Lee Teik Aun v Mujur Zaman Sdn Bhd (BA-22NCvC-515-12/2022)

Content

1 DALAM MAHKAMAH TINGGI MALAYA DI SHAH ALAM DALAM NEGERI SELANGOR DARUL EHSAN, MALAYSIA GUAMAN SIVIL NO BA-22NCVC-515-12/2022 ANTARA LEE TEIK AUN (No K/P: 630810-08-5461) … PLAINTIF

Subparagraph

(ii) whether the Sale & Purchase Agreement has been frustrated pursuant to Section 57(2) of the Contracts Act 1950 due to the 2nd Defendant being wound up on 15.12.2012; and

Subparagraph

(iii) whether the Plaintiff’s claim is time-barred pursuant to the Limitation Act 1953.

Preamble

Pursuant to Section 52 of the Bankruptcy Act 1967, the twilight period would be two (2) years, where the transaction is not bona fide and without valuable consideration. The Defendants highlighted that the Plaintiff never paid the Purchase Price as this was a contra arrangement entered into in satisfaction of the Debt. Frustration [15] The Defendants also argue that since the 2nd Defendant has been wound up, the Sale & Purchase Agreement would also be frustrated pursuant to Section 57(2) of the Contracts Act 1950. Limitation [16] The Defendants argue that this suit is purely a contractual claim. The Sale & Purchase Agreement was signed on 15.12.2011. The vacant possession for the Bungalow Lot must be delivered by 15.12.2014. Therefore, the cause of action would accrue from 15.12.2014. As such, limitation would have set in within six

Subsection

(6) years, i.e. on 15.12.2020. The suit was only filed on 1.8.2022. [17] The Defendants also argue that the Plaintiff failed to take any action even though the 2nd Defendant was wound up in 2012. If the Plaintiff had wanted to take legal action, the Plaintiff should have commenced legal action either when the 2nd Defendant was being wound up in 2012, or, alternatively, on the date when vacant possession ought to have been delivered, on 15.12.2014. The Plaintiff failed to do so on either of those dates. [18] The Plaintiff had relied on Section 29(1) of the Limitation Act 1953 to argue that the period of limitation shall not begin to run until the Plaintiff has discovered the fraud. However, the Defendants argue that the Plaintiff is merely trying to create all these issues in order to give rise to a semblance of fraud in order to defeat limitation. The Defendant state that Section 29 or the Limitation Act 1953 will not apply if the Plaintiff is able to discover the fraud with reasonable diligence. In this case, there is no fraud or concealment as the facts could have been ascertained through conduct of relevant searches. Summary of the Plaintiff’s case (in opposing Enclosure 65) Illegality – Section 223 and 293 Companies Act 1965 [19] The Plaintiff argues that Sections 223 and 293 of the Companies Act 1965 can only apply to cases where the properties being disposed belongs to the company that has subsequently been wound up. However, in this case, the Master Land / the Bungalow Lot do not belong to the 2nd Defendant. It actually belongs to the 1st Defendant. Therefore, the provisions of Sections 223 and 293 cannot apply. Frustration [20] The Plaintiff also argues that frustration only applies to supervening events that happened after the contract. In this case, the Defendants were already aware of the Winding Up Petition. The Plaintiff submits that Section 57(2) of the Contracts Act 1950 cannot apply because the alleged impossibility is a pre-existing and known circumstance. Limitation [21] The Plaintiff argues that the claim is based on fraud and not contract. Therefore, limitation would run from the date of discovery of the fraud. The fraudulent concealment would defeat the limitation period. Questions of law are fact-dependant [22] The Plaintiff also argues that all the issues relating to the Development, the Master Land, the Bungalow Lot, the Winding Up Petition and the fraud are all questions of fact. Therefore, to make a determination under Order 14A of the Rules of Court 2012 is not appropriate. Findings by the Court [23] Order 14A Rule 1 of the Rules of Court 2012 provides as follows: - “ORDER 14A DISPOSAL OF CASE ON POINT OF LAW Determination of questions of law or construction (O. 14A, r. 1)

Subsection

(1) The Court may, upon the application of a party or of its own motion, determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the Court that —

