Ample Maintain Sdn. Bhd. v Daya Cmt Sdn. Bhd. (PA-12BNCC-3-05/2021)

In the Sessions Court suit, the Sessions Court directed the Plaintiff to obtain the leave of Court before they were allowed to continue the suit. The Plaintiff did not obtain leave. The Defendant applied to strike out the suit.

The Sessions Court struck out the Plaintiff’s suit. The Plaintiff appealed to the High Court against the Sessions Court’s decision. Should the Session Court’s decision be affirmed or reversed i.e. should the Plaintiff’s suit be struck out, or not? THE PERTINENT PLEADED FACTS AND THE PARTIES’ POSITIONS [4] The Plaintiff was the Defendant’s subcontractor. The Defendant subcontracted to the Plaintiff certain roofing works in a construction project.

The contract between the parties took the form of a Letter Of Award.

The Defendant retained a sum of RM112,500.00 that stood as the Retention Sum, which was to secure the due performance of the contract, particularly for defects liability work—the rectification or remedial work, S/N chcw5zFb2EqZBg0wZsssaQ **Note : Serial number will be used to verify the originality of this document via eFILING portal Page 3 of 16 through the Defects Liability Period, before a project of works comes to an end (defects rectification work).

The Defendant paid the Plaintiff progressively.

When the Defendant issued the final statement of account, there was a final progressive claim of RM28,900.93 (the RM28K) that was due and payable to the Plaintiff.

The Plaintiff asserts that the Defendant took more than a year to pay the RM28K. The Defendant, in contrast, asserts that the RM28K was in fact paid approximately 4 months after it was due.

The Plaintiff mounts a shrewd argument.

The Plaintiff asserts that the late payment of the RM28K constituted a breach, or a repudiation, of the contract by the Defendant. The Plaintiff asserts that due to the Defendant’s breach or repudiation, the contract between the parties was terminated, and accordingly the Plaintiff’s obligations under the contract came to an end. In other words, the Plaintiff’s obligations under the contract were extinguished. In particular, the Plaintiff no longer needed to perform any defects rectification work.

In consequence, the Plaintiff claims for the return of the RM112,500.00 Retention Sum, since, as the Plaintiff argued, the contract was terminated. S/N chcw5zFb2EqZBg0wZsssaQ **Note : Serial number will be used to verify the originality of this document via eFILING portal

It is worth noting that the Plaintiff’s prayers in the Statement of Claim is for a Declaration that the Plaintiff had validly terminated the contract between the parties, or alternatively, that the contract was in fact terminated.

The Plaintiff also prays for a Declaration that the Defendant holds the RM112,500.00 Retention Sum on trust for the Plaintiff, and for an Order that the Defendant returns the Retention Sum.

In opposing the claim, the Defendant asserts that the Plaintiff’s claim was premature. The Retention Sum was not yet payable. The purpose of the Retention Sum was to secure the performance of the defects rectification work. The issue of the return of the Retention Sum concludes only after the Defects Liability Period.

The Defects Liability Period finishes only in April 2023. The Defendant asserts that the Plaintiff’s claim for the Retention Sum before the end of the Defects Liability Period is premature. The Defendant contends that the Plaintiff’s suit is therefore not sustainable, and is an abuse of the process of the Court. THE SCHEME OF ARRANGEMENT OVER THE DEFENDANT [17] After the Plaintiff filed the Sessions Court suit, a scheme of arrangement or compromise was sanctioned over the Defendant (Scheme Of Arrangement). S/N chcw5zFb2EqZBg0wZsssaQ **Note : Serial number will be used to verify the originality of this document via eFILING portal

The Scheme Of Arrangement was applicable to the Defendant’s non-financial institution creditors such as unsecured suppliers, trade creditors and subcontractors, which include the Plaintiff.

To facilitate and preserve this Scheme Of Arrangement, the Shah Alam High Court, in June 2020, granted a Scheme Of Arrangement Order that included a term (paragraph 6) that provided that all proceedings and actions, and further proceedings in any suits against the Defendant, are restrained, except with the leave of Court.

This moratorium allowed the Defendant and the creditors to crystalise the terms of the formal Scheme Of Arrangement that will bind the Defendant and the creditors.

