suffered by the Plaintiffs, including but not limited to Maybank as per its claim above, pursuant to Clause 3A.1 (c) of the SPA;

Further or alternatively, general, aggravated, exemplary or punitive damages for breach of the SPA and/or breach of the specific common law duty of care in tort;

Interest at the rate of 5% or any other rate as this Honorable Court deems fit and proper calculated from the date of judgment until final settlement;

Costs, and/or

Such further relief or other relief as this Honorable Court may deem just. [23] From a reading of the reliefs sought by the Applicants, it is clear that they are seeking several heads of remedies. This includes declarations and orders for specific performance. 12 [24] The Respondent in opposing this application argued that the Applicants should file a proof of debt for the determination by the Liquidators. In considering this proposition this Court perused the cases which spelt when winding up courts are not able to adequately deal with in situations where the reliefs sought were in the nature of those stated in the amended statement of claim. [25] The Court of Appeal in Ganda Setia Cemerlang Sdn Bhd & Anor v Maika Holdings Bhd [2017] 6 MLJ 661 provided the clearest guidance to this court in determining this matter. The Court of Appeal held as follows: “[41] With respect, we cannot agree with the learned judge. Contrary to the view of the learned judge, the remedy of specific performance remains one which the winding up court cannot make; and certainly, it is not a remedy that can be resolved through the lodgment of a proof of debt with the liquidators of the respondent. That order is properly in the jurisdiction of the court in exercise of its civil jurisdiction, and granted, if at all, after trial. The presence of the alternative prayer (b) in the terms set out at p 81 of the record of appeal does not alter that view. There may be a difference, perhaps, if the relief was couched as an additional relief. The order of specific performance is a discretionary remedy and the law on pleadings allows for this alternative remedy in the event this specific performance is not granted. That, however, does not diminish the significance of the remedy as a primary or main remedy. In the weighing of discretion, the court will always question the issue of adequateness of damages as an alternative remedy. It is precisely because damages is not an adequate remedy that specific performance is sought; but in the event the court is not with the appellants, then the appellants want to be allowed 13 this avenue. We do not see how by this alternative plea, leave to commence action against the respondent should be denied. … [48] Finally, we note that the learned judge had expressed the view that the order of specific performance cannot be granted against the respondent because it will cause financial hardship; or be counter-productive to the object of winding up the respondent, which is to preserve the assets of the respondent for fair distribution. Here, once again, we must remind that it is not for the winding up court to decide whether an order of specific performance ought to be granted on the particular facts; that is the function and role of the civil court in the event leave to commence litigation is allowed. The winding up court should not be second guessing what that court, may or may not eventually decide on the merits. That is entirely within the purview of the civil court.” (Emphasis Added) [26] In Shencourt (supra) the Court of Appeal had a similar situation to deal with where the relief sought by the Plaintiff therein had a counterclaim with a declaratory relief. The Court categorically ruled that such declaratory orders cannot be dealt with adequately by the winding up court (see at paragraph 13 and 14 of Shencourt). [27] This Court is of the firm view that declarations and specific performance are orders are not appropriate to be made by a which a winding up court cannot make bbased on the dicta in Ganda and Shencourt. 