Augustine A/L T.K. James (Liquidator for Began Construction Sdn Bhd) v Liew Chong Min (W-02(A)-1297-07/2022)

DAN LIEW CHONG MIN (No. K/P: 690717-08-5517)

NG TUCK WENG (No. K/P: 600213-08-5693)

TAN KINV TAT … RESPONDEN- (Dahulunya Beramal Sebagai RESPONDEN Tetuan Kinv Law Office) (Dalam Mahkamah Tinggi Di Kuala Lumpur (Bahagian Dagang) Kes Pasca Penggulungan Guaman No.: WA-28PW-218-08/2021 (Nombor kes Asal Petisyen Penggulungan : WA-28NCC-660-10/2017) Antara Lim Wee Ngeh Painting Construction Sdn Bhd (No Syarikat: 672847-A) …

Dan Liew Chong Min (No K/P: 690717-08-5517)

Ng Tuck Weng (No K/P: 600213-08-5693)

Tan Kinv Tat … Responden- (Dahulunya Beramal Sebagai Responden Tetuan Kinv Law Office) Dan Augustine A/L T.K James (Pelikuidasi Bagi Began Construction Sdn Bhd No Syarikat: 199701009535 (425031-W) … Pemohon Didengar Bersama dengan DALAM MAHKAMAH RAYUAN MALAYSIA (BIDANGKUASA RAYUAN) RAYUAN SIVIL NO. W-02(A)-1297-07/2022 ANTARA AUGUSTINE A/L T.K. JAMES (PELIKUIDASI BAGI BEGAN CONSTRUCTION SDN BHD NO SYARIKAT: 199701009535 (425031-W) …

DAN LIEW CHONG MIN (No. K/P: 690717-08-5517) … RESPONDEN (Dalam Mahkamah Tinggi Di Kuala Lumpur (Bahagian Dagang) Kes Pasca Penggulungan Guaman No.: WA-28PW-352-12/2021 (Nombor kes Asal Petisyen Penggulungan : WA-28NCC-660-10/2017) Antara Lim Wee Ngeh Painting Construction Sdn Bhd (No Syarikat: 672847-A) … Pempetisyen Dan Began Construction Sdn Bhd (No Syarikat: 199701009535(425031-W) … Responden Dan Liew Chong Min (No K/P: 690717-08-5517) … Pemohon Dan Augustine A/L T.K James (Pelikuidasi Bagi Began Construction Sdn Bhd No Syarikat: 199701009535 (425031-W) … Responden) CORAM AZIZAH BINTI HAJI NAWAWI, JCA SEE MEE CHUN, JCA LIM CHONG FONG, JCA JUDGMENT OF THE COURT Introduction [1] There are 2 appeals, namely appeal 1296 and appeal 1297 being heard together. Parties have agreed that appeal 1296 be heard first and that its decision binds appeal 1297. [2] All references to enclosures are to appeal 1296 except where otherwise stated. Parties [3] The Appellant who is the Plaintiff in the High Court (HC) is the Liquidator of a wound-up company, Began Construction Sdn Bhd (the Company). The Appellant was appointed pursuant to a court order dated 11-11-2019 to replace the Official Receiver (OR). [4] The 1st and 2nd Respondents/Defendants were the directors and shareholders of the Company when the winding-up petition was presented. The 2nd Respondent was absent in the HC proceedings. The 3rd Respondent/Defendant is an advocate and solicitor who was practising under the name and style of The Law Chambers of Tan Kinv Tat (TKT). Background facts [5] The Appellant had filed a notice of motion (encl. 1) in the HC pursuant to sections 472 and 541 of the Companies Act 2016 (CA 2016) that the list of dispositions as set out in paragraph 1(a) to (o), paid to the creditors and to the 3rd Respondent, are void. The payments are as follows: a) a sum of RM100,036.00 of the Company's money to The Law Chambers of Tan Kinv Tat, Advocates & Solicitors, the Third Respondent on the 13.11.2017. b) a sum of RM5,000.00 of the Company's money to the The Law Chambers of Tan Kinv Tat, Advocates & Solicitors, the Third Respondent on the 24.11.2017. c) a sum of RM440,000.00 of the Company's money to SJEE Engineering Sdn Bhd on 31.10.2017. d) a sum of RM20,000 of the Company's money to Optad Marketing Sdn Bhd on the 31.10.2017. e) a sum of RM120,000.00 of the Company's money to QST Solutions Sdn Bhd on the 31.10.2017. f) a sum of RM90,000.00 of the Company's money to Perkasa Solaris Sdn Bhd on the 13.11.2017. g) a sum of RM68,419.30 of the Company's money to Soon Hin Hardware Sdn Bhd on the 13.11.2017. h) a sum of RM66,203.98 of the Company's money to Mega Tyre & Car Services on the 13.11.2017. i) a sum of RM50,000.00 of the Company's money to Ng Sin Yee on the 24.11.2017. j) a sum of RM67,331.10 of the Company's money to Messrs. Ferida, Hassan, Low & Ng on the 24.11.2017. k) a sum of RM100,000.00 of the Company's money to Ng Chee Meng on the 24.11.2017. l) a sum of RM40,000.00 of the Company's money to Yik Seong Trading Sdn Bhd on the 24.11.2017. m) a sum of RM170,000.00 of the Company's money to Public Bank Berhad on the 24.11.2017. n) a sum of RM49,800.00 of the Company's money to Ng Chee Siong on the 24.11.2017. o) a sum of RM250,000.00 of the Company's money to Perkasa Solaris Sdn Bhd on the 13.11.2017. [6] In paragraph 2, an order was sought that the Respondents be jointly and severally liable to pay the Company and/or the Liquidator the above sums of RM1,531,754.38 as listed in paragraph 1(c) to (o). Paragraph 3 next sought an order that the 3rd Respondent returns and/or pays the Company and/or the Liquidator the sum of RM105,036.00 as listed in paragraph 1(a) and (b). [7] The principal grounds advanced were that all the above dispositions as listed in paragraph 1(a) to (o) of encl. 1 are void as they were made after the presentation of the winding-up petition and/or also amounts to undue preference over the Company’s creditors. [8]

