Ng King Chong v Ooi Kim Geik (B-02(NCC)(A)-1532-08/2017)

1 IN THE COURT OF APPEAL, MALAYSIA AT PUTRAJAYA (APPELLATE JURISDICTION) CIVIL APPEAL NO. B-02(NCC)(A) - 1532 - 08/2017 BETWEEN

1. NG KING CHONG

2. NG KIM PIN … APPELLANTS AND

1. OOI KIM GEIK

2. NATION PARK SDN BHD (In Liquidation)

3. MOHD AFRIZAN BIN HUSAIN (As Liquidator of Nation Park Sdn Bhd) … RESPONDENTS (In the High Court of Malaya at Shah Alam Originating Summons No: BA – 24NCC - 29 - 04/2017 Between

1. NG KING CHONG

2. NG KIM PIN … PLAINTIFFS And

1. OOI KIM GEIK

2. NATION PARK SDN BHD (In Liquidation)

3. MOHD AFRIZAN BIN HUSAIN (As Liquidator of Nation Park Sdn Bhd) … DEFENDANTS) 2 CORAM: ROHANA YUSUF, JCA VERNON ONG LAM KIT, JCA HARMINDAR SINGH DHALIWAL, JCA JUDGMENT OF THE COURT [1] This appeal emanated from the decision by the Shah Alam High Court delivered on 14 July 2017. The learned Judge had dismissed the appellants’ Originating Summons to, inter alia, set aside a winding up order and to declare the liquidation of the company Nation Park Sdn Bhd (“the Company”) to be null and void. [2] The learned Judge had also, at the same hearing, dismissed the appellants’ application in Enclosure 5 in which an injunction was sought against the liquidator of the Company, the 3rd respondent here, from carrying out the liquidation of the Company until the disposal of the Originating Summons. [3] Aggrieved with the decision, the appellants filed the instant appeal. After hearing the parties and taking into consideration the written submissions, we unanimously allowed the appeal and set aside the order 3 of the High Court. Our reasons for doing so now follow and will constitute the judgment of the court. Background Facts [4] On 4 June 1993, the Company was established by the 1st respondent’s late husband, one Ng Kin Yong. The business activity of the Company included nursery plantation, landscaping and maintenance of landscape gardens. The late Ng Kin Yong had his siblings involved in the business, namely, the 1st and 2nd appellants and another brother named Ng King Siong. [5] Each sibling was entrusted with different responsibilities in that they handled different departments and projects of the Company. The relationship of the late Ng Kin Yong and his siblings in the Company was essentially a “quasi-partnership”. The late Ng Kin Yong, as the founder and majority shareholder of the Company, was at all times the decision maker of the Company. He also managed the day-to-day operations of the Company and held the position of director and project manager of the Company. 4 [6] On 16 October 2015, the late Ng Kin Yong was diagnosed with terminal cancer. He passed away on 29 March 2016. Before the late Ng Kin Yong passed away, the shareholding of the Company was held by the parties as follows: Shareholder / Unit Shares / Percentage

