Chay Kam Yuin v Nihon Properties Sdn Bhd (WA-28PW-368-12/2021)

In the matter before me, the Applicant has applied by way of a Notice of Motion in enclosure 1 dated 20.12.2021 (Motion) pursuant to sections 471 and 486(2) of the Companies Act 2016 and/or the inherent jurisdiction of this Court under Order 92 Rule 4 of the Rules of Court 2012 for inter alia the following orders:-

(i) the Applicant be given leave to commence proceedings against the Respondent’s creditor, Badan Pengurusan Bersama Market Hall (“JMB”) to challenge the debt filed by the JMB vide the Proof of Debt dated 20.12.2017 (POD)

The Applicant is a contributory of the Respondent company and in brief claims that:-

(a) no judgement or order was obtained by the JMB which shows that the Respondent is owing the JMB

(b) the maintenance fee or sinking fund levied are in contravention of section 25 of the Strata Management Act 2013

(c) the debt claimed under the POD is wrongful and illegal

After hearing the learned counsels for the respective parties who had submitted before me on 7.4.2022, I had dismissed the Motion with costs of RM3,000. The Applicants being dissatisfied with my decision have since appealed against the same and herewith are my written grounds. S/N 32VXLFj/nkwiq8sgoDuKQ Brief Background Facts

On 24.10.2017, the Respondent was ordered to be wound up and the Official Receiver (“OR”) was appointed as the Liquidator thereof.

The Respondent is the registered owner and developer of a commercial complex or shopping mall known as “Market Hall Pudu” which is located in the heart of Pudu, Kuala Lumpur.

On 20.12.2017, the JMB lodged the POD with the OR claiming for a total sum of RM473,547.55 being the sum due and payable in respect of the unsold units, the details of which are as follows:

(a) maintenance fee and sinking fund accrued for a period from March 2017 to September 2017; and

(b) fire insurance accrued for a period from 31.5.2017 to 30.5.2018.

On 4.12.2018, Mr. Lim Tian Huat was appointed as the Liquidator of the Respondent in place of the OR.

By way of a letter dated 6.11.2019, the Liquidator has provided the Applicant at his request a summary of proofs of debt, which were adjudicated as at 5.11.2019. The POD lodged by the JMB was included therein.

By way of a letter dated 6.7.2020, the Liquidator has at the request of the Applicant informed the JMB of the nature and breakdown of the JMB’s claim under the POD. S/N 32VXLFj/nkwiq8sgoDuKQ

Prior to the filing of the Enclosure 1, the Applicant has commenced an action in the High Court of Kuala Lumpur under Post Winding-Up No. WA-28PW-131-05/2021 (“Motion 131”) for, inter alia, leave to commence legal proceedings against the Liquidator in admitting the POD. Motion 131 was withdrawn by the Applicant after a copy of the POD was forwarded to his solicitors on 12.5.2021. Court’s Findings

From the documents before me, it was clear that:-

(a) the POD was admitted by the Liquidator on 5.11.2019 and the Applicant was informed of the said Liquidators decision on 6.11.2019 as can be seen in exhibit LTH-1 of enclosure 4 and by way of another letter dated 6.7.2020 as found in exhibit LTH-5 of enclosure 4

(b) the Motion was only filed on 20.12.2021, i.e a period of almost 2 years after the Applicant was informed of the Liquidators decision on the said POD

I have further observed that the Applicant had not lodged any appeal against the admission of the said POD within the prescribed period under Rule 93 of the Companies (Winding Up) Rules 1972 which reads: “If a creditor or contributory is dissatisfied with the decision of the liquidator in respect of a proof, the Court may, on the S/N 32VXLFj/nkwiq8sgoDuKQ application of the creditor or contributory, reverse or vary the decision; but subject to the power of the Court to extend the time, no application to reverse or vary the decision of the liquidator in a winding up by the Court shall be entertained, unless notice of the application is given before the expiration of twenty-one days from the date of service of the notice of rejection.”

