Khee San Food Industries Sdn Bhd v Adam Primus Varghese Bin Abdullah (WA-24NCC-490-10/2024)

The Plaintiff seeks to restrain the Defendant from filing the threatened petition to wind up the company based on the statutory notice issued on 26-9-2024.

This Court, after considering the arguments put forth by counsels for the litigants allowed the Originating Summons filed by the Plaintiff. The Defendant dissatisfied with the said decision has since appealed against the order entered by this Court.

Maybank Islamic Berhad had on 15-11-2021 filed an Originating Summons No. WA-28JM-21-11/2021 (“OS 21”) to appoint a Judicial Manager over the affairs of the Plaintiff.

The Defendant was appointed as the Interim Judicial Manager over the affairs of the Plaintiff pursuant to the orders of the High Court. The Defendant was appointed by way of an ex-parte order of the High Court.

The application to appoint a Judicial Manager was opposed by the shareholders of the Plaintiff, Khee San Berhad, and some of the creditors of the Plaintiff including one, Tunai Impian Enterprise Sdn Bhd.

Khee San Berhad had then applied by way of the Originating Summons No. WA-24NCC-572-12/2021 under Section 366 and 368 of the Companies Act 2016 (“OS 572”) for a scheme of arrangement. This OS was eventually withdrawn.

The Defendant sought an order to direct payment for his remuneration in OS 21 but this was dismissed by the High Court on 20-3-

This is what is referred to as the Section 417(3) of the Companies Act 2016 application (refers as enclosure 157). The Defendant did file an appeal against the said order but this was dismissed by the Court of Appeal.

Maybank Islamic Bank Berhad then withdrew OS 21 on 1-9-2022. This caused the termination of the Defendant’s position as interim judicial manager over the affairs of the Plaintiff.

The Defendant then applied to vary OS 21 on 7-4-2023 but was unsuccessful and was struck out by the High Court on 29-7-2024. It is to be noted that the Court had struck out the said application and directed that costs to be paid by the Defendant to the Plaintiff as well as to the third parties.

The Defendant then issued a letter to the Plaintiff dated 6-8-2024 demanding payment to the sum of RM 432, 167.08 being (i) legal fees due to Messrs. Zaid Ibrahim & Co. for the sum of RM 282, 167.08 and (ii) the sum of RM 150,000.00 allegedly due to Agensi Pekerjaan Iramuara Maju Sdn Bhd.

The Plaintiff denies liability for the sums claimed, as stated in the letter dated 12-8-2024.

The Defendant then issued the statutory demand based on the alleged sums and claimed that if the sums are not paid, a petition to wind up the Plaintiff will be filed. I refer to the notice dated 26-9-2024. This was responded to by the Plaintiff’s solicitors in the letter dated 7-10-2024.

Based on the above, the Plaintiff seeks a restraining order to prevent the Defendant from filing the said petition to wind up the Plaintiff. The Plaintiff believes that the debts are disputed and should be determined through a claim filed by the Plaintiff before any such petition is filed. The Plaintiff also contends that the petition constitutes an abuse of court process and should therefore be restrained. Defendant’s Contention 14. The Defendant contends that the said sums claimed against the Plaintiff are due and payable to him as he was validly appointed as the Interim Judicial Manager of the Company. He says that he is entitled to be indemnified and paid for the costs incurred in his capacity as the Interim Judicial Manager, appointed by Maybank Islamic Berhad.

The Defendant claims that he had the authority under Sections 414, 416, and 417 of the Companies Act 2016, as well as Schedule 9 of the same Act, to manage the Plaintiff's business and appoint solicitors to defend the claims made against the Plaintiff at the time of his appointment as Interim Judicial Manager.

He also suggests that these claims need not to be taxed and are due and payable by the Plaintiff. Therefore, justifying the issuance of the said notice against the Defendant. C. Decision of this Court 17. Firstly, I note that the invoice issued by Messrs. Zaid Ibrahim & Co. dated 30-8-2022 was issued by the said firm to the Plaintiff. The invoice is not against the Defendant but was issued to the Plaintiff and was received by the Defendant in his capacity as an agent of the Plaintiff due to his appointment as Interim Judicial Manager. As such, liability for the said payment falls on the Plaintiff and, the party who could actually claim the said sum is Messrs. Zaid Ibrahim & Co.

