Portneka Sdn Bhd v Mitisa Holdings Sdn Bhd (W-02(IM)-891-07/2020)

1 IN THE COURT OF APPEAL, MALAYSIA APPELLATE JURISDICTION APPEAL NO: W-02(IM)-891-07/2020 BETWEEN

1. PORTNEKA SDN BHD (Company No : 375290-M)

2. ADAMAS EXCEL SDN BHD … APPELLANTS (Company No : 470112-H) AND MITISA HOLDINGS SDN BHD … RESPONDENT (In Liquidation) (Company No :510994-M) [IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR (COMMERCIAL DIVISION) POST WINDING-UP NO: WA-28PW-218-03/2019 COMPANIES WINDING UP NO: 28NCC-84-02/2014 In the matter of Section 218(1)(e) and/or the Companies Act 1965 2 And In the matter of Mitisa Holdings Sdn Bhd (Company No: 510994 – M) BETWEEN CRBC (M) HOLDINGS SDN BHD … PETITIONER (Company No: 2522836 – X) AND MITISA HOLDINGS SDN BHD … RESPONDENT (In Liquidation) (Company No :510994-M)] CORAM: LAU BEE LAN, JCA AZIZAH BT NAWAWI, JCA NORDIN BIN HASSAN, JCA 3 Grounds of Judgment The Application [1] This is the Respondent's Notice of Motion (enclosure 9) made pursuant to Section 67(1) of the Court of Judicature Act 1964 (“CJA”) for an order that the Notice of Appeal filed by the Appellants dated 23.07.2020 ("NOA") be struck out. The grounds of the application are:

(ii) that the learned Judicial Commissioner of the High Court of Kuala Lumpur had on 29.06.2020 given his advice or direction 4 in respect of the distribution of the monies under the said Project;

(iii) that the Appellants had appealed against the decision given on 29.06.2020;

(iv) that a direction sought by a Liquidator pursuant to Section 487(3) CA 2016 (formerly Section 237(3) of CA 1965) is a direction or an advice for an administrative proceeding and not a judgment or an order within the scope of Section 67(1) of the CJA and therefore is non-appealable;

(ii) a sum of RM856,714.82 was payable to Adamas Excel Sdn Bhd;

(iii) a sum of RM173,539.51 was due to Sigma Elevator (M) Sdn Bhd;

(iv) a sum of RM75,960.25 was due to Camar Kreatif Sdn Bhd; and

(ii) If in the affirmative, then all payments paid by PEMBINAAN BLT SDN BHD to MITISA HOLDINGS SDN BHD (In Liquidation) up to the sum of RM2,385,412.81 in relation to the Project shall be distributed to all unsecured creditors whom their Proof of Debt are admitted in a pari passu manner, including the Sub-contractors. (as amended)

(iii) Provision or deductions be made in respect of the sum of RM531,441.12 already paid by PEMBINAAN BLT SDN BHD to PORTNEKA SDN BHD on 10.01.2019. [20] On 29.6.2020, the High Court answered the question in paragraph (i), above in the affirmative and in relation to prayer (ii), the High Court ruled that the final sum up to RM2,385,412.81 shall be distributed to all unsecured creditors whom their Proof of Debt are admitted in a pari passu manner. 9 [21] The Appellants had on 23.07.2020 appealed against the decision of the learned JC and in the Memorandum of Appeal, the Appellants had pleaded that the learned JC had failed to consider or to give adequate consideration to the following, inter alia:

(ii) The Motion for directions under section 237 (3) CA 1965 is an abuse of process;

(iii) The application for directions under section 237 (3) CA 1965 ought to be made before a liquidator makes a decision on the management of the affairs and property of the Respondent and the distribution of its assets and not after;

(iv) The issues raised and evidence tendered by the Appellants pertaining to matters that occurred post winding up;

(vi) That section 292 of the CA 1965 and the pari passu rule do not apply to decisions and payments made by a liquidator for the benefit of the wound-up company. 10 Our Findings [22] The Respondent took the position that the directions given pursuant to subsection 487(3) of the CA 2016 (formerly subsection 237(3) of the CA 1965) are in the nature of advice, and not a judgment or order within the scope of subsection 67(1) of the CJA. Therefore, directions given pursuant to subsection 487(3) of the CA 2016 are not appealable. [23] Subsection 487(3) of the CA 2016 reads as follows: “Exercise and control of liquidator's powers …

(3) The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up…” [24] Section 67 of the CJA reads as follows: “Jurisdiction to hear and determine civil appeals

(1) The Court of Appeal shall have jurisdiction to hear and determine appeals from any judgment or order of any High Court in any civil cause or matter, whether made in the exercise of its original or of its appellate jurisdiction, subject nevertheless to this or any other 11 written law regulating the terms and conditions upon which such appeals shall be brought.

