1. ) Sapura Energy Berhad v 1. ) Petronas Dagangan Berhad (WA-24NCC-148-03/2022)

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SAPURA 1200 LTD … APPLICANTS AND TECNIMONTHQC SON BHD … PROPOSED INTERVENER JUDGMENT A. Introduction [1] The proceedings before this court involve schemes of arrangement under section 366 of the Companies Act 2016 (“CA”). [2] Two orders were granted at the application of the applicants. The first, granted on 10 March 2022 (“March 2022 Order”): i. ordered meetings of creditors of the applicants including the 3rd applicant (“Scheme Creditors”) to be summoned under section 366(1) of the CA; and ii. granted restraining orders under section 368(1) of the CA (“Restraining Orders”) in favour of the applicants including the 3rd applicant, effective for three months. [3] In the second order, granted on 8 June 2022 (“June 2022 Order”), the Restraining Orders were extended for a further nine months. [4] The proposed intervener, a company in dispute with the 3rd applicant, filed an application in enclosure 131, seeking leave to inter alia commence arbitration proceedings against the 3rd applicant (“Arbitration Proceedings”), to seek reliefs for losses and damages against the 3rd applicant. [5] I found there to be no exceptional circumstance that would the Arbitration Proceedings, for the purpose of seeking reliefs for losses and damages against the 3rd application. [6] However, I took note of an adjudication decision dated 17 May against the proposed intervener. The proposed intervener intends to apply for the proposed intervener to file the Stay Application. [7] The full reasons for my decision are set out below. B. Background Facts The Dispute Between The Proposed Intervener And The 3rd Applicant [8] On or about 14 July 2017, the proposed intervener appointed the 3rd applicant as a subcontractor by way of a subcontract agreement and related documents (“Subcontract”). The 3rd applicant was required to necessitate the grant of leave for the proposed intervener to commence 2022 (“Adjudication Decision”) which allowed the claim of the 3rd applicant for a stay of the Adjudication Decision (“Stay Application”) under section 16(1) of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”). It may not be able to do so as arbitration proceedings have not been commenced, and section 16(1)(b) of CIPAA requires there to be pending arbitration proceedings where an application for stay is made. It is on this basis that I granted leave for the proposed intervener to commence the Arbitration Proceedings, but only to the extent necessary execute mechanical works for a plant at the Pengerang Integrated Complex, Johor, for a total provisional price of RM113,800,000. [9] The 3rd applicant claimed RM55,128,311.07 from the proposed intervener, for works completed. The claim was disputed by the proposed intervener. [10] This prompted the 3rd applicant to initiate adjudication proceedings against the proposed intervener. The 3rd applicant claimed RM50,690,660.95, for works done under the Subcontract. The proposed intervener disputed the claimed sum and submitted a cross-claim of RM76,205,852.50. [11] The learned adjudicator decided in favour of the 3rd applicant. The Adjudication Decision, delivered on 17 May 2022, provided as follows: a. The 3rd applicant’s adjudication claim was partly allowed, and the 3rd applicant is entitled to payment of RM15,369,094.52. b. The proposed intervener’s cross-claim was dismissed; c. The 3rd applicant was awarded interest and costs; and d. The proposed intervener was ordered to pay RM15,369,094.52 together with interest and costs, within one month of the Adjudication Decision. The Schemes Of Arrangement [12] Meanwhile, the applicants, including the 3rd applicant, had filed an originating summons pursuant to sections 366 and 368 of the CA, ultimately seeking approval for schemes of arrangement involving the applicants (collectively, the “Schemes”). [13] The following orders were granted: a. The March 2022 Order: i. an order under section 366(1) of the CA for meetings of the Scheme Creditors to be summoned for the purpose of considering and if thought fit, approving the Schemes; and ii. Restraining Orders in favour of the applicants, including the 3rd applicant, pursuant to section 368(1) of the CA, effective for three months from 10 March 2022. The Restraining Orders restrained all proceedings against the applicants and their respective assets. b. The June 2022 Order, pursuant to which the Restraining Orders were extended for a further nine months, to 10 March 2023. The Proposed Intervener’s Application [14] With the orders given by this court, the proposed intervener filed enclosure 131, seeking leave to inter alia: a. Intervene and be made a party to the proceedings before this court (prayers 1 and 2 of enclosure 131); b. Commence the Arbitration Proceedings to seek reliefs for loss and damages against the 3rd applicant (prayer 3.1 of enclosure 131); c. File an application pursuant to inter alia section 15 of CIPAA to set aside the Adjudication Decision (“Setting-Aside Application”) (prayer 3.2 of enclosure 131); and d. File the Stay Application pursuant to inter alia section 16 of CIPAA (prayer 3.3 of enclosure 131). [15] The proposed intervener and the applicants agreed on prayers 1, 2, 3.2 and 3.3. [16] The only prayer in enclosure 131 that remained in contention was prayer 3.1, which is the prayer for leave to be granted for the proposed intervener to commence the Arbitration Proceedings to seek reliefs for loss and damages against the 3rd applicant. C. Considerations [17] I first considered whether the Restraining Orders would apply to the Arbitration Proceedings. The answer to this is clear in the March 2022 Order, which provides that: “4. Restraining orders be granted in favour of each Applicant pursuant to section 368(1) of the Act for a period of 3 months from the date of the Order, whereby all proceedings and/or further proceedings and/or intended and/or future proceedings in any action or proceeding against any Applicant and/or its respective assets (wherever located, and whether held by such Applicant in whole or in part, directly or indirectly, as principal or agent, beneficially or otherwise), including, without derogating from the generality of the foregoing:

4.1. winding-up and arbitration proceedings as well as any intended or future proceedings … … be and is hereby restrained and stayed (the "Restraining Order") except by leave of this Honourable Court.” (emphasis added) [18] By the Restraining Orders, the proposed intervener is restrained from commencing the Arbitration Proceedings unless leave of court is obtained. [19] The principles on the grant of leave to continue with proceedings where a restraining order under section 368 of the CA is in place are set out in Re Top Builders Capital Bhd & Ors [2021] 10 MLJ 327. Rephrasing these principles would not do justice to the extensive assessment of Ong Chee Kwan JC (as His Lordship then was), so I have reproduced the relevant paragraphs below: “[99] … the starting principle when entertaining an application for leave under s 368(1) of the CA is that such leave will only be granted in ‘exceptional circumstances’ and the burden will be on the applicant to show so. However, it will be unwise to attempt at defining what would constitute ‘special circumstances’. A prescriptive and definitive list of factors would not be attempted because of the infinite variety of circumstances. But it will be safe to adopt the English High Court’s guide in Ronelp Marine Ltd v STX Offshore & Shipbuilding Co Ltd [2016] EWHC 2228 (Ch) that ‘exceptional circumstances’ here must be such that the circumstance or combination of circumstances must be of sufficient weight to overcome the strong imperative to have the claims dealt with under the machinery of the scheme of arrangement. [100] The fact that the applicant’s claim in the legal proceedings may have a ‘real prospect of success’ alone cannot constitute ‘special circumstances’. Similarly, the contention that the legal proceedings if permitted to proceed would finalise the quantum of the applicant’s claim and therefore assists the applicant in its claim as a recognised scheme creditor based on a fully adjudicated sum to be paid instead of a provisional sum asserted for voting purpose cannot constitute ‘special circumstances’. Such contentions would defeat the very purpose of the scheme of arrangement which depends on a summary determination of the claims to achieve an expedited solution to the company financially distressed situation. It must also follow that a claim that the scheme creditor’s claims will only be determined in a summary fashion as oppose to a full evaluation of the evidence commonly afforded by the civil suit cannot be a reason to grant leave. [101] Leave will likely be granted where the commencement or continuation of the legal proceedings does not impede the achievement of the scheme or where it would in fact facilitate and or assist towards the achievement of the scheme. For instance, where the claim is proprietary in nature and the applicant is not seeking anything other than to reclaim possession or ownership of property said to belong to him, leave will normally be granted. Another instant is where the adjudication of the quantum of the creditor’s claims is determinative of the question of approval of the scheme, leave may be granted to proceed with legal proceedings if the circumstances of the disputes are such that a summary decision on the claims is not appropriate. [102] Ultimately what the court is asked to do is to balance between the harm or loss to the applicant if leave is not granted with the harm and loss to the general body of creditors under the scheme of arrangement if leave is granted taking into consideration, inter alia, the structure and terms of the scheme and how the company seeks to implement the same, the support of the creditors for the scheme, the company’s financial position, the bona fide of the company in proceeding with the scheme, the stage of the legal proceedings and whether the outcome of the legal proceedings would have a determinative impact to the approval of the scheme.” (emphasis added) [20] Guided firstly by the starting principle in Re Top Builder, which is that leave will only be granted in “exceptional circumstances”, I find the proposed intervener has not shown any exceptional circumstance that would warrant the grant of leave to commence the Arbitration Proceedings. [21] As with Re Top Builder, I am guided by Ronelp Marine Ltd and other companies v STX Offshore & Shipbuilding Co Ltd [2016] EWHC 2228 (Ch), where the court held that to meet the requirement of an “exceptional” case, the applicant: “… must demonstrate a circumstance or combination of circumstances of sufficient weight to overcome the strong imperative to have all the claims dealt with in the same way …” [22] Having considered the facts giving rise to the claims arising from the Subcontract, I am unable to find any exceptional circumstance giving rise to the need for the dispute between the proposed intervener and the 3rd applicant to be dealt with outside the scope of the Schemes. [23] The reason for my finding relates directly to the very nature of the proposed intervener’s claim, which is a pure monetary claim. [24] The following was held in Re Top Builder: “Court unlikely to grant leave for pure monetary claims [44] Generally, the court is unlikely to grant leave in relation to a pure monetary claim unless exceptional circumstances arise. This was made clear by the English High Court in AES Barry Ltd v TXU Europe Energy Trading (in administration) [2004] EWHC 1757 (Ch): [14] … where the creditors’ claim is simply a monetary one, the court has to carefully scrutinise whether or not it is appropriate to allow that claim to be determined and enforced in advance of the achievement of the statutory purposes and the conclusion of the administration, either by a scheme or, if all else fails, by an order for the liquidation of the Company. [24] It seems to me that it will only be in exceptional cases, and I do not rule out that there may be such cases, but it will be in exceptional cases that the court gives a creditor, whose claim is simply a monetary one, a right by the taking of proceedings to override and pre-empt that statutory machinery …” (emphasis added) [25] In the case before this court, the proposed intervener’s cross-claim consists of claims for liquidated and ascertained damages due to late completion of works, additional construction costs, additional supervision costs, losses and damages. It cannot be disputed that these are pure monetary claims, and I cannot see how these claims can be justified to be dealt with outside the scope of the Schemes. [26] In fact, I am of the view that the cross-claims fall squarely within the scope of the Schemes and can be adequately dealt with under the Schemes. Paragraph 7 of Annexure A of the March 2022 Order, read with paragraphs 6 and 7 of the June 2022 Order, provide that the Scheme Creditors shall submit a proof of debt on or before 30 June 2022. [27] Thus, if the proposed intervener has a valid claim against the 3rd applicant, it can submit its proof of debt under the Schemes. If the proof of debt is admitted, this would entitle the proposed intervener to attend and vote at the creditors’ meetings and subsequently to receive payments under the Schemes. If the proof of debt is rejected, the proposed intervener may apply for its claim to be adjudicated under the adjudication process set out in the March 2022 Order, read with the June 2022 Order. [28] This process of the resolution of claims or disputes by creditors is in line with the intention of section 368(1) of the CA, which allows the court to restrain proceedings against a company, where a compromise or arrangement has been proposed between a company and its creditors, as is the case before this court. The intention must then be for the process for resolution of claims under the proposed compromise or arrangement to prevail over the process of legal proceedings before the court or via arbitration. This would ensure that the proposed compromise or arrangement would have the highest chance of success, and would avoid a situation where the company’s resources are split between working towards the success of the compromise or arrangement on the one hand, and defending claims that remain in the normal course of the dispute resolution process on the other hand. [29] I am also unable to agree with the proposed intervener that a summary decision on its cross-claim against the 3rd applicant is not appropriate and that the cross-claim cannot be adequately dealt with in the Schemes. A similar contention was raised in Re Top Builders, where it was argued that the legal proceedings, if permitted to proceed, would finalise the quantum of the applicant’s claim and therefore assist the applicant in its claim as a recognised scheme creditor based on a fully adjudicated sum to be paid instead of a provisional sum. [30] On this issue, I am guided by and adopt the following reasoning of the court in Re Top Builders: “[100] The fact that the applicant’s claim in the legal proceedings may have a ‘real prospect of success’ alone cannot constitute ‘special circumstances’. Similarly, the contention that the legal proceedings if permitted to proceed would finalise the quantum of the applicant’s claim and therefore assists the applicant in its claim as a recognised scheme creditor based on a fully adjudicated sum to be paid instead of a provisional sum asserted for voting purpose cannot constitute ‘special circumstances’. Such contentions would defeat the very purpose of the scheme of arrangement which depends on a summary determination of the claims to achieve an expedited solution to the company financially distressed situation. It must also follow that a claim that the scheme creditor’s claims will only be determined in a summary fashion as oppose to a full evaluation of the evidence commonly afforded by the civil suit cannot be a reason to grant leave.” (emphasis added) [31] Based on this reasoning, permitting the proposed intervener to commence the Arbitration Proceedings to seek reliefs against the 3rd applicant would defeat the purpose of the Schemes. [32] Finally, I am of the view that the grant of leave would give an unfair advantage to the proposed intervener over other Scheme Creditors of the 3rd applicant. This is inconsistent with the legislative purpose of section 368 of the CA. [33] At the most fundamental level, the process of considering whether leave should be granted involves a balance of two priorities, the priority of the intervener to pursue its claim against the 3rd applicant, and the priority of the general body of the 3rd applicant’s Scheme Creditors who are following through with the Schemes. [34] On this, I am guided by the recent case of Mansion Properties Sdn Bhd v Sham Chin Yen & Ors [2021] 1 MLJ 527, where the Federal Court held as follows: “[47] We can confidently say that the legislative purpose of s 368(1) of the CA is to preserve status quo and to prevent efforts to develop and approve a scheme of arrangement from being thwarted by the dissipation of the company’s assets. In light of the potential necessity for immediate action and speedy procedures, an ex parte application would be suitable and appropriate to achieve the legislative purpose.” (emphasis added) [35] It is my considered view that the granting of leave for the proposed intervener to proceed with the Arbitration Proceedings for the purpose of seeking loss and damages against the 3rd applicant would not preserve status quo and would lead to time and resources including finite financial and human resources of the 3rd applicant being diverted to the Arbitration Proceedings, instead of being focused on working towards the success of its Scheme. D. Decision [36] With the assessment and considerations above, I find there to be no exceptional circumstances necessitating the grant of leave for the proposed intervener to commence the Arbitration Proceedings for the purpose of seeking reliefs for loss and damages against the 3rd applicant. [37] I have however taken note of the proposed intervener’s argument that without the Arbitration Proceedings being initiated, the proposed intervener would not be able to file the Stay Application. [38] At this point, I must highlight again that the proposed intervener and the applicants had agreed on prayers 3.2 and 3.3 in enclosure 131, namely that leave be granted for the proposed intervener to file the Setting-Aside Application and the Stay Application. Orders to this effect were granted by way of a consent order dated 24 June 2022. [39] However, the proposed intervener argued that it must commence the Arbitration Proceedings before it can file the Stay Application. Learned counsel for the proposed intervener referred the court to section 16 of CIPAA, which provides as follows: “(1) A party may apply to the High Court for a stay of an adjudication decision in the following circumstances:

(a) an application to set aside the adjudication decision under section 15 has been made; or

(b) the subject matter of the adjudication decision is pending final determination by arbitration or the court.” (emphasis added) [40] The position of the proposed intervener is that it is entitled to a stay of the Adjudication Decision as the 3rd applicant is not in the position to repay the adjudicated amount if the amount is paid to it. [41] The determination of this issue is not the subject matter of proceedings before this court. Nevertheless, to avoid a catch-22 situation where the Stay Application may not be able to be commenced without there being pending arbitration proceedings, I allowed prayer 3.1 and granted leave to commence the Arbitration Proceedings, but only to the extent necessary for the proposed intervener to file the Stay Application pursuant to section 16(1) of CIPAA. Dated 25 January 2023 - sgd - Adlin Abdul Majid Judicial Commissioner High Court of Malaya Commercial Division (NCC6) Kuala Lumpur Counsel: Applicants : S. Suhendran (together with Jack Yow and Neoh Jin Keat) of Messrs. Rahmat Lim & Partners Proposed : T. Baskaran (together with Tan Zu Hao, Tan Eng Keat, Intervener Yap Bing Yew and Viviene Khor) of Messrs. Gan, Lee & Tan Legislation referred to: Companies Act 2016, section 366, section 368 Construction Industry Payment and Adjudication Act 2012, section 15, section 16 Cases referred to: Mansion Properties Sdn Bhd v Sham Chin Yen & Ors [2021] 1 MLJ 527 Re Top Builders Capital Bhd & Ors [2021] 10 MLJ 327 Ronelp Marine Ltd and other companies v STX Offshore & Shipbuilding Co Ltd [2016] EWHC 2228 (Ch)