Drawbridge Technologies (M) Sdn Bhd v 1. ) Ad&M Global Sdn Bhd (WA-28NCC-847-09/2024)

Content

1 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR IN THE FEDERAL TERRITORY, MALAYSIA (COMMERCIAL DIVISION) COMPANIES (WINDING UP) NO.: WA-28NCC-847-09/2024 In the matter of Section 465(1)(f) and/or Section 465(1)(h) of the Companies Act 2016; And In the matter of Companies (Winding Up) Rules 1972; And In the matter of AD&M Global Sdn Bhd [Company No.201801004550 (1266564-M)] BETWEEN DRAWBRIDGE TECHNOLOGIES (M) SDN BHD [Company No.: 200301017425 (619845-H)] … PLAINTIFF

Preamble

pursuant to Section 15.4 of the VAR Agreement No.2, Autodesk Asia was terminating the same with immediate effect; and b) the termination would take effect on 13.12.2023. [28] With the termination of the VAR Agreement No. 2, the Company was unable to thereafter sell any Autodesk Products. Breakdown of relationship – lockout from emails [29] On 31.10.2023, Jason and or Wong had (without informing Rannie and or Jordan) changed the domain, host server and emails of the Company. This effectively prevented both Rannie and Jordan from having access to their emails assigned to them by the Company. [30] However, Jordan was successful in restoring the above back to the Company’s original domain, host server and emails on 9.11.2023. [31] On the same day, Jason immediately emailed to MYNIC Berhad stating as follows: a) alleging that Jordan had “illegally use his position to represent” the Company to change the domain, host server and emails; b) such purported change by Jordan was done without the Company and management approval; and c) Jordan requested MYNIC Berhad to withdraw the current server and to make some reversal. [32] On 10.11.2023, MYNIC Berhad stated that Jason’s request would be processed within the same day. [33] Jason did not carbon copy his email to MYNIC Berhad to either Rannie or Jordan. However, he did carbon copy the same to Wong. As such, Rannie and Jordan demanded Jason and Wong to allow them access to Autodesk’s partner portal and to their email addresses respectively in the Letter of Demand. [34] Notwithstanding the above, Rannie remained locked out from the Company’s email notwithstanding that he is still its director. Demand for outstanding debts [35] On 27.11.2023, the Company issued a letter of demand through their solicitors, Messrs KJ Yap & Co to Drawbridge demanding for a purported outstanding sum of RM 2,016,215.80 for goods sold and delivered to Drawbridge. [36] On 15.12.2023, Drawbridge had replied through their then solicitors, Messrs WS Wong & Co, stating inter alia as follows: a) Drawbridge was in the midst of verification on the amount claimed by the Company and they would revert upon completion of the verification process; b) Drawbridge requested the Company to forward a number of invoices for the purpose of verification on the amount claimed by 18.12.2023; and c) Drawbridge also demanded for the letter of appointment of Messrs KJ Yap & Co as the solicitor for the Company duly signed by all directors and or all shareholders. [37] On 18.12.2023, the Company replied through Messrs KJ Yap & Co stating as follows: a) the Company was in astonishment that Drawbridge had requested the Company to furnish the invoices within 1 working day upon receiving Drawbridge’s reply letter, despite Drawbridge having taken more than ½ month to reply to the Company’s earlier letter; b) the Company would only disclose those invoices upon commencement of court proceeding as the request was unreasonable as Drawbridge was aware of the said outstanding sum and had a record of all the relevant transactions; c) the Company demanded Drawbridge to settle the outstanding sum of RM2,016,215.80 before 19.12.2023, 6.00pm, failing which the Company would proceed with the legal proceeding without further notice to Drawbridge; d) Messrs KJ Yap & Co was duly appointed by the Company and they would only file in their letter of appointment at the court proceeding; e) queries were raised as to which rules or regulations that a copy of their letter of appointment should be produced at this stage; and f) they requested for Messrs WS Wong & Co’s confirmation if they had instruction to accept service of cause papers on behalf of Drawbridge within 24 hours from the date of the letter. [38] On 19.12.2023, Drawbridge replied through Messrs WS Wong & Co stating, inter alia, as follows: a) there was no delay in replying to Messrs KJ Yap & Co’s letter; b) the appointment of Messrs KJ Yap & Co by the Company was disputed because the board of directors and or all the shareholders of the Company did not appoint them and were not aware of their appointment in this matter; c) they requested again the relevant invoices referred to in their letter dated 15.12.2023 for verification of the amount claimed. The failure or refusal of the Company or Messrs KJ Yap & Co to provide the same shall invoke the adverse inference under the law against the Company and Messrs KJ Yap & Co; d) they reminded that Messrs KJ Yap & Co are to bear the cost of the litigation pursuant to Order 59 rule 6 of the Rules of Court 2012 should the Company proceed with the court action; and e) they had instruction to accept service of the cause papers. [39] There was no further response from either the Company or Messrs KJ Yap & Co for the year 2023 thereafter. Removal from management [40] Sometime on 2.7.2024, Drawbridge received a notice from the liquidator of JRSYS stating as follows: a) that JRSYS requested for an extraordinary general meeting to be convened on 19.7.2024 for the Company pursuant to S. 322 of the Companies Act 2016; and b) that the resolution to be tabled at the said meeting to vote for the removal of Jordan as director of the Company with