14 Rationale for leave [28] In Shencourt (supra) several cases were discussed by the Court of Appeal. It is in that germane decision that this Court finds the rationale why leave from court is required before initiating an action against companies that have been wound up. [29] In Vagrand Pty Ltd (In Liq) v. Fielding & Ors [1993] 11 ACLC 411 the Federal Court of Australia held as follows: “The reason for imposing a requirement of leave, in the case of litigation against companies in liquidation, was explained a century ago by Manning J, of the New South Wales Supreme Court, in Thomson v. Mulgoa Irrigation Co Ltd (1893) 4 BC (NSW)33: All that s. 140 means is that a company in liquidation is not to be harassed and its assets wasted by unnecessary litigation, and the leave of the Court is therefore required as a safeguard. Before any action can be brought or continued against a company, the Court must investigate the intended litigation.” (Emphasis Added) [30] In Re Sydney Formworks (supra), McLelland CJ in Eq expressed the reason for the requirement of leave in this way: “This view is in keeping with what I consider to be the obvious intention of the section, namely, to ensure that the assets of the company in 15 liquidation will be administered in accordance with the provisions of the Companies Act and that no person will get an advantage to which, under those provisions, he is not properly entitled, and to enable the Court effectively to supervise all claims brought against the company which is being wound up.” (Emphasis Added) [31] In Capita Financial Group Ltd v. Rothwells Ltd (No 2) [1989] 7 ACLC 634 Rogers CJ held as follows: “It is necessary to understand the rationale which buttresses the requirement for showing the existence of a prima facie case. The provisional liquidators and liquidator, respectively, are entitled to be protected from involvement in court proceedings which may be perhaps only of a nuisance nature, or which may be thought to be totally devoid of any substance. The resources of the company in liquidation should not be frittered away in defending baseless claims. It seems to be that it is considerations of this nature which have led the courts uniformly over the years to demand that there be evidence showing a prima facie case. As Mr Reeves, for the provisional liquidators, pointed out, the requirement goes back to a decision of Manning J in Thomson v. The Mulgoa Irrigation Co. Ltd [1894] 4 N.S.W. Bankruptcy Company and Probate Cases 33. As His Honour pointed out: The Court will strain a point to avoid the absurdity of merely requiring the same pleadings to be put on the file again so as to make the matter merely one of costs; but grounds must be shewn on the merits, which would justify the court in granting leave in the first instance. The plaintiff should pledge his oath that he has a valid an unimpeachable document. All that s. 140 means is that a 16 company in liquidation is not to be harassed and its assets wasted by unnecessary liquidation and the leave of the court is therefore required as a safeguard. Before any action can be brought or continued against a company, the court must investigate intended litigation. This approach has been maintained thereafter in successive decisions of courts. (See Re Sydney Formworks Pty Ltd (in liq) (1965) N.S.W.R. 646 at p. 650; Re A.J. Benjamin Ltd (in liq) (1969) 90 W.N. (N.S. W.) 107 at p. 109; Re Harry B Harvey Pty Ltd (in liq) (1971-1973) CLC 40-051; Ex Parte Walker (1982) 6 A.C.L.R. 423 at p. 426; Ogilvie-Grant & Anor v. East

