BK-A52NCvC-30-06/2023

William Shakespeare was right after all in composing the words ‘He that dies pays all debts’ in his magnum opus, The Tempest (Act 3 Scene 2). These words could not be more apt to illustrate this case. This is a case where an orchestrated business chicanery akin to the Machiavellian tactics foiled by the dynamic provisions of our company law. 2

This ground of judgment is prepared pursuant to an appeal filed by the defendant at the High Court due to his dissatisfaction over my decision allowing an order in terms for enclosure 19. Enclosure 19 is the plaintiff’s application to enter summary judgment against the defendant under Order 14 rule 1 of the Rules of Court 2012 (the ROC).

The plaintiff claimed against the defendant at enclosure 19, the balance purchase price of a hotel business in the sum of RM250,000.00, 5% interests per year from the date of the filing of Writ until full payment of the judgment sum and costs. My reasons for the decision of enclosure 19 are set out herein below.

The facts of the instant case have been collated together from the affidavits exchanged between the parties. The facts below are the summation of what appeared to have been agreeable by both parties.

The plaintiff is a company that runs a hotel business having its registered address at No 28, Tingkat 3 Lorong Medan Tuanku Satu, 50300 Kuala Lumpur. The defendant is an individual residing at No 41, Jalan Kristal 2/1, Taman Kristal 2, 43800 Dengkil, Selangor who sat as one of the directors in Hotel Run Star Sdn Bhd (HRS). Perhaps the defendant’s residential address became the sole reason why this fortunate court being chosen to be the forum of convenience to both parties. 3

On 6.4.2018, the defendant had entered into a written agreement (exhibited as RS-2 in the plaintiff’s affidavit) (the agreement) with the plaintiff to acquire business rights and ownership over one of the plaintiff’s hotels located at No 506 Jalan Tunku Abdul Rahman, 50100 Kuala Lumpur (the Chow Kit branch). The agreed purchase price was RM550,000 and the hotel business must be surrendered to the defendant by 1.5.2018.

Exhibit RS-2 contained two letters. The first letter dated 6.4.2018 was written by the defendant expressing the intention to acquire the business and ownership of the Chow Kit branch from the plaintiff as well as satisfying the first payment in the sum of RM150,000.00 by way of CIMB cheque no 82652. The first letter had included the name of HRS (at the material time HRS was yet to be incorporated) and the defendant. This letter was addressed to the plaintiff and the plaintiff’s director, Rajendran Sengodan.

Meanwhile, another letter exhibited in RS-2 is the second letter dated 19.4.2018 written by the defendant informing the plaintiff that the defendant was furnishing the second payment in the sum of RM100,000.00 towards the total purchase price of the Chow Kit branch business. The total sum paid to the plaintiff thus far is RM250,000.00, half of the agreed purchase price.

The plaintiff surrendered the hotel business of the Chow Kit branch to the defendant on 1.5.2018 despite the balance purchase price remained unpaid. However, the defendant in retort claimed that the Chow Kit branch was never surrendered to him but to a company styled as HRS. 4

The plaintiff’s counsel had sent a letter of demand on 10.2.2020 to the directors of HRS demanding the unpaid balance of the agreed purchase price. However, the directors of HRS including the defendant denied their liability vide their solicitors’ letter dated 25.2.2020. At all material times, the directors of HRS including the defendant were aware about the plaintiff’s demand for the remaining balance of the purchase price.

About 15 months after receiving the letter of demand from the plaintiff, HRS had voluntarily lodged an application to the Companies Commission of Malaysia on 6.5.2021 to be struck off from the register by virtue of section 550 of the Companies Act 2016 (CA 2016). HRS’s application to be stuck out from the register was coupled with a written resolution attested by the directors (including the defendant) and members of the company.

The Registrar of Companies (the Registrar) issued a formal letter on 9.10.2021 to HRS containing the Registrar’s finding about HRS was not carrying business and not in operation. HRS was struck off from the register and dissolved thereafter.

The defendant claimed that he is not liable to pay the balance purchase price to the plaintiff because HRS had ratified the acquisition of the Chow Kit branch business. There was a clear separation of legal entity between the defendant and HRS. This is where the genesis of the problem that triggered the chain of hard arguments between parties which I have summarised below. 5 C) THE LAW ON SUMMARY JUDGMENT

The law on summary judgment in Malaysia rests on a solid foundation. Summary judgment is a procedure under the civil procedure which allows a party to obtain judgment against another party, if there is no triable issue. In short, it will allow the plaintiff to obtain judgment against the defendant only in very plain and obvious cases.

