Hap Seng Credit Sdn Bhd v Sri Muda Haulage Sdn Bhd (WA-28NCC-171-03/2017)

Furthermore, the case for the Respondent is even more impaired since it had previously made part payment of the original debt which led to the withdrawal of the first petition referred to earlier. This shows admission of indebtedness on the part of the Respondent, and thus again suggests the absence of any bona fide dispute vis-à-vis the Petitioner’s new notice and petition.

But from the affidavits and submissions, the Respondent did raise two principal grounds that should nevertheless be examined. The first however is a point that can be summarily dismissed all the same. It pertains to the argument that the petition is defective since it was made pursuant to the provisions in the CA 2016 whilst the notice which preceded it was issued under the CA 1965.

There is little substance in this objection since the situation is addressed by reference to the savings and transitional provisions found in Section 619 of the CA 2016. I set out below the entirety of Section 619.

General transitional provisions

Any person appointed under the corresponding previous written law and holding office at the commencement of this Act, shall remain in office as if he had been appointed under this Act.

Any act made, executed, issued or passed under the corresponding previous written law and in force and operative at the commencement of this Act, shall so far as it could have been made, executed, issued or passed, under this Act have effect as if made, executed, issued or passed under this Act.

The memorandum of association and articles of association of an existing company in force and operative at the commencement of this Act, and the provisions of Table A under the Fourth Schedule of the Companies Act 1965 if adopted as all or part of the articles of association of a company at the commencement of this Act, shall have effect as if made or adopted under this Act, unless otherwise resolved by the company.

All proceedings, judicial or otherwise commenced before and pending immediately before the commencement of this Act under the Companies Act 1965 shall be deemed to have commenced and may be continued under that Act.

A company or foreign company registered under any corresponding previous written law shall be deemed to have been registered under this Act and this Act shall extend and apply to the company accordingly and any reference to this Act, express or implied, to the date of registration of the company shall be construed as a reference to the date upon which the company was registered under the corresponding previous written law.

A company which is in the course of winding up immediately before the commencement of this Act shall continue to be wound up under the relevant provisions in the Companies Act 1965.

Section 308 of the Companies Act 1965 shall continue to apply to a company which is in the course of being struck off the register by the Registrar immediately before the commencement of this Act. Page 5 of 13