The same can be said with regard to the letter of appointment of Agensi Pekerjaan Iramuara Maju Sdn Bhd dated 22-1-2022. The said appointment was made by the Defendant on behalf of the Plaintiff, acting solely as the Plaintiff’s agent in his capacity as Interim Judicial Manager of the Company. Therefore, the contract with Agensi Pekerjaan Iramuara Maju Sdn Bhd is between the Plaintiff and Agensi Pekerjaan Iramuara Maju Sdn Bhd. The Defendant had in fact signed the said letter on behalf of the Plaintiff and not in his personal capacity.

The Defendant had also not executed any form of personal guarantee as requested by Agensi Pekerjaan Iramuara Maju Sdn Bhd. The letter dated 24-8-2022 by Agensi Pekerjaan Iramuara Sdn Bhd was only executed by the said agency with the Plaintiff (through the Defendant as its agent). The Defendant did not execute any letter of guarantee.

The invoice dated 15-8-2022 from Agensi Pekerjaan Iramuara Maju Sdn Bhd was also issued by the said agency to the Plaintiff and not to the Defendant.

The Defendant has not shown to this Court that he has paid any of these sums to Agensi Pekerjaan Iramuara Maju Sdn Bhd or the fees of Messrs. Zaid Ibrahim & Co.

These two bills are the basis for the statutory notice issued by the Defendant to the Plaintiff. (i) Messrs. Zaid Ibrahim & Co. fees of RM 282,

167.08 and (ii) the fees from Agensi Pekerjaan Iramura of RM 150,000.00 being a total sum of RM 432, 167.08.

It is trite law that the Judicial Manager or even an Interim Judicial Manager is only acting as an agent of the Company. Please refer to the Section 416 of the Companies Act 2016 24. I also note that under Section 416 of the Companies Act 2016, the Defendant as the Interim Judicial Manager may be personally liable for the contract entered on behalf of the company unless the requisite notice to deny personal liability under Section 416(2) of the Act was issued by the Defendant.

Further, I note that even if the Defendant is made personally liable for the said contracts, he should only be indemnified for any such expenses defrayed by him in the course of his duties as the Interim Judicial Manager.

For ease of reference I reproduce Section 416 of the Companies Act 2016: - “(1) The judicial manager or interim judicial manager of a company -

shall be deemed to be the agent of the company;

shall be personally liable on any contract, including any contract of employment, entered into or adopted by him in the carrying out of his functions, except in so far as the contract or a notice under subsection

otherwise provides; and

shall be entitled to be indemnified in respect of that liability, and to have his remuneration and expenses defrayed, out of the property of the company which is in his custody or under his control in priority to all other debts except those subject to a security to which subsection 415(2) applies.

Where a contract entered into by the company is adopted by the judicial manager or interim judicial manager, he may, by notice given to the other party, disclaim any personal liability under the contract.

For the purposes of this section, the judicial manager or interim judicial manager is not to be taken to have adopted a contract entered into by the company by reason of anything done or omitted to be done within thirty days from the making of the judicial management order

Nothing in this section shall-

limit the right of a judicial manager or interim judicial manager to seek an indemnity from any other person in respect of contracts entered into by him that are approved by the Court; or

make the judicial manager or interim judicial manager personally liable for payment of rent under leases held by the company at the time of the appointment.”

Therefore, before the Defendant could claim that the said sums of RM 432, 167.08 to be paid by the Plaintiff to him, he must first have incurred personal liability for these sums and paid them to Messrs. Zaid Ibrahim & Co. and Agensi Pekerjaan Iramuara Maju Sdn Bhd. The affidavits filed by the Defendant did not show that he had paid the said sums to either firm. At this juncture, the invoices issued by the said firms have only been made to the Plaintiff and not to the Defendant personally.