In plain and obvious cases, the plaintiff should not be delayed from enjoying his claim against the defendant. On the other hand, the defendant should not be stopped from raising any triable issue which requires further enquiry by the court to determine the claim between parties.

The provision that govern the application for summary judgments is Order 14 rule 1 of the Rules of Court 2012 (‘the ROC’). Order 14 rule 1 reads as follows: Order 14. Summary judgment

Application by plaintiff for summary judgment (O. 14, r. 1)

Where in an action to which this rule applies a statement of claim has been served on a defendant and that defendant has entered an appearance in the action, the plaintiff may, on the ground that the defendant has no defence to a claim included in the writ, or to a particular part of such a claim, or has no defence to such a claim or part thereof except as to the amount of any damages claimed, apply to the Court for judgment against that defendant. [17] The locus classicus on summary judgment is National Company for Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 MLJ 300 wherein the 6 Federal Court pronounced the following preliminary requirements for summary judgment: We think it appropriate to remind ourselves once again that in every application under Order 14 the first considerations are (1) whether the case comes within the Order and (b) whether the plaintiff has satisfied the preliminary requirements for proceeding under Order 14. For the purposes of an application under Order 14 the preliminary requirements are:

the Defendant must have entered an appearance;

(ii) the statement of claim must have been served on the defendant; and

(iii)the affidavit in support of the application must comply with the requirements of Rule 2 of the Order 14. … If the plaintiff fails to satisfy either of these considerations, the summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. [18] Subsequently, the Supreme Court in Bank Negara Malaysia v Mohd Ismail & Ors [1992] 1 MLJ 400 ruled that the court has to deal with summary judgment application under Order 14 according to the following manner:

In an application under Order 14, the court has to be satisfied on affidavit evidence that the defence has not only raised an issue but also that the said issue is triable. The determination of whether an issue is or is not triable depends on the facts or the law arising from each case as disclosed in the affidavit evidence before the court.

(ii) Under an Order 14 application, the duty of a judge does not end as soon as a fact is asserted by one party, and denied or 7 disputed by the other in an affidavit. Where such assertion, denial or dispute is equivocal, or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently in probable in itself, then the judge has a duty to reject such assertion or denial, thereby rendering the issue not triable. Unless this principle is adhered to, a judge is in no position to exercise his discretion judicially in an Order 14 application.

