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(a) The section 218 statutory notice dated 11.5.2015 issued by the petitioner was not premised on any judgment nor proof;
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Court of Appeal of Malaysia28 Feb 2017C-02(NCC)(A)-1045-06/2016
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“Judge dated 13.5.2015 which had allowed the winding up of the appellant pursuant to a petition filed by the respondent herein (petitioner in the court below) under Sections 218 (e) and 218 (2) of the Companies Act 1965 (CA 1965). [2] Having heard parties and after taking into consideration the Appeal Records, unanimous”
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1 DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN) RAYUAN SIVIL NO: C-02(NCC)(A)-1045-06/2016 ANTARA ANJAKAN REZEKI SDN BHD [CO. NO: 890146-T] ...PERAYU DAN U.I. LEAD SDN BHD [CO. NO: 256617-V] ...RESPONDEN [Dalam Perkara Mengenai Mahkamah Tinggi Malaya di Kuantan Petisyen Penggulungan Syarikat No: 28NCC-38-2015 Dalam Perkara Mengenai Anjakan Rezeki Sdn Bhd (Company No: 890146-T Dan Dalam Perkara Mengenai Seksyen 218(1)(e) dan 218(2) Akta Syarikat 1965 Antara U.I. Lead Sdn Bhd (No. Syarikat: 256617- V) ...Pempetisyen Dan Anjakan Rezeki Sdn Bhd (No. Syarikat: 890146-T) …Responden] ___________________________________________________________________________ 2 CORUM: ALIZATUL KHAIR OSMAN KHAIRUDIN, JCA NALLINI PATHMANATHAN, JCA ZABARIAH MOHD YUSOF, JCA JUDGMENT [1] This is an appeal by the appellant (respondent in the court below) against the decision of the learned High Court Judge dated 13.5.2015 which had allowed the winding up of the appellant pursuant to a petition filed by the respondent herein (petitioner in the court below) under Sections 218 (e) and 218 (2) of the Companies Act 1965 (CA 1965). [2] Having heard parties and after taking into consideration the Appeal Records, unanimously, we allowed the appeal with costs. Herein below are our reasons. [3] Parties shall be referred to, as they were, in the High Court. Background: [4] The petitioner filed a winding up petition against the respondent in the High Court. The claim by the petitioner against the respondent 3 is for a sum of RM154,004.82 as due and owing by the respondent to the petitioner. [5] There was never any judgment obtained by the petitioner against the respondent for the alleged sum due and owing. [6] On 1.10.2015, the learned Judge allowed the winding up petition against the respondent after refusing to admit the affidavit in reply of the respondent dated 23.9.2015 which was considered by the learned Judge to have being filed out of time, in contravention of Rule 30 (1) of the Rules of Winding up of Company 1972 (the 1st winding up proceedings). The respondent appealed to the Court of Appeal on this ruling, which was allowed on 2.2.2016, and the order of winding up against the respondent dated 1.10.2015 was set aside. The Court of Appeal remitted back the petition for a rehearing to the High Court. [7] The learned Judge allowed the 2nd Petition of winding up and ordered winding up of the respondent premised on 3 grounds namely: i) the respondent failed to rebut the statutory presumption of its inability to pay the debt, when it failed to pay after 3 weeks of the 218 notice; and 4 ii) the respondent based its submission on its Reports and Financial Statement of Accounts (pages 48-70 of the CB). However, a perusal of the same disclosed that there is nothing to indicate that the petitioner owes the respondent the amount of RM144,000.00. The respondent’s own Financial Statement of Accounts for the year ending 31.12.2014 shows that the sum of RM154,004.82 under “other payables” as evidencing that this sum is due to the petitioner (page 70 of the CB). There was indeed proof of the said sum of RM154,008.42 as the amount due and owing by the respondent. The learned Judge further found that there has been no denial in any of the affidavits on this fact and therefore there is no dispute on the debt claimed by the petitioner. iii) the issue of whether the respondent company is solvent was never argued at the application for stay proceedings and the High Court had accordingly dismissed the application for stay by the respondent for the winding up. There has never been any appeal by the respondent on this. Therefore, it was the finding of the learned Judge that the respondent company is insolvent. 5 Grounds of Appeal by the Respondent: [8] It was argued that the learned Judge erred in law and in fact in allowing the petition of winding up of the respondent for failing to take into consideration the following:
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(a) The section 218 statutory notice dated 11.5.2015 issued by the petitioner was not premised on any judgment nor proof;
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(b) Vide petition dated 23.7.2015, the petitioner claimed RM154,004.82 against the respondent, which was allegedly the amount due and owing by the respondent. The petitioner alleged that the respondent has knowledge of the said debt and also alleged that the statement of account (which was the respondent’s) showing RM154,002.82 was attached with the section 218 notice. However, there was no such statement of account attached to the said notice and neither was proof of such service established;
