Bidari Ehsan Sdn Bhd v 1. ) Kamarulzaman Bin Abd Jalil (WA-24NCC-188-03/2023)

KAMARULZAMAN BIN ABD JALIL

AZMAN BIN ATAN

MOHD ZAHIR BIN MAMAT@MOHAMAD

YAP CHOW TAI

DIONG SHEIH YEE

LIM HANG TEE

TUG KAI LUI

NORA AZLINA BT MOHD NOOR

ABDUL MALIK BIN AMID

CHE MAH BT MD ISA

YAKOP BIN OMAR

MOHAMAD KAMIL BIN HARUN

SITI MAWAR BINTI HJ MD LAJIS

YONG LAI MUN

JAMILAH BINTI ISMAIL

FANG YOKE KUAN

CHIN MIN THONG

HUANG SIN KIO

YAP YIN PENG

KWANG SUI MOY

KWONG KENG WAI

SHU KWAI SIM

SYDNEY SOO CHEE SENG

CHIANG YEN TEK

CHONG KUAI

LOKE CHOW YEW

AKBAL SINGH A/L GURDIAL SINGH

TING HUONG PING

JASMINDER KAUR A/P HERBANS SINGH

JAMAL BIN SERON

MUK SENG WAI

MOHAMED NAPI BIN MOHD ZIN

EU JOO SON

AHMAD FAIZAL BIN ABD RAHMAN

AINUN BINTI HAJI OMAR

SAHINDERPAL SINGH A/L HARBAN SINGH

YAP SIEW YIN

GOH GEOK CHOO

MOHAMAD SHOFI BIN OSMAN

TAY HANG POO

LEE SIONG CHUN

ANN PEI FERN

WAN NOOR IZA BINTI WAN YAHAYA

NAZLI BINTI IDRIS

CHUA LONG JUAY

KHAIRUL YAZID BIN MASROR

CHUA KONG CHENG

KAMARIAH BINTI UJUD

CHA KONG MIN

WONG PENG PENG

ZAMARIAH BINTI BACHIK

NOOR WATI BINTI DAIMAN

LOKE KONG POO

LIM LEE KIEW

VIJAYAN A/L ARUMUGAM

SHUI KWAI SIM

SEE SIEW LAN

LIEW TAI THYE

HUSSIN BIN ABDULLAH

CHEN YOOK LEN @ AH FOOK

CHUA OI LENG

WONG WAI KUAN

MAH PHOOI YOKE

CHONG YON FUNG

CHEAH TONG SENG

LEE LIN NGOR @ LEE LIH NGOR

LIAU SAI PING

KHAIROL NIZAM BIN RAMLI

HOO SUI @ HOO KUM SUI

CHONG LEE LEE

ARUMUGAM A/L PERUMAL

LAI JOO LIAN

LIM CHAI KIM

KHOO HOO NEO

ABD RASHID BIN JANI

PHUA LYE HONG

TAN SIEW LEE

THANABALAN A/L K. RAJAGOPAL

LEE WAI YEE

MOHD NADZIRI BIN ISMAIL

ADAN BIN WAISO

TAN AI KHIM

YEE LAI PING

SHARIFAH JANORWATI BINTI WAN MOHAMAD

YEW CHUI FUNG

BEATRIX VOHRAH NEE CHEW GHIM NEO

HETISH CHANDER SHARMA

YAP YEE LOONG

LEE CHEW KUEN

AB RAHMAN BIN MD SOM

ABD HALIM BIN ABD WAHAB

ABD. LATIF BIN HAJI GAPOR

ABDUL MAJID BIN HASSAN

SABARIAH BINTI KASSIM

ABDUL RASHID BIN HALIM

ABU HARITH BIN SHAMSUDDIN

AHMAD BIN HJ ABDULLAH

AHMAD RADZUAN BIN HASSAN

HJ AHMAD ZAKI BIN HJ HASSAN

ALI NAPIAH BIN HASSIM

AMRAN BIN MUNIR

AZMEE B ITAM

BASIR BIN MOHAMED JOHAR

CHEONG SAW KONG

ESNAN BIN AB. GHANI

FARIDAH BT AHMAD

HABSAH BINTI KASIM

HAMDAN BIN BAHAROM

CHAN CHIN SAM

HAMDANI BIN SADIMAN

HASIMAH BINTI JUSOH

IMALUDDEN BIN ABDULLAH

KAMAR BIN KASSIM

KAMISAH BINTI SAMSURI

KANNAMAH A/P MOTTAN

KAVARY A/P VAYAPURY

LAI SEI CHAI

LAW HUA EIM

LIHAN BIN ALI

MAHMUD BIN NIHAT

MAIZURA BINTI OTHMAN

MARCELLA BINTI MELAN

MD. ZAWAWI BIN SHAMROZ

MISS YATI BT DANI

MOHAMAD BIN SAARI

MOHD ARIRI BIN ALWI WEE

MOHD HAIRUDIN BIN MUKRI

MOKHTAR BIN ADNAN

NIK SALIMI BIN NIK MOHAMED SALLEH

NIK SHAIRAN BIN NIK MOHAMED SALLEH

NORDIN BIN AHMAD

NORHAIDAH BINTI ALI

NOR SAMAH BINTI ABD KADIR

RAMLAH BINTI MOKHTAR

AZIZA BINTI AHMAD

RANJIT SINGH A/L DHARAM SINGH

RAZALI BIN ISNIN

ROSELINA BT AMIRULDIN

ROSLAN BIN ARSHAD

ROSLINA BINTI SHAHRI

ROSLLINA BINTI MAT REJAB

SAIDAH BINTI AHMAD

SAFFUWAN BIN MOHAMED JOHAR

SALWA BINTI HASHIM

SHAHARUDDIN BIN RAMLY

NOR SAMAH BINTI ABD KADIR (SELAKU WAKIL PESAKA BAGI SHAKIR BIN MOHAMED JOHAR)

