Genisys Integrated Engineers PTE LTD v Onn Kien Hoe (WA-28PW-406-09/2023)

ONN KIEN HOE

MOK YUEN LOK (NRIC NO: 600928-10-6267) RESPONDENTS JUDGMENT INTRODUCTION [1] Genisys Integrated Engineers Pte Ltd (“the Applicant”) filed Enclosure 1 for leave to commence an application for the removal of Onn Kien Hoe and Mok Yuen Lok (“the Respondents”) as the Liquidators of UEM Genisys Sdn Bhd (“the Company”) and that Tan Peng Sam @ Cheng Peng Sam be appointed as the new Liquidator of the Company, and for other consequential orders including for assessment of remuneration of the current Liquidators. [2] During the hearing on 29.01.2024, the Applicant was given leave to commence an action to remove the Liquidators of the Company. This Court then directed that:

Enclosure 1 be converted to a proper application for the removal of the Respondents as Liquidators of the Company;

This Court will decide on the main issue, which is the removal of the Respondents as Liquidators in these proceedings while the parties are to file a separate application for ratification/assessment of remuneration;

(c)

The Respondents be allowed to file a comprehensive affidavit to address all the issues raised by the Applicant earlier. BACKGROUND FACTS [3] The Company is a joint venture company formed between the Applicant with 49% shareholding and UEM Group Berhad (formerly known as United Engineers (Malaysia) Bhd (“UEM”) with 51% shareholding. [4]

The Applicant alleges that the Respondents have failed to faithfully and vigorously exercise their statutory duties as Liquidators of the Company and/or failed to apply reasonable professional skill and exercise due diligence in conducting the affairs of the Company. It would be against the interest of the shareholders of the Company to allow the Respondents to remain as Liquidators of the Company any longer.

(ii) The Applicant avers that since their appointment, over 17 years since the winding-up of the Company, the Respondents had not been able to complete the liquidation process. Although all creditors had been fully paid in the year 2016, the Respondents were, thereafter, still not able to complete the liquidation process for over seven (7) years. [8] The above were the initial grounds to justify the removal of the Liquidators. However, another ground, which is more significant, came to light in the course of these proceedings. [9] On 29.11.2023, the First Respondent deposed in his Affidavit in Reply

(“the Respondents’ “AIR (2)”) that there was a misappropriation of a large sum of money amounting to RM15,681,746.06 (the “Misappropriated Sum”) by the Company’s “senior staff”, an employee named Lim Andy, from the Company’s bank accounts and fixed deposits which were maintained and controlled by the Respondents. [10] The Respondents admitted in their AIR (2) that the alleged misappropriation occurred between 03.11.2015 and 24.07.2023 but was only discovered “sometime in late October 2023”. The Respondents admitted that they had no inkling whatsoever that funds of the Company were being stolen regularly, by their own employee, over a prolonged period of more than seven (7) years and eight (8) months which involved 48 cheque withdrawals and 14 fixed deposit uplift transactions. [11] The Respondents allege that Lim Andy had forged the First Respondent’s (Onn Kien Hoe) signatures in the Forms 75 since 2016. This deposition also amounts to an implied admission that the Respondents had failed to supervise the preparation and lodging of Forms 75 and failed in their basic duty as court-appointed liquidators. [12] (i) The Applicant further avers that the First Respondent dishonestly claimed that the signatures on the Statutory Declarations of 15 Forms 75 lodged with the Companies Commission of Malaysia (“SSM”) since 2016 are not his, despite admitting that he “remembers signing the same before handing it to Lim Andy for filing purposes”. The allegation that these signatures were forged, when the First Respondent had signed these Statutory Declarations in person before four different commissioners for oaths, is just not credible, and untruthful. The Applicant submits that the truth is likely that the Forms 75 and the supporting documents used to prepare the same were not checked by the First Respondent before the Statutory Declarations were signed. This is plain and simple gross negligence and a dereliction of duties for over to seven years at least.