immediate effect. [41] On 19.7.2024, the said general meeting was convened whereby it was resolved that Jordan be removed as a director of the Company with immediate effect. The said resolution was passed with 3 votes in favour and Drawbridge solely voting against. [42] On 19.8.2024, Messrs KJ Yap & Co finally replied Messrs WS Wong & Co’s letter dated 19.12.2023 stating the following: a) Messrs KJ Yap & Co was properly appointed by the 2 directors of the Company, namely Wong and Jason to take legal action against Drawbridge; b) in any event, if Drawbridge disputed their appointment of solicitor, they would refer the written Letter of Appointment during the court proceeding; c) Drawbridge had made few payments to the Company whereby the said conducts amounted to admission of debts, however, as of 19.8.2024, Drawbridge was still indebted to the Company the principal amount of RM1,406,898.63 together with late payment interest amounting to RM332,430.96 (as of 31.07.2024); d) despite repeated requests and ample of time given to Drawbridge, the outstanding total sum of RM1,739,329.59 remained unpaid. [43] On 21.8.2024, Drawbridge replied through their solicitors, Messrs Ong Kok Bin & Co, stating, inter alia, as follows: a) they had instructions to take over conduct of the matter and are currently taking instruction and reviewing the matter; and b) they requested for time until 2.9.2024 to reply to Messrs KJ Yap & Co’s letter dated 19.08.2024. [44] On 21.8.2024, Messrs KJ Yap & Co replied stating as follows: a) the Company was not agreeable to any extension of time for Drawbridge to reply; b) the Company’s Letter of Demand to Drawbridge was on 27.11.2023 and Drawbridge had unreasonably delayed the matter without explanation; c) the Company was in financial difficulties due to Drawbridge’s non-payment. This had purportedly caused the Company to be sued by their supplier, Tec D (M) Sdn Bhd, under Civil Suit No.: BB-B52NCVC-73-7/2024 whereby Rannie is also one of the defendants in the suit; and d) the Company demanded for the full payment from Drawbridge before 26.8.2024. [45] On 22.8.2024, Messrs Ong Kok Bin & Co wrote a letter the particulars of which are as follows: a) it was noted that Messrs KJ Yap & Co had represented on previous occasions that they had mandate to act for the Company; and b) a copy of their letter of appointment was requested to be furnished by latest 23.08.2024. [46] On 22.08.2024, Messrs KJ Yap & Co replied stating as follows: a) their firm was appointed by the 2 directors of the Company, namely Wong and Jason; and b) they enclosed their letters of appointments signed by Wong and Jason. [47] On 26.8.2024, Drawbridge replied through their solicitors, Messrs Ong Kok Bin & Co, stating, inter alia, as follows: a) based on Drawbridge’s records and whatever documents available to them, the amount claimed by the Company was exaggerated; b) numerous payments were made by Drawbridge which did not appear to be reflected in their letter; c) as such, any amount due to the Company (if any) was much less than what was stated in their letter; d) Drawbridge took note of the allegation that it was due to Drawbridge’s alleged non-payment that resulted in the Company being sued by Tec D (M) Sdn Bhd. However, having reviewed the statement of claim, the sum claimed was RM273,564.94, excluding late interests; e) interestingly, the Company was silent as to the indebtedness of Man Sketch, whom Jason is both a director and shareholder of Man Sketch; f) Man Sketch is indebted to the Company a sum which, if repaid, would have been able to be utilised to settle Tec D (M) Sdn Bhd; g) by that analogy, the Company’s conduct in targeting Drawbridge solely under the circumstances was highly questionable and oppressive; h) Drawbridge denied all allegations against them contained in all the Company’s letters; and i) Messrs Ong Kok Bin & Co have instructions to accept service on Drawbridge’s behalf. [48] On 4.9.2024, Drawbridge was served with the cause papers by the Company. The covering letter and the cause papers can be found at Annexure GG of Enclosure 20. Court’s Considerations [49] The Court of Appeal has set out a non-exhaustive list to illustrate how the ground of just and equitable may be met in Gulf Business Construction (M) Sdn Bhd v. Israq Holding Sdn Bhd [2010] 5 MLJ 34 (“Gulf Business Construction”). [50] More specifically, 2 illustrations which form part of the non-exhaustive list cited in Gulf Business Construction are as follows: - a) where the substratum of the company has gone; and b) where the relationship of the parties has broken down irretrievably. Sub-stratum of Company gone [51] In the present case, it is clear that the Company’s nature of business was the carrying out of the business of computer programming activities, wholesale of computer hardware, software and peripherals. Recital C of the Shareholder Agreement stipulates that the Company will mainly be for the purposes of “carrying on the business inter alia to develop software, provide training services and trade in computer software and hardware”. [52] Since its incorporation, the Company had only been a reseller of products developed by Autodesk Inc. of the United States of America. In fact, the Company had dealt with products related only to Autodesk Inc. In this regard, the Company had purchased Autodesk Products from its distributors in Malaysia, namely: a) Ingram Micro Malaysia Sdn Bhd; b) Tec D (M) Sdn Bhd; and c) Tec D Distribution (Malaysia) Sdn Bhd. [53] Upon receipt of the Autodesk Products from the authorised distributors, the Company would then sell the same to end-users in Malaysia. The sale of Autodesk Products by the Company to end-users was in line with its status as Autodesk Asia’s appointed