SELVARAJOO A/L VAYAPURY

SITI SAPIYAH BINTI MOHD DEWA

SURIYATI BT MOHD LAZIM

SYED MOHD AZIZI BIN SYED SAIDIN

WAHID BIN OMAR

YUSLIZA BINTI JUSOH

ZAINON BINTI AHMAD KUTTY

ZAINUDDIN BIN ABD HAMID

ZAINUL ABIDIN BIN MOHAMED ALI

ZAKARIA BIN SHAFIE

ZAMANI BIN JOPRI

ZULKIFLI BIN JAMALUDDIN

TAN ENG GUAN

KOPERASI KOGUMA BERHAD

KOPERASI PERUMAHAN ANGKATAN TENTERA BERHAD

TAICHEN REALTY SDN BHD

TAI CHEE CHOONG

OOI SIEW CHEN

NG SOO SHIN

ONG KOK AUN

YAP GAIK CHOO (NRIC NO.: 700604-10-5362) …INTERVENERS JUDGMENT Introduction [1] This is the Applicant’s Originating Summons filed pursuant to Section 366 (3) and (4) of the Companies Act, 2016 (“CA 2016”) for the Court to approve and give sanction to the Applicant’s scheme of arrangement that has received the requisite approvals from its Scheme Creditors. [2] In considering whether to approve and grant sanction to the proposed scheme, the Court does not act as a mere rubber stamp but will examine if the proposed scheme though having met the approval of the Scheme Creditors, is nevertheless, one that an intelligent and honest man, as a member of the class concerned and acting in respect of his interest might reasonably approve the proposed scheme. The Court must also be satisfied that the proposed scheme is fair and equitable in the circumstances. [3] In this case, the scheme of arrangement is proposed in the context of a liquidation. The proposed scheme is aimed at re-developing the existing twenty-one (21) blocks of units serving as hostel accommodation in a mixed development project that had been undertaken and completed by the Applicant. It sought to demolish all the existing 21 blocks and in their place, build new apartments on the land with the owners of the units being given the opportunity to “opt-in”, namely, to participate in the new development to purchase the new units build therein from the White Knight, for a substantially higher price albeit with a right to set off from the new purchase price the sums previously paid for their original units under their respective original sale and purchase agreements with the Applicant (“the Original SPAs”) or to “opt-out”, namely, to receive a sum, says to represent a higher than the current market value of the units in return for surrendering their units to the White Knight to be demolished. [4] Significantly, the proposed scheme is confined to only purchasers who are still currently owners of the units. The following persons are excluded and are not recognized as Scheme Creditors:

any person who did not execute the Original SPAs for the purchase of units in the project;