The affidavit filed by the Defendant does not show that these two firms have demanded payments from him personally, either while he was still the Interim Judicial Manager or after the cessation of the Judicial Management application. Therefore, at this juncture, the appropriate party to make such claims against the Plaintiff would be (i) Messrs Zaid Ibrahim & Co and (ii) Agensi Pekerjaan Iramuara Maju Sdn Bhd.

I therefore find that it is not appropriate for the Plaintiff to make such claims for these two firms. These two entities have a right of their own to make claims against the Plaintiff. Until such time that the Defendant is made liable or at least a suit is filed against him by these two firms for the fees incurred whilst he was the Interim Judicial Manager, then it would be wrong for him to jump the gun and issue the statutory notice for the alleged debts owed by the Plaintiff to Messrs. Zaid Ibrahim & Co. and Agensi Pekerjaan Iramuara Maju Sdn Bhd.

Furthermore, the affidavit filed by the Plaintiff shows that the company is now challenging the fees claimed by Messrs. Zaid Ibrahim & Co. and wishes that they be taxed before any payments are made. The Plaintiff is entitled to have the fees taxed pursuant to Section 126 of the Legal Profession Act 1976. I do note that although the invoice issued by Messrs. Zaid Ibrahim & Co. was more than six months ago, the Plaintiff can apply for leave to file the application out of time, as they wish to have the fees taxed. This Court will not prevent the Plaintiff from filing such an application and will leave the issue for the Court to consider at its absolute discretion. This Court will not tie the hands of my brother and sister Judges that may be hearing such an application by the Plaintiff if need to do so.

It also challenges the fees claimed by Agensi Pekerjaan Iramuara Maju Sdn Bhd and claims that it is excessive. It suggests that the fees claimed are beyond the number of any workers supplied even if it is to be accepted. The fees charged were RM 150,000.00 whereas, what was agreed between the Defendant and the said firm was allegedly RM 1,200.00 per foreign worker. According to the invoice, the said firm had only supplied 100 employees. Based on the said calculation, at most the amount should be RM 120,000.00 and not RM 150,000.00 as per claimed. Therefore, there are issues that need to be explored before any liability could be said to be irrefutable as alleged by the Defendant.

As such, I find that the above are issues that should be resolved by way of a suit between the said firms and the Plaintiff. If any action is taken against the Defendant for these claims, he could drag the Plaintiff as a third party and seek an order for indemnity under Section 416 of the Companies Act 2016 against the company for any liability that may be imposed against him under the said contracts. The winding up mechanism of a company as provided under the Companies Act 2016 should not be used to resolve the alleged claims by Messrs. Zaid Ibrahim & Co. and the said agency.

I therefore find that the Plaintiff has shown that the debts are bona fide disputed by it. I opine that this is a suitable case for a Fortuna Injunction to be ordered against the Defendant. Furthermore, the Defendant has not filed the petition to wind up the company as of today.

I further opine, based on the above, that if the Petition is filed on the same terms as claimed in the said statutory notice, it will most likely fail, that it would be an abuse of process of this Court and such petition may cause irreparable harm to the Plaintiff.

I refer to Triterra Metropolis Sdn Bhd v. Qingjian Holding Group (Malaysia) Sdn Bhd [2022] MLJU 947 and Tan Kok Tong v. Hoe Hong Trading Co Sdn Bhd [2007] 4 MLJ 355.

For the above reasons, I allow the Plaintiff’s application with costs of RM 10,000.00. The costs are granted based on the seniority of counsel, the importance of the subject matter to the client and the complexity of the claim. Dated 6 March 2025 Dato’ Indera Mohd Arief Emran bin Arifin Judge High Court of Malaya at Kuala Lumpur NCC5 Counsel: Tharminder Singh, Shahmi Nazir & Jane Chan for the Plaintiff Izral Partnership Advocates & Solicitors Saritha Devi & Nabila Roslee for the Defendant Firoz Julian Advocates & Solicitors