Based on the aforementioned facts, I hold that the Applicant has slept on his rights to challenge the POD and that the period referred to in Rule 93 of the Companies (Winding Up) Rules 1972 for an appeal against the decision of the Liquidator vis a vis the POD has, on the facts before me, expired. I hold, as this Court has done in Linkman Connections Sdn Bhd v Chong CHuan Long (liquidator for Leica Residence Sdn Bhd (in voluntary liquidation) & Anor [2020] MLJU 2478 that the proper course of action for any complaint by the Applicant being a person who is aggrieved by the act of the Liquidator in admitting the POD is to have filed an action under section 517 of the Companies Act 2016 to reverse the Liquidator’s act within 21 days of the date of service of the notice referred to therein.

I also find that the reasons put forth by the Applicant herein to explain the delay in the filing of the Motion on the fact that the Applicant has contended that he has tried to obtain the POD from the Liquidator with the statement of accounts which were only served on 31.3.2022 on the Applicant and who thereafter obtained legal advice that the amounts were illegally charged as being non sensical and unacceptable as these details could have been S/N 32VXLFj/nkwiq8sgoDuKQ obtained and any legal advice thereto could very well have been sought by the Applicant much earlier either at the time of the POD being accepted by the Liquidator or at the very least when the Applicant was informed of the said Liquidators decision on 6.11.2019. On that basis, I therefore reject the reason for the delay in filing the Motion.

I agree with the Respondent Liquidators’ contention that the Applicant by filing this Motion is now attempting a back door method to challenge the admission of the said POD, and accordingly this action cannot be maintained due to the lack of bona fide on the part of the Applicant herein in filing the Motion. I refer to the Court of Appeal’s decision in Lim Chiew v Lee Chao Yong & Ors [2018] 1 LNS 1025 where it was held that:- “[31] It is trite, that inordinate delay without explanation, is in itself fatal to the application under section 279 of the RCA. This was held by Ramly Ali J, (now FCJ), in Abric Project Management Sdn Bhd v. Palmshine Plaza Sdn Bhd & Anor [2007] 7 CLJ 516, where the Court in dismissing an application under section 279 of the RCA, at para 94, 95 and 96, pages 549 to 550 held: "[94] There was clear delay in the filing of encl. 37. Enclosure 37 was only filed on 27 December 2005 where evidence suggests that the applicant knew of the sale of the said land at least as early as 20 August 2004. [95] No reasons have been proffered by the 1st Respondent to explain a delay of almost one and a half years. Such a S/N 32VXLFj/nkwiq8sgoDuKQ delay would be in itself, be grounds to refuse encl. 37. In the Leon case (supra). Plowman J held "another ground for refusing the relief for which the plaintiff is asking in this motion is the matter of delay. It is clear from the evidence that the plaintiff knew before Christmas, 1965... the writ was not issued until Mar. I, that is to say, after a delay of over two months..."

I also minded that Section 471 of the Companies Act 2016 provides as follows:

From the express wordings of the above said section, I hold that the said section is not applicable to the Applicant to support its Motion herein as the said section refers to an “action or proceeding shall be proceeded with or commenced against the company” and not to an action against a third party, as in this case herein, for leave in respect of a purported claim against the JMB who is not the Company in liquidation. Reliance on this section by the Applicant for its Motion, is therefore clearly wrong and misconceived.

As to the applicability of Section 486(2) of the Companies Act 2016, I set out the same which is as follows: S/N 32VXLFj/nkwiq8sgoDuKQ

(a) without the authority under paragraph (b), exercise any of the general powers specified in Part I of the Twelfth Schedule; and

(b) with the authority of the Court or the committee of inspection, exercise any of the powers specified in Part II of the Twelfth Schedule.