any person whose Original SPA has been validly terminated; or

any person whose unit has been auctioned by any banks. [5] There are 2 interesting legal issues raised before this Court. Firstly, whether by excluding the other unsecured creditors of the Applicant as Scheme Creditors, the principle of pari passu that is fundamental to a winding up has been breached. Secondly, whether the proposed scheme is effectively a devise to permit the White Knight to secure an en bloc sale of the 21 blocks and if so, whether this is a deprivation of the right to property and thereby rendering the proposed scheme not one where an intelligent and honest man of that class would approve and or the proposed scheme is otherwise unfair and inequitable under the circumstances. Background facts [6] Prior to its winding-up, the Applicant was the developer of a 147- acre land (“Project Lands”) for a mixed development project comprises a residential scheme (“Taman Universiti”), hostel accommodation (“SiberTel”), and a commercial area (“Siber Square”) (collectively referred to as “SiberTel Project”). [7] SiberTel was developed in 1999 to cater for college and university students. It consists of 21 blocks comprising a total of 4,566 units of hostel accommodation and was built on 8 parcels of the Project Lands. [8] All 4,566 units were sold to 2,720 purchasers (“Purchasers”) between year 2000 to 2002 for the purchase price of between RM33,600 to RM36,000. [9] There was a guaranteed Annual License Fee (“Annual License Fee”) arrangement equivalent to 10% of the purchase price between the Applicant and the Purchasers, where the Purchasers would be paid once every 3 months for a period of 10 years after the hostel units have been completed. [10] Upon the completion of the hostel units, the Applicant was only able to make regular payments of the Annual License Fee from 2002 to 2005 when the Applicant started to face financial difficulties. [11] As a result, the Applicant accumulated huge debts consisting of outstanding quit rents, assessments, insurance premiums, water bills and electricity bills. [12] This led to SiberTel’s condition to be increasingly neglected and poorly managed, causing various equipment, fixtures and fittings, electrical wirings and electrical appliances like fans and lights to be stolen. [13] All 2,720 Purchasers had never occupied their units. This is because SiberTel was built specifically as a hostel accommodation without living area or kitchen facilities. [14] In addition, SiberTel is presently in an inhabitable state as the area became enveloped with vegetations with no water and electricity supply. [15] Whilst the obligation was on the Applicant to apply for strata titles, the Applicant had not applied for strata titles for all the 4,566 units. [16] Upon the Applicant being wound up and when the Liquidator of the Applicant (“Liquidator”) took over the affairs of the Applicant, the Liquidator had made inquiries as to the cost of applying for strata titles and the costs of refurbishing SiberTel. [17] The estimated cost to apply for strata titles is approximately RM3,000 per unit, which totals to RM13,698,000.00 whilst the cost to refurbish all 21 blocks of SiberTel is more than RM20,000,000.00. [18] To date, the Liquidator had not undertaken the application for strata titles or refurbishment of SiberTel due to lack of funds. [19] In 2016, a few purchasers approached one Rising Charm Sdn. Bhd. as the White Knight to come up with a proposal to rehabilitate SiberTel. [20] The Liquidator in principle had no objection to the White Knight’s proposal subject to the Purchasers’ approval. [21] Subsequently, on 15.5.2017, the Applicant was granted leave to summon a creditors’ meeting with the Purchasers of SiberTel units pursuant to section 366 of the CA 2016 (“1st Creditors’ Meeting”). [22] Unfortunately, the 1st Creditors’ Meeting which was convened on 1.11.2017 had failed to achieve the prerequisite of 75% vote as only 74.662% voted for the proposed scheme. [23] Thereafter, SiberTel remained abandoned until year 2022 where the same White Knight again submitted a revised proposal to rehabilitate SiberTel. [24] The Liquidator similarly had no objection to the White Knight’s revised proposal subject to the Purchasers’ approval. [25] More pertinent to note is that the Selangor Housing and Property Board (“LPHS”) had in principle since year 2017 given its support to the White Knight to rehabilitate SiberTel. [26] Following thereto, on 8.7.2022, the Applicant was granted leave to summon a fresh creditors’ meeting with the Purchasers of the SiberTel units for the purposes of taking into consideration a scheme of arrangement (“2nd Creditors’ Meeting”). [27] This 2nd Creditors’ Meeting is the subject matter of this Originating Summons. The Proposed Scheme of Arrangement [28] UHY Advisory (KL) Sdn. Bhd. was appointed as the scheme advisor. [29] The proposed scheme of arrangement (“Proposed Scheme”) was conceptualised through the Explanatory Statement annexed in Annexure A of Enclosure 1. The Proposed Scheme is formulated to bind a specific class viz. the Purchasers of the SiberTel units. [30] The Proposed Scheme is aimed at redeveloping the Project Lands by demolishing all existing 21 blocks in SiberTel and building new apartments on the Project Lands for dwelling purposes. [31] All demolishment, redevelopment, and rebuilding will be undertaken by the White Knight (“New Development”). All costs and payments towards the New Development will also be paid directly from the White Knight, and not from the assets of the Applicant as the Applicant has no funds and assets. [32] All the Purchasers shall be given the opportunity to participate in the New Development by either opting in or opting out as follows: - Opting in Stage 1 Extinguishing of the Applicant’s existing obligations towards the Purchasers

The Purchasers will enter into a new sale and purchase agreement (“SPA”) with the White Knight, which will effectively supersede the original SPA between the Applicant and the Purchasers.

The Purchasers will also be entitled to set off the purchase price of the new SPA with the purchase price of the original SPA.

Any Purchasers with more than 1 unit may opt to combine his SPA price to set off against the purchase price of the new SPA.

Any shortfall after the set-off shall be borne by the Purchasers. Stage 2 Creation of replacement of fresh obligations between the Purchasers and the White Knight

The new SPA will govern the relationship, rights and obligations of the Purchasers and the White Knight.

The Applicant is discharged from the new relationship between the Purchasers and the White Knight by virtue of the new SPA. Opting out Stage 1 Extinguishing of the Applicant’s existing obligations towards the Purchasers

The Purchasers may opt out by informing the scheme advisor within 3 months from the completion of the Conditions Precedent.

If the Purchaser fails to notify the scheme advisor of his election within 3 months from the completion of the Conditions Precedent, the Purchaser shall be deemed to have opted out.

All opt-out Purchasers shall be deemed to have agreed to terminate the original SPA with the Applicant with no further claims against the Applicant. Stage 2 Creation of replacement of fresh obligations between the Purchasers and the White Knight In return, the White Knight will make payments to each opt-out Purchaser in the following manner: -

1st Option – to pay RM12,000 per unit if the opt-out Purchasers opt to receive the sum after 36 months from the date of fulfilment of the

2nd Option – to pay RM10,500 per unit if the opt-out Purchasers opt to receive the sum after 12 months from the date of fulfilment of the