Subsection

(2) On such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just.” Preliminary objections – Locus standi of deponent [24] The Plaintiff had raised a preliminary objection and had objected to Mr Lee Kin Liong (“the Deponent”) affirming the Defendants’ affidavit in Enclosure 51 and Enclosure 56 on behalf of the 2nd Defendant. The Plaintiff asserted that the Deponent cannot affirm the affidavits on behalf of the 2nd Defendant as the 2nd Defendant has already been wound up. [25] However, I have dismissed the Plaintiff’s preliminary objections and I accept the legal authorities cited by the Defendants, namely Ringgit Exotika Sdn Bhd v Pengarah Tanah & Galian Selangor & Ors [2014] 8 MLJ 111 and United Malayan Banking Corp v Yap Peng Wai @ Yap Peng Hooi [1998] 5 MLJ 511. Both these cases support the proposition that an affidavit should only contain facts which are within the personal knowledge of the deponent and the personal knowledge may be derived from records or documents seen by the deponent. In the present case, the Deponent is a director of the 1st Defendant. The document and facts deposed for both the 1st Defendant and the 2nd Defendant are not disputed by the Plaintiff. Illegality – Sections 223 and 293 Companies Act 1965 [26] Section 223 of the Companies Act 1965 states that: - “Section 223. Avoidance of dispositions of property, etc. Any disposition of the property of the company including things in action and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court shall unless the Court otherwise orders be void.” [27] The Winding Up Petition was commenced against the 2nd Defendant on 14.4.2011. The Sale & Purchase Agreement was executed eight (8) months later, on 15.12.2011. The 2nd Defendant was wound up two (2) months thereafter, on 15.2.2012. These facts are not disputed by the Plaintiff. As such, the disposal of the Bungalow Lot, which was made after commencement of the Winding Up Petition, would clearly contravene Section 223 of the Companies Act 1965. [28] In Kimoyama Eletrik (M) Sdn Bhd v Metrobilt Construction Sdn Bhd [1990] 3 MLJ 309, it was held that: - “From the authorities cited above (with the exception of Re Miles [1948] 1 Ch 188), it can be concluded that under s 223 of the Companies Act, the disposition of the property of the company after a winding-up petition has been presented is void unless the court makes a validating order. The purpose of the section is to protect the interests of creditors when a petition for winding up is presented. The court, however, has the discretion whether or not to make a validating order. The court cannot exercise its discretion to make a validating order if the result of the order is to make one or more creditors being paid in full.” [29] At this juncture, it is pertinent to note that there was no actual payment of the Purchase Price, as the Sale & Purchase Agreement signify a contra arrangement in satisfaction of the Debt owing by Dato’ Yap to the Plaintiff. This is evident from the Statement of Claim: - “8.5 Pada 15.12.2011, Perjanjian Jualbeli bagi Lot tersebut dengan butir-butir No D1-023 (PJB Plaintif) diperincikan sebagai HS(D) 14638, PT No 14952 Mukim Ijok, Daerah Kuala umpur dan harga pembelian sebanyak RM 838,346.00 telah ditandatangani oleh D1 selaku Pemilik Berdaftar, D2 selaku Penjual/Pemaju dengan Plaintif yang dianggap sebagai Pembeli bagi tujuan menjelaskan Hutang Dato’ Yap.” [30] Section 293(1) of the Companies Act 1965 provides that: - “Section 293. Undue preference.

Subsection

(1) Any transfer, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company which, had it been made or done by or against an individual, would in his bankruptcy under the law of bankruptcy be void or voidable shall, in the event of the company being wound up, be void or voidable in like manner.” [31] The rule regarding undue preference under Section 293 of the Companies Act 1965 is to prevent a person from obtaining an unfair advantage over other creditors (in the event that the company being wound up) by concluding a transaction before the commencement of the winding up proceeding. [32] Section 293 of the Companies Act 1965 does not stand alone. It is to be read together with Sections 52 and 53 of the Bankruptcy Act 1967. In Silver Corridor Sdn Bhd v Gallant Acres Sdn Bhd & Anor [2016] 5 MLJ 1, it was held that: - “[32] The words ‘undue preference’ as appeared in the title of the section in the context of s 293 of the CA read together with s 52 of the BA, as far as relevant to the facts of the present case, refer to an act of preference by a company which is in the run-up to be wound up during the twilight period of two years, in disposing or transferring its properties to any person or entity (through not bona fide purchaser) and without valuable consideration, the effect of which be detrimental to the interest of the general creditors (particularly unsecured creditors) in the process of liquidation in the event of it being wound up by court.” [33] Accordingly, the Sale & Purchase Agreement, being transacted and disposed to the Plaintiff without valuable consideration, within two (2) years of the 2nd Defendant being wound up, would be void. [34] In respect of both Sections 223 and 293, the Plaintiff had advanced the argument that the Master Land / the Bungalow Lots belong to the 1st Defendant only. Therefore, the provisions of Sections 223 and 293 would not be applicable as the properties do not belong to the 2nd Defendant. With respect, I do not accept this argument. Both the 1st Defendant and the 2nd Defendant are jointly undertaking the development project. The purpose of the Sale & Purchase Agreement is to sell the Bungalow Lot. Both the 1st Defendant and the 2nd Defendant had entered into the Sale & Purchase Agreement with the Plaintiff. The 2nd Defendant had also signed the agreement. It would be difficult to accept the argument that the 2nd Defendant is now to be construed as not selling or disposing any properties. Frustration [35] Section 57(2) of the Contracts Act 1950 provides that: - Contract to do act afterwards becoming impossible or unlawful

