Piminik Capital Sdn Bhd v Akay Holdings Sdn Bhd (WA-22NCC-234-05/2022)

This is a straightforward case where the Plaintiff seeks a refund from the Defendant of an agreed sum upon the Plaintiff’s decision not to proceed with a mining contract entered with the Defendant.

Prior to the Plaintiff filing the Writ of Summons in this action, an order was made by the winding up Court appointing interim liquidators over the Defendant. Following an application by the Defendant, an ad interim stay was subsequently ordered in respect of the order appointing the interim liquidators. Whilst the aforesaid ad interim 2 stay order was in place, the Plaintiff filed the present Writ of Summons.

The Plaintiff thereafter filed for summary judgment under Enclosure 7 on the ground, inter alia, that the Defendant had through their previous solicitors agreed to the pay the refund sum.

The Defendant contended that the Plaintiff’s Writ of Summons is a nullity as the same was filed by the Plaintiff without first obtaining leave from the winding up Court as required under section 471(1) of the Companies Act 2016 (‘CA 2016’). It is the Defendant’s case that the ad interim stay order does not wipe out the order appointing the interim liquidators. Based on the aforesaid, the Defendant filed Enclosure 11 to strike out the Plaintiff’s Writ of Summons.

The Plaintiff contended that no leave is required under the said section 471(1) by reason of the ad interim stay order and further contended that the Defendant has no bona fide defence to its claims.

This judgment deals with both Enclosures 7 and 11. By consent of the parties, Enclosure 11 was heard first before Enclosure 7.

On 30.5.2022 the Plaintiff filed its claim against the Defendant based on the Defendant’s failure and or refusal to refund a sum of RM4,500,000.00 by 30.4.2022, being the balance of the advance sum paid by the Plaintiff to the Defendant pursuant to a joint venture 3 as evidenced by a letter dated 23.9.2020 and a subsequent letter dated 20.11.2020 (‘the Contract’).

The Contract was for the Plaintiff to mine and extract gold on a piece of land in Pahang owned by the Defendant (‘the Land’). [9]

3.1. Both Akay and Piminik mutually agree to terminate the Mining Joint Venture as of the date of this letter, after which neither party shall have any claims against each other in respect of the Mining Joint Venture save for antecedent claims arising out of a breach of the terms herein;

3.2. Akay shall pay the sum of RM4,500,000.00 only to Piminik or its authorized representative by 30.04.2022 in full and final amicable settlement of this matter … ‘ [14] On 14.12.2021, the Plaintiff through their solicitors again confirmed and agreed that the sum of RM4.5 million shall be paid to the Plaintiff by 30.4.2022. [15] Notwithstanding the aforesaid, the Defendant failed and or refused to pay the RM4.5 million to the Plaintiff by 30.4.2022. The Parties’ respective contentions [16] The Plaintiff based its claim based on Clause 9 of the Contract which stipulates: Clause 9 at E8(14) “in the event that Piminik elects not to proceed with the mining operation within three (3) months of all approvals being obtained then the sum of RM500,000.00 is to be forfeited and the balance of RM4.5 million is to be refunded.” [17] The Plaintiff contended that the Defendant had accepted the Plaintiff’s termination on 12.10.2021 and did not dispute that a sum of RM4.5 million is refundable to the Plaintiff. [18] However, after this action was filed, the Defendant now claims that:

the RM4.5 million was only to be refunded out of the acquisition proceeds pursuant to Clause 9A;

the content of the letter dated 9.12.2021 constitutes without prejudice negotiations and shall not be disclosed or relied on in court as evidence. [19] Clause 9A provides: “Pending the following matters:

the discharge of all encumbrances by Arch Reinsurance Ltd on MC482 as set out in Paragraph 6.2;

(ii) the presentation of a valid charge on MC482 as set out in Paragraph 6.4; and