3rd Option – to pay RM9,200 per unit if the opt-out Purchasers opt out early by giving written notice from 1 January 2023 to 31 May 2024. [33] In respect of the opt-out sums offered for each of the SiberTel units, the Liquidator had obtained an independent Valuation Report dated 14.11.2022 (“Valuation Report”) from Messrs. Henry Butcher Malaysia (SEL) Sdn. Bhd. which provides that the Market Value per unit is only about RM8,000 whilst the Forced Sale Value per unit is RM6,000 in its existing physical “as is where is” condition. [34] The above valuation is consistent with the Proclamations of Sale from year 2016 to year 2018 for the public auctions of some of the SiberTel units. [35] Thus, the lowest “opt-out” offer viz. RM9,200 per unit by the White Knight under the Proposed Scheme is in fact 15% higher than the highest valuation given in the Valuation Report. To put it another way, the Applicant maintained that the Purchasers are not in any way short-changed under the Proposed Scheme. [36] As the Liquidator is not in a position to refurbish the 21 blocks of SiberTel nor applied for strata titles due to lack of funds, it is contended that the Proposed Scheme is clearly a better option as the successful implementation of the Proposed Scheme would guarantee some form of return to the Purchasers as opposed to its current state. The wider social objective and public interest of reviving the abandoned SiberTel can also be achieved. [37] The Applicant has duly served the Court Order dated 7.8.2022 granting leave to summon a fresh creditors’ meeting with the Purchasers for the purposes of taking into consideration the Proposed Scheme to all the Purchasers on 6.8.2022 via registered posts. The aforesaid High Court Order was also advertised in the Berita Harian and New Straits Times newspapers on 26.7.2022. [38] Subsequently, the Explanatory Statement containing the Notice of

Meeting was served on all the Purchasers on 10.11.2022,

11.2022 and 14.11.2022 via registered posts and the Notice of Meeting was also advertised in the Berita Harian and New Straits Times newspapers on 21.11.2022. [39] At the 2nd Creditors’ Meeting which was convened on 13.12.2022,