(2) The Court of Appeal shall have all the powers conferred by section 24A on the High Court under the provisions relating to references under order of the High Court.” [25] The Respondent relied on the decision of the Federal Court in Ooi Woon Chee & Anor v. Dato' See Teow Chuan & Ors and Other Appeals [2012] 2 CLJ 501, where the Federal Court held, inter alia, as follows: “[52] It is also our considered view that the Court of Appeal erred in failing to find that the directions given by the learned Judicial Commissioner under s. 237(3) of the Act were in the nature of advice and is accordingly not a judgment or order within the scope of s. 67(1) of the Courts of Judicature Act 1964 ("the CJA 1964”) and are thereby non-appealable. An appeal to the Court of Appeal only lies from a judgment or order within s. 67(1) of the CJA 1964 which provides: The Court of Appeal shall have jurisdiction to hear and determine appeals from any judgment or order of any High Court in any civil cause or matter... [53] We are of the view a direction or advice given under s. 237(3) of the Act is not a judgment or order. In Re Sportsman's Leisure & 12 Hobby Warehouse Pty Ltd (in liq) (1989) 7 ACLC 1270, the court in considering the nature of application for directions under s. 379(3) of the Companies (Queensland) Code which is similar to our s. 237(3) of the Act held at p. 1273 that a direction given under similar provisions is not a ‘judgment' or 'order'. The court followed Re Blackcbird Pies (Management) Ply Ltd (No 2) [1970] Qd R 33 wherein it was held: That subsection [s. 237(3)] does not, in my opinion enable the Court to make binding orders on persons in the nature of judgments. The directions which a Court may give on an application under it are more like the directions or advice which may be given under section 45 of the Trustees and the Executors Acts. Such directions are not in my opinion, subject to appeal. (Re Tooth's Trusts [1877] 5 Q.S.C.R. 10). I have set out these views on section 237(3) because it was contended that the decision of WB. Campbell J created an estoppels between the parties. But there was no judgment and no order. In my opinion there was no estoppels. Nor was there any right of appeal. [54] The rationale or the purpose of s. 237(3) of the Act is to enable a liquidator both to obtain advice and to protect his position as to personal liability in the administration of the winding up. This reasoning has been followed in several Australian decisions. In Re Security Provident Fund Limited (in liq); Rodger v. Gourlay (1984) 2 ACLC 594 at p. 595 the Australian Supreme Court ruled that: 13 The major matter is that the question asked in the summons (or at least questions 1 and 2) are outside the scope of liquidators' summons for directions. It is clear, upon authority, that subsec. 379(3) does not enable the Court to make binding orders in the nature of judgment.... The function of a liquidators' summons for directions is to give him advice as to his proper course of action in the liquidation; … In Re JW Murphy & PC Allen (1996) 19 ACSR 569, the Supreme Court of New South Wales held at p. 570: an application for directions under s. 379(3) of the Companies Code [or s. 479(3) of the Corporation Law] is an administrative non-adversary proceeding, and a direction given pursuant to that section has no effect on the substantive rights of persons external to the winding up. [55] As encl. 485 direction is only an administrative proceeding by way of advice, any direction given is not a judgment or order and therefore does not fall within s. 67 of the CJA 1964. It is our judgment therefore that the directions given by the learned Judicial Commissioner in encl. 485 are non-appealable.” (emphasis added) 14 [26] On the other hand, the Appellants had submitted that the application before the High Court is not simply seeking direction from the Winding-up Court but involves the ascertainment of the commercial rights of parties not parties to the liquidation. The Appellants relied on the case of Equiticorp Holdings Ltd v. Mak Kum Choon & Ors and another appeal [2020] 2 MLRA 114 where the Court of Appeal has considered the issue of the court's jurisdiction and competence to hear an appeal for applications under section 487(3) CA 2016 and/or section 237(3) of the CA 1965. [27] Taking Ooi Woon Chee (supra) into consideration the Court of Appeal in Equiticorp (supra) clarified at page 133 of that case that: “[76] We are, therefore, of the view that the court necessarily has to ask itself whether s 237(3) has been properly, suitably or