2017. The appellants then filed the instant Originating Summons to set aside the said winding up order. At the High Court [14] At the High Court, as alluded to at the outset, the Originating Summons and the application in Enclosure 5 were dismissed. The grounds 7 for doing so are set out in the judgment of the learned Judge and can be summarised as follows: a) The appellants’ failure to obtain leave from the winding up court before filing the Originating Summons and Enclosure 5 amounted to an abuse of process; b) The appellants should have proceeded with their claims or action in the winding up court and not by instituting a fresh suit as the appellants have done; and c) Based on the affidavits filed, the appellants were aware of the winding up petition filed against the 2nd respondent but did not take part in that proceedings. The Instant Appeal [15] Before us, the decision of the High Court was assailed by the appellant on a number of grounds. However, we considered that the only ground which merited consideration, and the only ground which had any chance of success, was the ground of breach of rules of natural justice based on the principle as set out by the Federal Court in Badiaddin bin Mohd Mahidin & Anor v Arab Malaysian Finance Bhd [1998] 1 MLJ 393, now commonly known as the Badiaddin principle. 8 [16] In essence, the complaint of the appellants was that the 1st respondent, as the petitioner, had failed to include the appellants as parties in the winding up petition. It was also asserted that the 1st respondent as petitioner had failed to serve the cause papers on the appellants as members/contributories of the Company. [17] The 1st respondent argued in turn that the filing of a fresh action by the appellants amounted to an abuse of the court process. Citing the authority of Sinarlim Sdn Bhd v Waja Destinasi (M) Sdn Bhd [2012] 3 CLJ 678, it was contended that the proper course would have been to file an appeal to a higher court if they were not satisfied with the order granted by the court. Relying on the case of Hock Hua Bank v Sahari bin Murid [1981] 1 MLJ 143, it was further argued that one High Court cannot set aside a final order regularly obtained from another High Court of concurrent jurisdiction. [18] It was also reasoned by all the respondents that the appeal should fail as the appellants had failed to obtain leave of the winding up court. Any application to set aside the winding up order ought to have been made in the winding up court. It was further maintained that there had been no breach of natural justice as there is no requirement under the Companies 9 Act 2016 (“CA 2016”) or the Companies (Winding-Up) Rules 1972 for the petition to be served on the shareholders of the company. [19] Arising out of these contentions, and in determining whether there had been a breach of natural justice, it is necessary, at the outset, to consider whether the appellants are right to assert that they ought to have been made parties to the petition and whether they ought to have been served with the cause papers. [20] In this respect, it is significant that the petition was filed pursuant to s. 218(1)(f) and s. 218(1)(i) of the Companies Act 1965 (“CA 1965”). Section 218(1)(f) states that the court may order the winding up of a company if “the directors have acted in the affairs of the company in their own interests rather than the interests of the members as a whole, or in any other manner whatsoever which appears to be unfair or unjust to other members”. Section 218(1)(i) states that winding up may be ordered if “the court is of opinion that it is just and equitable that the company be wound up”. [21] Now, the winding up of a company on the just and equitable ground is one of the remedies available to a shareholder, as opposed to a creditor of the company, in the event of a shareholders’ dispute or where there is 10 some form of wrongdoing by the directors. The court’s jurisdiction is usually invoked where the company is a quasi-partnership, as in the present case, but can also apply to other circumstances as case laws have shown. Common examples of when this jurisdiction has been invoked is where there is a deadlock in management (see Dato’ Ting Check Sii v Maritime Utama Sdn Bhd & Anor [2013] 9 MLJ 527) or where there is a breakdown in mutual trust and confidence among the shareholders (see Varusay Mohamed Shaik Abdul Rahman v SVK Patchee Bros (M) Sdn Bhd [2002] 3 MLJ 674). [22] Other remedies available to a shareholder are in cases of oppression where the court can also order the company to be wound up under s. of the CA 2016. Sometimes, a share buy-out order is also made to bring an end to the oppressive conduct. Yet another recourse available to a shareholder is the statutory derivative action provided in sections 347 to 350 of CA 2016 which provisions are similar to the old s. 181A to s. 181E of CA 1965. With the new CA 2016, however, the common law derivative action, it would appear, is no longer available to a shareholder. [23] However, it is trite that unlike the just and equitable ground for winding up as well as the oppression action, the derivative action is instituted on behalf of the company for a cause of action which the company 11 has against a wrongdoer. So it is quite different in that any remedy obtained is for the benefit of the company. Apart from the shareholders, creditors could also petition for the winding up of the company based on the company’s inability to pay its debts. [24] In our assessment, it is evident that the grounds relied upon in the instant case, to establish the just and equitable ground, have much in common to an oppression petition