That motion was allowed by the HC, also on 13-6-2022. Decision in the HC [14] The grounds of judgment (GOJ) of the HC Judge (HCJ) are to be found in encl. 56/14-50. The GOJ dealt with both the Liquidator’s motion to void the dispositions and the 1st Respondent as the Plaintiff’s motion for validation. That GOJ also dealt with dispositions made to another legal firm, referred to by its acronym of W&T. [15] In paragraph 27 of the GOJ, the HCJ stated that it is trite that any disposition of the Company’s property made after the commencement of winding-up shall be void and the Company cannot dispose of its property in whatever form and by whatever means. This was after the relevant sections 472(1) and 541 CA 2016 and the authority of Azabar Holdings Sdn Bhd (in Liquidation) v Kumarappan @ Thannirmalai a/ KM Palaniappan [2021] 3 MLJ 448 had been considered. [16] As against the 2nd Respondent, it was stated that as he had not replied to the assertions made by the Appellant, he would be deemed to have admitted to such assertions. However, the application of the Ng Hee Thoong principle would be subject to the Court’s decision on the 1st Respondent’s liability. Refer to paragraphs 28 and 29 of GOJ. [17] As against the 1st Respondent, the HCJ found he had no knowledge of the winding-up petition. It was held that the 1st Respondent only knew of the winding-up order after he received the notice to attend the first meeting of the creditors and contributories on 19-12-2017. The 1st Respondent also had no involvement in the winding-up petition as the winding-up order was entered in the absence of the Company. [18] The HCJ then stated as follows: “38. As this Court had made a finding that Liew as well as W&T had no knowledge of the Petition, and as the monies were due and owing at the material times to the said creditors of the Company; it is only to be expected that the dispositions were in the course of the Company's ordinary trade and done in good faith ie, bona fide.