86.69% of the Purchasers who were present at the meeting had supported and voted for the Proposed Scheme. [40] Having obtained 86.69% in value of the Purchasers [which far exceeded the 75% threshold requirement pursuant to section 366(3) of the CA 2016], the Applicant on 31.3.2023 filed Enclosure 1 herein for the Proposed Scheme to be sanctioned by this Court. Objections to Sanction [41] There are 3 groups of interveners who intervened at this Sanction stage: - a) the 1st to 89th Interveners (added vide Enclosure 6) who objected to Enclosure 1 (“1st Group of Interveners”); b) the 90th to 158th Interveners (added vide Enclosure 8) who also objected to Enclosure 1 (“2nd Group of Interveners”); and c) the 159th to 167th Interveners (added vide Enclosure 17) who supported Enclosure 1 (“3rd Group of Interveners”). [42] Of the total 158 Interveners from the combined 1st and 2nd Groups of Interveners, 71 of them did not attend the 2nd Creditors’ Meeting, 4 attended and voted in favour of the Proposed Scheme, 1 had attended but abstained from voting, 60 had attended and voted against the Proposed Scheme and 21 had attended and voted but their votes were deemed as “spoilt votes”. [43] Notwithstanding the aforesaid, the fact that these 158 Interveners now intervened in the proceedings at this Sanction stage to object to the Proposed Scheme must be taken to mean that they are against the Court giving the sanction to the same. To my mind, they are not precluded from changing their minds even at this late stage of the proceedings. Legal issues at Sanction Stage [44] The Interveners have raised the following legal issues in opposing the Court granting its sanction to the Proposed Scheme: a) whether the application should be filed before the Winding Up Court; b) whether is permissible in law for a company under liquidation to enter into a scheme of arrangement with only a preferred class of creditors to the exclusion of other creditors of the company and thereby breaching the pari passu principle; c) whether the Proposed Scheme is such that ‘an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve’ and that the Scheme is considered “fair and equitable” for the Court to give its sanction. [45] Each of the legal issues above shall be considered in turn. Proper forum to file Enclosure 1 [46] The Applicant has been wound up by the Insolvency Court at Kuala Lumpur. As the Court that ordered the winding up of the Applicant, the Insolvency Court is seized with the jurisdiction to hear all matters relating to the winding-up of the Applicant. The Proposed Scheme in this case is made by the Liquidator of the Applicant and is therefore a matter relating to the winding up of the Applicant. [47] Notwithstanding the aforesaid, it is contended by the Applicant that all payments towards the New Development and the “opt-out” payments to be made under the Proposed Scheme are directly from the White Knight, a third party, who is not a creditor or a contributory of the Applicant. [48] There is therefore no distribution from the assets of the Applicant for the New Development. Instead, the Proposed Scheme envisaged the Applicant being released from its obligations to pay its debts to the Purchasers and in its place, a new contract is created between the White Knight and the Purchasers. [49] Hence, it is contended that the Proposed Scheme is one that would operate outside the winding-up of the Applicant. It is contended that since the Proposed Scheme is outside the primary object of winding-up viz. ‘to collect and distribute the assets of the company pari passu amongst unsecured creditors after payment of preferential debt’ [See: the Court of Appeal case of Ganda Setia Cemerlang Sdn. Bhd. & Anor v Maika Holdings Bhd (In Liquidation) [2017] 6 MLJ 661], there is no necessity for the application to be filed before the Winding-Up Court. [50] In addition, the Applicant further contended that under Order 88 Rule 2 read together with Appendix C of the Rules of Court 2012, it provides that except for proceedings relating to the winding-up of companies and capital reduction under the CA 2016, all other proceedings shall be commenced by Originating Summons. [51] Reference was also made to the Atkin’s Court Forms Malaysia – Companies (General) where Procedural Table 1: Proceedings by way of Originating Summons of the same provides that an application to approve a compromise or arrangement between a company and its creditors or any class of them shall be commenced by Originating Summons. [52] Procedural Table 11: Scheme of Arrangement, Reconstruction and Amalgamation further provides that the applicant of the scheme is required to prepare and present at the Court Registry 3 copies of Originating Summons to sanction the proposed scheme as approved at the creditors’ meeting. [53] On the other hand, every application at the Insolvency Court, other than a petition, shall be made by either a notice of motion or a form of summons [See: Rule 7 of the Companies (Winding-up) Rules 1972]. No application by way of an Originating Summons can be made at the Insolvency Court. [54] Based on the aforesaid, the Applicant submitted that Enclosure 1 is rightly filed before this Court by Originating Summons. Enclosure 1 involves a matter pursuant to section 366 of the CA 2016 which is outside the winding-up regime of the Applicant. [55] With respect, I do not think that it is right to state that because an application for scheme of arrangement is made under section 366 of the CA 2016, such an application must fall outside the winding up regime of the Applicant. [56] Even though the application under section 366 of the CA 2016 is to be made by way of an Originating Summons and therefore could not be filed in the Insolvency Court, the fact that the application is made by a company in winding up, to my mind, means that the said application is subject to the overarching winding up regime before the Insolvency Court. This means that even though in a scheme of arrangement, the applicant is generally at liberty to exclude certain creditors from the scheme, a different consideration applies when the company is under liquidation in that the applicant must ensure that the pari passu principle must not be infringed unless there are exceptional grounds for departing from the same. [57] Furthermore, although the Originating Summons is not filed in the Insolvency Court, it does not mean that the Court hearing the matter cannot where it finds it more expedient to do so, orders that the Originating Summons be transferred to be heard by the Insolvency Court. This is especially where the proposed scheme of arrangement is so inextricably linked to other factual matrix or matters in the winding up of the company that it would make the Insolvency Court better placed to consider the merits of the scheme of arrangement together with the other issues under the winding up process. [58] However, in the present case, it does not seem to me that the merits of the application cannot be adequately determined by this Court. There can be no doubt that this Court does have the jurisdiction to entertain the application. [59] Accordingly, I would respectfully reject the contention by the Interveners that this Court ought not to hear the application at all. A scheme of arrangement with only a preferred class of creditors and the pari passu principle [60] It is common ground that the following persons are excluded and are not recognized as Scheme Creditors under the Proposed Scheme: a) any person who did not execute the SPA for the purchase of units in the Project; b) any person whose SPA has been validly terminated; or c) any person whose unit has been auctioned by any banks. (“the Excluded Creditors”) [61] The effect of the Excluded Creditors being left out of the class of creditors in the Proposed Scheme means that while the class of creditors in the Proposed Scheme will be receiving direct payments from the White Knight, the Excluded Creditors will be left with the limited assets of the Applicant for the payment of their claims. Further, whilst the Excluded Creditors’ claims against the assets of the Applicant would be based on their proof of debts, the “opt-out” Purchasers would be paid pre-determined fixed sums instead, namely between RM 9,200 to RM 12,000. These sums have no co-relation with the outstanding Annual License Fee owed by the Applicant to them at all. Indeed, under the Proposed Scheme, the “opt-out” Purchasers shall be deemed to have agreed to terminate the Original SPA with the Applicant with no further claims against the Applicant. [62] The aforesaid is prima facie in breach of the pari passu principle since all these creditors, namely both the Excluded Creditors and the “opt-out” Purchasers are treated as ‘unsecured creditors’ of the Applicant and ought therefore to be treated equally. [63] However, the Applicant contended that a plain reading of section 366(1)(c) and section 366(3)(d) of the CA 2016 would permit the liquidator to enter into a scheme of arrangement with a single class of creditors comprising only the Purchasers of the SiberTel units in the Project. [64] In support, the Applicant referred to the Federal Court case of Francis a/l Augustine Pereira v Dataran Mantin Sdn. Bhd. & Ors and other appeals [2014] 6 MLJ 56. [65] In Dataran Mantin, a scheme of arrangement was formulated solely for the purchasers and the secured creditor of an abandoned project excluding from the class, the other non-project creditors of the company. [66] The Federal Court held that the creditors under the project including the secured creditor could be recognised as “a distinct class of creditors” because these creditors’ rights are not so ‘dissimilar to that of the left-out creditors as to make it impossible for them to consult together with a view to their common interest’. The Federal Court further held that it would have been impossible for the scheme creditors to