Subsection

(2) A contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.” [36] The Plaintiff has argued that Section 57(2) Contracts Act 1950 would not be applicable because the impossibility is a pre-existing and known circumstance. The Plaintiff is clearly trying to raise issues of fraud in order to argue that the elements of fraud is a pre-existing issue as it happened prior to the Sale & Purchase Agreement. I do not accept this argument. The Defendants had clearly stated that the Sale & Purchase Agreement has been frustrated because the 2nd Defendant has been wound up. The winding up occurred after the parties entered into the Sale & Purchase Agreement. [37] A similar situation arose in Pakatan Mawar (M) Sdn Bhd (Dalam Likuidasi) v Nurul Akhmar Mohd Safiee & 7 Yang Lain [2013] 1 LNS 1031: - “20. Apabila sesebuah syarikat itu telah digulungkan oleh mahkamah dan pelikuidasi telah dilantik, tindak tanduk oleh dan terhadapnya akan dikawal khususnya oleh Akta Syarikat 1965. Seksyen 223 dengan jelas memperuntukkan: …. Dalam keadaan kes ini, tidak dapat dinafikan bahawa projek yang dibangunkan oleh Plaintif telah terbengkalai sejak dari tahun 1998 sehingga Plaintif digulungkan. Saya bersetuju dengan penghujahan Peguam Plaintif yang terpelajar bahawa kontrak antara Plaintif dan Defendan-Defendan semestinya, jika tidak diteruskan, akan terbatal jika kontrak itu tidak mungkin dapat dilaksanakan selaras dengan peruntukan seksyen 57(2) Akta Kontrak 1950. Dalam kes ini, pelikuidasi, yang bertindak di bawah seksyen 287(1) Akta Syarikat 1965, dan selaras dengan tanggungjawab utama dan kuasa mereka (lihat seksyen 233 dan 236), tidak meneruskan dengan projek Plaintif kerana ketiadaan dana. Ekoran daripada itu, seksyen 66 Akta Kontrak 1950 terpakai dan remedi Defendan-defendan adalah untuk membuat tuntutan kewangan terhadap Plaintif. Memandangkan Plaintif telah digulungkan, Defendan-defendan, yang kini menjadi pemiutang yang tidak terjamin (unsecured creditor), perlulah membuat tuntutan secara memfailkan bukti hutang selaras dengan peruntukan seksyen 291 Akta Syarikat 1965.” Limitation [38] The Plaintiff executed the Sale & Purchase Agreement on 15.12.2011. The 2nd Defendant wound up on 15.2.2012. This would amount to a breach of contract. The Plaintiff would be entitled to take legal action. But the Plaintiff fail to do so. [39] Vacant possession was supposed to have been delivered on 15.12.2014. The Defendants failed to deliver vacant possession. The Plaintiff would be entitled to take legal action. Again, the Plaintiff fail to do so. The cause of action arising from the breach of the contract would accrue from 15.12.2014. Limitation period would expire on 15.12.2020. [40] The Plaintiff’s right to commence an action could have arisen either when the 2nd Defendant was wound up on 15.2.2012 or when the vacant possession of the Bungalow Lot was not delivered on 15.12.2014. The Plaintiff did not take any action on either of this time period. [41] Instead, the Plaintiff raised the allegation of fraud. The allegations of fraud pleaded by the Plaintiff are: -