From this I hold that the said dispositions were made to have benefitted the Company's general body of creditors. Authority for this can be found in the case of BSN Commercial Bank (M) Berhad v. River View Properties and anor action [1996] 1 LNS 63; [1996] 4 MLRH 485 which has held that: "[17] Dispositions are said to be void under s. 223 of the Companies Act 1965 'unless the Court otherwise orders'. [18] Thus, each case must be approached and dealt with on its own facts and circumstances. No two cases are the same. It revolves on the good faith and honesty of the personalities, and it is here that the judge's common sense opinion of what is just and fair prevails: Re Steane's (Bournemouth) Ltd [1950] 1 All ER 21 at p 25; Re J Leslie Engineers Co Ltd (In liquidation) [1976] 1 WLR 292 at p 304 laid down the now classic principle that in deciding the existence of good faith and honest intention, the absence of knowledge by the transferee of the winding-up petition was a very powerful factor in favour of validation. Incidentally, it is pertinent to note that in Re Gray's Inn Construction Co Ltd, it was held that the court should not validate a transaction if its effect was to pay off a creditor in full at the expense of the general creditors. Mr Wong Kim Fatt, at the Bar, informed this court that River View had no creditors, and consequently, he submitted that this court should validate the release of the fixed deposits to the current account of River View. It is my judgment that the court will always have regard as to whether the disposition was made bona fide in the course of the company's current trade, and if not validated, the trade of the company would be paralysed without any advantage as envisaged in Re Clifton Place Garage Ltd [1970] Ch 477 (CA) (emphasis mine)."

… I also find that there is no evidence before this Court which proves that the said payments made were not based on the good and honest intention of either Liew and/or W & T and as such I do hold that such payments are bona fide.” [19] The HCJ had also referred to the Federal Court case of Wong Wee Kheong & Anor v Daya Bersama Shd Bhd & Other Appeals [2013] 3 CLJ 969 on the principles of validation. [20] The decision of the HCJ meant that the dispositions, including that to the 3rd Respondent, were not rendered void. Submissions of the Appellant [21] The Appellant had submitted that the 1st Respondent had knowledge of the presentation of the winding-up petition based on its fresh evidence showing the letter of service of the winding-up petition, and the sealed judgment, both to the registered and business address. A director is the alter ego of a company and section 213(1) CA 2016 spells out the duties and responsibilities of directors. [22] The 3rd Respondent too had knowledge and reference was made to the case of Zulpadli & Edham v Inai Offshore & Marine Engineering Sdn Bhd (In Liquidation) [2011] 4 MLJ 161. [23] The dispositions were not beneficial to the general body of creditors or bona fide where they were to the 1st Respondent’s siblings and own companies and had nothing to do with the Company’s current trade. [24] Contrary to the HCJ’s finding that the Appellant had not identified any creditors that would have been prejudiced, the Appellant submitted it had provided a list of creditors who had submitted their proof of debt (POD) with the OR. Submissions of the 1st Respondent [25] The 1st Respondent submitted that the HCJ had in paragraph 34.1 of the GOJ held that the creditors were indeed authentic creditors of the Company. The 1st Respondent had no knowledge of the winding-up petition. The letters of service cannot be regarded as the 1st Respondent having actual or personal knowledge and such service is only a formal requirement to move the winding-up proceedings along. As the 1st Respondent had no knowledge of the winding-up petition, the dispositions are deemed to have benefitted the Company’s general body of creditors. With regard to the dispositions being made to persons connected to the 1st Respondent, this does not demonstrate fraudulent trading. Further it is settled law that a company is separate from its directors and shareholders. There was also no evidence of any creditor being prejudiced. Submissions of the 3rd Respondent [26] For the 3rd Respondent, it was submitted that neither the 3rd Respondent nor TKT was involved in the winding-up petition or the subsequent proceedings; the instruction letters were issued and the dispositions made before the Company was wound-up; and there could be no cause of action under section 541 CA 2016. Our decision [27] In this appeal, the Appellant is not proceeding against the disposition of RM20,000.00 made to Optad Marketing Sdn Bhd (Optad) and RM120,000.00 made to QST Solutions Sdn Bhd (QST). These are in respect of paragraph 1(d) and (e) of encl. 1. [28] This leaves a balance sum of RM1,496,730.38 of which RM1,391,754.38 was made to various third parties and RM105,036.00 was made to the 3rd Respondent. The law [29] As the Appellant’s motion was premised on sections 471 and 541 of CA 2016, we set out the relevant provisions as follows: “Avoidance of dispositions of property or certain attachment, etc.

(1) Any disposition of the property of the company, other than an exempt disposition, including any transfer of shares or alteration in the status of the members of the company made after the presentation of the winding up petition shall, unless the Court otherwise orders, be void. … Power of Court to assess damages against delinquent officers, etc.