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(c) The debt was disputed on substantial grounds and/or that the petitioner was not a creditor of the respondent;
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(d) There is a cross claim by the respondent in the Kuantan Sessions Court in Civil Suit A52NCVC-6-2/2016 against the petitioner; 6
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(e) The respondent is solvent premised on a Company Search by the respondent. Submission by the Petitioner: [9] There is no requirement in law that a creditor must obtain a judgment before serving a statutory demand and whether or not a judgment is obtained, an unpaid creditor is entitled to a winding-up order against a company (refer to Lafarge Concrete (M) Sdn Bhd v Gold Trend Builders Sdn Bhd [2012] 6 MLJ 817 at page 823). Hence this ground in the memorandum of appeal by the respondent must fail. [10] In addition, the alleged cross claim filed by the respondent in Kuantan Sessions Court in Civil Suit A52NCVC-6-2/2016 is no bar to the winding up petition filed by the petitioner, in line with the observations by the Court of Appeal in Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank Bhd [1997] 2 MLJ 756. [11] The petitioner has satisfied the requirements under Section 218 (2)
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(a) of the CA 1965 which provides that a demand must be served on the company by leaving the said document at its registered address requiring the company to pay the sum due. As the requirement of the sections have been complied with, and the 7 company has neglected to pay the sum to the creditor after 3 weeks, the presumption of inability to pay its debt therefore arises. It is therefore incumbent upon the respondent to rebut this statutory presumption. [12] The respondent’s own Reports and Financial Statement for the year ending 31.12.2014 shows that the sum of RM154,004.82 under “other payables” is a sum that is due to the petitioner (page 70 of the CB). This serves as proof that the said sum of RM154,008.42 is due and payable to the petitioner. Hence there is no dispute on the debt claimed by the petitioner. As far as the cross claim is concerned, the Financial Statements of Accounts of the respondent does not disclose any debt or liability that is due from the petitioner. Therefore there is no basis for the cross claim against the petitioner as alleged by the respondent. [13] The issue on the solvency of the respondent had been argued in the stay application proceedings and the court had dismissed the application by the respondent and there has not been any appeal on it. The petitioner submits that the learned Judge correctly concluded that the issues and the evidence in relation to the insolvency of the respondent were previously raised and decided against the respondent and hence the doctrine of res judicata applies in the circumstances. 8 OUR FINDINGS: [14] Our findings in allowing the appeal herein is primarily based on: i) the debt being substantially disputed; and ii) the petitioner failing to prove that it is a creditor. The debt is being substantially disputed: [15] It was argued by the petitioner that the CA 1965 does not prohibit a creditor to file a winding up petition against a company notwithstanding there is no judgment debt granted by the court. Section 218(1)(a) to (n) of the CA 1965 sets out the grounds wherein Courts may order that a company be wound up. It is undisputed that a creditor need not obtain a judgment to file a winding up petition, provided there are no bona fide disputes on the debt claimed (disputed on substantial grounds) (See BMC Construction Sdn Bhd v Dataran Rentas Sdn Bhd [2001] 1 MLJ 356). If there is a bona fide dispute of debt on substantial ground, the Courts will not allow a petition for winding up, as the company cannot be said to have refused/neglected to pay the debts (See Securicor (M) Sdn Bhd v Universal Cars Sdn Bhd [1985]1 MLJ 84). 9 What amounts to a bona fide dispute has been explained in BMC Construction Sdn Bhd v Dataran Rentas Sdn bhd (supra). Although it is not wrong to say that a dispute arises “whenever there are opposing assertions as there is no agreement on the matters diametrically asserted”, however, it cannot be said that a bona fide dispute arises automatically by mere lip service of a dispute of the debt nor a mere refusal to pay. The dispute must be premised on substantial grounds (Morgan Guaranty Trust Co of New York v Lian Seng Properties Sdn Bhd [1991] 1 CLJ 260) and the respondent must advance a prima facie case which is sufficient to satisfy the court that there are contestable issues that requires adjudication in an action or in some other proceeding (See Re Great Britain Mutual Life Assurance Society [1880] 16 Ch D 246). The dispute must be based on substantial not frivolous grounds. [16] The respondent vide its notice of demand dated 22.6.2015 against the petitioner claimed for the amount of RM144,000.00 being arrears in rental for space for machineries belonging to the petitioner at the rate of RM12,000.00 a month for a period of 12 months (January-December 2014). This arrangement for rental was allegedly made orally, which was disputed by the 10 petitioner. The respondent had filed a civil suit A52NCVC-6- 2/2016 in the Kuantan Sessions Court for such claim. Hence, prima facie, the respondent has a claim against the petitioner which can be contra against the claim by the petitioner. There is thus, a basis for the cross claim by the respondent. [17] The learned Judge in her judgment said that this cross claim is an afterthought by the respondent (Refer to paragraph 23 of the judgment). Her Ladyship’s basis for saying so is because the civil suit was only filed 2 months after the Court of Appeal had set aside the winding up order in the 1st winding up proceedings dated 23.9.2015. Her Ladyship was of the view that if it is true that the respondent had a bona fide cross claim against the petitioner, she believed that the respondent would have filed the civil suit immediately after it received the 218 notice. We disagreed with this finding as the contemporaneous documents vis-a-vis the letter of demand dated 22.6.2015 for the arrears of rental was issued before the filing of the petition. In any event, the issues pertaining to the claim of arrears of rental as a contra to the claim by the petitioner should be ventilated at trial in the civil suit. It does not warrant the winding up court to undertake a minute examination of the factual basis of the dispute via affidavit evidence. 11 [18] After the statement of accounts in P-1 (pages 39-42 of the CB) was issued by the petitioner, the respondent issued a statement of accounts of the respondent which can be found in CKF-4 (page 79 of CB). From P-1, there are entries that show debit and credit of monies in the accounts of the respondent. The respondent in its affidavit claims that from these entries in P-1, it indicates that there has been the practice of contra payments in the course of business dealings between the petitioner and the respondent. [19] A perusal of the statement of accounts of the respondent’s in CKF- 4, depicts the sales and purchase of machineries by the petitioner. These machineries were placed on sites belonging to the respondent in respect of which rentals are being charged by the respondent. This is the cross claim which the respondent is claiming to contra the amount claimed by the petitioner in the amount of RM144,000.00 as stated in CKF-4. Therefore there is basis for the averment of the respondent that there are some monies owing by the petitioner, which is the subject of the civil suit of A52NCVC-6- 2/2016 in the Sessions Court. Therefore we found that the learned Judge was plainly wrong when she found that the cross claim was an after thought by merely referring to the date of filing of the civil suit. [20] To our mind, this cross claim provides a legitimate challenge to the debt claimed. The claim in the civil suit of A52NCVC-6-2/2016 12 translates into a bona fide dispute on the debt. Thus, since a bona fide dispute on the debt has been raised, it would be most prudent for the petitioner to adjudicate this dispute in the civil suit. (See Re Nima Travel Sdn Bhd. Sun Soon Heng Coach Works Sdn Bhd v Nima Travel Sdn Bhd [1986] 2 MLJ 374). [21] A winding up petition is not an appropriate means of collecting a disputed debt. The courts have held that a winding up petition must not be used as a means to bring improper pressure on a company to pay up disputed debt. The proper course is to have the matter adjudicated in a proceeding for such debt recovery by filing the necessary writ/action in court. [22] In the present appeal, there are substantial grounds to show that the amount claimed are being disputed. Therefore, the learned Judge erred when she found that there was no dispute on the debt claimed (paragraph 20 of her grounds). Statement of Account not attached to the Notice dated 11.5.2015: [23] Vide petition dated 23.7.2015, the petitioner claimed RM154,004.82 against the respondent, which was allegedly the amount due and owing by the respondent. The Notice dated 11.5.2015 which was exhibited as P2 in the affidavit verifying the petition states that: 13 “TAKE NOTICE that you are now required to pay U.I. Lead Sdn Bhd of NO 23-3, Jalan Puteri 1/6, Bandar Puteri, 47100 Puchong Selangor the sum of RM 152,004.32 being the outstanding payment due and owing to the said U.I. Lead Sdn Bhd, the particulars of which are within your knowledge. A copy of your statement setting out the said outstanding sum of RM 154, 004.82 is attached for your easy reference.”(emphasis ours) From P2, it appears that the respondent would have knowledge of the said debt as the respondent’s statement of account showing RM154,002.82 was allegedly attached with the section 218 notice. [24] However, the respondent contended that the purported statement of account was never annexed to the petition, nor was it served on the respondent. This was expressly averred to, by the respondent in its Affidavit in Reply dated 23.9.2015 at paragraphs 4 and 5 which states the following: “4. Reference is made to paragraph 5 of the Petition dated 23.7.2015 (herein referred as “Petition”). I vehemently state that the Respondent is not indebted to the Petitioner the outstanding amount as referred.