(iii) Where the issue raised is solely a question of law without reference to any fact or where the facts are clear and undisputed, the court should exercise its duty under Order 14. If the legal point is understood and the court is satisfied it is unarguable, the court is not prevented from granting a summary judgment merely because the question of law is a first blush of some complexity and therefore takes a little longer to understand. [19] It is pertinent to emphasise here that the judicial power of the court to allow summary judgment application is not being loosely exercised. Summary judgment will only be given favouring the plaintiff in plain and obvious cases after close scrutiny of all of the affidavits exchanged between the parties. At this stage, the court will analyse all the issues raised by the defendant and the court has to be satisfied that the issues are indeed triable issues. [20] Therefore, an expression claiming that summary judgment process defies natural justice is a mere rhetorical notion trying to create a false patina to the law. In this respect, Halsbury LC in delivering the 8 judgment of Jacobs v Booth Distillery Co [1901] 85 LT 262 had this to say: People do not seem to understand that the effect of Order 14 is that, upon the allegation of the one side or the other, a man is not to be permitted to defend himself in court; that his rights are not to be litigated at all. There are something too plain for argument; and when there were pleas put in simply for the purpose of delay which only added to the expense, and where it was not in aid of justice that such things should continue, Order 14 was intended to put an end to that state of things, to prevent sham defences, from defeating the right of parties by delay, and at the same time causing great loss to the plaintiffs who were endeavouring to enforce their rights. [21] The court in Southern Finance Bhd (formerly known as United Merchant Finance Bhd) v Sun City Development Sdn Bhd & Anor [2006] 6 MLJ 673 also expressed similar sentiment as Jacobs, wherein the court observed as follows: A defendant should not be shut out from defending unless it is very clear indeed that he has no case in the action under discussion (Sheppards v Wilkinson 6 TLR 13). The power to give summary judgment under O 14 is ‘intended only to apply to cases where there is no reasonable doubt that a Plaintiff is entitled to judgment and where therefore it is inexpedient to allow a Defendant to defend for mere purposes of delay’. (Jones v Stone [1894] AC 122). Where there is any serious conflict to matters of fact or where any real difficulty as to matters of law arises, summary judgment under O 14 should not be granted. (Electric and General Corpn v Thomson-Houston Electric 10 TLR 103). But, however difficult the point of law is, once it is But, however difficult the point of law is, once it is understood and the Court is satisfied that it is really unarguable it will give final judgment (Cow v Casey [1949] 1 KB 481). 9 [22] In essence, before this court can allow summary judgment to be entered against the defendant, the defendant shoulders the burden of showing that there is a triable issue. The threshold that needs to be satisfied by the defendant in establishing a triable issue is quite low. This is reflected from the rulings of the Court of Appeal in ES HVAC Sdn Bhd v Miracle Asset Builder Sdn Bhd [2019] 3 MLJ 485; [2019] 1 LNS 209 that : [12] …Even in the absence of a statement of defence or affidavit, the application for summary judgment can be resisted by relying on the plaintiff’s own documents (see Noh Hyoung Seok v Perwira Affin Bank Bhd [2004] 2 MLJ 203). …Even if the defendant was not able to point to a specific issue which ought to be tried, but nevertheless satisfied the court that there were circumstances that ought to be investigated, then the words ‘there ought for some reason to be a trial’ would be invoked (see United Merchant Finance Bhd v Majlis Agama Islam Negeri Johor [1999] 1 MLJ 657; [1999] 2 CLJ 151). (Emphasis added.) [23] In the same vein, Justice Nazlan (now JCA) in delivering the judgment of Juliana Quah Kooi Hong v LFE Corporation Bhd & Anor [2021] MLJU 1934 observed as follows: The burden was firmly on the defendants to show that there is a triable issue that does not justify summary judgment be entered against them. If the defendants can demonstrate even one triable issue, this Court will not grant summary judgment. But it has to be a genuinely triable issue. As made clear by the Federal Court in Voo Min En & Ors v Leong Chung Fatt [1982] 2 MLJ 241, it is not enough for a defendant to raise an issue or any issue. The defendant must instead raise such issue as would require a trial in order to determine it. [24] Being mindful of the preceding principles, the remaining task for this court is to decide whether this present case is a plain and obvious 10 case which entitles a plaintiff to a summary judgment and whether there is any triable issue raised by the defendant. If there are triable issues or there ought for some other reason to be a trial of the plaintiff’s claim, the courts must dismiss the plaintiff’s application for summary judgment against the defendant. I shall now evaluate the competing arguments between parties. D) SUBMISSIONS OF THE PARTIES i) Submission by the Plaintiff [25] According to the plaintiff, the defendant began to run a business under the auspices of HRS only after the plaintiff had surrendered the Chow Kit branch business to the defendant. [26] At the material time when the agreement was entered between the plaintiff and the defendant on 6.4.2018, HRS was not in existence. HRS was only