(1) If in the course of winding up it appears that-

any person who has taken part in the formation or promotion of the company; or

any past or present liquidator or officer, has misapplied or retained or become liable or accountable for any money or property of the company or been guilty of any misfeasance or breach of trust or duty in relation to the company, the Court may, on the application of the liquidator or of any creditor or contributory examine into the conduct of that person, liquidator or officer and compel him to repay or restore the money or property or any part of the money with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust or duty as the Court thinks just.” [30] It is indeed a trite principle of law that the disposition of the Company’s property after the presentation of the winding-up petition on 5- 10-2017 shall, unless the Court otherwise orders, be void. This is evident from a reading of section 471(1) CA 2016 itself. [31] We will only need to refer to two high authorities to drive home this principle. The 1st is the Supreme Court case of Lian Keow (In Liquidation) & Anor v Overseas Credit Finance (M) Sdn Bhd & Ors [1988] 2 MLJ 449 where this was stated at page 456: “Before considering these rival submissions, I like to state that the corresponding section in the English Companies Act 1948 is section 227. In re Wiltshire Iron Company (1868) 3 Ch App 443, Lord Cairns L.J., speaking of the general purpose of section 153 (the forerunner of section 227) of the English Companies Act 1862, said at p. 446: The 153rd section no doubt provides that all dispositions of the property and effects of the company made between the commencement of the winding up (that is the presentation of the petition) and the order for winding up shall, unless the court otherwise orders, be void. This is a wholesome and necessary provision to prevent, during the period which must elapse before a petition can be heard, the improper alienation and dissipation of the property of a company in extremis. …” [32] This Court in Azabar Holdings, which was also referred to by the HC stated as follows at page 462: “[37] As for the effect and consequences of a contravention of s 223 of the CA 1695, we think that it is highly relevant to refer to In re AI Levy (Holdings) Ltd [1964] Ch 19 where Buckley J (an obvious authority in company law jurisprudence) examined the equivalent section under English company law and said: It appears to me that the object of the section is to protect the interests of the creditors from the possibly unfortunate results which would ensue from the presentation of a petition, and to protect their interests as much during the period while the petition was pending as after an order has been made on it. What the section provides in its present terms is that any disposition of the property of the company made after the commencement of the winding up shall be void in the winding up of the company unless the court otherwise orders; that is to say, if and when the company comes to be put into liquidation the transaction is to be as if it had never taken place. (Emphasis added.)” [33] However, this does not end the matter as it has also been said that the general rule in what used to be section 223 of Companies Act 1965 (CA 1965), which is now section 471 CA 2016 does not rule out bona fide transactions. That much is clear from the Federal Court case of Wong Wee Kheong & Anor v Daya Bersama Shd Bhd & Other Appeals [2013] 3 CLJ 969 at pages 981-982 as follows: “[12] … It is true that ordinarily since the respondent company had been wound up on 24 August 2000, a disposition of the company's property after the commencement of the winding up, which was on 31 May 2000 (filing of the petition) would be void. However based on the peculiar set of facts of the case, it is our considered view that the proviso in s. 223 of the Act is still operative in relation to the transactions which took place and the court has the power and jurisdiction to declare the transactions as valid. [13] It is to be noted that s. 223 of the Act makes no mention as to time. It is our view validation can be made by the court at any time. We are in agreement with the submission of learned counsel for the appellants that to insist that the purchasers must have applied for a validation after the company was wound up, there must be knowledge. Here the purchasers had no knowledge at all of the winding up order at the material time. It is also noted that the Act does not prescribe as to how the discretion under s. 223 of the Act is to be exercised. However there are case laws that have distilled the principles involved in validating transactions after the commencement of winding up, and even after a winding order has been granted based on two broad considerations:

if the transaction(s) are beneficial to the general body of creditors; or

if it was just and fair to allow the transaction(s) with particular regard to the good and honest intention of the persons concerned. [14] The general rule in s. 223 of the Act is that it does not shut out bona fide transactions. In Lian Keow Sdn Bhd (In Liquidation) & Anor v. Overseas Credit Finance (M) Sdn Bhd & Ors [1988] 1 LNS 44; [1988] 2 MLJ 449, Seah, SCJ made reference to a passage by Vaisey J in Re Steane's (Bournemouth) Ltd [1950] 1 All ER 21 which states: that each case must be dealt with on its own facts and particular circumstances (special regard being had to the question of the good faith and honest intention of the persons concerned), and that the court is free to act according to the judge's opinion of what would be just and fair in each case. The discretion is an unfettered one”. (Emphasis added) [34] From the above, bona fide transactions are those transactions which the Court finds to fall within either of the broad considerations laid down. [35] It is to be noted that in Wong Wee Kheong, there was an absence of knowledge of the winding-up petition. As against the 1st Respondent [36] As alluded earlier, the HC found that the 1st Respondent had no knowledge of the winding-up petition and that the 1st Respondent only knew of the winding-up order after he received the notice to attend the first meeting of the creditors and contributories on 19-12-2017. It was then said it is only to be expected that the dispositions were in the course of the Company’s ordinary trade and done in good faith i.e. bona fide and the dispositions had benefitted the Company’s general body of creditors. i. Knowledge [37] On the issue of knowledge, the Appellant had on 11-1-2023 obtained an order from this Court to admit fresh evidence (encl.41/1-3) as per the letter of service dated 10-10-2017 of the winding-up petition and the letter of service dated 13-12-2017 of the sealed winding-up order. These letters of service can be found in encl. 39/4-9. A perusal of the letters would show they had been served on the registered address at Jalan Kuchai Lama and the business address of the Company. Refer to exhibit “AJ-6” to the affidavit in support of the fresh evidence application, to show the SSM search (encl. 9/95). [38] We find that the service of the winding-up petition was in accordance with Rule 25(1) Companies (Winding-Up) Rules 1972 (1972 Rules) where such petition shall be served at the registered office of the Company. The aforesaid rule provides as follows: “25. Service of petition

Every petition shall, unless presented by the company, be served upon the company at the registered office of the company, and if there is no registered office, then at the principal or last known principal place of business of the company, if can be found, by leaving a copy with any member, officer, or servant of the company there, or in case no such member, officer, or servant can be found there, then by leaving a copy at the registered office or principal place of business, …” [39] Hence, it follows that the 1st Respondent, being the director of the Company would have knowledge of the winding-petition. As was said in Lembaga Kumpulan Wang Simpanan Pekerja v Adorna RMIT Sdn Bhd & Ors [2003] 4 MLJ 729 at page 730: “… Directors are the alter ego of a company. It is therefore not appropriate for a director to escape culpability by pleading that he is a sleeping partner or director, or a silent director or a non-active director.” [40] In Ravichanthiran a/l Ganesan v Percetakan Wawasan Maju Sdn Bhd & Ors [2008] 8 MLJ 450 it was said at page 457: “[10] Even, assuming that the plaintiff is a non-executive director, nevertheless he is still a director in the eyes of the law and his roles and duties are governed by the CA in particular, s 132. Furthermore a non-executive director is entrusted to look after the affairs of the company and to keep a close watch on the company's managers and other directors in order to safeguard the investment of shareholders. …” … [12] It is trite law that the affairs of the company, as a separate legal entity, are managed by the directors of the company. …” (Emphasis added) [41] In essence, the Company acts through its director and the affairs of the Company has to by necessity be managed by the directors. It does not lie on the 1st Respondent to escape liability by saying, as he did, that he was the muscles behind the Company, managing projects and work sites with the 2nd Respondent being the brains, managing the affairs of the Company. When the winding-up petition was served at the registered office of the Company, that sets the winding up proceedings on course. The 1st Respondent too cannot evade liability by saying that such service does not equate to personal knowledge as that is not what the law in the form of Rule 25(1) 1972 Rules says. The law only requires service on the registered address of the Company. [42] In this regard, section 213(1) CA 2016 spells out in no uncertain terms the duties and responsibilities of company directors. It provides as follows: “Duties and responsibilities of directors