consult with the other left-out unsecured creditors of the company, as their interests were not common. [67] The Federal Court in arriving at this decision had cited with approval the local case of Jin Lin Wood Industries Sdn. Bhd. & Ors v Mulpha International Bhd No. 2 [2005] 7 CLJ 208 where the following was held: “… The mere exclusion of certain creditor does not open the applicants to imputations of mala fides and abuse of process. Under s 176(1), the applicants have the discretion not to compromise with all creditors and the rights of the remaining creditors are merely stayed…” [emphasis added] [68] The Federal Court in Dataran Mantin went on to hold at para [49] that the wording used in section 176(1) of the CA 1965 [which is in pari materia with section 366(3) of the CA 2016] is clear and unambiguous in its meaning and as such ought to be construed in its ordinary and natural meaning. The Federal Court had this to say: “… we are of the view that there is no restriction for the scheme to be directed at a distinct class of creditors under s176(1) of the Act. In the instant case the creditors of the project are a distinct class of creditors.” [69] The Applicant also cited the High Court case of Capital Dynasty Sdn Bhd (in liquidation) v Chiang Bing & Ors [2009] 8 MLJ 841 (“Capital Dynasty”) where another scheme of arrangement involving an abandoned project where the scheme class comprised of the purchasers of the units in the project was also approved by the Court. [70] Armed with the aforesaid 2 cases, the Applicant contended that it is free to enter into the Proposed Scheme with only a single class of creditors viz. the Purchasers of the SiberTel units because it would have been impossible for the Purchasers to consult with the other unsecured creditors of the Applicant due to their uncommon interests. [71] Further, as all payments towards the New Development will be made directly from the White Knight, no payments will be made from the assets of the Applicant. The payments of RM12,000, RM10,500 or RM9,200 to each of the “opt-out” Purchasers will also be made directly from the White Knight to the respective Purchasers. [72] In the circumstances, it was contended that the pari passu principle will not be infringed if the Applicant elects to enter into the Proposed Scheme with only a class of creditors. Instead, it serves to benefit the Applicant and its other unsecured creditors by discharging the Applicant from the unfulfilled obligations owed to this class of creditors viz. the Purchasers. This is because the other unsecured creditors stand to gain more from any realisation or distribution from the assets of the Applicant. [73] I would respectfully disagree. Unlike the facts in Dataran Mantin and Capital Dynasty, this is not a case involving an abandoned project at all. All 4,566 units had been duly constructed and completed and were sold to the 2,720 Purchasers between year 2000 to 2002 for the purchase price of between RM33,600 to RM36,000 for each unit. In other words, the Project had been completed save for the application for the strata titles and the beneficial titles of the units have already been transferred to the Purchasers. [74] Indeed, in the present case, with the completion of the units, the Applicant had entered into a contractual relationship with the Purchasers whereby in consideration of the Applicant being granted the exclusive license to run as the operator and manager of the units as hostel accommodation for students, the Applicant was obliged to pay a guaranteed Annual License Fee equivalent to 10% of the purchase price between the Applicant and the Purchasers, where the Purchasers would be paid once every 3 months for a period of 10 years. [75] It is these Annual License Fee that the Applicant owes to each of the Purchasers in differing sums. These outstanding Annual License Fee are mere debts due which are no different from the debts owed by the Applicant to the Excluded Creditors. The Applicant has huge outstanding debts consisting of quit rents, assessments, insurance premiums, water bills, electricity bills and various other outstanding debts. The debts that are due to these Purchasers are the outstanding Annual License Fee which the Applicant had failed to pay under the aforesaid contractual arrangement. These are unsecured debts and the Purchasers are unsecured creditors of the Applicant in the same class as other unsecured creditors of the Applicant which are not included in the Proposed Scheme. [76] To my mind, the Proposed Scheme results in the unsecured creditors of the Applicant being treated unequally as those Excluded Creditors would not be paid in the same manner as the Scheme Creditors. Whilst the Schemed Creditors can look to the White Knight for payments of their debts, the Excluded Creditors can only look to the limited assets of the company for payments. This is an infringement of the pari passu principle under our winding up laws and the circumstances of this case certainly does not justify a departure from the principle. Whether the Proposed Scheme is fair and equitable [77] There are 3 stages to a scheme of arrangement: a) an application under s. 366(1) of the CA 2016 for an order that a meeting of the relevant classes of creditors to be convened (‘Convening Stage’); b) the actual convening and holding of the meetings of the relevant classes of creditors (‘Meeting Stage’); and c) if the scheme is approved by the requisite majority at the relevant meeting(s), an application is made to the Court for its sanction of the scheme under s. 366(4) of the CA 2016 (‘Sanction Stage’). [78] Once the court-convened meeting has been held, the company may apply for court sanction of the scheme of arrangement. The Court will refer to three (3) criteria for the determination of court sanction as held in the High Court case of In Re Sateras Resources (Malaysia) Bhd [2005] 6 CLJ 194. The Court in the said case referred to UDL Argos Holdings Ltd [2002] 1 HKC 172 and adopted the principles set out in Buckley on the UK Companies Act (14th Ed, 1981) which held as follows: “…… In exercising the power of sanction the court will see, first, that the provisions of the statute have been complied with, second that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest might reasonably approve. The Federal Court of Australia in the case of Hiberman Friendly Society (NSW) Limited [2002] FCA 913 stated that: Nevertheless, the Court is not a mere rubber stamp and it will look at the arrangement to ensure that it is a reasonable one. If the Court concludes that there is an objection to the arrangement, such that a reasonable person might not approve it, then the Court may refuse to approve the arrangement. The Court must be satisfied that the proposal is at least so fair and reasonable that an intelligent and honest person who is a member of the class of the security holders bound by the arrangement acting alone in respect of his or the interest, as such security holder might approve it …” [emphasis added] [79] The principles guiding the court at the Sanction Stage is also stated in Re Telewest Communications plc (No 2), Re [2005] BCC 36 which emphasised that the Court has no role in determining the commercial merits of the scheme but merely ensuring that the scheme is such that ‘an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve’ and that the Scheme is considered “fair and equitable”. [80] In our present case, owing to the Applicant’s default in making payment of the Annual License Fee as contracted with the Purchasers, sometime on 28.1.2011, a purchaser presented a winding-up petition under Section 218 of the then Companies Act 1965 to wind up the Applicant. The petition was mainly premised on the fact that the Applicant had breached the contract by failing to pay the Annual License Fee. On 22.9.2011, an order was granted by the Kuala Lumpur High Court that the Applicant be wound up and the Liquidator was appointed. [81] At the material time and up to the time the Liquidator took over the affairs of Applicant, the Applicant had not applied for strata titles for the 4,566 units (which it was obliged to do) and SiberTel was in a state of despair. In the year 2013, the Liquidator made inquiries as to the cost of refurbishing SiberTel and it is estimated to cost more than RM20,000,000.00 to refurbish all 21 blocks today. In addition, the cost of application for strata titles in year 2022 for SiberTel is approximately RM3,000.00 per unit, which amounts to RM13,698,000.00. The Liquidator had not undertaken the refurbishment or the application for strata titles due to lack of funds. [82] It is premised on the aforesaid circumstances that the Applicant has now applied for the Proposed Scheme to be sanctioned, having already obtained 89.6901% votes in favour of the same at the Creditors Meeting. [83] When one scrutinised the Proposed Scheme, it entails the demolition of the whole buildings, rebuiding new buildings and thereafter selling the new units to the Purchasers at a new purchase price with appropriate deductions for the payments previously made by the Purchasers under their Original SPAs with the Applicant. In particular, the Explanatory Statement to the Proposed Scheme stipulates thus: “…3.0 Proposed Scheme Objective and Rationale 3.3 The Proposed Scheme is aimed at essentially redeveloping the Project Land by demolishing all existing twenty one (21) blocks in SiberTel and building new apartments on the Project Land be given the opportunity to participate in the new development and enable the Opt In Purchasers to purchase new units build therein by way of setting off SPA Price against the new unit price.” “…4.0 The Proposed Scheme Salient Features and Implementation of the Explanatory Statement 4.1 The Proposed Scheme shall be subject to the following conditions precedent been met within eighteen (18) months from the date of Court Convened Meeting:

(iii) The completion of the transfer of the Project Land to Rising Charm from BESB;” [emphasis added] [84] However, it must be highlighted that what the Applicant owes to the Purchasers are the Annual License Fee which was a guaranteed sum equivalent to 10% of the purchase price between the Applicant and the Purchasers where the Purchasers would be paid once every 3 months for a period of 10 years after the hostel units have been completed. [85] Given that the Annual License Fee started to be payable from 2002 and the Applicant had defaulted since 2005/2006, the total Annual License Fee due to each of the Purchaser at the time the Applicant was ordered to be wound up on 22.9.2011 i.e. a span of 6 years, would easily exceed RM 12,000.00. Yet for the “opt-out” Purchasers, not only would their claims be extinguished under the Proposed Scheme, they would also lose their units to the White Knight. [86] In truth, the effect of the Proposed Scheme as stated above is to permit the White Knight to compel the Purchasers to surrender their property rights in their units to the White Knight and to relinquish their rights to compel the Applicant to procure the strata titles to the units to be issued to them under the Original SPAs and to also relinquish all their claims against the Applicant in respect of the outstanding Annual License Fee due to them. [87] For those Purchasers who are opposing the Proposed Scheme, the Court in granting the sanction will in effect be compelling them to decide either to “opt in” (if only to avoid the consequences of opting out) - which means that they will have to give up their property interests in their units and pay a much higher sum to acquire a new property (between RM250,000.00 to RM400,000.00 per unit) with no assurance that the new units would continue to be maintained and the price of their units not deteriorating after the implementation of the Proposed Scheme – or to “opt out” – which means that the Purchasers will be compelled to sell their units for a price between RM 9,200.00 to RM 12,000.00 only and for their claims against the Applicant for the Annual License Fee to be discharged. [88] As rightly pointed out by learned counsel for the Interveners, what are due from the Applicant to the Purchasers are the Annual License Fee. Yet, under the Proposed Scheme, what is taken into account has no nexus to the outstanding Annual License Fee but the purchase price of the units under the Original SPAs for those who choose to “opt in” and for those who “opt-out”, the sums between RM 9,200 to RM 12,000 which do not reflect the value of Annual License Fee duly owed by the Applicant to the Purchasers. [89] As far as I know, in our country there are no existing legislations allowing for an en bloc process involving the sale of a block of units where most residents (usually more than 80%) have collectively agreed to sell to a buyer, typically a property developer, who in turn would demolish the entire block for re-development. If this Court were to sanction the Proposed Scheme, this will mean that the scheme of arrangement which is enacted primarily for the purpose of enabling a company facing financial distress to restructure its debt obligations, reschedule payments, or seek debt forgiveness, with the consent of the affected creditors, can now be used as a mean to achieve an en bloc process in Malaysia. [90] That the Purchasers have all acquired a property interest in their respective units can no longer be challenged. The beneficial interests in the units passed upon full payment of the purchase price. This has been so held by the Supreme Court in Yeong Ah Chee v Leong Chong Hai & Anor and other appeals [1994] 2 MLJ 614 as follows: “It is an old and well-settled rule of equity that under a valid contract for the sale of land, the beneficial ownership of the land passes to the purchaser who becomes the equitable owner, the vendor having a right to the purchase money for which he has a lien on the land. Please see Lysaght v Edwards and this case was cited with approval very often in our courts, eg by the Federal Court in Inter-Continental Mining Co Sdn Bhd v Societe des Etains Bayas Tudjuh and Temenggung Securities Ltd & Anor v Regisrtrar of Titles,Johore & Ors. When the full purchase price is paid, the vendor becomes a bare trustee, ie. unqualified trustee for the purchaser. It is also of salutary effect to remind ourselves of the fact that rules of equity apply to this country by the Civil Law Act 1956 and of the observation of Lord Russel of Killowen in Oh Hiam & Ors v Tham Kong that ‘the Torrens system is designed to provide simplicity and certitude in transfer of land which is amply achieved without depriving equity of the ability to exercise its jurisdiction in personam on grounds of conscience’.” [emphasis added] [91] This is further supported by the decision in Federal Court He-Con Sdn. Bhd. v Bulyah bt Ishak & Anor (as administrators for the estate of Nor Zainir bin Rahmat, the deceased) and another appeal [2020] 4 ML J 662 as follows: “That Samuel Naik’s case also decided that once the vendor had received full payment of the purchase price from the purchaser, the vendor becomes a bare trustee. And in that legal capacity, the vendor was not permitted in law to sell or transfer the land to new purchasers. Any subsequent conveyance of the same property to new purchasers would thus be void as the vendor, by then being a bare trustee, did not have the requisite capacity to enter into such agreement. It goes without saying that creating a charge over such property would be aimed by the same incapacity. In para 77, the apex court in Samuel Naik held that the failure on the part of the original purchaser to lodge a caveat timeously did not in any way negate or defeat its equitable right, title or interest in the property under scrutiny.” [emphasis added] [92] Therefore, I agree with learned counsel for the Interveners that neither the Applicant nor the White Knight has any rights to interfere with the Purchasers’ proprietary rights through the Proposed Scheme or otherwise which if sanction is given by this Court, will effectively deprive the Purchasers of their property rights to the units in contravention of Article 13 of the Federal Constitution which stipulates thus: “13 Rights to Property