incorporated on 30.4.2018, long after the agreement had been concluded between the plaintiff and the defendant. This can be seen from the company search result issued by the Companies Commission of Malaysia exhibited as RS4 in the plaintiff’s affidavit. Although the defendant alleged that HRS had ratified the purchase of the Chow Kit Branch, that fact, was never pleaded in the defendant’s statement of defence. [27] Further, the part payment of RM250,000 was made by the defendant himself before the incorporation of HRS. The plaintiff averred that it was ridiculous for the defendant to argue that the part payment was a loan given by the defendant to HRS. Logically speaking, how could 11 a company receive a loan when it does not even exist when the part payment was made? [28] The plaintiff had instructed its previous counsel to send a letter of demand (exhibit RS3 plaintiff’s affidavit) to the defendant demanding the unpaid balance of the purchase price in the sum of RM250,000.00. The defendant however ignored the plaintiff’s demand. The outstanding amount remained unpaid. [29] The plaintiff contended that the defendant failed to raise any issues to be tried and prayed for order in terms of its application to enter summary judgment against the defendant. The plaintiff made references to the principle of law on summary judgment pronounced by the apex court in cases National Company For Foreign Trade v Kayu Raya Sdn Bhd [1984] 1 MLRA 190 and Bank Negara Malaysia v Mohd Ismail Ali Johor & Ors [1992] 1 MLRA 190. Submission by the Defendant [30] The defendant argued that when the agreement was concluded, HRS was in the midst of incorporation. Being the director of HRS, the defendant had advanced his own money to HRS in the sum of RM150,000.00 as part payment of acquiring the Chow Kit branch business from the plaintiff. The defendant alleged that HRS’s annual financial report as exhibited at GI-1 proved that the RM150,000.00 was a loan given by him to HRS. [31] The letter exhibited as RS-2 clearly stipulated that the defendant was acting under an authorisation to make the payment to the plaintiff by 12 way of CIMB cheque no 82652 in the sum of RM150,000.00. The defendant claimed that as much as he was acting under authorisation, Rajendran Sengodan too was acting on behalf of Hotel Sahara to receive the payment. Therefore, Rajendran Sengodan should also be made as a party to this proceeding. [32] After HRS was finally incorporated on 30.4.2018, a resolution was passed by the board of directors on 30.6.2018 ratifying the agreement to acquire the Chow Kit branch business. The ratification had been marked as GI-4 in the defendant’s affidavit. By virtue of section 65 of CA 2016, the company shall be bound by the contract after the ratification as if the company had been in existence at the date of the contract (see Thai Hwa Realty Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [1996] MLJU 317, Ahmad bin Salleh & Ors v Rawang Hills Resort Sdn Bhd [1995] 3 MLJ 211). [33] The defendant also argued that all forms of communication with the plaintiff were addressed to HRS. In fact, the business license for the operation of the Chow Kit branch was issued by the Kuala Lumpur City Hall to HRS as shown in exhibit GI-2. [34] The defendant argued that the duty to fulfil the contractual obligation of the agreement rests upon HRS and not the defendant in his personal capacity. The lack of privity between the defendant and the plaintiff negates the plaintiff from making demands to the defendant (see Boustead Naval Shipyard Sdn Bhd v Dynaforce Corp Sdn Bhd [2015] 1 MLJ 284). 13 [35] The defendant submitted that the plaintiff had no locus standi to initiate legal action against the defendant from the beginning. Therefore, the legal action against the defendant cannot be sustained. (see Metrod (M) Bhd v MGS Transport Sdn Bhd [2011] 9 MLJ 873, Chandran a/l Sellapan v Puncak Permata Sdn Bhd (creditors voluntary liquidation) [2013] 1 MLJ 417). [36] According to the defendant, HRS is an independent entity which is distinct from its directors and members. HRS being an incorporated company should be rightfully liable to satisfy the remaining debt owed to the plaintiff (see Salomon v A Salomon & Co Ltd [1987] AC 22, Abdul Mohd Khalid bin Hj Ali & Ors v Dato Hj. Mustapha Kamal & Anor [2016] 7 MLJevi 114). [37] The plaintiff should have lifted the corporate veil. Even if the plaintiff wishes to lift the corporate veil, the plaintiff would ultimately fail in doing so because the threshold set out in Nulink Solutions Sdn Bhd v Afdilia Holdings Sdn Bhd [2016] MLJU 1009 were unable to be satisfied. [38] The defendant vehemently contended that he was cherry picked by the plaintiff and made as a scapegoat to satisfy the plaintiff’s claim. The plaintiff had mala fide against the defendant for initiating legal action against the defendant alone and not other members of HRS. The defendant prayed from this court that the plaintiff’s application at enclosure 19 to be dismissed. 14 E) CONSIDERATIONS BY THIS COURT [39] At the outset, I find that the plaintiff in this case has satisfied all of the preliminary requirements set out by Order 14 of ROC 2012 and the application was properly filed. Therefore, the burden now shifts to the defendant to satisfy this court that the defendant has raised triable issue that merits for a full trial. [40] I am mindful that for the purpose of summary judgment application under Order 14, this court must look at the matter as a whole and ask itself whether the defendants have satisfied the court that there is an issue or question in dispute which ought to be tried, or there ought for some other reason to be a trial of that claim or part of the claim. [41] Despite the apparent intransigence reflected from the submissions of the parties in this case, I have rearranged the whole gamut of arguments to three core issues, which in my view, became the determinative factors in evaluating the suitability of permitting summary judgment against the defendant. The three material issues that attract the consideration of this court are as follows: i) Whether the Chow Kit branch had been duly surrendered by the plaintiff according to the agreement and the outstanding purchase price is due. ii) Whether the plaintiff is allowed to recover the unpaid balance purchase price from the defendant after HRS had ratified the agreement in acquiring of the business rights and the ownership of the Chow Kit branch. 15 iii) Whether the dissolution of HRS diminishes the plaintiff’s right to recover the balance purchase price from the defendant for the transfer of the business rights and the ownership of Chow Kit branch. I shall now address the preceding issues in the following arrangement. First issue: Whether the Chow Kit branch had been duly surrendered by the plaintiff and the outstanding purchase price is due. [42] Exhibit RS-2 containing the first letter dated 6.4.2018 had stipulated the agreed terms between the parties. The agreement vividly mentioned the agreed price for acquiring the Chow Kit branch business and the said letter confirms that the first payment was made by the defendant in the sum of RM150,000. The second payment was made on 19.4.2018 which was accompanied by a letter written by the defendant to the plaintiff confirming the second payment in the sum of RM100,000.00 towards the fulfilment of the agreed terms. Therefore the total sum paid for the business acquisition is RM250,000 and the remaining sum unpaid is RM250,000. [43] I am flabbergasted to read the line of arguments crafted by the defendant in his submission. It would be convenient to reproduce the relevant passage of the defendant’s submission for ease of reference: [46] Defendan ingin menegaskan bahawa Plaintif telah gagal mengemukakan apa-apa keterangan untuk menyokong dakwaan kosongnya bahawa Defendan yang telah membayar jumlah sebanyak RM150,000.00 dan RM100,000.00 masing-masing atas kapasiti 16 peribadi beliau. Plaintif tidak mengemukakan apa-apa keterangan seperti imej cek, penyata bank atau apa-apa bukti lain yang menyokong dakwaan Plaintif. [44] Plain reading over the defendant’s above passage would ordinarily mean that the defendant insisted the plaintiff produce some documentary evidence showing that the defendant made the payments and that the payments were made in his own capacity. I find that the defendant’s submission on this part contradicted his own documents produced in exhibit RS-2. Both letters in exhibit RS-2 were letters prepared and signed by the defendant himself confirming two payments made by the defendant to the plaintiff. The plaintiff had admitted in accepting the two payments from the defendant. [45] I find that the defendant’s assertion contradicted the contemporaneous documents produced before this court. For this matter, I seek solace in the decision of the High Court in WTWT Sdn Bhd v Chew Meu Jong & Ors and another appeal [2018] MLJU 1360 wherein the learned judge ruled that the issues raised by the plaintiffs were not genuine as their assertions contradicted the contemporaneous documents exhibited in the affidavits. Same here. I find that the defendant’s quibble denying making payments in his own capacity and insisted the plaintiff to produce documents were mere palavers that can be dismissed by this court. [46] The defendant’s submission on this point was nothing more than blowing hot and cold to gain an advantage over the plaintiff’s claim. The law is trite that the defendant cannot have an inconsistent stance. In Cheah Theam Kheng v City Centre Sdn Bhd (in liquidation) & Other 17 Appeals [2012] 1 MLJ 761, the Court of Appeal made the following observation: [105] We categorically say that the liquidator cannot blow hot and cold to suit him whenever he feels like it. He cannot approbate and reprobate in the same breath. On the one hand, he claims that the High Court order dated 26 July 2001 overrides or displaces a statute which render the said order invalid and yet he has the audacity to continue to act as a liquidator by virtue of the said order. In the words of Sir Nicolas Browne-Wilkinson VC in Express Newspapers plc v News (UK) Ltd and others [1990] 3 All ER 376, at pp 383–384: There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance. [47] Based on the contemporaneous documents produced in the affidavits, this court is convinced to hold the defendant had concluded the agreement in his own capacity before the incorporation of HRS and the defendant had fulfilled the part payments in the sum of RM250,000.00 in acquiring the Chow Kit branch business from the plaintiff. The remaining RM250,000.00 is still due and owed to the plaintiff. [48] In addition, the company search result in exhibit RS-4 vividly showed that HRS was only incorporated on 30.04.2018, long after the agreement had been concluded and after the both payments were furnished to the plaintiff. In this regard, when the two payments were made by the defendant, HRS was not in existence. At the material 18 time, when the agreement was concluded between the plaintiff and the defendant, HRS was nothing more but an ‘illusionary’ company. At this point of transaction, as I see it, the defendant should be personally liable in line with section 65(1) of CA 2016 which prescribed the following provision: Section 65. Pre-incorporation contract