(1) A director of a company shall at all times exercise his powers in accordance with this Act, for a proper purpose and in good faith in the best interest of the company.” [43] We therefore find that the 1st Respondent had knowledge of the winding-up petition. [44] The HCJ had in paragraph 38 stated that as the 1st Respondent had no knowledge of the winding-up petition it is only to be expected that the dispositions were in the course of the Company’s ordinary trade and in good faith. This part of the finding cannot possibly stand where we have found that indeed the 1st Respondent had such knowledge. [45] We thus find the dispositions made after the presentation of the winding-up petition are void. We now consider whether the transactions are bona fide as per the principles identified in Wong Wee Kheong. ii. Principles identified in Wong Wee Kheong [46] To recap, the principles identified in Wong Wee Kheong at page 982 were:

if the transaction(s) are beneficial to the general body of creditors; or

if it was just and fair to allow the transaction(s) with particular regard to the good and honest intention of the persons concerned. iii. Beneficial to the general body of creditors [47] We deal with the dispositions to the 3rd party creditors other than to the 3rd Respondent. Apart from the dispositions listed in paragraph 1(g) of encl. 1 to Soon Hin Hardware Sdn Bhd, paragraph 1(j) to Messrs Ferida, Hassan, Low & Ng and paragraph 1(m) to Public Bank Berhad, we find that the rest of the dispositions were in the form of repayment of loans to companies connected to the 1st Respondent or to a sibling, and without documents evidencing such loans. [48] The averments in the Appellant’s affidavit in reply show the following: a. Liew Yann Min, a director and shareholder of SJEE Engineering Sdn Bhd is the elder brother of the 1st Respondent; b. The shareholders and directors of Perkasa Solaris Sdn Bhd are the 1st and 2nd Respondents; c. Liew Yee Min, the proprietor of Mega Tyres and Car Services, is the 1st Respondent’s sibling; and d. There are no documents to prove the loans given. [49] Refer to paragraphs 10.2, 10.5, 10.6, 10.7, 10.9, 10.10 and 10.12 of the Appellant’s affidavit in reply (encl. 4/38-45). [50] The 1st Respondent claimed to be able to produce bank statements and cash book statements to support the loans given to it. We refer for instance, to encl. 6/7-8, which is the document to support a loan given by Ng Sin Yee where the bank statement purports to show an entry of RM50,000.00 and the cash book statement records it accordingly. [51] However, we agree with the Appellant that these and the other documents are internal documents without any audited documents in support and are thus suspect. Further, as per paragraph 5 of the Appellant’s affidavit in support (encl. 4/7): “5. The Liquidator had sent notices to the Directors and Secretary of the Company requesting them to submit a Statement of Affairs and surrender all books and records but was not avail as of to date the Directors have failed, neglected, and refused to do the same.” [52] Under the circumstances, it cannot be said that the dispositions to individuals, to siblings and to the Respondent’s own company can be deemed to have benefitted the Company’s general body of creditors where the dispositions are not bona fide and the documents in support of the loans given are suspect. [53] Surely it cannot be the case that paying a loan without proper documentation is treated to be in the course of the Company’s ordinary trade or for that matter paying to a company where the 1st Respondent is a director and shareholder along with the 2nd Respondent. [54] It was also held by the HCJ that the Appellant had not identified any creditors of the Company being prejudiced which meant there was no evidence of undue preference. We find this to be incorrect as the Appellant had provided a list of creditors as in encl. 5/147-148 to appeal

