Mr. Hamed Ahmed Al Ghazali v Abrar Group International Sdn Bhd (WA-28PW-115-04/2021)

Hamed Ahmed Al Ghazali (Sultanate of Oman Passport

Abdul Latif Al Khunaini (Kuwait Passport No.: P05268143)

Faisal Al Hajri (Kuwait Passport No.: P05361503)

Husam Abu Ghazaleh (Kingdom of Jordan

Ahmad Al Osaimi (Kuwait Passport No.: P05875721)

Fuad Al Wohaib (Kuwait Passport No.: P05034177) … APPLICANTS AND ABRAR GROUP INTERNATIONAL SDN BHD (283272-P) … DEFENDANT GROUNDS OF JUDGMENT INTRODUCTION [1] The Plaintiffs/Applicant (“Plaintiff”) seeks the following reliefs against the Defendant/Respondent (“Defendant”) in Enclosure 20: a) to reverse and/or vary the decision of the Liquidator in rejecting the Plaintiffs’ proofs of debts (“PODs”) under section 517 Companies Act 2016 (“CA 2016”) (prayer (b)); and b) compensation/restitution of the monies paid into the Raya Fund investment to the Applicants (prayers (c) and (d)). BACKGROUND FACTS [2] The Defendant is an investment holding company. It is the holding company of Abrar Global Asset Management Sdn Bhd (“AGAM”), which is an asset management company. [3] Except for the Second Plaintiff (“P2”), the Plaintiffs claim they are investors in a short-term investment fund known as the “Raya Fund”. The Raya Fund was offered by AGAM to its customers in mid-March 1997. The terms of the investment include that:

the fund is for a period of one year starting April 1997 and ending in April 1998;

the investment is based on the principle of Bai Bithaman Ajil. AGAM would purchase Mun Loong Bhd shares (“Mun Loong Shares”) from the Defendant at RM13 a share and the Defendant would repurchase the same at RM15.60 a share.

investors will receive a fixed return of 15% to 20% net; and

the investment is guaranteed by the Defendant’s directors. [4] The Bai Bithaman Ajil investment was structured on the basis of the Defendant and AGAM entering into the following agreements i.e., for:

an asset Purchase Agreement, wherein the Defendant agreed to sell the Mun Loong shares to AGAM (“APA”).

an asset Sales Agreement, wherein the Defendant agreed to repurchase the Mun Loong shares from AGAM and with the price to be paid within a year (“ASA”).

a Trust Deed, wherein the Defendant holds the Mun Loong shares on trust for AGAM pending settlement of the repurchase price (“Trust Deed”).

a Guarantee and Indemnity by directors of the Defendant to guarantee repayment of all moneys owing and payable by the Defendant to AGAM (“Directors’ Guarantee”).

A Guarantee and Indemnity by the Defendant to guarantee repayment of all moneys owing and payable to the Defendant to AGAM under the APA (“Corporate Guarantee”); and

A Power of Attorney by the Defendant in favour of AGAM (“Power of Attorney”). [5] On 23.02.1999, AGAM informed its investors that the Raya Fund “could no longer be materialised” due to the crash in the Malaysian stock market. [6] On 23.02.1999, AGAM also informed some of the Plaintiffs that the Defendant intended to propose a settlement proposal (“Settlement Proposal”). The Settlement Proposal entailed payment through the issuance of new shares by Abrar Corporation Bhd. The Settlement Proposal did not materialise. [7] The Defendant went into creditors’ voluntary liquidation on 31.11.2005 and the Liquidator was appointed on the same day. [8] On 27.08.2020, the Liquidator gave notice to the Defendant’s creditors, including the Plaintiffs, of the following:

his intention to declare dividends and to carry out a Proof of Debt exercise for the purpose of interim distribution; and

that the respective Proofs of Debt are to be submitted by 17.09.2020. [9] On 20.10.2020, the Liquidator informed the Plaintiffs that the supporting evidence provided was insufficient to prove their claims and requested for further evidence. [10] On 30.10.2020, the Liquidator gave notice that he had rejected the PODs (“Notices of Rejection”). The rejection of the Plaintiffs’ PODs is based on two broad reasons:

insufficient evidence to substantiate claims; and

the claims are not provable in the Defendant’s winding-up. PRINCIPLES OF LAW [11] On 11.04.2021, the Plaintiffs filed this appeal. The principal issues in Enclosure 20 concern:

appeal against the decision of the Liquidator; and

proof of debt involving an insolvent company [12] i. Section 279 of Companies Act 1965, which is pari materia with section 517 of the CA 2016 provides: “Any person aggrieved by any act or decision of the liquidator may apply to the court which may confirm, reverse or modify the act or decision complained of and make such order as it thinks just.” ii. It is trite law the court should be slow to interfere with any act or decision of the liquidator in discharging his role and will do so only if it is so unreasonable and absurd that no reasonable person would have acted in that way. The court will not interfere with the decision simply because its opinion might differ from that of the liquidator. See Sunrise Megaway Sdn Bhd (in liquidation) v Kathryn Ma Wai Fong [2021] 3 MLJ 602 (CA) at paras [7] and [50]. iii. In Sunrise Megaway (supra), the Court of Appeal further explained at para [30]: “…in our view it is not for the court to determine how the investigation is to be done or carried out by the liquidator and the relevancy and adequacy of the documents to be considered in his investigation before he makes his finding and decision as otherwise, the court will be seen as usurping the function of the liquidator or interfering with the conduct or decision of the liquidator in discharging his role and function in company liquidation. The matter is within the statutory powers of the liquidator unless he had failed to carry out investigations or his conduct was so unreasonable and absurd that no reasonable person would so act or has acted in bad faith”. DEFENDANT’S SUBMISSION [13] The Defendant submits that the Plaintiffs’ PODs were rejected because:

the Defendant is not liable to the Plaintiffs for their investments, if any, in the Raya Fund. AGAM is the party liable to the Plaintiffs. There is no agreement by the Defendant to honour AGAM’s obligations to Raya Fund investors;

some of the Plaintiffs’ claims were premised on fraud. Such claims are not provable; and

some of the Plaintiffs are unable to substantiate the amount invested in the Raya Fund. ii. This appeal should be dismissed as the Liquidator’s decision was neither unreasonable nor absurd. IMMEDIATE RESTITUTION [14] In prayers (c) and (d) of Enclosure 20, the Plaintiffs are seeking restitution and to be fully indemnified for the sums they had allegedly invested in AGAM. This Court agrees with the Defendant’s submissions that it has no power to allow such a relief for the following reasons: i. This Court’s powers under section 279 of the CA 1965 are limited to affirming, reversing, or modifying the decision of the Liquidator under section 279 of the CA 1965. In this case, if the appeal is allowed, the Court has only power to reverse or modify the Liquidator’s decision to the amount of debt that should have been admitted as proof for the purpose of winding-up. ii. This Court has no power to order immediate restitution. The Defendant is an insolvent company. An order for immediate restitution would run contrary to the pari passu principle under section 292 of the CA 1965, which is the “cornerstone of insolvency law”. See Dubon Bhd (in liquidation) v Wisma Cosway Management Corporation [2020] 6 CLJ 589 at para 35, citing Malaysian Trustees Bhd v Transmile Group Bhd & Ors [2012] 3 MLJ 679 at para 22. iii. In any event, the Plaintiffs agreed to drop their claims under prayers (c) and (d) during the continued hearing of this appeal. Therefore, this issue is now academic. FINDINGS OF THIS COURT [15] Having read the submissions by the parties, I am in agreement with the Defendant’s submission that the Plaintiffs’ claims are not provable in the winding-up of the Defendant for the following reasons:

There is no debt owing by the Defendant to the Plaintiffs since the investment agreement is between the Plaintiffs and AGAM. The Defendant was never a party to the investment agreement. In fact, AGAM had itself admitted to this fact in its letter dated 25.07.1998 to the Defendant.

(ii) A Corporate Guarantee was given by the Defendant to AGAM. A cause of action, if any, based on the said Corporate Guarantee lies with AGAM and not the Plaintiffs. There is, however, no guarantee by the Defendant to the Plaintiffs or to the Raya Fund investors. [16] Therefore, this Court finds that the Liquidator was not wrong in rejecting the Plaintiffs’ PODs as there is no privity of contract between the parties herein. Additionally, the Plaintiffs claim is premised on fraud. These are not provable against a company in a winding-up. [17] (i) The Plaintiffs in their submission seek to make a claim based on constructive trust against the Defendant. The Plaintiffs’ case is that the moneys they had invested in the Raya Fund are held by the Defendant on trust for them.

(ii) This is clear from the Plaintiffs’ submissions in Enclosure 37 paragraph 15: “This matter is purely on trust, fiduciary obligations, inequitable conduct and entrustment of trust monies. Which R6 (the six Plaintiffs) now specifically seek to enforce / make restitution as per the reliefs in Enclosure 1.” – (see Enclosure 37, paragraph 19) In paragraph 55: “R6’s money is trust money and is not part of the insolvent company estate.” [18] (i) This Court agrees with the Defendant’s submission that the Plaintiffs’ case is wholly inconsistent with the fact that the Plaintiffs have filed PODs with the Liquidator. By doing so, the Plaintiffs have placed themselves as creditors and sought to share the pari passu distribution of the Defendant’s liquidated assets.

(ii) The Plaintiffs’ claims on alleged trust money clearly cannot be “… dealt with adequately in the winding-up or the remedy sought cannot be given in the winding-up proceedings” as per Ganda Setia Cemerlang Sdn Bhd & Anor v Maika Holdings Bhd (in liquidation) [2017] 6 MLJ 661 at paragraph [18]. The Plaintiffs are required to first obtain leave under section 263 of the CA 1965 to bring such a claim against the Defendant. The Plaintiffs cannot do so under an appeal under section 263 of the CA 1965.

(iii) The Plaintiffs did not in their affidavits make claims based on a Quistclose trust. This contention is made for the first time in submissions. [18] Therefore, this Court finds that the Plaintiffs have failed to make a case for this Court to reverse or vary the Liquidator’s decision in rejecting the Plaintiffs’ PODs. For the reasons aforesaid, the Plaintiffs’ appeal is dismissed with costs of RM3,000.00. Dated 19 February 2024 …………t.t….………… Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE APPLICANT: MR HENRY QUAH SOLICITORS FOR THE APPLICANT: TETUAN CHAMBERS OF LIM YEEU REN COUNSEL FOR THE RESPONDENT: ANDREW CHIEW AND NICOLA TANG SOLICITORS FOR RESPONDENT: TETUAN LEE HISHAMMUDDIN ALLEN & GLEDHILL Cases Referred to: ➢ Sunrise Megaway Sdn Bhd (in liquidation) v Kathryn Ma Wai Fong [2021] 3 MLJ 602 ➢ Dubon Bhd (in liquidation) v Wisma Cosway Management Corporation [2020] 6 CLJ 589 ➢ Malaysian Trustees Bhd v Transmile Group Bhd & Ors [2012] 3 MLJ 679 ➢ Ganda Setia Cemerlang Sdn Bhd & Anor v Maika Holdings Bhd (in liquidation) [2017] 6 MLJ 661 Legislation Referred to: ➢ Companies Act 2016 ➢ Section 279 of the Companies Act 1965 Decision date: 08.05.2023