No person shall be deprived of property save in accordance with law.

No law shall provide for the compulsory acquisition or use of property without adequate compensation.” [See also: Mollie Ong Siew Choo @ Mrs Chong Kim Choy & Ors v NCT United Development Sdn. Bhd. [2023] MLJU 1209]. [93] Accordingly, for the reasons stated, it is my judgment that the Proposed Scheme is not one that ‘an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve’ and that the Scheme cannot be considered to be “fair and equitable” in the circumstances of this case. Conclusion [94] By reason of the aforesaid, the Originating Summons in Enclosure 1 is dismissed with costs. Dated the 12th day of December 2023 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 Counsel:

Mr. Gary Ng Cheng Yip for Plaintiff

Mr. Davey Wan Guan Hui together with Ms. Tsu Jean Yinn for 1st group of Interveners Messrs. Caitlen, Nicholas Cheoh & Partners (Petaling Jaya)

Ms. Nadia Ashefa binti Zuhairi for 2nd group of Interveners

Mr. P Rajendran together with Mr. Loganathan P. L. Suppiah for 3rd group of Interveners

Ganda Setia Cemerlang Sdn. Bhd. & Anor v Maika Holdings Bhd (In Liquidation) [2017] 6 MLJ 661 2. Francis a/l Augustine Pereira v Dataran Mantin Sdn. Bhd. & Ors and other appeals [2014] 6 MLJ 56 3. Jin Lin Wood Industries Sdn. Bhd. & Ors v Mulpha International Bhd No. 2 [2005] 7 CLJ 208 4. Capital Dynasty Sdn Bhd (in liquidation) v Chiang Bing & Ors [2009] 8 MLJ 841 5. In Re Sateras Resources (Malaysia) Bhd [2005] 6 CLJ 194 6. UDL Argos Holdings Ltd [2002] 1 HKC 172 7. Re Telewest Communications plc (No 2), Re [2005] BCC 36 8. Yeong Ah Chee v Leong Chong Hai & Anor and other appeals [1994] 2 MLJ 614 9. Court He-Con Sdn. Bhd. v Bulyah bt Ishak & Anor (as administrators for the estate of Nor Zainir bin Rahmat, the deceased) and another appeal [2020] 4 ML J 662 10. Mollie Ong Siew Choo @ Mrs Chong Kim Choy& Ors v NCT United

Sections 176(1) and 366 of the Companies Act, 2016 2. UK Companies Act 3.