This was the proof of debt submitted by Insolvency Department to the Liquidator which showed an amount of RM12,029,520.98. These would be the creditors prejudiced by the dispositions made and it cannot be said that such dispositions are to the benefit of the general body of creditors. [55] The dispositions to Soon Hin Hardware Sdn Bhd, Messrs Ferida, Hassan, Low & Ng and Public Bank Berhad suffer the infirmity of being made after the presentation of the winding-up petition and not being beneficial to the general body of creditors. iv. Just and fair with particular regard to the good and honest intention of the persons concerned [56] In BSN Commercial Bank (M) Bhd v River View Properties Sdn and another action [1996] 1 MLJ 872, the following was stated at page 882: “Dispositions are said to be void under s 223 of the Companies Act 1965 ‘unless the Court otherwise orders’. Thus, each case must be approached and dealt with on its own facts and circumstances. No two cases are the same. It revolves on the good faith and honesty of the personalities, and it is here that the judge's commonsense opinion of what is just and fair prevails: Re Steane's (Bournemouth) Ltd [1950] 1 All ER 21 at p 25; Re J Leslie Engineers Co Ltd (In liquidation) [1976] 1 WLR 292 at p 304 laid down the now classic principle that in deciding the existence of good faith and honest intention, the absence of knowledge by the transferee of the winding-up petition was a very powerful factor in favour of validation. Incidentally, it is pertinent to note that in Re Gray's Inn Construction Co Ltd, it was held that the court should not validate a transaction if its effect was to pay off a creditor in full at the expense of the general creditors.” (Emphasis added) [57] Here, the knowledge of the 1st Respondent of the winding-up petition is a factor to show the absence of a good and honest intention. As against the 2nd Respondent [58] We deal next with the 2nd Respondent who was absent in the HC proceedings and this appeal. The Appellant has sought to make him jointly and severally liable with the other Respondents. We agree with the HCJ that as the 2nd Respondent had not replied to the assertions made by the Appellant, he would be deemed to have admitted to such assertions and that the application of the Ng Hee Thoong principle would be subject to the Court’s decision on the 1st Respondent’s liability. The effect is that if the 1st Respondent is liable, the 2nd Respondent is equally liable. As against the 3rd Respondent [59] The firm of TKT had represented the Company in the adjudication proceedings and was instructed by the 1st and 2nd Respondents to receive the award sum on behalf of the Company. [60] Then came the letters of instruction (Instructions) from the Company signed by the 1st and 2nd Respondents to make the payments to various third parties, including the 3rd Respondent. These were duly done. The Instructions are dated between 27-10-2017 to 23-11-2017 and can be seen in encl. 4/88-128 together with the payment made. The fact of their issuance is not disputed. The full particulars of the dispositions correspond with the particulars listed in paragraphs 1(a) to (o) of encl. 1. [61] The Instructions to pay the 3rd Respondent and the payment, in encl. 4/98, 99, 126 and 127 are appended as follows: This space is intentionally left blank [62] As the other Instructions are too numerous, we will append the first such Instruction given and the payment made, as in encl. 4/88-89: [63] The above will thus show the 3rd Respondent received instructions from the Company signed by the 1st and 2nd Respondents to pay out, and these were duly acted upon. [64] Insofar as knowledge of the winding-up petition is concerned, we are of the considered opinion that the 3rd Respondent did not have any such knowledge. We say so because the 3rd Respondent and/or TKT was only involved in the adjudication proceedings and was never involved in the winding-up petition and its related proceedings. There was no evidence that the existence of the winding-up petition was made known to the 3rd Respondent. Eventually, by the time of winding-up, TKT had already been discharged by the Company. [65] Liability on paying out the dispositions cannot possibly attach on the 3rd Respondent where he and/or TKT acted on the Instructions and had no knowledge of the winding-up petition. [66] In addition, we find that the Appellant has no cause of action against the 3rd Respondent under section 541 CA 2016 which deals with inter alia the action of an “officer”. An officer is defined in section 2 as follows: “… “officer”, in relation to a corporation, includes-

any director, secretary or employee of the corporation;

a receiver and manager of any part of the undertaking of the corporation appointed under a power of contained in any instrument; and