(iii) the securing of all approvals necessary to commence the extraction of gold on MC482 as set out in Paragraph 8, Akay undertakes, within seven (7) days of Akay’s receipt of the acquisition proceeds from the contemplated government acquisition of about 30 acres of MC482 as set out in Paragraph 3 above (“the Acquisition Proceeds”), to pay the Acquisition Proceeds up to a maximum of RM5 million to Messrs. Thomas Philip as stakeholder, as security for the refund of either RM5 million upon the approvals not being obtained within the Approval Period as set out in Paragraph 8, or RM4.5 million in the event that Piminik elects not to proceed with .” [emphasis added] [20] The Plaintiff contended that Clause 9A does not state that the Defendant is to refund the RM4.5 million advance out of the acquisition proceeds. It merely states that the Defendant is to pay the acquisition proceeds to the stakeholder as security for the refund of the RM4.5 million advance, pending the perfection of the matters stated in Clause 9A. [21] The acquisition proceeds relate to the government’s compulsory acquisition of approximately 30 acres of the Land (‘the Acquisition Proceeds’) which the parties had agreed under the aforesaid Clause 9A that the Defendant would place up to RM 5 million to the Defendant’s erstwhile solicitors as security for the refund to the Plaintiff in the event approvals for the mining are not obtained or up to RM 4.5 million in the event the Plaintiff decides not to proceed with the Contract notwithstanding the necessary approvals being obtained. [22] The Plaintiff contended that the payment from the Acquisition Proceeds as stipulated in Clause 9A serves as ‘security’ for the payments envisaged in the said clause and is not a prerequisite for the Defendant’s obligation to pay the RM 5 million or RM 4.5 million as the case maybe as contended by the Defendant. [23] Based on the aforesaid, the Plaintiff filed its Notice of Application vide Enclosure 7 for summary judgment for the sum of RM 4.5 million as the Plaintiff had decided not to proceed and had terminated the Contract. The Defendant had through its solicitors also had acknowledged the Plaintiff’s entitlement to the refund of RM 4.5 million and had agreed for the same to be paid by 30.4.2022. Defendant’s Striking Out Application [24] After the Plaintiff filed the Notice of Application under Enclosure 7 for summary judgment, the Defendant filed its Notice of Application vide Enclosure 11 to strike out the Plaintiff’s Writ of Summons and Statement of Claim. [25] It is not disputed that prior to the Plaintiff filing its Writ of Summons on 30.5.2022, there was an ongoing winding up proceedings taken against the Defendant in the High Court of Kuala Lumpur of Suit No. WA-28NCC-885-12/2021 (‘the Winding Up Petition’). [26] On 7.1.2022, an Ex-Parte Order was granted by the Winding Up Court wherein 2 approved liquidators were appointed as interim liquidators of the Defendant pending the hearing of the Winding Up Petition (‘the Ex Parte Order’). [27] The Defendant had subsequently filed an application to set aside the Ex Parte Order to the Winding Up Court (‘the Setting Aside Application’). [28] Pending the hearing of the Setting Aside Application, the Defendant had, on 23.2.2022, obtained an ad interim order to stay the Ex Parte Order (‘the Ad Interim Stay Order’) from the Winding Up Court. The material terms of the Ad Interim Stay Order are as follows: ‘…IT IS HEREBY ORDERED as follows:

The Ex-Parte Order dated 07 January 2022 (Enclosure 17) herein is stayed on an ad interim basis pending the disposal of the Respondent’s Summons in Chambers dated 25 January 2022 (Enclosure 19) herein, and subject to the conditions:

The Respondent shall not dispose of any assets;

(ii) The Respondent shall not conduct any mining operation on the Mining Land;

(iii) The Respondent shall not enter into any new contracts;

(iv) The Respondent shall not remove any documents from the Respondent’s office premises;

The Respondent shall not remove any minerals from the Mining Land;

(vi) The Respondent shall not carry out any mining of sand or remove any sand, and

(vii) The Respondent shall account to the Court for any withdrawal of money from any bank accounts.

The Respondent shall file an affidavit to inform the court in the event it carries out matter stated in para 1(vii) above.