The Minister may direct the Commission to issue guidelines, circulars or practice notes to provide for any matters in force before the commencement of this Act to be dealt with in such manner to bring them in conformity with this Act. [13] There could arguably be two alternative interpretations as to which law to follow in the case before me. The first is pursuant to Section 619(2), which provides for the petition to continue as if the notice had been issued under the relevant corresponding provision now found in the new law in the CA 2016. The second is that the petition should be deemed to continue to be governed under the CA 1965 in accordance with Section 619(4) or Section 619(6), the latter specifically dealing with winding up proceedings. [14] I take the view that the correct application of the law on savings and transitional arrangement should, in this context, invoke the latter interpretation. I say so for several reasons. First, the words “Any act made, executed, issued or passed under the corresponding previous written law” in Section 619(2) suggest the subject matter to be more in the nature of an executive decision or an exercise of discretionary authority. Which is not generally the case for the issue of the winding up notice. These words do not appear intended to encompass the decision to issue a winding up notice under Section 218 of the CA 1965. [15] Second, Section 619(4) on the other hand, refers to “proceedings, judicial or otherwise”. It is not incorrect to characterise the service of a winding up notice as a proceeding, for the word “proceeding” is not used exclusively to refer to judicial proceedings. For instance, Section 355 (1) of the CA 1965 (now Section 582 (1) of the CA 2016) on irregularities in proceedings empowers the Court to cure any deficiency, defect or irregularity in notice, in the absence of substantial injustice. Clearly “proceeding” in that statutory provision must be interpreted to include steps taken under the Act, such as the issuance of a winding up notice, which is not in the nature of a proceedings usually understood to be judicial or court-related. [16] Further, in any event, Section 619(4) itself describes “proceedings” as “judicial or otherwise”. Additionally, it is very plain from the language of Section 619 (6) that specifically, for winding up process which has not concluded before the new Act came into force, reliance ought to continue to be made under the previous legislation. Page 6 of 13 [17] Third, and this is probably the most important, in respect of winding up proceedings which had been initiated by the issuance of notice under Section 218, but which petition was issued post the coming into force of the CA 2016 on 31 January 2017, like the situation in the instant petition, Section 619(2) which deems the “act” to be made under the corresponding provision in the new law, may not be able to be fully applied because the new law in the CA 2016 contain provisions that were not part of the old law in the CA 1965, and vice versa. [18] One key example is the new Section 466(2) which introduces the requirement that a winding up notice expires after six months. There was no such provision under the CA 1965. Thus, if Section 619(2) was to be applied to a winding up notice that had been issued more than six months before the service of petition, the notice would be deemed to have been issued under Section 466(1), but Section 466(2) would also at the same time operate to render the petition defective on account of the notice which had expired under the CA 2016. [19] Another notable change is found in Section 467(2) which significantly provides for the commencement of winding up by the Court to be at the date of the winding up order, and no longer from the date of the presentation of petition as was the requirement previously in Section 219 of the CA 1965. [20] As such, given the significant differences, it would be more legally efficient, fair and consistent with the pursuit of justice if winding up notices issued prior to the coming into force of the CA 2016 be deemed under Sections 619(4) or 619(6) to continue to subsist under the CA 1965. [21] The objection of the Respondent which is premised on this ground is therefore lacking in merit. The Petitioner could have easily applied to the Court orally at the hearing for appropriate amendments be made to the intitulement of the petition to reflect the application of Section 218 of the CA 1965 and Section 619 (4) or (6) of the CA 2016 to the instant winding up petition. Excessive Interest Not Justified [22] A more substantive challenge presented by the Respondent pertains to the claim for interest made by the Petitioner. The Petitioner submitted that the interest rate imposed by the Petitioner against the Page 7 of 13 Respondent was wholly on the basis of the agreed terms of the agreement signed by the Respondent earlier. The interest rate of 1.25% per month as claimed by the Petitioner is in accordance with the Petitioner’s prayers in the Statement of Claim filed against the Respondent earlier which later reflects in the judgment being the JID dated 8 October 2010. No objection was ever raised by the Respondent in regards to the interest rate imposed. [23] The Petitioner argued that the Respondent should have filed an application to set aside the JID instead of objecting and questioning the interest rate claimed by the Petitioner after almost seven years has lapsed, at this final stage whereby all cause papers for winding up proceeding are in order. The JID obtained by the Petitioner on 8 October 2010 was a regular judgment, and the Petitioner was under no responsibility to seek an amendment to the said JID. [24] The crux of the Respondent’s challenge on the interest claim is that the Section 218 Notice is invalid for claiming an excessive sum given that the interest rate imposed, at 1.25% per month or 15% per annum is almost double the statutory limit of 8% per annum as stipulated under Order 42 r 12 of the former Rules of High Court 1980 applicable then. [25] In Kong Ming Bank Bhd v Lau Pang Thang & Ors [1995] 1 MLJ 567, the High Court held that a post-judgment interest rate which is in excess of the statutory minimum provided for by O 42 r 12 of the RHC and Section 16(i) of the Courts of Judicature Act 1964 is illegal and would entitle the court to set aside the judgment ex debito justitiae unless the plaintiff can prove that it is entitled to a higher interest rate. [26] It was stated in that case that in order to penalize the defendant into paying more than the statutory rate of interest after judgment, the plaintiff must expressly state so in the agreement, and the relevant provision in the agreement must be construed strictly. The Court ruled in that case that the provision on interest was too vague to amount to an agreement on post-judgment interest. Therefore, the defendants were entitled as of right to set aside the default judgments as being illegal. [27] In the instant case, the Petitioner maintained that the interest terms were in accordance with the provisions of the agreement. Yet, the Petitioner chose not to exhibit the agreement which it contended Page 8 of 13 contained the specific term on the higher interest allegedly agreed to by the parties. Kong Ming Bank Bhd v Lau Pang Thang & Ors clearly ruled that it would be for the plaintiff, or the Petitioner herein, to prove such agreement on higher interest. The Petitioner has in the instant case not discharged this evidential burden. The claim for interest is out of time [28] For the purpose of computing the six-year limitation period under Section 6(3) of the Limitation Act 1953 (“the LA”) for the recovery of interest in respect of a judgment debt, I think the position in law is pretty settled. Time starts to run from the date of judgment, and that the limitation however only concerns post judgment interest and does not apply to pre-judgment interest. In Perwira Affin Bank Bhd v Lim Ah Hee [2004] 2 CLJ 787, Abdul Hamid Mohamad FCJ (later Chief Justice) stated thus:- “A few things need be said about this part of the judgment. First, the learned judge took the date from which the interest was calculated (1 December 1985) as the date the interest became due. In view of the judgment of this court in Ernest Cheong which was followed by this court in Moskow Narodny Bank Ltd, with respect, that is not correct. Those cases held, and I agree, that regarding interest before judgment, the date the interest became due is the date of judgment. The interest merged with the judgment sum. Secondly, the learned judge calculated the period of limitation from the date the interest was calculated in the judgment (1 December 1985) to the date of judgment (23 October 1987). In view of the two judgments of this court just mentioned, with respect, that too is not correct. As decided in Ernest Cheong, the period is to be calculated from the date of judgment to the date of filing of the bankruptcy notice... (emphasis added) [29] The interest calculated prior to the date of the judgment merged into the judgment debt. Therefore, the limitation period would start to run from the date of the JID in the instant case. The service of the winding up notice however was effected subsequent to the expiry of the requisite six-year period from the date of the JID of 8 October 2010. The last date for making the claim for arrears of interest was therefore 7 October 2016. The Petitioner however only served the notice on 16 November 2016 and the presentation of the petition even later in March 2017. Page 9 of 13 [30] It is thus an undeniable fact that the recovery instituted by the Petitioner was more than the stipulated six-year limitation period. The limitation period for the recovery of interest in respect of a judgment debt is stated under Section 6(3) of the Limitation Act 1953 as follows:

An action upon a judgment debt shall not be brought after the expiration of twelve years from the date on which the judgment became enforceable and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest became due. [31] The Federal Court in United Malayan Banking Corporation Bhd v Ernest Cheong Yong Yin [2002] 2 CLJ 413 held that the second part of Section 6(3) which concerns arrears of interest ought to be construed thus: - “... we would hold that it is obvious that the second limb of s. 6(3) of the Act provides that an action to recover arrears of interest must be brought within six years of the judgment date and because of the word "arrears", it cannot denote interest which is still not due...” [32] What this means is that if a person commences a recovery action on a judgment even one day after the six-year limitation, that person is absolutely barred from claiming arrears in interest. This arrears encapsulates not only the interest otherwise incurred after the six-year period but crucially also the entire interest having arisen within the six-year limitation period. [33] I reproduce that part of the judgment of Abdul Malek Ahmad FCJ in United Malayan Banking Corporation Bhd v Ernest Cheong Yong Yin [2002] 2 CLJ 413 which made this important statement of law, as follows:- “Thus, a person filing an action for recovery of arrears of interest on the last day of the six-year period from the judgment date is only entitled to that amount and nothing more. If he files it on the first day after the six year period, his action is barred by limitation, arrears of interest included. In the instant case, although the amount of arrears of interest claimed is only for six years from the judgment date, the bankruptcy notice had been filed on 24 January 1996, long after the limitation period of six years which expired on 14 October 1993. Accordingly, the bankruptcy notice is rendered invalid. As for the prejudgment interest, despite the Court of Appeal's finding on this point, we hold that that is in order as it is merged with the principal amount from the date of the breach, and Page 10 of 13 which is the standard stipulation in all contracts, to become the judgment debt”. [34] As such, it is as clear as day that although the Petitioner in the instant case had merely included the claim for interest calculated up to the six years post judgment (the JID), that claim cannot but fail. This is because the Petitioner is statutorily prevented from claiming any or all of this interest since the Petitioner only commenced the action to recover after the expiry of the six-year period subsequent to the JID. In light of the decision of the Federal Court in Ernest Cheong, in the instant case, if the Petitioner had instituted the present action on the very final day of the six-year limitation under Section 6(3), the Petitioner would certainly be entitled to the interest thus accumulated. However, limitation would set in and bar any such action even if the Petitioner had claimed for the very same arrears in interest merely one day after the expiry of the six years. [35] I should add that even though Ernest Cheong concerned a bankruptcy case and not a winding up proceeding like the petition before me, the construction of Section 6(3) by the Federal Court applies with equal force to all situations involving a claim for arrears of interest. To the extent there is a judgment debt, like the JID in the instant case, “the action on a judgment debt” referred to in Section 6(3) should appropriately include a winding up petition. [36] The Petitioner’s argument that it had confined the claim for interest to only that portion having accrued within the six years upon the JID is misconceived since it failed to appreciate that it is the time of recovery which is crucial here. For the claim was only filed after the expiry of the six years. Order 46 r 2 irrelevant [37] Neither can the assertion of the Petitioner that it had obtained leave to execute the JID after six years under Order 46 r 2 of the Rules of Court 2012 (“the RC 2012”) assist the case of the Petitioner. Order 46 r 2 (1) (a) provides that a writ of execution to enforce a judgment or order may not be issued without the leave of the Court where six years or more have lapsed since the date of the relevant judgment or order. [38] For even if the Petitioner could enforce the JID beyond the six-year period in light of the requisite leave under Order 46 r 2, that Page 11 of 13 leave does not and cannot have the effect of permitting the specific claim for arrears in interest, in light of the clear prohibition under Section 6(3) of the LA, and as made manifest by the Federal Court in United Malayan Banking Corporation Bhd v Ernest Cheong Yong Yin [2002] 2 CLJ 413. [39] No less importantly, Order 46 r 2 cannot be the basis of the Petitioner’s claim for arrears in