At a Court-convened Creditors’ Meeting in October 2020, to consider and approve the Scheme Of Arrangement, 92.5% of the creditors voted to approve the scheme. The required percentage under sub-section 366(3) of the Companies Act 2016, is 75%. So, the Scheme Of Arrangement was approved.

The Defendant then had to get the Court’s sanction for the Scheme Of Arrangement so that it had the force of a Court Order. In March 2021, the Shah Alam High Court granted the Order to approve and sanction the Scheme, which has a binding effect on the Defendant and the creditors. S/N chcw5zFb2EqZBg0wZsssaQ **Note : Serial number will be used to verify the originality of this document via eFILING portal

The Plaintiff was included in the List Of Creditors who will be paid under the Scheme Of Arrangement. The value of the debt owed to the Plaintiff was recorded as RM223,190.98, much higher than the RM112,500.00 Retention Sum claimed in the Sessions Court suit. The Defendant asserts that this sum includes the Retention Sum that the Plaintiff claims in the suit. The Plaintiff confirms this fact. THE RESULTANT STRIKE OUT ORDER [24] The Plaintiff filed an Order 14 Application to enter summary judgment against the Defendant.

Before the hearing of the Summary Judgment Application, the Sessions Court directed the Plaintiff to apply for the leave of Court to continue with the suit. The Plaintiff did not do it.

After submissions by both sides (on two separate hearing dates), the Sessions Court struck out the Plaintiff’s suit, and necessarily struck out the Plaintiff’s Summary Judgment Application too. THE SESSIONS COURT’S GROUNDS FOR STRIKING OUT THE PLAINTIFF’S SUIT [27] This is an analysis and summary of the Sessions Court’s reasons behind the decision to strike out the Plaintiff’s suit— S/N chcw5zFb2EqZBg0wZsssaQ **Note : Serial number will be used to verify the originality of this document via eFILING portal Page 7 of 16

There was a valid and enforceable Shah Alam High Court June 2020 Order, which froze any suit or proceeding against the Defendant. That Restraining Order captured the Plaintiffs’ suit. Any person who wished to commence or continue a suit against the Defendant must get the leave of Court before they can do so. The Sessions Court directed the Plaintiff to get leave. The Plaintiff did not.

There was then a valid and enforceable Shah Alam High Court March 2021 Order, which sanctioned the Scheme Of Arrangement between the Defendant and its creditors. This Order bound the Plaintiff. The Sessions Court reasoned that this March 2021 Sanction Order was akin to a Consent Order entered into by all involved. And a Consent Order is a contract between the Defendant and its creditors (which included the Plaintiff)— a contract that had the force of “the command of the Court” that recorded it: Tan Geok Lan v La Kuan @ Lian Kuan [2004] 3 MLJ 465 (FC) at paragraph 15; [2004] 3 AMR 177; [2004] 2 CLJ 301; [2004] 1 MLRA 165.