In the event of breach of any of the said conditions, this ad-interim order shall lapse.’ [29] It is common ground that at the time the Plaintiff filed this action against the Defendant on 30.5.2022, the Ad Interim Stay Order was still in effect. [30] At the time of the hearing of Enclosure 11 before this Court, counsel informed this Court that the Winding Up Petition has been dismissed by the Winding Up Court. [31] Notwithstanding the aforesaid, the Defendant contended that the Plaintiff’s Writ of Summons filed on 30.5.2022 herein is a nullity as the same was filed without prior leave of the Winding Up Court. This is based on section 471 of the CA 2016 which provides: “(1) When a winding up order has been made or an interim liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and in accordance with such terms as the Court imposes.

The application for leave under subsection (1) shall be made in the Court granting the winding up order and shall be served on the liquidator.” [32] Section 471 of the CA 2016 is in pari materia to section 226(3) of the Companies Act 1965 (‘CA 1965’) where it is provided that: ‘(3) When a winding up order has been made or a provisional liquidator has been appointed no action or proceeding shall be proceeded with or commenced against the company except –

by leave of the Court; and

in accordance with such terms as the Court imposes.’ [33] Learned counsel for the Defendant contended that our Courts have consistently held that following a winding up order or where a provisional liquidator has been appointed, any action filed, be it by writ or other originating process, if filed without obtaining leave of the Court, shall be a nullity [See: Pantai Towers Management Corporation v. Metroplex Berhad [2011] 1 LNS 1931]. Also Ganda Selat Sdn Bhd (in Liquidation) v. MPDT Capital Bhd [2022] 2 CLJ 412, the Court held: “[3] OS 725 was filed by the defendant against the wound up company (as defined below) without leave of the insolvency court (as defined below) in contravention of s. 471(1) of the Companies Act 2016. Without the prior leave of the insolvency court, the Shah Alam High Court lacked the jurisdiction to hear the defendant's action against the company in OS 725.”] [34] The Court in the case of CIMB Bank Bhd v Wisma Rakyat Holdings Sdn Bhd [2019] 1 LNS 182 went through a comprehensive analysis of whether section 471 of the CA 2016 remains in effect in the face of an order for stay. [35] In brief, Wisma Rakyat Holdings Sdn Bhd (‘Wisma Rakyat’) was placed under provisional liquidation on 21.2.2017. Thereafter, on 17.8.2017, Wisma Rakyat was wound up. However, on 6.9.2018, Wisma Rakyat obtained order for stay of the winding up order. On 23.2.2018, CIMB Bank Bhd filed the action but without first obtaining leave of the Court. [36] To that, the learned Judge in that case made the following findings: ‘[8] Relying on the case of American International Assurance Bhd v. Coordinated Services L Design Sdn Bhd [2012] 1 CLJ 506 and the case of The Ayer Molek Rubber Company Bhd v. Bintang- Bintang Sdn Bhd [2013] 4 CLJ 820, it was contended by the learned counsel for the Plaintiff that the effect of the stay granted by the Court of Appeal on 06.09.2017 was that the whole effect of the winding-up order ceased and the company could resume the conduct of its business and affairs as if the winding-up order is non-existence. : [15] Clearly, the stay granted by the Court of Appeal in the instant case was limited in nature in that it was only until the disposal of the appeal against the winding-up order in the Court of Appeal. Thus, it cannot be said that the stay had the same effect as envisaged in the cases cited by the learned counsel for the Plaintiff i.e. that it cancels out the winding-up order completely as if it was never granted. : [20] That being the case, I find the Plaintiff's reliance on the stay Order dated 06.09.2017 to be misplaced. It does not absolve the Plaintiff from obtaining the leave of Court under Section 226(3) of the CA 1965 before filing this action. : [26] As can be seen above, the wordings in Section 236(2)(a) of the CA 1965 are clearly distinguishable from the ones used in Section 226(3) of the CA 1965 in that the words "no action shall be proceeded with" are absent in the former. In my view, these words envisage a situation where there is a pending action against the wound-up company but that the said action is without leave of court. Hence, leave would be required to proceed with the action. Such is the situation with the Plaintiff's case.’ [37] The findings of CIMB Bank Bhd v Wisma Rakyat Holdings Sdn Bhd (supra) were guided by the principles laid down in the case of Pengurusan Danaharta Sdn Bhd v Kasawa (M) Sdn Bhd [2004] 5 CLJ 474 where Hishamudin Yunus J (as he then was) held: ‘[1] As a matter of law, the stay order, being in the nature of a stay pending appeal and thus not absolute in nature, did not wipe out or bring an end to the winding-up order. As long as the winding-up order was still in existence, s. 226(3) of the Act applied, and the petitioner should have sought leave of court before presenting the petition. Therefore, the presentation of the present petition without prior leave of court was a breach of that provision; hence, the petition was bad in law and should be dismissed. (pp 477 g-h & 478 a … : In my opinion, in view of the previous winding-up order, the presentation of the present petition, without prior leave of court, as stipulated by s. 226(3), is a breach of that provision and hence the petition is bad in law and should be dismissed. The petition should not have been filed in the first place. With respect, I am unable to agree with the submission of the learned counsel for the petitioner regarding the effect of the stay order. Upon a close reading of the provision of s. 243(1), it will be noted that the relevant part reads: ... the Court may ... make an order staying the proceedings either altogether or for a limited time... [Emphasis added] Thus, in the context of a winding-up order, there are two types of stay order:

the "altogether" (or absolute or unlimited) type of stay order; or

the "limited time" type stay order. For the purpose of s. 226(3), it is important to distinguish these two types of stay order. Now, the relevant part of the stay order in the present case reads:

(ii) that a stay of the Winding-Up Order dated 24.5.2000 be allowed pending the Respondent's appeal to the Court of Appeal pursuant to Section 243(1) of the Companies Act 1965; Thus, the stay order in the present case, being in the nature of a stay pending appeal, clearly is of type (b). It is a limited stay order - limited in time. It is not the absolute or the unlimited type. It is not the "altogether" type. In my judgment, the stay order of 19 October 2000, being limited in time and thus not absolute or not unlimited in nature, does not relieve the petitioner of the requirement to obtain leave under s. 226(3). The provision of s. 226(3) is clear. It says: When a winding up order has been made... It is undisputed in the present case that a winding up order had been made. In my view, the winding-up order is still in existence notwithstanding the stay order. As a matter of law, the stay order, being in the nature of a stay pending appeal, and thus not absolute in nature, does not wipe out, or brings an end to, the winding-up order. In Vijayalakshmi Devi v. Jegadevan [1995] 2 CLJ 392 NH Chan JCA, delivering the judgment of the Court of Appeal, said (at p. 396): The stay of operation of an order means that the order which has been stayed would not be operative from the date of the passing of the stay order. It does not mean that the said order has been wiped out from existence... [Emphasis added] So long as the winding-up order is still in existence, s. 226(3) applies; and the petitioner must seek leave of court before presenting the petition.’ [38] Based on the aforesaid authorities, it is contended by learned counsel for the Defendant that the Ad Interim Stay Order in the present case is akin to the orders for limited stay pending appeal in CIMB Bank Bhd v Wisma Rakyat Holdings Sdn Bhd (supra) and Pengurusan Danaharta Sdn Bhd v Kasawa (M) Sdn Bhd (supra) Both stay orders are limited, pending the disposal and a final determination on the status of the principal order. [39] Therefore, just as a limited stay of the winding up order does not absolve a litigant from the requirements of Section 226(3) of the CA 1965 (now Section 471(1) of the CA 2016), the Ad Interim Stay Order in our present case, being a limited stay of the Ex Parte Order, also does not absolve the Plaintiff from the requirements of section 471(1) of the CA 2016 as the Ex Parte Order is not wiped out. [40] There is no dispute that in the instant case, the Plaintiff has not obtained the leave of the Court prior to the filing of the Writ for this action. Accordingly, following the Court of Appeal’s case of CGU Insurance Bhd v Asean Security Paper Mills Sdn Bhd [2001] 1 CLJ 305, where the Court of Appeal struck out a notice of appeal due to lack of leave of court, learned counsel for the Defendant urged this Court to also strike out the Plaintiff’s Writ of Summons. The relevant passage of CGU Insurance Bhd states: ‘[1] Section 226(3) CA imposes certain restrictions on any party commencing or proceeding to take up any action or proceeding against a company which has been wound up. Further, the CJA defines an appeal as a "proceeding" within the meaning of s. of the CJA. Therefore, the appellant's appeal was subject to s. 226(3) CA whereby leave of the winding-up court was required before it could proceed with an appeal against the respondent company.’ [41] On the other hand, the Plaintiff contended that section 471(1) of the CA 2016 does not apply in the present case by reason of the Ad Interim Stay Order. In support, reliance was placed on the Court of Appeal’s case of Vijayalakshmi Devi d/o Nadchatiram v. Jegadevan s/o Nadchatiram & Ors [1995] 1 MLJ 830 (‘Vijayalakshmi Devi’), in particular, to the following passages dealing with the effect of an order to stay proceedings under the winding up order: ‘… the effect of an order to stay proceedings under the winding-up order altogether after a winding-up proceedings. In 2 Jowitt’s Dictionary of English Law (2nd Ed) under ‘Stay’ at pp 1701-1702, after stating that the term ‘stay of proceedings can mean a total discontinuance of an action, it says this: ‘…but in strictness it is only accurate when a decree or judgment has been given, for in such a case the suit or action cannot be dismissed, because the court has adjudicated on it and therefore all that can be done is to stay proceedings under the decree or judgment’ : ‘ …the stay of operation of an order means that the order which has been stayed would not be operative from the date of passing of the stay order. It does not mean that the said order has been wiped out from existence: see Shree Chamundi Mopeds Ltd v Church of South India Trust Association (1992) 3 SCC 1 at p9; AIR 1992 SC 1439 and Supreme Court on Words and Phrases