reseller. [54] There is no dispute that the Company has lost its reseller status when Autodesk Inc. terminated the relationship on 12.12.2023. Since the termination of its relationship with Autodesk Inc, the 1st Respondent has not conducted any active trade at all. There is no dispute that the Company’s Standard Ledger shows that no new sales were transacted by the Company since the issuance of the termination notice. [55] Thus, the averment that “the Company has been actively exploring new business opportunities and diversifying its portfolio beyond Autodesk products, and remains committed to carrying on its business activities” has remained unfulfilled even after more than 16 months since the Autodesk’s termination. In fact, at the hearing. learned counsel for the Company conceded that despite efforts to engage in trades after the termination, the Company has failed to find any real footing and currently continues to run at a loss. [56] In Dato’ Ting Check Sii v. Marine Utama Sdn Bhd & Anor [2013] 9 MLJ 527 (HC) (“Dato’ Ting Check Sii”) the High Court held that the substratum of a company was lost when the company’s only client for the transportation service had ceased doing business with the company. Accordingly, the petitioner in that case successfully established that the main objective of the company had lapsed and ceased to exist. [57] Similarly, in this case, since its incorporation, the Company had only dealt with Autodesk Inc. related products. When Autodesk Asia terminated the Company’s status as reseller of Autodesk Products on 12.12.2023, this had effectively rendered the Company from dealing further with Autodesk Products. [58] More importantly, after the termination, the Company has not engaged in any active trade since. Whilst the Respondents deny that the Company only deals with Autodesk Products, the documentary evidence provided by the Respondents show only one sale transaction on a product that is not directly developed by Autodesk Inc. Even then, that one other sale was a product whose usage is directly related to the Autodesk Products. [59] In truth, both documentary evidence made available to this Court and the Respondents’ own contentions support the Petitioner’s contention that the Company has lost its substratum when its status as Autodesk Asia’s reseller was terminated. No evidence was adduced by the Respondents to show the Company has carried out any active trade since the Termination Notice was issued. [60] For the above reasons, I find that the Company’s substratum has indeed gone with the Autodesk termination and the Company’s failure to find new opportunities to carry on its business even after 16 months since the termination. Irretrievable Breakdown in Relationship [61] Quite apart from the loss of substratum, it is also my judgment that the relationship between the shareholders of the Company has broken down irretrievably. [62] There is no dispute that Jason, as a director of the Company and the 3rd Respondent, had caused the Company the loss of its reseller status with Autodesk Inc. [63] There is ample evidence that there is now a loss of trust and confidence in Jason to act in interest of the Company. More specifically: a) Jason and Wong (a director of the Company) have removed Rannie’s and Jordan’s access to the Company’s emails; b) The original structure where all the shareholders would participate in the management of the Company no longer holds true. The Shareholder Agreement envisaged that the Company is run and managed by representatives of all its shareholders, namely Drawbridge, Man Sketch, JRSYS and Wong. However, at the general meeting on 19.07.2024, Jordan was removed as a director. This effectively gave control of the Company to Jason and Wong, as both of them forms majority of its board of directors; c) Jason and Wong have also caused the Company to sue Drawbridge for outstanding debts due but did not take similar action to sue Man Sketch for its outstanding debts owed to the Company. At the hearing, learned counsel for the Company had justified the non-action against Man Sketch on the ground that Man Sketch had been paying its debts to the Company. However, it was subsequently brought to this Court’s attention that Man Sketch had only been paying the Company the amount sufficient to pay the legal costs that the Company is incurring for its legal action taken against Drawbridge. [64] To my mind the aforesaid demonstrates that the relationship between the shareholders of the Company has unfortunately broken down irretrievably. This is further fortified by the various allegations and counter-allegations that the parties have made against each other in their correspondences. Conclusion [65] Based on the aforesaid, it is my judgment that the Petitioner, Drawbridge has established to the satisfaction of this Court based on the balance of probabilities that it is just and equitable that the Company be wound up on the ground that the substratum of the Company is lost and that the relationship between the shareholders has broken down irretrievably. [66] Accordingly, this Court makes the following orders: a) that AD&M Global Sdn Bhd [Company No. 201801004550 (1266564-M)] be wound up under the provisions of the Companies Act 2016; b) that the Gabriel Teo Chun be appointed as the liquidator of the Company; c) that the remuneration of Gabriel Teo Chun, as Liquidator of the Company shall be on a time-cost basis or as provided under the Companies (Winding-Up) Rules 1972 and be paid out of the assets of the Company; d) that the cost of the Petition fixed at RM 10,000.00 subject to allocator be paid out of the assets of the Company, Dated the 4th day of July 2025 ONG CHEE KWAN Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 & Admiralty Counsel: