85 LT 758 & 759; In re Patrick [1891] 1 Ch 82; and Malayawata Steel Bhd v Government of Malaysia [1980] 2 MLJ 103. [30] Now, in order for section 52 of the Bankruptcy Act 1965 to apply, the Liquidator needs to prove that the assignment was not made in good faith or done without valuable consideration. This was reiterated by the Federal Court in Silver Corridor Sdn Bhd v Gallant Acres Sdn Bhd & Anor [2016] 5 MLJ 1 in the following terms: 20 A transfer or conveyance made during the twilight period either not in good faith or without valuable consideration is absolutely void against the liquidator. However, there no evidence showing either that the assignment was not done in good faith or without valuable consideration. In fact, the contrary is evident, in that the assignment was made to ensure that the Respondent’s bank account is not frozen and that Project MK20 can proceed without affecting the progress of works. And the Intervener has given valuable consideration for the assignment, i.e. the advance of RM5.6 million. [31] Further, I find that the Liquidator has not fulfilled all the five conditions laid down by high authority, as stated above, for the application of section 53 of the Bankruptcy Act 1965. In particular, there is no evidence that the Respondent was insolvent when the arrangement was entered into. The fact that the Respondent was faced with a temporary lack of liquidity, which required the advance of RM5.6 million from the Intervener, cannot be equated to insolvency. See Arab Malaysian Merchant Bank Berhad v Orient Apparel Bhd & Ors [2002] 1 MLJ 89. [32] Further, in Tee Siew Kai (as the liquidator for Kumpulan Kerjaya Bhd (the receiver and manager appointed) (in liquidation) v Affin Bank (formerly known as BSN Commercial Bank (M) Bhd & Anor [2011] 4 MLJ 491 the court held that: 21 A company which faces some financial difficulty and requires a restructuring of its banking facilities need not necessarily be regarded as insolvent. The Liquidator relies merely on the fact that the Respondent needed funds to regularize its outstanding loan with Maybank Bhd to show insolvency, and that I find is insufficient. The Liquidator needs to show more than that. There are no financial statements of the Respondent tendered as evidence for the court to assess the general state of its financial affairs and to make a determination as to whether the Respondent was insolvent when the arrangement was entered into on 7.4.2016. Hence, I find that there is absolutely no evidence showing that the Respondent was insolvent at the point in time. [33] One other requirement under section 53(1) of the Bankruptcy Act 1965 is for the Intervener to be a creditor of the Respondent when the arrangement was made on 7.4.2016. I find that when the arrangement was finalized by way the three letters dated 7.4.2016, creating the Intervener’s exclusive right to receive the net proceeds of the sale under the SPA, the Intervener had not made the advance of RM5.6 million to the Respondent. The advance was only made on 8.4.2016 after all the security arrangements were in place, hence it cannot be said that the Intervener was a creditor of the Respondent when the alleged undue preference was created in favour of the Intervener on 7.4.2016. Thus, an arrangement made a day before the Intervener became a creditor 22 cannot be invalidated by the operation of section 53 of the Bankruptcy Act 1965 read together with section 293 of the Companies Act 1965. The Liquidator has further relied on the Proof of Debt filed by the Intervener after the winding up of the Respondent as proof of his contention that the Intervener is a creditor of the Respondent. However, when the Proof of Debt dated 24.2.2017 is scrutinized it is abundantly clear that the Intervener, whilst claiming a debt of RM13,627,694.50 from the Respondent, has categorically not surrendered its rights and securities in the proceeds of the sale under the SPA that is governed by the assignment created on 7.4.2016. In the circumstance, as the Intervener was not a creditor when the arrangement was made, I agree with the Intervener’s contention that the assignment cannot be deemed as giving preference to the Intervener as this crucial requirement of section 53(1) of the Bankruptcy Act 1965 has not been met. [34] Lastly, in order to determine whether the arrangement was to confer the Intervener a priority or advantage over other creditors in the winding-up, the court needs to be satisfied that the dominant intent to prefer was present. In Lin Securities v Royal Trust Bank (Asia Limited) [1995] 1 SLR 97; [1994] 3 SLR(R) 899, CA, the Singapore Court of Appeal held: The authorities establish that the mere fact that a preference is shown is not sufficient to enable the court to draw the inference that preference was fraudulent. 23 Before that inference can be drawn the court must be satisfied that the dominant motive of the debtor was to prefer the particular creditor. The inference of dominant motive must be drawn from the facts proved and in this regard in Lee Chao Yong v Siteman Construction Sdn Bhd (in liquidation) [2016] 5 MLJ 663 the Court of Appeal held as follows: The decision in Re TW Cutts was followed by the High Court in Singapore in Ho Mun-Tuke Don & Anor (Liquidators of City Securities Pte) v Oslo Finans As [1990] 1 SLR 398; [1990] 1 SLR(R) 326. At p 17, the court summarised the position as follows: From the judgment of Lord Evershed it is clear that, first, the onus is upon the person who seeks to avoid the payment to prove that the payment was made with a view to preferring the recipient over the other creditors; secondly, the word ‘view’ was construed as synonymous with ‘intention’ or ‘object’; thirdly, where there is no direct evidence, it is open to the court to infer such intention from the facts, but such inference should only be drawn if it is the true and proper inference, and it will not be drawn from the mere fact that the creditor was paid when others were not, and, lastly, the intention to prefer must be the dominant or principal intention. [35] The intended purpose of section 293 of the Companies Act 1965 and section 53 of the Bankruptcy Act 1965 is to invalidate fraudulent preference and hence it must be construed in that context. In Tee Siew Kai v. Affin Bank & Anor [2011] 1 LNS 18 the court held that: Section 293 of the Companies Act read in conjunction with Section 53 of the Bankruptcy Act, to my mind, cannot be construed in a mechanistic manner, but must be read in its proper context, which is to invalidate attempts at "fraudulent preference". It should not be a mere matter of counting the dates and determining 24 the "twilight period", and indulge in mere legal semantics with an indifferent regard to commercial reality and banking practices. It surely cannot be good law for a legal conclusion to be made dependent on the vagaries of dates merely. On the facts of this dispute, had the Supplemental Agreements and the Debentures been dated a few days earlier, they would as a simple matter of arithmetic be outside the "twilight period"....The answer must surely lie with the question whether these have been created or made in the course of normal, genuine commercial transaction. If so, there cannot be any issue of "fraudulent preference". Section 293 merely creates a rebuttable presumption of fraudulent preference where a charge, for example, is made within the six months from the date of presentation of the Winding-Up Petition, and it bears reiteration that all five necessary ingredients as established in Sime Diamond must be satisfied. [36] The evidence shows that the assignment or creation of the Intervener’s right to receive the net proceeds of the SPA, as contained in the three letters dated 7.4.2016, was to give security for the Intervener’s advance of RM5.6 million to the Respondent. The undisputed facts show that the arrangement via the said letters of 7.4.2016 was to elevate the Respondent’s cash flow problem and ensure that Project MK20 proceeded smoothly. The assignment was clearly to create security for payment of a larger advance. Thus, I do not find the presence of any element of “unfairness” in the arrangement. The Respondent had indeed received a larger sum of RM5.6 million as compared to the net proceeds due under the SPA, which was secured by the assignment. Hence, I find that the arrangement in the said letters of 7.4.206 was not intended to defraud or create an unfair advantage. The benefit that flowed 25 from the assignment to the Respondent and its creditors, as compared to that of the Intervener, is obviously far greater. Such greater benefit would necessarily negate any suggestion of unfair advantage. See Arab-Malaysian Bank Berhad v Orient Apparel Bhd & Ors [2002] 1 MLJ 89. [37] The undisputed facts show that the general creditors of the Respondent had enjoyed a greater benefit of the RM5.6 million advance, whereas the Intervener is only seeking the Stakeholder Sum of RM1.14 million. The purpose of the advance and the assignment was to ensure that the Respondent can carry on with its business. The Respondent then was under threat of their bank account being frozen and business operations being affected. In Arab-Malaysian Bank Berhad v Orient Apparel Bhd & Ors [2002] 1 MLJ 89 the court found that the securities created in favour of the bank in that case was to assist the company to “regain business strength” and thus they did not fall under “undue preference”. Thus, the mere creation of a security for an advance such as in this case cannot be termed as “undue preference”. [38] Further, I find that as early as 7.4.2016, the net proceeds due under the SPA has been earmarked as security payment to the Intervener for the RM5.6 million advance. In such circumstance, the promise to apply the earmarked funds for a specific purpose creates a trust. The Court of Appeal in PECD Bhd & 26 Anor v AmTrustee Bhd and other appeals [2010] 5 MLJ 357 affirmed this principle and held as follows: ... a contractual promise to apply earmarked monies for a specific purpose create an equitable trust in those monies by way of trust based on the proposition that it is unconscionable for a man to give an undertaking and obtain money on terms as to its application and then to totally disregard the terms on which the monies were to be applied. That decision was subsequently affirmed by the Federal Court in PECD Bhd & Anor v AmTrustee Bhd and other appeals [2014] 1 MLJ 91. Thus, the Stakeholder Sum which has been earmarked for a specific use, in this case as security for the RM5.6 million, becomes the subject of a trust and it binds the hands of the holder to act in accordance to that trust. Such a trust is commonly termed as a Quistclose Trust. See Pembinaan Lagenda Unggul Sdn Bhd v. Geohan Sdn Bhd & Another Appeal [2018 1 LNS 172 CA. I find that from the facts disclosed, such a trust has come into being. [39] It is trite law that the beneficial interest of a validly created trust is not affected by liquidation of a company which created that trust. Such a trust survives the company’s liquidation. This principle was reaffirmed by the Court of Appeal in Qimonda Malaysia Sdn Bhd (in liquidation) v Sediabena Sdn Bhd & Anor [2012] 3 MLJ 422 in the following terms: 27 The Rayack Construction case also failed to consider the fact that a trust, once created, would survive the company's liquidation. This is obvious — the monies held in trust were not it's monies in the first place, and the status of the trust does not change by virtue of the company's liquidation. Once it is found that the retention monies are trust monies, the question of preferential treatment to the respondents does not arise as the monies do not belong to the liquidation fund in the first place. [40] Learned counsel for the Liquidator submits that there is a requirement under section 223 of the Companies Act 1965 for a “validation” order to be obtained by the Intervener. Section 223 of the Companies Act 1965 reads: 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. I find that this argument is untenable on the facts and applicable law. Firstly, section 223 of the Companies Act 1965 is inapplicable because the Stakeholder Sum does not belong to the Respondent as a result of the aforementioned assignment and trust. Secondly, the disposition of the chose in action, in this case the assignment of the net sales proceeds under the SPA, was done prior to the commencement of the winding-up. Wherefore, I ordered that the Liquidator’s application in Enclosure 1 is dismissed and the sum of RM1,142,075.27 deposited with this court on 27.7.2017 be released to the Intervener with no order as to costs. 28 Dated this 3rd day of September 2018. Vazeer Alam Mydin Meera Judge High Court in Malaya Shah Alam. 29 Peguamcara & Peguambela