(ii) The Respondents have to date adduced only eight monthly bank statements (for the period of January 2023 to August 2023) as evidence of the alleged forgery allegedly carried out by Lim Andy. In regards to the remaining 88 forged monthly bank statements, the Respondents allege that these were mysteriously “deleted by Lim Andy previously”. [13] As additional grounds for removal, the Applicant relies on the unprofessional conduct of the Respondents in the previous disputes between the parties herein. These findings of unprofessional conduct are in the comments of the Federal Court Judge (FCJ) in the reported case of Genisys Integrated Engineers Pte Ltd v UEM Genisys Sdn Bhd (In Liquidation) [2023] 5 CLJ 1. [14] In the above case the Respondents had decided to reject the Applicant’s Proof of Debt (“POD”) on the basis of alleged limitation despite having earlier accepted the Applicant’s POD. The Federal Court found in the last section of paragraph 39 as follows: “[39]…As liquidator, the respondents had flagrantly failed to comply with the procedures under WUR. The liquidators had admitted the POD of GIE. Having done so, the liquidators are estopped from availing themselves and invoking the statue of limitation to reject the said POD.” [15] To rebut the Respondents contention that the Federal Court never made a remark of them being vexatious towards the Applicant, the Applicant reproduced the following paragraph from the Federal Court’s case report: “[14] The liquidators were held to be personally liable for the costs of proceedings on an indemnity basis as their conduct had unnecessarily caused GIE to commence their action. Their unreasonable and vexatious conduct was demonstrated by the deduction of the procurement fee despite knowing it was time-barred. When they were informed of the disagreement, they ought to have sought the court’s direction pursuant to s 487(3) Companies Act 1965 (“the CA”) (then applicable). This was not done.” RESPONDENTS’ REPLY TO THE ALLEGATIONS AGAINST THEM [16] The Respondents aver that they have appointed the firm of Folks Corporate Services (“Folks”) to carry out an independent review of the actual losses and to prepare a report which will determine the actual loss caused by Lim Andy and another employee of the Respondents. [17] The Respondents also avers that they have made full restitution of the losses which they have determined on their own, pending payment of an insurance claim to cover the losses. However, the Respondents did not mention any restitution on the interests the Company had lost over the seven (7) years. [18] The Respondents further submits that at its highest, even if they were negligent (which is not admitted), carelessness does not equate to dishonesty on their part. They cited the case of Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 AMER in support of their contention. THE LAW ON REMOVAL OF LIQUIDATORS [19] The power of the Court to remove Liquidators is founded in section 482 of the CA 2016, which allows the Court to remove Liquidators on “cause shown”. [20] The discretion of the Court to remove a Liquidator was succinctly explained in the Court of Appeal case of Yeo Ann Kiat & 238 Ors v Hong Leong Bank Bhd & Anor [2016] 6 MLJ 499 by Vernon Ong JCA (as he was then) at pages 507 as follows: “[24] In most instances, the common grounds advanced to justify the court in removing a liquidator are

The liquidator’s personal unfitness, and/or

(ii) The liquidator’s personal misconduct. Be that as it may, we do not think that the power of removal under s 232(1) is confined to that. The court has the power to remove a liquidator if the court is satisfied on the evidence that it is in the interest of the liquidation that he should be replaced; by that we mean all those who are interested in the company being liquidated.” [21] In determining “on cause shown” the Court of Appeal case of Shencourt Sdn Bhd v Shencourt Properties Sdn Bhd [2019] 3 CLJ 791 held as follows: “[14] The threshold to satisfy ‘cause shown’ is not high but there must be a clear evidence justifying the removal. The phrase ‘cause shown’ is generic in nature and will include the following: (a) some unfitness of the person; (b) there must be some justifiable reason for the removal; (c) he has not properly exercised his discretion; (d) have place themselves in the position of conflict of interest such as to rob them of the real and apparent independence necessary for the conduct of a proper winding-up. [15]…the Courts have gone to the extent of saying there need not be personal misconduct or unfitness. (See Re Karamelli Burnet Ltd [1971] 1 Ch 203).” [22] Referring to Shencourt (supra), which states “there must be some justifiable reason for the removal”, the Applicant submits that there is cause shown, and it is a justifiable reason to remove the Respondents as the Liquidators when they have failed to faithfully exercise their statutory duties as the Liquidators and/or failed to apply reasonable skill and exercised due diligence in concluding the liquidation of UEG expeditiously. FINDINGS OF THIS COURT [23] Having read and considered all the allegations against the Liquidators and the replies in their affidavits and submissions by the Liquidators’ counsel, this Court finds that the Applicant has satisfied the test for the removal of the Respondents as Liquidators of the Company for the reasons given below:

The fact that the Respondent’s employee was able to misappropriate monies belonging to the Company for over seven

years and eight (8) months can only mean there was a total lack of supervision over the work of the Respondents’ employees. This involves 48 unauthorised withdrawals from the Company’s account and 14 fixed deposit uplift transactions, from which the monies were obviously never put back into the Company’s account.