presented under the old s. 181 of CA 1965 (now replaced by s. 346 CA 2016). In order to establish her case, the 1st respondent had raised serious allegation against the appellants in that they had acted against the interests of the company and were only concerned with their own benefits. [25] Now, in an oppression action, similar allegations can sometimes be raised successfully, for example, where directors exercise their powers for an ulterior purpose (see Edmund Charles Liebenberg v ICB-Griffin Manufacturing Sdn Bhd & Ors [2005] 5 MLJ 259 or where there is mismanagement of a company’s financial affairs (see Chiew Sze Sun & Anor v Cast Iron Products Sdn Bhd & Ors [1994] 1 CLJ 157). [26] The common factor in each type of action is the concept of unfairness as determined by the Federal Court in Jet-Tech Materials Sdn Bhd v 12 Yushiro Chemical Industry Co Ltd & Ors and another appeal [2013] 2 MLJ 297 which decision followed the principles as set out earlier in Ebrahimi v Westbourne Galleries Ltd [1973], O’Neill v Philips [1999] 2 BCLC 1 and Pan-Pacific Construction Holding Sdn Bhd v Ngui Kee Corp (M) Bhd [2010] 6 CLJ 721. [27] We also note with interest that an oppression action can be brought against any director or shareholder or even third parties. In such an action, the alleged oppressors as well as the company will be named as respondents to the action. Affidavits by each party will invariably be filed to determine the truth of the allegations. [28] In the event, it appears incongruous to us the assertion that in a winding up petition under the just and equitable ground, which we consider to be similar in many ways to an oppression action, there is no requirement to name as respondents the parties who are alleged to have acted against the interests of the company. In our view, it is only fair and just that those upon whom serious allegations have been made are given the opportunity to respond to the petition by filing affidavits in reply. [29] We also think that it is no answer to say that the appellants would have been duly served with the advertisement as required under rule 24 of 13 the Companies (Winding Up) Rules 1972. That provision, as we understand it, is more to provide a general notice to all creditors of the company where any action is filed to wind up the company with the intention to invite support or opposition to the petition. Under the said rule 24, the petition shall be advertised in Form 4 of the Companies (Winding Up) Rules 1972. Such advertisement, as can be seen from a perusal of Form 4, will not disclose the allegations made against the appellants. They will, in the end, remain clueless as to the allegations against them. [30] Service of the petition on the company as required by rule 25 of the Companies (Winding Up) Rules 1972 also offers no assistance as the company is separate from the shareholders. It does not follow that once a company is served the shareholders will be deemed to have knowledge. Their interests may not match as is evident from the factual matrix of the instant case. It is therefore our judgment that in the interests of justice, in addition to fulfilling the requirement under the said rule 24, the petition filed by the 1st respondent ought to have named the appellants as respondents and the petition ought to have been served on them in the normal way. [31] Since it is beyond dispute that the appellants were not named as respondents and there was no proper service on them, should the petition then be set aside as being null and void for breach of natural justice? The 14 jurisprudence in this regard, in our view, has been settled by the Badiaddin principle. The Federal Court there, through the judgment of Mohd Azmi FCJ, set out the law as follows (supra at p 409): “It is of course settled law as laid down by the Federal Court in Hock Hua Bank’s case that one High Court cannot set aside a final order regularly obtained from another High Court of concurrent jurisdiction. But one exception to this rule (which was not in issue and therefore not discussed in Hock Hua Bank) is where the final judgment of the High Court could be proved to be null and void on ground of illegality or lack of jurisdiction so as to bring the aggrieved party within the principle laid down by a number of authorities culminating in the Privy Council case of Isaacs v Robertson [1985] AC 97 where Lord Diplock while rejecting the legal aspect of voidness and voidability in the orders made by a court of unlimited jurisdiction, upheld the existence of a category of orders of the court ‘… where a person affected by the order is entitled to apply to have set aside ex debito justitiae in the exercise of the inherent jurisdiction of the court, without his needing to have recourse to the rules that deal expressly with proceedings to set aside orders for irregularity, and give to the judge a discretion as to the order he will make.” [32] And His Lordship continued his pronouncement (at p 409): “For my part, I must hasten to add that apart from breach of rules of natural justice, in any attempt to widen the door of the inherent and discretionary jurisdiction of the superior courts to set aside an order of court ex debito justitiae to a category of cases involving orders which contravened ‘any written law’, the contravention should be one which defies a substantive 15 statutory prohibition so as to render the defective order null and void on ground of illegality or lack of jurisdiction. It should not for instance be applied to a defect in a final order which has contravened a procedural requirement of any written law. The discretion to invoke the inherent jurisdiction should also be