City Properties Sdn Bhd v Jalex Sdn Bhd (WA-28PW-389-08/2022)

In Enclosure 1, the Applicant, in its capacity as the sole contributory/shareholder of KL Landmark Development Sdn Bhd (in liquidation), seeks the sanction of this Court under section 486 of the Companies Act 2016 (“CA 2016”) for leave nunc pro tunc (retrospective sanction) for KL Landmarks Development Sdn Bhd (“the Company”) to appoint solicitors and to proceed with the legal suits/appeals as listed below: i) Kuala Lumpur High Court Companies (Winding-Up) No. WA- 28NCC-618-07/2016; ii) Kuala Lumpur High Court Originating Summons No. WA-24C- 79-03/2022; iii) Appeal against the decision of the High Court under the suit number of Kuala Lumpur High Court Originating Summons No. WA0-24C-79-03/2022; and iv) Kuala Lumpur High Court Originating Summons No. WA-24C- 80-03/2022.

The Respondent and the Company had entered into two (2) construction agreements; dated 23.03.2012 for a sum of RM19,608.243.50, and dated 18.11.2013 for a sum of RM2,881,931.30.

Due to a dispute between the parties, the Respondent commenced adjudication proceedings and obtained two (2) adjudication decisions against the Company, both dated 29.03.2016.

Based on the above two (2) adjudication decisions, the Respondent proceeded to wind up the Company vide petition No. WA-2NCC-618- 07/2016 (Suit 618) and obtained a winding-up order on 29.09.2016.

The Company, thereafter, commenced the following suits against the Respondent: i) WA-24C-79-03/2023 (“Suit 79”); and ii) WA-24C-80-03/2023 (“Suit 80”). Both suits are the Company’s applications to set aside the adjudication decisions against the Company.

Presently, the application before this Court is focused on the application for leave nunc pro tunc in respect of the Company’s Suit 79, the Company’s appeal to the Court of Appeal (“COA”) against the dismissal of Suit 79, and to proceed with Suit 80. Both Suit 79 and Suit 80 are the Company’s applications to set aside the adjudication decisions given against the Company.

The Applicant avers that the two (2) adjudication decisions in Suit 79 and Suit 80 ought to be set aside as the claims in both the suits are based on agreements executed before the coming into force of the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”).

The Federal Court in the case of Jack-In Pile (M) Sdn Bhd v Bauer (M) Sdn Bhd (2020) 1 MLJ 174 held that the CIPAA could only be applied prospectively and that it does not apply retrospectively. Therefore, it follows that the two awards by the Adjudicators are without jurisdiction, and, thus, ought to be set aside because the agreement on which Respondent based its CIPAA claim was executed before the CIPAA came into force. [9] The Applicant avers that it had obtained a sanction from the Insolvency Department on 28.03.2022 (“Insolvency Sanction”) prior to the commencement of Suit 79 and Suit 80. There was, however, a mistake in respect of the letter giving sanction in regard to the specific case for which the sanction was given. Thus, the mistake could be rectified by this Honourable Court. [10] The Federal Court in Winstech Engineering Sdn Bhd v ESPL (M) Sdn Bhd [2014] 3 MLJ 1 [see tab 7 of the ABOA] in adopting the principles laid down in Re Saunders, held as follows: “[22] Following Saunders’ case, we hold that the view in appropriate circumstances, which are to be proven, leave nunc pro tunc may be given under s 236(2)(a) of the Companies Act subject to the discretion of the courts under s 236(3) of the Act. Such discretion and control by the court under s 236(3) is to be read together with s 226(3) of the Act. This is notwithstanding the fact that the proceedings had already commenced.” [11] Similarly, in the case of Reebok (M) Sdn Bhd v CIMB Bank Bhd [2018 MLJU 1116, the Court of Appeal stated in paragraph 23 that a retrospective sanction can be given by the court. The Court of Appeal held: “(23) The Companies Act as well as case laws do not permit an action to be commenced after a winding-up order without first obtaining the sanction of the liquidator. If sanction has not been obtained the commencement of the proceedings will be irregular in relation to locus standi and will be struck out, unless a retrospective sanction is approved by the Court.” [12] Azlan Sulaiman, JC, in the case of Small Medium Enterprise Development Bank Malaysia Bhd v Oren Venture Sdn Bhd & Ors