I hold that the said Section 486(2) of the Companies Act 2016 is only to be invoked by any creditor or contributory by applying to the Court with respect to any exercise or proposed exercise of the Liquidator’s powers under the Twelfth Schedule where the conduct of the Liquidator can be shown by the Applicant to be

(i) acting fraudulently

Save for the above categories, this Court should not interfere with the decision of the Liquidator. I rely on Koh Huat Kwan v Pegawai Penerima (selaku pelikuidasi bagi Poh Mah Housing Development Sdn Bhd) & Ors [2015] 7 CLJ 16, where the Court of appeal in a judgment delivered by Vernon Ong JCA (as His S/N 32VXLFj/nkwiq8sgoDuKQ Lordship then was) held in a case involving the similar section 236(3) and/or section 279 in the Companies Act 1965 that: “[15] At the outset, it is pertinent to note that the appellant's application to set aside the consent order is predicated on s. 236(3) and/or s. 279 of the CA 1965 which are as follows: Section 236(3) reads: The exercise by the liquidator of the powers conferred by this section shall be subject to the control of the Court, and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of those powers. Section 279 further provides as follows: Any person aggrieved by any act or decision of the liquidator may apply to the Court which may confirm reverse or modify the act or decision complained of and make such order as it thinks fit. [16] We agree with the learned High Court Judge's observation that the reference to the word "court" would mean the "Winding-Up Court" and any application arising out of any matter in the course of a winding-up should be referred to the Winding-Up Court. [17] By invoking either of the aforesaid sections of the CA 1965, the Winding-Up Court is only justified in interfering with the exercise of the powers, acts or decisions of the first respondent qua liquidator if the appellant can show that the S/N 32VXLFj/nkwiq8sgoDuKQ conduct of the first respondent falls within the following categories:

(a) that the first respondent had acted fraudulently; or

(b) that the first respondent was not bona fide in his conduct; or

(c) that the conduct of the first respondent was so utterly unreasonable and absurd that no reasonable person would so act. (see Leon v. York-O-Matic Ltd [1966] 3 All ER 277; Harold M Pitman & Co v. Top Business Systems (Nottingham) Ltd [1984] BCLC 593; Abric Project Management Sdn Bhd v. Palmshine Plaza Sdn Bhd & Anor [2007] 7 CLJ 516; [2007] 3 MLJ 571)

Applying the authority of Koh Huat Kwan (supra) herein, I find no arguable case for the Applicant to bring an action against the JMB under this section 486(2) of the Companies Act 2016 when the Applicant has not made out a case or proven to this Court that any of the categories mentioned in Koh Huat Kwan (supra) exists in the Motion before this Court. At the risk of repetition, the Applicant has also not in his Motion seeked leave to commence proceedings for or on behalf of the Company, but that the Applicant be allowed to commence the said actions under his own name which then puts the applicant outside the ambit of section 486(2) of the Companies Act 2016.

I hold that the grounds in support of the Motion which consists of, amongst others, (i) no judgement or order was obtained by the JMB S/N 32VXLFj/nkwiq8sgoDuKQ which shows that the Respondent is owing the JMB, (ii) the maintenance fee or sinking fund levied are in contravention of section 25 of the Strata Management Act 2013 and (iii) the debt claimed under the POD is wrongful and illegal are mere allegations which have not been substantiated by the Applicant. In coming to my decision on this, I have viewed exhibits LTH 9 to 11 in enclosure 8 and 9 respectively and find that the JMB’s claim appear to prima facie tally with the statement of accounts and invoices therein.

In the circumstances I hold that the Liquidator’s act of accepting the POD is not so unreasonable or absurd and I had hereby dismissed the Motion in enclosure 1 with costs of RM3,000. Dated: 2nd June 2022 sgd. NADZARIN WOK NORDIN HIGH COURT JUDGE KUALA LUMPUR HIGH COURT Parties: Angeline Ang for the Applicant [Messrs Chee Hoe & Associates] Vynny Wong for the Respondent [Messrs Kee Sern, Siu & Huey] Lee Zi Qin, watching brief for Badan Pengurusan Bersama Market Hall S/N 32VXLFj/nkwiq8sgoDuKQ