appropriately invoked before proceeding to consider the application on its terms. Section 237(3) is not available nor is it suitable for applications under the guise of directions for general administration when the pith and substance of the application is to decide substantive questions as against the persons making proprietary claims is adverse to the assets of the wound-up company. [77] Before any court is divested of jurisdiction and competence to hear any matter including an appeal [on the basis that the matter is not appealable], the court will and should always first examine the propriety of the matter or appeal. It is 15 only where the matter or appeal is not properly within the ambit of the relevant law or bona fides is not established that the submission of lack of competency is condescended to. This approach is evident in Ooi itself where the Federal Court set about examining first the factual matrix and circumstances in order to deal with the issue of bona fides and propriety or correctness of the application under s. 237(3) before dealing with the matter of jurisdiction and competency of the appeal. It was only after it was satisfied that the application was bona fides [para 49] and proper [para 50] that the Federal Court considered and agreed with the issue of the non-appealability of the directions sought.” (emphasis added) [28] Therefore, this Court in Equiticorp (supra) essentially asked the basic issue first, whether the application before the High Court falls within subsection 237(3) of the CA 1965 (and/or subsection 487(3) of the CA 2016), that is, the application was merely seeking directions for general administration from the court. If the application was merely seeking directions for general administration from the court as envisaged by subsection 237(3) of the CA 1965 (and/or subsection 487(3) of the CA 2016), then pursuant to the case of Ooi Woon Chee (supra), any direction given is not a judgment or order and therefore does not fall within section 67 of the CJA 1964. [29] Justice Mary Lim (now FCJ) added that an application made under subsection 237(3) of the CA 1965 should not be made under the guise of directions for general administration, when in fact the pith 16 and substance of the application is to decide substantive questions or substantive rights of the parties. [30] In Kemacahaya Development Sdn Bhd v. Syarikat Bekalan Air Selangor Sdn Bhd & Ors and another appeal [2019] 6 MLJ 364, this Court also had to ascertain whether the subject matter of the application falls within subsection 237(3) of the CA 1965, before applying the case of Ooi Woon Chee (supra). Justice Hasnah Mohamad (now FCJ) held as follows: “[16] By virtue of the doctrine of stare decisis we are bound by the decision of the Federal Court in Ooi Woon Chee (supra) that a direction pursuant to section 237(3) CA 1965 is an administrative proceeding by way of a direction, and does not fall within section 67 of the CJA and is non-appealable. However, as is obvious from the grounds of decision the learned Judge had made findings as opposed to giving directions or advice on administrative matters, envisaged by section 237(3) CA, the directions sought were outside the purview of section 237(3) CA. We had further considered the submissions of the parties and we were nevertheless of the view that the application by the Liquidator pursuant to section 237(3) CA 1965 and/or section 487(3) CA 2016 is in the first instance itself is a misconceived application, in that the asset which the Liquidator sought direction for is not in his custody.” (emphasis added) 17 [31] Having considered the application before the High Court and the decision of the learned JC, we are of the considered opinion that the learned JC had made findings which have affected the rights of parties, including parties who are not parties to the application before the High Court. In his Judgment, the learned JC held as follows: “37. This Court holds that payments owed by PBLT to Respondent are assets of the Respondent, and to allow the NSCs to receive the payments due to them direct from PLBT, would in the opinion of this Court lead to the NSC being placed in a favourable position of ‘leap frogging’ or ‘jumping the queue’ in front of the other creditors whereby the undue preference rule will kick in/be triggered, see secs. 292 and 293 CA 1965 where the relevant provisions in respect of all debts in a winding up shall be paid pari passu and the undue preference rule respectively are referred to.” [32] The learned JC has made a substantive and final finding that