1 ACLC 742 at p. 744; and Maclean v. Burns Philp Trustee Co Pty Ltd & Ors (1985) 2 N.S.W.L.R. 623 at p. 646).” (Emphasis Added) [32] The three (3) cases were quoted with approval in Shencourt (supra). It is therefore clear that the rationale for leave is very much due to courts wanting to have cognizance of the legal challenges faced by a company in liquidation so that it is not harassed and its assets wasted by unnecessary liquidation. The leave of the Court is required as a safeguard. Complexity of Issues [33] During the course of submissions, counsel for the Applicants had also raised two other issues to further bolster their contention of why this Court should grant leave under section 451 of the Act. Firstly, counsel contended that the Suit that they intend to pursue had sufficient degree of complexity which involves multiple causes of action. It 17 includes even questioning the creditors’ voluntary winding up of the Respondent. Reference was made to paragraph 43 (i) to (v) of the Amended Statement of Claim which reads as follows: “i. The voluntary winding up of the First Defendant was done for no reason other than to defeat and/or stifle the Plaintiffs’ right to be indemnified pursuant to Clause 3A.1 of the SPA; ii. The voluntary winding up of the First Defendant was made with full awareness and/or knowledge that the First, Second and/or Third Defendant has an obligation to indemnify the First Plaintiff, pursuant to Clause 3A.1 of the SPA, against all losses and damages suffered by the Plaintiffs; iii. The voluntary winding up of the First Defendant was made, notwithstanding the numerous correspondences from Maybank (as described in paragraph 29 above) requesting for new Corporate and Personal Guarantees and/or various Letters of Comfort or Undertaking from the First, Second and/or Third Defendant, in respect of the various banking facilities; iv. By failing to provide the requisite notices to the First Plaintiff to attend the creditors meeting on 30.06.2017; v. By failing to disclose the liability that the First Defendant was owing on the indemnity to the First Plaintiff in the Statement of Affairs and/or Statement of the Position in the Winding Up, in light of Clause 3A.1 of the SPA.” 18 [34] This Court is of the view that there were valid reasons for counsel to highlight this point as it would not be appropriate for a winding up court to determine the issues. It plainly falls outside the purview of the winding up court. Quite clearly, this Court will not hesitate to rule that filing a proof of debt is entirely inappropriate. [35] In Shencourt, the Court of Appeal remarked that “…the extent of the seriousness of the defects wherein there would be some degree of complexity of issues involved, it is unlikely that the defendant’s liquidators can adequately deal with the plaintiff’s counterclaim and quantify the damages suffered in the winding up of the defendant.” This Court is in full agreement with the above dicta as complexity of issues would only be adequately dealt by a court other than a winding-up court. [36] It is based on the above reasons that this Court is of the firm view that the Applicants have succeeded in demonstrating that there is a real dispute and prima facie case that would warrant this Court to exercise its discretion to allow for leave to be granted. Whether leave can be granted retrospectively [37] Both parties conceded there are no local authorities that have dealt on this exact issue. This Court was furnished with foreign authorities by the Applicants to support their argument. However, before proceedings commenced, parties informed this Court that the issue will not be contenstded. 19 [38] Be that as it may, it is apposite for this Court to consider this point of law in light of the authorities submitted before this Court. It is perhaps useful to state the applicable position in law, one which this Court would have taken regardless of the concession made by the Respondent in this case. [39] The position under English law and Irish law is substantially the same as both laws recognize that leave may be granted retrospectively. It is to be noted that the wordings of the English and Irish positions with regard to leave are worded as follows:

Section 130(2) of the UK Insolvency Act 1986: “(2) When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court and subject to such terms as the court may impose.”

Section 222 of the Irish Companies Act 1963: “222.— When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court may impose.” 20 [40] The wordings in the above provisions are largely similar to section 451 (2) of the Act. As such, reference to the English and Irish authorities provide good guidance. [See In Re Saunders (A Bankrupt) [1997] Ch 60; Adorian v Commissioner of Police of the Metropolis [2009] 1 WLR 1859; Gaardsoe v Optimal Wealth Management Ltd (in liquidation) [2013] Ch 298; Re MJBCH Ltd (in liquidation) [2013] 1 IR 407 and Bank of Ireland v Colliers International UK plc [2013] Ch 422]. [41] Similarly, this Court also referred to the authorities decided under Australian law in which the courts held that retrospective leave may be granted. [See Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) [1993] 11 A.C.S.R. 516; Re Sydney Formworks Pty Ltd (in liq) [1965] N.S.W.R. 558; Humphris and another v Jenshol and another [1997] 25 A.C.S.R and Emanuele v Australian Securities Commission [1997] HCA 20]. [42] From an analysis of the authorities, leave may be granted retrospectively after commencement of proceedings. The proceedings will not be a nullity for … owant of prior leave. 21 [43] In In Re Saunders (supra), the question was whether proceedings against a bankrupt could be retrospectively authorised. The Court held as follows : “In our view, the purposes of the insolvency legislation can quite well be served without requiring that a summons served, or an application made, without prior consent should be considered to be a nullity or incompetent. The purpose of the legislation is, in general terms, to prevent the liquidators' or administrators' task being made more difficult by a scramble among creditors to raise actions, obtain decrees or attach assets. We cannot, however, see that there is any reason why it should be necessary for the provision of such protection to treat any proceedings which may, for one reason or another, be commenced without consent as null and, therefore, incapable of proceeding further.” (Emphasis Added) [44] In Re Saunders (supra) was quoted with approval in the case of Gaardsoe (supra): The Queen’s Bench Division dealt with the issue of whether the absence of prior permission has the consequence that the proceedings were a nullity. “12. I deal first with the question of whether the absence of prior permission has the consequence that the proceedings were a nullity. This is, of course, the issue that arises directly in the defendant's Queen's Bench application; but it is, in my view, necessary also for me to decide it. In my judgment the proceedings are not a nullity. They are, to quote from the 22 judgment of Lindsay J in In re Saunders (A Bankrupt) [1997] Ch 60, 82b, “existing and capable of redemption by the late giving of leave”. ….. (Emphasis Added) [45] In Adorian (supra), the court took into account the issue of limitation coming into play in the event a pre-emptive action is not taken to commence proceedings before seeking leave or permission from the courts. It held as follows: “[41] It follows, as it does in limitation cases, that a lawsuit within s 329, begun without permission, can properly proceed to trial if the permission point is not taken. Where the claim is plainly eligible for permission, this is an economical and practical course. If it were, otherwise, the point could not only be unanswerably taken against the claimant at an advanced stage of the proceedings, and costs be resisted on the ground that the progress of the action without permission has been entirely unlawful, but the judge would be required to take the point at trial. Moreover, a perfectly sound claim issued late in the limitation period could be defeated, or at least placed at risk, by an opportunistic motion to strike it out, brought in the knowledge that by the time permission could now be obtained the claim will be out of time. In any such event a case which everyone knows is perfectly sound would collapse.” (Emphasis Added) [46] This Court is also of the opinion that there is no express prohibition in section 451(2) of the Act to the like effect. It would be a different consideration if there is an express prohibition in the language of the 23 legislation to disallow any party from seeking leave retrospectively. Furthermore, the provision does not stipulate the consequences of such non-compliance. [47] In Re MJBCH Ltd (supra), it was held that : “[20] In my judgment, having regard to the purpose of s 222 as set out above and the above constitutional principles, in the absence of express words which provide that the commencement of proceedings without leave of the court in breach of s 222 render proceedings a nullity or which preclude the court from granting leave for commencement after the event, s 222 should not be so construed. Whilst s 222, by its express words provides “no action or proceeding shall be proceeded with or commenced against the company except by leave of the court”, it does not provide for the consequences of the commencement of an action without leave of the court. Further, while the words “except by leave of the court” are open to the construction that leave should be obtained prior to commencement, it does not appear to me that, having regard to the statutory purpose and the necessity to construe the restriction on access to the courts strictly, that these words should be construed as precluding the court granting leave for the commencement of the action after the event.” (Emphasis Added) 24 Conclusion [48] The rationale for leave, which primarily is to safeguard the interest of the wound up company, is the basis why leave of court is required. Be that as it may, in discharging its discretion, the courts will have a duty to consider the interest of all parties. This will include the interest of the Applicants in order to avoid meritorious claims from being shut out. [49] Courts will act as the gatekeeper in determining whether leave should be granted based on the principles in Mosbert and Shencourt. Once the requirements are fulfilled it matters not if leave is late or obtained after the commencement of the particular action. [50] In the circumstances, this Court in exercising its powers under section 451 of the Act, is of the view that the Applicants are entitled to leave. The Amended Originating Summons in enclosure 13 is therefore allowed with costs in the cause. (AHMAD FAIRUZ BIN ZAINOL ABIDIN) Judicial Commissioner High Court of Malaya Kuala Lumpur Dated: 11th July 2019 25 Counsels: Dato’ Sunil Abraham & Austen Pereira for the Applicants Messrs Cecil Abraham & Partners Suite 12.01, Level 12 Menara 1MK 1 Jalan Kiara, Mont’ Kiara 50480 Kuala Lumpur Lee Shih & Janice Ooi for the Respondent Messrs Skrine Level 8, Wisma UOA Damansara 50 Jalan Dungun, Damansara Heights 50490 Kuala Lumpur