A contract or transaction that purports to be made by or on behalf of a company at a time when the company has not been formed has effect as a contract or transaction made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract or transaction accordingly. [49] I am agreeable with the plaintiff’s submission that it would be ridiculous for the defendant to issue a loan to a non-existing company. The financial statement of HRS produced at exhibit GI-1 failed to show that the RM150,000.00 was a loan given to by the defendant to HRS. Therefore, argument raised by the defendant that the RM150,000.00 was a loan given to HRS is illogical because HRS was only incorporated after the conclusion of the contract. In this regard, the decision of the Court of Appeal Dae Hanguru Infra Sdn Bhd v Baldah Toyyibah (Prasarana) Kelantan Sdn Bhd and another appeal [2022] 4 MLJ 51 proffers some guidance in dealing with situation of this sort. In Dae Hanguru Infra Sdn Bhd, Rohana Yusuf (PCA) ruled as follows: [64] It would be opportune at this juncture to appreciate the principle of law in this regard. In common law, a company is not bound by a pre-incorporation contract, because a company cannot enter into any contract before incorporation due to a lack of legal entity. It has no separate legal existence until incorporation, as decided in Black v Smallwood [1966] ALR 744. Neither can it appoint an agent before incorporation as stated in Kelner v Baxter (1866) LR 2 CP 174. Thus, 19 a company cannot ratify an agent’s action as any ratification has to be retrospective to the date of the transaction at which point the company was non-existent. [50] There was nothing shown to this court that the said agreement was either novated or assigned to the defendant to make HRS a party. Further, neither documents nor any other evidence able to support that the defendant was HRS’s promoter. Therefore, the plaintiff has a bona fide claim against the defendant for the balance purchase price of the Chow Kit branch business. I also conclude that the plaintiff has discharged its duty under the agreement by surrendering the Chow Kit branch business despite the balance purchase price remained unpaid. The business licence exhibited at GI-2 issued by the Kuala Lumpur City Hall to HRS is a conclusive proof that the business had been duly transferred by the plaintiff. [51] It is my considered finding that the plaintiff has the right to claim the overdue balance purchase price in the sum of RM250,000.00 and the plaintiff has proven that the Chow Kit branch business had been duly transferred according to the agreement. Therefore, I answer the first issue of this case in affirmative. The question now is, who should be responsible to satisfy the outstanding balance of the purchase price after the ratification by HRS in acquiring of the Chow Kit branch business. I shall deal with this issue in the subsequent heading. 20 Second issue: Whether the plaintiff is allowed to recover the unpaid balance purchase price from the defendant after HRS had ratified the agreement in acquiring of the business rights and the ownership of the Chow Kit branch. [52] Normally, under ordinary circumstances, once a contract is ratified by a company the company shall assume all duties, responsibilities and liabilities under the ratified contract. In this respect, section 65(2) of CA 2016 stipulates: Section 65. Pre-incorporation contract