exercised judicially in exceptional cases where the defect is of such serious nature that there is a real need to set aside the defective order to enable the court to do justice. In all cases, the normal appeal procedure should be adopted to set aside a defective order, unless the aggrieved party could bring himself within the special exception.” [33] In this connection as well, the Federal Court had earlier observed, through the judgment of Abdoolcader J (as he then was), in EU Finance Berhad v Lim Yoke Foo [1982] 2 MLJ 37 as follows (p 39): “The general rule is that where an order is a nullity, an appeal is somewhat useless as despite any decision on appeal, such an order can be successfully attacked in collateral proceedings; it can be disregarded and impeached in any proceedings, before any court or tribunal and whenever it is relied upon – in other words, it is subject to collateral attack. In collateral proceedings the court may declare an act that purports to bind to be non-existent.” [34] In similar vein, the Federal Court in Muniandy a/l Thamba Kaundan & Anor v D&C Bank Berhad & Anor [1996] 2 CLJ 586, through the judgment of Edgar Joseph Jr FCJ, stated (at p 593): “The rule that the Court has no power under any application in the action to alter or vary a judgment after it has been entered or an order after it has 16 been drawn up, except in so far is necessary, to correct errors in expressing the intention of the Court, is subject to certain exceptions, one of which is that an order which is a nullity owing to failure to comply with an essential provision such as service of process, can be set aside by the Court which made the order in the exercise of its inherent jurisdiction (see Craig v Kanseen [1943] 1 AER 108 at 113 CA applied in United Malayan Banking Corpn Bhd v Syarikat Perumahan Lunas Sdn Bhd [1988] 1 MLJ 546). If, therefore, Counsel for the chargors were correct in his contention that the ex parte orders were null and void – a point to which we shall be coming to shortly – then the Judge was wrong in applying the principle of functus officio to the circumstances of the case before him.” (Emphasis retained) [35] The principles gained from the case authorities can therefore be expressed as follows. As a general rule, an aggrieved party who is dissatisfied with a final order of a court of unlimited jurisdiction must appeal to a higher court. The exception to this rule is that where an order is null and void on the grounds of breach of natural justice, illegality or lack of jurisdiction, such court will have the power under its inherent jurisdiction to set aside its own order. Where an order is a nullity, it can be successfully challenged in collateral proceedings. [36] Reverting now to the instant case, it is our view that the High Court had the jurisdiction to set aside its own order made in breach of natural justice and to order the matter to be re-heard with the appellants being 17 allowed to be heard on the petition. We also agree that the argument of functus officio had no traction as only arguments of one side had been heard albeit in breach of the rules of natural justice. In a sense, the High Court itself was in error when failing to order the petition to be served on the parties against whom serious allegations of wrongdoing were made and who would also be most affected by the order for winding up of the Company. In the circumstances, it would be unjust to disregard such error and disallow the appellants from being heard on the merits. [37] It is also pointless to argue that the application to set aside the order should have been made in the winding up court and not by a fresh action. It is settled law, as we had earlier accepted, that any person affected by an order obtained in breach of natural justice is entitled to have it set aside ex debito justitiae in the exercise of the inherent jurisdiction of the court without his needing to have recourse to the rules that deal expressly with proceedings to set aside such orders. In short, an order made in breach of the rules of natural justice was a nullity and could be challenged in collateral proceedings (see Grafton Isaacs v Emery Robertson [1985] AC 97; Lee Tain Tshung v Hong Leong Finance Bhd [2000] 3 MLJ 364 and Selvam Holdings (M) Sdn Bhd v Grant Kenyon & Eckhardt Sdn Bhd; (BSN Commercial bank (M) Bhd & Ors, interveners [2000] 3 MLJ 201). 18 [38] For the same reasons that were canvassed in the foregoing, the argument that the appeal was fatal as the appellants had failed to first obtain leave of the winding up court under s. 471 of CA 2016 is a non-starter. Additionally, no leave is required as the action filed by the appellants was not to obtain any remedy for or against the Company but to declare that the winding up of the Company itself was null and void. The Result [39] In the circumstances, and for the reasons provided, we were persuaded that the decision of the learned Judge was plainly wrong and cannot be upheld. The appeal was therefore allowed and the order of the High Court was set aside with the consequential order that the matter be remitted to the High Court to be reheard with the appellants added as respondents. The 1st respondent was ordered to pay costs of RM15,000.00 as costs here and below subject to allocator fees. Deposit to be refunded. Dated: 15 October 2018 Signed (HARMINDAR SINGH DHALIWAL) Judge Court of Appeal Malaysia 19 Counsel / Solicitors: For the Appellants: KF Wong (with him YF Chan) (M/s KF Wong & Lee) For the 1st Respondent: Goh Keng Tat (with him Alexavier Lee) (M/s Goh Keng Tat & Co) For the 2nd and 3rd Respondents: Michael Chow (with him Nicholas Poon) (M/s Michael Chow)