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5. With reference to paragraph 6 of the Petition I state that the purported statement of the Respondent that was said to be attached in the S. 218 Statutory Notice was never attached nor served to us. The said Statement was not even attached in the 218 Notice that is annexed in the Petition.” 14 It is incumbent on the petitioner to show proof that the statement of account was indeed attached to the petition and that there was such service. Any statement of account or invoice, if any, ought to have been served on the respondent as proof of the existence of any debt or claim before the issuance of the section 218 notice. [25] A perusal of the statutory declaration by the process server of the petitioner, Mohd Nor Aliff bin Hamsil dated 27.5.2015 (exhibit P-3) confirmed that there is no attachment as alleged in the statement of account as to the amount owed by the respondent. This is evident from paragraph 3 of the Statutory Declaration which states the following: “3. Saya telah menyerahkan ke atas syarikat tersebut dengan Notis tersebut bersama dengan surat iringan bertarikh 11 Mei 2015 oleh Tetuan SL Goon & Partners secara serahan tangan dengan menghantar ke alamatnya di A-135, Tingkat 1, Wisma Sri Prima, Jalan Haji Abdul Aziz, 25000 Kuantan, Pahang. [26] Paragraph 3 of the said statutory declaration only refers to a covering letter (“surat iringan”) by the solicitors and 218 notice which was served on the respondent. There is no mention of any attached documents as alleged by the petitioner. A further perusal of the “Lampiran S-1” of the statutory declaration show that there is no attachment or any statement of account although the notice mentioned the statement of account as being attached. Clearly 15 there is doubt as to whether the statement of accounts was indeed attached and served on the respondent. [27] In a winding up petition, it is pertinent that, the actual claim/proof of debt by the petitioner be made out as the section 218 notice per se is insufficient as evidence of a debt. The notice under section 218 is merely a notice of demand for the purpose of invoking the presumption that the respondent is unable to pay its debts. It is still incumbent on the petitioner to prove that it was a creditor and that the sum stated in the notice was due and owing. This has been set out in the case of Metal Reclamation (Industries) Sdn Bhd v JRC Tenaga Sdn Bhd [2000] 6 CLJ 290 which held that: “[1] A statutory notice under s. 218 (2) (a) of the Act cannot be said to be prima facie evidence of the debt. It is nothing more than a letter of demand sent to invoke the presumption of inability to pay debts and its function is to warn the debtor of an impending petition. [2] A petitioner will still have to prove that it is a “creditor” and that the sum so stated in the notice is owing and due. 3] Once a debt, not being a judgment debt, is disputed, a creditor has no right to petition and this is so even if the company is insolvent. [4] A winding up petition is not a legitimate means of seeking to enforce a payment of debt which has not been clearly determined. Otherwise, the courts which hear winding up petitions would first have to establish the debt and this will put the courts to unnecessary strain if a petition to wind up is 16 based not upon a judgment debt but purely on a s. 218(2) (a) notice.” [28] This court in Syarikat Mohd Noor Yusof Sdn Bhd v Polibna Engineering Enterprise Sdn Bhd [2005] 2 CLJ 676 has set out that in the petition of winding up of a company the petitioner must prove that: i) the petitioner is a creditor; and ii) the amount claimed is a debt due and owing. We found that, in the present case, the petitioner failed in these respects. The statement of accounts in exhibit P-2 of the Affidavit of the petitioner no: 1 dated 19.10.2015 was not proven to have been served. In addition, the statement of accounts are internal documents of the petitioner. There is also no explanation as to the transaction of credit and debit of RM500,000.00 in the statement of accounts, neither are there supporting documents of invoices to support the statement of accounts nor is there any explanation on the “balance brought forward” in the amount of RM450,000.00 when the credit and debit as at 31.12.2012 shows a zero amount. Logically this would mean that there is no debt due and owing. These are crucial documents as they are the documents of the 17 petitioner, which was intended to show that the petitioner was a creditor. Whether the Respondent is insolvent: [29] The learned Judge in her grounds states that: [26] Responden …menyatakan melalui “Summary of Financial Information” setakat 31/12/2013 mereka mempunyai aset berjumlah RM520,308.00 dengan nilai asset berjumlah RM1,340,466.00. Namun Penyata Kewangan setakat 31/12/2014 pula menunjukkan baki nilai