The alleged forgeries in the Forms 75 since the year 2018 is doubtful. The Forms 75 were signed before four (4) different commissioners for oaths. To imply that all the four commissioners for oaths attested the “forged Forms 75” without requiring the maker to attend before them and cross-checking his identity card is not credible. In any event, the fact that the First Respondent admitted signing the Forms 75 before handing them to Lim Andy for filing purposes can only mean that the First Respondent failed to counter-check and verify the details in the Forms 75 before signing them. Therefore, I accept the submission by the Applicant’s counsel on this issue.

I cannot accept the Respondent’s counsel’s submission that all the omissions to properly supervise the Respondents’ employees’ work resulting in misappropriation or theft of monies is mere carelessness on the part of the Respondents. I find that failure to supervise reflects a cavalier and indifferent attitude by the Respondents towards their duties as court-appointed liquidators. These omissions amount to gross negligence and unprofessional conduct ,which falls within the parameters of “justifiable reason for his removal”, as enunciated by the Court of Appeal in Shencourt Sdn Bhd v Shencourt Properties Sdn Bhd referred to earlier.

Additionally, I find that the Respondents have failed to act independently and have shown bias and a lack of impartiality against the Applicant as had been found by the Federal Court against the Respondents in the case cited earlier. Their conduct was found to be so unacceptable that the Federal Court found it proper to order costs personally against the Respondents. Thus, I find the Applicant’s distrust towards the impartiality of the Respondents to be justified.

The fact that the Respondent have taken over 17 years and yet are unable to close the liquidation process again indicates a lack of professionalism by the Respondents, especially when the Company is solvent. Furthermore, all creditors have been fully paid since 2016 yet, the liquidation process remains unfinished more than seven years later. The Respondents’ reply that they are still waiting for tax clearance from the Inland Revenue Board (“IRB”) is unacceptable. All that is required is for them to regularly follow up with the IRB. It is common knowledge that the IRB is very efficient in collecting taxes owing to it. This lack of urgency in closing the liquidation process gives credence to the Applicant’s allegation that the Respondents are deliberately delaying the conclusion of the liquidation to be able to continue collecting fees from the assets of the Company.

Regarding the issue of conflict of interest in the appointment of Folks to conduct an independent investigation into the actual losses suffered by the Company, I agree with the Applicants' submission that the Respondents should not be allowed to appoint any entity to carry out an 'independent' investigation to determine the amount actually stolen by their own employees. This is to avoid any suspicion that the Respondents may influence the appointed entity to suppress any findings that could implicate them in any way. I believe that such an appointment should be made by a new Liquidator who is not conflicted. [24] For the reasons aforesaid, I find that the Applicant has satisfied the test required for removal of the Respondents and that the Applicant has shown evidence of sufficient cause to enable this Court to exercise its discretion to remove the Respondents as Liquidators of the Company. Therefore, I allow the application with costs. Dated 10 February 2025 ……………t.t………………. Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE APPLICANT: GIDEON TAN WITH ASHVINPAL KAUR A/P JOGINDER SINGH SOLICITORS FOR THE APPLICANT: TETUAN GIDEON TAN RAZALI ZAINI COUNSEL FOR THE RESPONDENT: KIRUBAKARAN WITH MARTIN CHO CHENG YU AND YEO YEN HOCK SOLICITORS FOR THE RESPONDENT: TETUAN SHUI TAI Cases Referred to: ➢ Genisys Integrated Engineers Pte Ltd v UEM Genisys Sdn Bhd (In Liquidation) [2023] 5 CLJ 1 ➢ Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 AMER ➢ Yeo Ann Kiat & 238 Ors v Hong Leong Bank Bhd & Anor [2016] 6 MLJ 499 ➢ Shencourt Sdn Bhd v Shencourt Properties Sdn Bhd [2019] 3 CLJ 791 Legislation Referred to: ➢ Companies Act 2016 Decision date: 10 July 2024