MLJ2 410 (“Orens’ case”), held as follows; “(35) Thus under the Act the scheme for a wound-up company bringing, continuing with or defending an action is very straight forward and simple. Firstly, only the liquidator has the power to do so. It is only when he refuses to, or is unable to, or is advised not to, or has no funds to (and I stress that those grounds are not exhaustive) can a creditor or contributory apply to the winding-up court for one of the two orders; either to compel the liquidator to bring, continue or defend the action, or alternatively for an order that they be given the sanction by the court to bring, continue or defend the action. In their application they would have to satisfy the court that doing so would be in the interest of the Company. And in giving that sanction, the court can impose terms and conditions, including requiring security and indemnity. But the Liquidator does not have hat power;

secondly, only the court is best placed to make that judicial evaluation of whether bringing, continuing with or defending that action would be in the interest of the company, particularly where the liquidator has first declined to.” [13] It is to be noted that Oren’s case stated above has recently been affirmed by the Court of Appeal. [14] Applying the principles enunciated by Azlan Sulaiman JC, in Oren’s case, I find the Applicant has satisfied the test of retrospective sanction for the following reasons: i) the Liquidator has declined to commence the necessary legal actions to set aside the adjudication decisions which is why she has given sanction to the Applicant to commence Suit 79 and Suit 80. Had she been willing to file the suits she would not have given the sanction. ii) The filing of the two suits is obviously in the best interest of the Company since, prima facie, the Adjudicators decision appears to be out of his/her jurisdiction. Based on the decision of the Federal Court in the case of Jack-in Pile (M) Sdn Bhd v Bauer (M) Sdn Bhd (“Bauer’s case”) cited earlier, the Adjudicator does not appear to have any jurisdiction to decide on any dispute arising from any agreements executed before the coming into force of the CIPAA. [15] With respect to this application for leave nunc pro tunc, the Applicant’s submission in reply states as follows: “(13) the Applicant submits that the insolvent company, KLLD has obtained the Liquidator’s Sanction at he commencement of Suit 79 and Suit 80. The Respondent is also aware of this Liquidator’s Sanction, as it was mentioned in paragraph 33 of the Respondent’s Submissions.

It is submitted that the Applicant is aware of the technical defect in the Liquidator’s Sanction, as raised by the Respondent, that it was wrongly stated in the Liquidator’s Sanction as the Court of the Special Commissioner of Income Tax instead of the High Court of Malaya at Kuala Lumpur.

Hence, the Applicant made this application as a rectification step in regard to Suit 79, Suit 80 and the appeal against the decision in Suit 79 as those proceedings have already been commenced with the Liquidator’s Sanction in place, albeit the technical defect, which could only be rectified by a retrospective court sanction issued by this Honourable Court.” [16] I accept the Applicant’s submissions above as a valid ground for application for leave nunc pro tunc. I am persuaded by the decision in Lai King Lung and Anor v Merais Sdn Bhd (2020) 5 MLRA 1, where the Federal Court stated at paragraph 30, line C: “At the hearing in the Court of Appeal, the Defendant acknowledged that in appropriate circumstances the court may grant retrospective leave nunc pro tunc, but this would require formal application by the Plaintiff. However, given that there was no formal application, supported by a properly deposed affidavit the defendants argued that there was no material before the Court of Appeal to consider or justly grant any nunc pro tunc leave. It was in this context that the Court of Appeal opined that there may be retrospective leave or sanction granted in appropriate cases, or even the application of the principle of ratification.” [17] Applying the principles enunciated in the case of Lai King Lung above, I find the Applicant has satisfied the test and this is an appropriate case for this Court to exercise its discretion to grant leave nunc pro tunc for the Suit 79, the appeal and also, in respect of Suit 80. As for the Company’s winding-up No WA-28NCC-618-09/2016, there is no requirement for leave, although I mistakenly allowed leave to appeal against the High Court’s decision to wind up the Company. [18] I also award the Applicant cost in the sum of RM5,000.00 to be paid by the Respondent. Dated 14 March 2024 ……………..t.t……………... Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE APPLICANT: KAMRAJ NAYAGAM WITH NICOLE LEE SHIH SOLICITORS FOR THE APPLICANT: TETUAN MAH-KAMARIYAH & PHILIP KOH COUNSEL FOR THE RESPONDENT: JOSHINAE WONG WITH IRVIN WONG SOLICITORS FOR THE RESPONDENT: TETUAN CHRISTINA CHIA LAW CHAMBERS Cases Referred to: ➢ Jack-In Pile (M) Sdn Bhd v Bauer (M) Sdn Bhd (2020) 1 MLJ 174 ➢ Winstech Engineering Sdn Bhd v Espl (M) Sdn Bhd [2014] 3 MLJ 1 ➢ Reebok (M) Sdn Bhd v CIMB Bank Bhd [2018 MLJU 1116 ➢ Small Medium Enterprise Development Bank Malaysia Bhd v Oren Venture Sdn Bhd & Ors (2020) MLJ2 410 ➢ Lai King Lung and Anor v Merais Sdn Bhd (2020) 5 MLRA 1 Legislation Referred to: ➢ Section 486 of the Companies Act 2016 ➢ Construction Industry Payment and Adjudication Act 2012 (“CIPAA”). Decision Date : 13.04.2023