aset yang dimiliki Responden adalah RM67,923.00 sahaja. Jumlah RM67,923.00 tersebut tidak mampu untuk membayar hutang Pempetisyen. Oleh yang demikian dakwaan Responden bahawa Responden mempunyai nilai aset dan hasil keuntungan seperti yang diikrarkan di dalam perenggan 17-19 Afidavit Tambahan Responden adalah tidak benar dan bertentangan.” A perusal of the “Summary of Financial Information” at pages 57 and 58 of the CB (P-2) reveal that for 2013, the respondent has current assets worth at RM520,308.00 and revenue of RM1,340,466.00. As at 2014, the current assets is valued at RM484,090.00 and revenue at RM811,532.00. Therefore, the learned Judge erred when she found that “Baki nilai asset yang dimiliki oleh responden adalah RM67,923.00 sahaja” which the learned Judge found to be insufficient to meet the amount claimed as debt by the petitioner. 18 [30] To support its contention that the respondent is insolvent, the Petitioner had annexed in its affidavit a “Lapuran Pegawai Penerima dan Pelikuidasi Syarikat “ dated 20.11.2015 (Report) which states cash in hand as RM1,000.00 and cash in the Bank as RM2,500.00 (page 97 of CB). However, this Report is incomplete and failed to take into account the list of assets as listed in the affidavit of the respondent in exhibit CKF-2 which totaled up to RM994,000.00 (Page 20-30 of CB). [31] Thus, from the documents, the learned Judge erred when she found that the respondent company is insolvent. In addition, from the Reports and Financial Statements of the respondent as at 31.12.2014 in P-2 (pages 145-168 of the CB), the respondent company is not dormant but is still actively operating business, apart from diligently preparing its updated audit report to SSM. [32] Further, the learned Judge states in her grounds that, in the stay application proceedings, the respondent failed to raise the issue of solvency then. The stay application has been dismissed and there has not been any appeal on the decision. Hence, the petitioner submits that the issue on solvency is res judicata. We found that this is wholly untenable, because, firstly, the hearing of the stay application is premised upon different principles and consideration altogether. The concern in that application was whether there were special circumstances to warrant a stay being granted. Secondly, 19 the matter before us is an appeal on the winding up of the respondent, so surely the issue of solvency is a live issue for the purposes of winding up. The issue of res judicata has no application at all here. [33] Thus, the learned Judge erred when she found that the respondent’s company is insolvent. In any event even if the respondent is insolvent, as the debt had been disputed on grounds which we found to be substantial, the petitioner has no right to petition for a winding up order (Refer to Metal Reclamation (Industries) Sdn Bhd v JRC Tenaga Sdn Bhd) (supra). [34] It is undisputed that the debt pursued by the petitioner in the section 218 notice, is not a judgment debt. The debt has not been determined. Lafarge Concrete (M) Sdn Bhd v Gold Trend Builders Sdn Bhd (supra) which was cited by the petitioner to justify that winding up is not prohibited despite the absence of a judgment debt, was a case where there was no genuine dispute on the debt claimed by the petitioner. There, the respondent confirmed that the debt was true and due. The respondent in its affidavit admitted the total debt claimed and the court held that there was no bona fide dispute as to that debt. In our case there are bona fide genuine disputes on the debt. Similarly, the reliance by the petitioner on the case of Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank Bhd (supra) to assert 20 the proposition that the existence of a cross claim is no bar to a petition of winding up is misconceived, as the winding up order there, was premised on a judgment after summary proceedings prior to the petition being filed. Hence there was a judgment obtained which is in direct contrast to the appeal before us. Conclusion: [35] Hence, premised on the above, the petitioner has not proven nor shown that there was a debt due and owing by the respondent, and thus the petitioner is not a creditor as envisaged within Section 218 (2) of the CA 1965 which entitled it to petition for the winding up of the respondent. Premised on the above, it is clear that the Judge was plainly wrong when she made the order for winding up of the respondent. [36] We allow the appeal with costs and set aside the order of the High Court. Signed by: Zabariah Mohd Yusof Judge of the Court of Appeal, Putrajaya. Date: 18.10.2018 21 COUNSEL: Wan Rohimi bin Wan Daud & Mohd Faizi bin Che Abu for the Appellant (Messrs. Tengku Amalin’ A-ishah Putri, Faizi & Wan Rohimi) L.L. Woon for the Respondent (Messrs. S.L. Goon & Associates)
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