Notwithstanding subsection (1), a contract or transaction referred to in that subsection may be ratified by the company after its incorporation and the company shall be bound by the contract or transaction as if the company had been in existence at the date of the contract or transaction and had been a party to the contract or transaction. [53] For this matter, I am once again guided by the principles set out in Dae Hanguru Infra Sdn Bhd (supra) in dealing with similar situation to the case at hand. The Court of Appeal in Dae Hanguru Infra Sdn Bhd opined the following test: [65] In Malaysia, this common law position has been altered and enacted into s 35(1) and (2) of the Companies Act 1965 which has now been legislated slightly differently in s 65(1) and (2) of the Companies Act 2016. [67] There are twin legal requirements under s 35(1) before a pre-incorporated contract can be binding. First, it must be a contract made on behalf of the company (in this case the plaintiff) prior to its incorporation. The second, that contract must be ratified by the company once incorporated. 21 [73] Lord Roskill in Cosmic Insurance Corp Ltd observed three requisite conditions to be fulfilled before s 35 can be said to have been met and they are these:

(a)the contract must purport to have been entered into by any person on behalf of the company prior to its formation;

(b)that contract is ratified by the company after its formation; and

(c)such contract upon ratification is pre-dated to the date it was made. [54] To my mind, the defendant has fulfilled the threshold set out in Dae Hanguru Infra Sdn Bhd upon the production of the HRS directors’ resolution (exhibit GI-4) in ratifying the contract acquiring the Chow Kit business. The defendant was on point when he argued that the plaintiff should have channelled the claim to HRS based on the separate legal entity principles enunciated in Salomon v A Salomon (supra). [55] However, the defendant’s submission on separate legal entity did not hold water once a company is dissolved. The company law dictates that once a company is struck off from the register and dissolved upon request by the company’s directors, the liability of the company remains with the directors. This case bears some peculiarity because after HRS ratified the acquisition agreement and after HRS directors being served with a letter of demand from the plaintiff, HRS had voluntarily applied to the Companies Commission of Malaysia to be dissolved. Leaving the plaintiff with forlorn hope in recovering the debt. Hence the issue raised by the defendant on separate legal entity is cadit quaestio. 22 [56] The answer to the second issue is a qualified one. Ordinarily, the plaintiff should channel its claim to HRS in adhering to the principle that a company is a legal person separate from its members; but only with the condition that HRS is not dissolved. Since HRS is now dissolved, the remaining question leads to whether the dissolution of HRS is the end game for the plaintiff in making claims against the defendant. I shall deal with this quandary below. Third issue: Whether the dissolution of HRS diminishes the plaintiff’s right to recover from the defendant the balance purchase price for the transfer of the business rights and the ownership of the Chow Kit branch. [57] In this case, both parties agreed that HRS is dissolved. Unfortunately, both parties did not submit further in their respective submissions on the liability of a dissolved company. At the outset, the law that governs the striking off a company is the CA 2016. Section 549 of CA 2016 circumscribed the instances which allow the Registrar to strike off a company. The provision states: Section 549. Power of Registrar to strike off company Notwithstanding any provision in this Act, the Registrar may strike a company off the register, if—

the company is not carrying on business or is not in operation;

the company has contravened this Act;

the company is being used for unlawful purposes or any purpose prejudicial to or incompatible with peace, welfare, security, public interest, public order, good order or morality in Malaysia;

in any case where the company is being wound up and the Registrar has reasonable cause to believe that—

no liquidator is acting; 23

(ii) the affairs of the company are fully wound up and for a period of six months the liquidator has been in default in lodging any return required to be made by him; or

(iii) the affairs of the company has been fully wound up under a winding up by the Court and there are no assets or the assets available are not sufficient to pay the costs of obtaining an order of the Court dissolving the company. [58] Meanwhile, section 550 of CA 2016 is the enabling provision that gives the power to the Registrar to strike off a company. Section 550 of CA 2016 can be dissected into two limbs. The first limb allows the Registrar to strike out company on his own motion. Meanwhile, the second limb permits the Registrar to strike off a company upon application by a director, member or liquidator of the company. In our present context, the Registrar in his letter mentioned that he had exercised the power under section 550 of CA 2016 only in its general terms. Taking into consideration from the overall circumstances of this case, the Registrar had exercised his power under the second limb. [59] Before the Registrar strike off a company, the Registrar has to issue a notice to the company as prescribed by section 551(1) of CA 2016. The company would then be given 30 days to reply, the failure of which, public notification will be issued with a view to strike the company off the register under section 551(2) of CA 2016. The company shall be dissolved after the Registrar has published the name of the company in the Gazette. Section 551 of CA 2016 states: Section 551. Notice of intention to strike off company

Before the name of a company can be struck off from the register under section 549, the Registrar may serve on the company or the 24 liquidator, a notice, stating that if an answer showing cause to the contrary is not received within thirty days from the date of the notice, a notification to the public will be published in the manner determined by the Registrar, with a view to striking the name of the company off the register.

The Registrar may strike the name of the company off the register after the expiration of thirty days of the publication of the notification in subsection (1) if he—

receives a confirmation that the company is no longer carrying on business or is not in operation;

receives no reply from the company to the notice referred to in subsection (1);

receives no objection to the notice and public notification referred to in subsection (1); or

is not satisfied with the reasons as to why the company should not be struck off.