any liquidator of a company appointed in a voluntary winding up, …” [67] From the above, it is clear that the 3rd Respondent is not an officer within the interpretation in section 2 and that section 541 read with section 2 does not attach liability against the 3rd Respondent. [68] The above was also the finding of the HCJ and the Appellant counsel has stated it is not appealing against this part of the decision but that the payments were made to the 3rd Respondent. [69] Nevertheless, it is only that the 3rd Respondent is not personally liable for the dispositions made to itself and the other third parties. The dispositions are still void for breach of section 471(1) CA 2016. [70] We were referred to Zulpadli & Edham which dealt with payments made to the appellant firm of solicitors after the presentation of a winding-up petition. This Court found that a charging order under section 123 of the Legal Profession Act 1976 was out of the question (paragraph 20). This Court then said only a validation order was doable as follows at page 171: “[21] On the facts of the present case, a validation order under s 223 was the only doable option. But there was no application from the appellant for such an order. Winding up had commenced against Inai on 29 June 2009, that is, at the time of the presentation of the petition of winding up (see s 219(2) of the Companies Act 1965). Without an order of validation, that remittance of RM1,400,000 to the appellant on 19 August 2009, which was clearly a disposition of the property of Inai after commencement of winding up, was void (see Lian Keow Sdn Bhd (in liquidation) & Anor v Overseas Credit Finance (M) Sdn Bhd & Ors [1988] 2 MLJ 449; Kimoyama Elektrik (M) Sdn Bhd v Metrobilt Construction Sdn Bhd [1990] 3 MLJ 309; Re Gray's Inn Construction Co Ltd [1980] 1 All ER 814); and In re Ashmark Limited (in liquidation) 2 IR 10, amongst a host of authorities on s 223 or equipollent provision). 'The disposition rendered void is void at the time it takes place' (see McPherson, The Law of Company Liquidation, (4th Ed) at p 222). [22] Without a charging order or an order of validation, the entire remittance to the appellant was void. The entire remittance must be returned to Inai.” [71] We note that the appellant there pitched its case on the basis of a lien held over the payment. The facts are also different where here the 3rd Respondent paid out based on the clear terms of the Instructions issued by the Company and without knowledge of the winding-up petition. Conclusion i. Appeal 1296 [72] For the above reasons, we allow appeal 1296 against the 1st Respondent as follows: i. order in terms of encl. 1, paragraph 1, that the disposition of RM1,496,730.38 is void, other than paragraph 1(d) and (e) on the disposition of RM20,000.00 made to Optad and RM120,000.00 made to QST; and ii. order in terms of encl. 1, paragraph 2, against the 1st and 2nd Respondent only for the amounts listed in paragraph 1 (a), (b), (c) and (f) to (o). [73] We dismiss the appeal against the 3rd Respondent. [74] The decision of the HC is set aside to the extent as above. [75] On costs, we award RM10,000.00 to the Appellant to be borne by the 1st Respondent and RM10,000,00 to the 3rd Respondent to be borne by the Appellant. All costs are subject to allocatur. ii. Appeal 1297 [76] As parties have agreed that the outcome of appeal 1296 binds appeal 1297, we allow appeal 1297 other than paragraph 2(d) and (e) of encl. 1, on the disposition of RM20,000.00 made to Optad and RM120,000.00 made to QST. The decision of the HC is set aside to the extent as above. We make no order as to costs. (SEE MEE CHUN) Judge Court of Appeal Malaysia Dated: 12-1-2024 Appeal 1296 Counsel for the Appellant: Segaran Mathavan (Mohd Aiziezuddin Bin Suib with him) Messrs. S. Mathavan & Nur Hafizah Subang Jaya, Selangor Counsel for the 1st Respondent: Gow Jia Jian (Najwatul Aqilah Amli with him) Messrs. Gow Victor & Co. Puchong, Selangor Counsel for the 3rd Respondent: Yeoh Cho Kheong (Jeffrey Lee Hur and Lock Jun Qi with him) Messrs. Ranjit Singh & Yeoh Kuala Lumpur Appeal 1297 Counsel for the Appellant: Segaran Mathavan (Mohd Aiziezuddin Bin Suib with him) Messrs. S. Mathavan & Nur Hafizah Subang Jaya, Selangor Counsel for the Respondent: Gow Jia Jian (Najwatul Aqilah Amli with him) Messrs. Gow Victor & Co. Puchong, Selangor Cases referred to: Azabar Holdings Sdn Bhd (in Liquidation) v Kumarappan @ Thannirmalai a/ KM Palaniappan [2021] 3 MLJ 448 Wong Wee Kheong & Anor v Daya Bersama Shd Bhd & Other Appeals [2013] 3 CLJ 969 Zulpadli & Edham v Inai Offshore & Marine Engineering Sdn Bhd (In Liquidation) [2011] 4 MLJ 161 Lian Keow (In Liquidation) & Anor v Overseas Credit Finance (M) Sdn Bhd & Ors [1988] 2 MLJ 449 Lembaga Kumpulan Wang Simpanan Pekerja v Adorna RMIT Sdn Bhd & Ors [2003] 4 MLJ 729 Ravichanthiran a/l Ganesan v Percetakan Wawasan Maju Sdn Bhd & Ors [2008] 8 MLJ 450 BSN Commercial Bank (M) Bhd v River View Properties Sdn and another action [1996] 1 MLJ 872 Legislation referred to: Companies Act 2016, sections 213(1), 471(1) and 541(1) Companies (Winding-Up) Rules 1972, Rule 25(1)