the payments owed by PBLT to the Respondent are assets of the Respondent, and this includes the payments due to the respective NSCs who have completed the works after PBLT had terminated the contract with the Respondent. This position was strenuously disputed by the Appellants, who took the position that when the Official Receiver made his decision to consent for payments to be made directly by PBLT to the Appellants, those payments ceased to be part of the Respondent's assets. Added to that, the Appellants further argued that when the Respondent’s main contract was terminated by PBLT, the substratum of the Respondent’s sub-contracts with the 18 NSCs was extinguished. Hence, PBLT continued to make direct payments to the NSCs for work done after the termination of the Respondent as the main contractor, with the consent of the Official Receiver and the Liquidator. These payments, according to the Appellants, cannot now to be claimed to be assets of the Respondent. [33] As such, we find that the above findings by the learned JC goes to the substantive rights of the parties, and are not mere directions or advice on administrative matters as envisaged by subsection 237(3) of the CA 1965. Therefore, the directions sought the Respondent are outside the purview of subsection 237(3) of the CA 1965. [34] Added to that, we are of the considered opinion and we agree with the Appellant that the Amended Notice of Motion dated 27.2.2020 in the Court below was not only seeking relief under subsection 487(3) of the CA 2016 (formerly ss. 237(3) CA 1965) but was also premised on sections 472, 475, 486, 527 and 528 of the CA 2016 (formerly sections 236 and 292 of the CA 1965). Hence, the learned JC has made a finding on the pari passu principle and the undue preference rule. [35] Therefore, unless the application is purely seeking directions or advice on administrative matters as envisaged by subsection 487(3) of the CA 2016 (formerly ss. 237(3) CA 1965), which is not the case before us, the application cannot be said to fall within subsection 19 487(3) of the CA 2016, and hence the principle in Ooi Woon Chee (supra) is not applicable. [36] Further, we take note that in the case of Ooi Woon Chee (supra), the liquidators there needed directions on the proper course going forward in the administration of the liquidation before a decision was made. However, in the present case and having looked at the purported directions sought by the Respondent, we find that the purported ‘directions’ are not administrative directions at all. The ‘directions’ sought are to determine the issue of entitlement to the payments due from PBLT, which had adversely affected the commercial interests of third parties, including the Appellants. [37] The directions sought are matters of substantive rights and liabilities of parties, including the Appellants who were not properly before the Court below. The Appellants were not named in the application below, and neither were the other nominated sub-contractors, namely, Sigma Elevator (M) Sdn Bhd and Camar Kreatif Sdn Bhd. [38] As such, we find that the pith and substance of the application was to decide on substantive questions or the substantive rights of the parties. We therefore find that the ‘directions’ sought by the Respondent are not in the true nature of directions seeking advice or guidance on administrative matters as envisaged by subsection 487(3) of the CA16 and/or subsection 237(3) of the CA 1965. 20 Conclusion [39] Since the learned JC has decided on the substantive rights of the parties, we are of the considered opinion that the decision of the learned JC do not fall within the nature of directions seeking advice or guidance on administrative matters as envisaged by subsection 487(3) of the CA16 and/or subsection 237(3) of the CA 1965. Therefore, we find that the Respondent’s application before the High Court falls outside the scope of the principle in Ooi Woon Chee (supra) and is therefore appealable. The Respondent’s Motion is dismissed with costs in the cause. Dated : 12 July 2021 sgd (AZIZAH BINTI NAWAWI) Judge Court of Appeal, Malaysia Parties Appearing: For the Appellant : Sukhwinder Singh/Fatin Mazlan Tetuan Akberdin & Co. For the Respondent : Mark Ho/Pang Li Xuan Tetuan Chellam Wong 21 Cases Referred

1. Ooi Woon Chee & Anor v. Dato' See Teow Chuan & Ors and Other Appeals [2012] 2 CLJ 501

2. Equiticorp Holdings Ltd v. Mak Kum Choon & Ors and another appeal [2020] 2 MLRA 114

3. Kemacahaya Development Sdn Bhd v. Syarikat Bekalan Air Selangor Sdn Bhd & Ors and another appeal [2019] 6 MLJ 364,