The Plaintiff stood to be paid, as one of the Defendant’s creditors, out of the Scheme of Arrangement. OBSERVATION OF THE SESSIONS COURT’S REASONING [28] I make the following analysis and observation. The Defendant’s creditors collectively voted in favour of the Scheme Of Arrangement. The S/N chcw5zFb2EqZBg0wZsssaQ Page 8 of 16 Court sanctioned the Scheme Of Arrangement. The Court granted an Order to carry out the Scheme Of Arrangement. The creditors were prohibited from commencing or continuing with their suits against the Defendant. [29] If this Court, or any other Court, permits the Plaintiff to continue to pursue this suit against the Defendant without the Defendant first getting the leave of Court to do so, then such an Order will render the Companies Act provisions on schemes of arrangement and compromise ineffectual and pointless. [30] It is therefore imperative for the Courts to be mindful not to allow that circumstance to happen. [31] Also, this is the reason that leave is required to commence or continue a suit against a company that is under a scheme of arrangement or compromise—to provide for the exceptional circumstances where a particular creditor persuades the Court to allow that creditor to commence or continue a suit against the company, unrestrained by the moratorium. [32] But here, the Plaintiff did not obtain leave. In fact, the Plaintiff did not even apply for leave. [33] The Plaintiff merely filed this suit, asserted that due to the Defendant’s alleged breach or repudiation, the contract between the Plaintiff and the Defendant was terminated, and contended that as a S/N chcw5zFb2EqZBg0wZsssaQ Page 9 of 16 result, the Plaintiff was entitled to be given the RM112,500.00 Retention Sum. [34] Another observation that I make is about the power to strike out. The Court has an inherent jurisdiction to strike out pleadings, dismiss an action, or to strike out a defence, if the Court decides that they are an abuse of the process of the Court: Raja Zainal Abidin bin Raja Haji Tachik & Ors v British-American Life & General Insurance Bhd [1993] 3 MLJ 16 (SC). [35] I note that Order 18 Rule 19, which provides for the striking out of a pleading in a suit, does not specifically provide that a Strike Out Order can only be made “on the application of a party”, unlike in other Rules. For example, an Order to transfer a proceeding from one Court to another Court under Order 57, can only be made “on the application of a party”. In my view, this means that the Court can strike out a pleading on its own volition. [36] And what principle guides the Court when it contemplates making such a Strike Out Order? Order 92 Rule 4 contains the answer. The Court has inherent powers to make any Order that is necessary “to prevent injustice” or “to prevent an abuse of the process of the Court”. [37] In my view, it would be unjust to allow the Plaintiff to continue with their suit, seeking a judgment against the Defendant, above and beyond, S/N chcw5zFb2EqZBg0wZsssaQ Page 10 of 16 and unrestrained by the Court Orders that were made on the Scheme Of Arrangement (which bound all the creditors to the terms of those Orders). [38] I will also add that if the Plaintiff is allowed to continue with this suit, without the leave of Court—but the Court sanctioned the Scheme Of Arrangement and ordered the Scheme to be carried out—such a continuation of the suit tantamounts to an abuse of the process of the Court. THE LAW ON APPELLATE INTERVENTION—THE PLAINLY WRONG TEST [39] An Appellate Court should only interfere to disturb the findings of the first instance Court (here: the Sessions Court), if the Sessions Court was ‘plainly wrong’ in its decision. [40] Our Federal Court, in Ng Hoo Kui & Anor v Wendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67; [2020] 8 AMR 227; [2020] 10 CLJ 1 (FC), through Justice Zabariah Mohd. Yusof FCJ, comprehensively expounded the genesis of the ‘plainly wrong’ principle, through its development, into its current meaning. [41] Ng Hoo Kui (supra) propounded that the primary ‘plainly wrong’ principle, includes the following not-exhaustive elaborative principles— S/N chcw5zFb2EqZBg0wZsssaQ Page 11 of 16

The Sessions Court’s decision is ‘plainly wrong’ if it was arrived at through “no or insufficient judicial appreciation of the evidence”: referring to UEM Group Bhd (previously known as United Engineers (M) Bhd v Genisys Integrated Engineers Pte Ltd & Anor [2010] MLJU 2179; [2011] 1 AMCR 338; [2010] 9 CLJ 785 (FC).

This phrase of the “lack of judicial appreciation of the evidence” encompasses these three errors: - a. critical factual finding which has no basis in evidence (findings not based on the evidence); b. demonstrable misunderstanding of the relevant evidence (misunderstanding the evidence); c. demonstrable failure to consider the relevant evidence (failure to consider the evidence).

The Sessions Court’s decision is ‘plainly wrong’ if it was arrived at through a “material error of law”: following Henderson v Foxworth Investments Ltd [2014] 1 WLR 2600 (UKSC).

The Sessions Court’s decision is ‘plainly wrong’ if it “could not reasonably be explained or justified”, making it a decision “which no reasonable judge could have reached”: Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Bhd & Anor Appeal [2018] 2 MLJ 177; [2018] 1 AMR 517; [2018] 2 CLJ 641 (FC). S/N chcw5zFb2EqZBg0wZsssaQ Page 12 of 16