interest because even though Order 46 r 2 provides leave to execute a judgment after the expiry of six years, a winding up petition is not a form of execution. [40] Thus, the fact that leave had been obtained under Order 46 r 2 to pursue recovery against the Respondent is of no consequence in so far as the winding up proceeding is concerned, and it is therefore doubtful whether the grant of an order for leave under Order 46 r 2 under the circumstances was necessary in the first place. [41] It has, after all, been established and considered settled law, as for instance by the Court of Appeal in Maril-Rionebel (M) Sdn Bhd & Anor v Perdana Merchant Bankers Bhd & Other Appeals [2001] 3 CLJ 248 that a winding up petition is not a form execution since it is not necessarily based on any judgment of the Court. It is premised on the inability of a company to pay its debts when they fall due, pure and simple. [42] Thus, in other words, as winding up petitions are not subject to Order 46 r 2, the Petitioner’s contention that had sought to justify its instant action on the basis of the leave obtained under Order 46 r 2 is unmeritorious. The leave would be necessary to pursue other forms of execution, but not the instant winding up petition. [43] As such, since the pertinent Section 218 notice as well as the petition had claimed for an amount inclusive of the judgment interest which has been shown to be statute-barred, the amount set out in the Section 218 notice can be validly said to be excessive, rendering the amount claimed under the Section 218 Notice to be erroneous, and not valid. [44] Furthermore, whilst part payment would, as stated above, often give rise to admission to indebtedness, the part-payment in the instant case, even if deemed to be an admission, cannot be the basis to Page 12 of 13 deny the legal effect of the statute of limitation. The claim for arrears in interest simply cannot be sustained. [45] The claim for arrears of interest via the winding up petition as expressed in the notice served and the petition presented by the Petitioner being barred by statute, the entire amount so demanded in the notice and petition is as such excessive, not valid and cannot be sustained. Any such form of illegality, being in the nature of a claim in contravention of the LA cannot be overridden or defeated by any argument of estoppel against the Respondent on the basis that the Respondent, after all these years had never applied to set aside the said JID. The limitation is absolute in effect, and given the absence of any evidence of fraud or mistake under Section 29 of the LA, neither of which was even suggested by the Petitioner. [46] In any event, there is no duty on or basis for the Respondent to have the JID set aside. The claim for interest only got statute-barred given the passage of time. And as for the claim at the rate higher than permitted, it was after all for the Petitioner to demonstrate agreement of parties in order to prove otherwise. Which it did not do. [47] For completeness, I should add that I am not unmindful of the decision of the Federal Court in the case of Malaysia Air Charter Company Sdn Bhd v Petronas Dagangan Sdn Bhd [2000] 4 CLJ 437 which had ruled that a notice of demand under Section 218(2)(a) of the CA 1965 need not specify the exact sum due as at the date of the demand since for so long as the sum due exceeds RM500 and remains unpaid, after a demand has been made, without a reasonable explanation to the satisfaction of the court, there is "neglect" to pay such sum within the meaning of the said section. [48] But that decision cannot be relied on to circumvent the clear statutory requirement of the LA. Neither did Malaysia Air Charter concern a statute of limitation. After all, furthermore, the Federal Court in that case was of the view that commercial reality demanded that preference be accorded to an interpretation that will remove from unmeritorious respondents the temptation to undertake an investigation into the exactness of the debt claimed to be owing on the relevant date. [49] Plainly, that concern did not arise in the instant case, where the LA clearly applies to bar the action on the arrears of interest which at the same time vitiated the notice and the petition. Page 13 of 13 Conclusion [50] In view of the foregoing reasons, primarily on account of the claim for interest being barred by statute, as well as of the absence of evidence of agreement justifying the high interest, the notice and petition are thus rendered defective. Accordingly, I dismiss the petition, with cost to the Respondent. Dated: 18 August 2017 (MOHD NAZLAN BIN MOHD GHAZALI) Judge High Court NCC1 Kuala Lumpur Counsel: For the Petitioner Shahirul Nazleen Messrs Bell & Lee Kuala Lumpur For Respondent Ahmad Zulfikri with Izmi Izdiharuddin Messrs Hasan Sabri & Hashim Nazri Selangor