The Registrar shall publish the name of the company which has been struck off in the Gazette and upon publication in the Gazette, the company shall be dissolved.

A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business, and a letter or notice to be sent under this section to a company may be addressed to the company at its registered office or, if no office has been registered, to an officer of the company, or if there is no officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who formed the company, addressed to him at the last known address. [60] Upon the fulfilment of the pre-conditions set out in section 551 of CA 2016, the Registrar may exercise his power under section 550 of CA 25 2016 under to strike off a company based on any of the instances stipulated by section 549 of CA 2016. [61] The effect of striking off under section 549 CA 2016 is set out in section 554 of CA 2016. Section 554 of CA 2016 has set out the effect of striking off on the company’s liability in the following manner: Section 554. Effect of striking off

Where a company is struck off from the register under section 549, the company shall be dissolved, but—

the liability, if any, of every director or officer and member of the company continues and may be enforced as if the company had not been dissolved; and

nothing in section 550 shall affect the power of the Court to wind up a company, the name of which has been struck off from the register provided that there is proof that the company has a property which can be realised.

Where the Court issued a winding up order under paragraph

(1)(b), the liquidator shall only be required to discover and realise any assets of the company. [62] In applying the preceding provisions of CA 2016 to the present context, it would be pertinent for me to reemphasise that HRS directors (including the defendant) had passed a resolution on 6.5.2021 for HRS to be struck off from the register and be dissolved. The said resolution was sent to the Registrar which subsequently triggered the Registrar’s power under section 550 of CA 2016. 26 [63] Upon receiving the HRS’ resolution, the Registrar issued a letter (the registrar’s letter) (Exhibit RS-1) to HRS concluding that HRS was no longer in operation and did not have an active business. The Registrar’s letter stated as follows: “Saya mempunyai sebab-sebab yang munasabah mempercayai bahawa syarikat di atas tidak menjalankan perniagaan atau tidak beroperasi.” [64] The Registrar’s letter had appropriately given HRS 30 days to showing cause to the contrary. There was nothing to suggest that the Registrar’s letter ever being replied by HRS or its directors or members. In this regard, the Registrar had properly fulfilled the pre-conditions set out by section 551(1), (2) and (3) of CA 2016. [65] It would be cogent for this court to conclude that the Registrar had exercised his power under section 550 of CA 2016 to strike off HRS from the register after finding that HRS was not carrying business and not in operation as described by section 549(a) of CA 2016. [66] Since the company is now dissolved, section 554 (1)(a) of CA 2016 comes into play. Section 554 (1)(a) of CA 2016 stipulates that the liability continues against the director or officer or member of the company as if HRS had not been dissolved. Hence, the defendant’s argument that he was cherry picked or the plaintiff had mala fide against him cannot be regarded as a triable issue due to section 554(1)(a) of CA 2016. [67] Conversely, if the defendant was really genuine to parry himself from the present claim, he could have applied to the Registrar to reinstate 27 the HRS’ name in the register like what was done in Greenlix Sdn Bhd & Anor v Suruhanjaya Syarikat Malaysia [2012] MLJU 464; so that, HRS would be able to answer the plaintiff’s claim. In Greenlix Sdn Bhd, the High Court allowed the application made by the petitioner under section 308(5) of the Companies Act 1965 (now section 555 of the CA 2016) to have the name of the company restored to the register so that the company would be able to pursue an ongoing claim. Unfortunately, the defendant in the present case did not take this route. [68] Based on the above reasons, it is my considered finding that the plaintiff retains the right to recover from the defendant the unpaid balance of the purchase price of the Chow Kit branch business as permitted by section 554 (1)(a) CA 2016. Therefore, my answer for this third issue would be in negative. CONCLUSION [69] After close scrutiny of all of the affidavits exchanged between the parties, it is my considered finding that this is a plain and obvious where the plaintiff is entitled to enter summary judgment against the defendant. I find that the defendant failed to establish any issues to be tried before this court. I therefore allow order in terms for the plaintiff’s application at enclosure 19. ……………sgd……………… DR. AZROL BIN ABDULLAH JUDGE SESSIONS COURT SEPANG