An Appellate Court is to evaluate whether the Sessions Court’s decision was “reasonably made”: paragraph 77 of Ng Hoo Kui (supra). [42] However, the ‘plainly wrong’ principle is not intended to be used as a catch-all method to replace the Sessions Court’s decision with my own (the Appellate Court’s) decision, on the facts of the case. The Federal Court in Ng Hoo Kui (supra) puts it this way— [76] What is pertinent is that, the ‘plainly wrong’ test is not intended to be used by an appellate court as a mean to substitute its own decision for that of the trial court on the facts. ….. [78] Hence following this court’s ruling in Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra an appellate court should not interfere with the factual findings of a trial judge unless it was satisfied that the decision of the trial judge was ‘plainly wrong’ where in arriving at the decision it could not reasonably be explained or justified and so was one which no reasonable judge could have reached. If the decision did not fall within any of the aforesaid category, it is irrelevant, even if the appellate court thinks that with whatever degree of certainty, it considered that it would have reached a different conclusion from the trial judge. [43] Put differently—even if an Appellate Court finds, on the evidence and the facts of a case, that the Appellate Court would have come to a different decision, the Appellate Court should not by-pass an analysis of S/N chcw5zFb2EqZBg0wZsssaQ Page 13 of 16 the first instance Court’s reasoning when it is deciding on the Appeal. The Appellate Court should still analyse the first instance Court’s reasoning. [44] I must consider the Sessions Court’s appreciation of the evidence and the Sessions Court’s application of the principles of law, in the context of these elaborative principles, to see if the Sessions Court has committed a fundamental error. [45] Applying these elaborative principles to this Appeal, I do not find that the Sessions Court’s appreciation of the facts, particularly the effects of the Shah Alam High Court Orders, leading to the Sessions Court’s decision to strike out the suit—to be ‘plainly wrong’; or fundamentally erroneous; or unreasonably made. [46] And so, I will not interfere with the findings of the Sessions Court. CONCLUSION [47] I affirm the Sessions Court’s decision to strike out the Plaintiff’s suit on these grounds—

As the Scheme Of Arrangement was being carried out over the Defendant, and there was a moratorium on suits brought against the Defendant, the Plaintiff should have, but did not, obtain the leave of Court to continue with the suit against the Defendant. In fact, the Plaintiff did not even apply for leave. S/N chcw5zFb2EqZBg0wZsssaQ Page 14 of 16

The Plaintiff’s suit was premature. The Plaintiff claims the return of the RM112,500.00 Retention Sum, even when the Defects Liability Period has not yet come to an end. The Plaintiff’s obligations to perform rectification work for defects was still ongoing when the Plaintiff filed the suit. [48] It is, accordingly, plain and obvious that the Plaintiff’s suit discloses no reasonable cause of action; it is frivolous and vexatious; and it is an abuse of the process of the Court. I also find it obviously unsustainable. [49] Hence, I dismiss the Plaintiff’s Appeal with costs of RM12,000.00 to be paid by the Plaintiff to the Defendant. Costs are subject to the allocatur. The Sessions Court’s decision is affirmed, and the Plaintiff’s suit is struck out. Dated: 12 January 2023 Signed KENNETH ST JAMES Judicial Commissioner High Court of Penang S/N chcw5zFb2EqZBg0wZsssaQ Page 15 of 16 Counsel/Solicitors For the Plaintiff: KL Lim [Messrs. Lim, Ho, Cheong & Lok] For the Defendant: Tay Hong Jin [Messrs. Tay Hong Jin Law Practice] Legislation referred to:

Companies Act 2016 – s. 366(3)

Rules of Court 2012 - O 14, O18 R19 & O92 R 4 Cases referred to:

Tan Geok Lan v La Kuan @ Lian Kuan [2004] 3 MLJ 465 (FC) at paragraph 15; [2004] 3 AMR 177; [2004] 2 CLJ 301; [2004] 1 MLRA

165.

Raja Zainal Abidin bin Raja Haji Tachik & Ors v British-American Life & General Insurance Bhd [1993] 3 MLJ 16 (SC).

Ng Hoo Kui & Anor v Wendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67; [2020] 8 AMR 227; [2020] 10 CLJ 1 (FC).

Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Bhd & Anor Appeal [2018] 2 MLJ 177; [2018] 1 AMR 517; [2018] 2 CLJ 641 (FC). S/N chcw5zFb2EqZBg0wZsssaQ Page 16 of 16 S/N chcw5zFb2EqZBg0wZsssaQ