at p 659. Therefore, the effect of the order of the then Supreme Court ordering a stay of the order of the High Court…is that the order of the High Court would not be operative from the date of the passing of the stay order of the then Supreme Court. It does not mean that the order of the High Court…staying all further proceedings under the winding up order…has been wiped out from existence. The order of the High Court…ordering an indefinite or permanent stay of the winding up proceedings is still in existence although, for the time being, inoperative or suspended until the appeal is heard by the Federal Court when it can either be set aside or affirmed.’ [emphasis added] [42] It is contended that since the stay of operation of an order means that the order stayed would be inoperative from the date of the passing of the stay order, it must mean that the legal consequence arising from the order appointing the interim liquidators as stipulated in section 471(1) ought not to come into force. This is notwithstanding the fact that the Ex Parte Order is not wiped up from existence. Court’s Analysis Defendant’s Enclosure 11 [43] I would like to start by stating my agreement that an order staying a prior order does not and cannot wipe out of existence the order which has been stayed. However, to my mind, the fact that the order so stayed is still in existence is very different from saying that the effect and or the operation of the terms of the order continues to be in force. To treat it to be so would render the stay order completely superfluous and impotent. [44] Take the present case, clearly by the Ad Interim Stay Order, the interim liquidators though appointed, can no longer exercise any control or power over the assets of the company. They cannot and in fact are prohibited from discharging their normal and general powers and duties as liquidators as specified in the Eleventh Schedule of the CA 2016. They do not take over the affairs of the company from the board of directors of the company who by reason of the Ad Interim Stay Order will resume and continue to manage and operate the day to day business of the company. The liquidators are however not released from the office since the Ex Parte Order is still in existence but this is the extent of their role as long as the Ad Interim Stay Order remains valid. [45] The legal effect of a stay order in relation to a winding up order ought not to be any different whether the same is an ‘altogether’ type of stay or a ‘limited’ type of stay save that the former is of a permanent character. Neither types of stay order will result in the wiping out of the winding up order. [46] To my mind, the reason why the order which has been stayed remained in existence and not wiped out is simple – the order was never set aside by the stay order but its effect and operation are suspended, kept behind a veil as it were, until such time when the stay order itself is set aside in which event the order that has been stayed will have its veil lifted and will automatically come into force again without a need for any application to re-instate the order. [47] The contention that leave of Court is needed notwithstanding the Ad Interim Stay Order faces an immediate quandary when one confronts the same with the requirement in Section 471(2) of the CA 2016 that the application for leave shall be served on the liquidator. Learned counsel for the Defendant was hard-pressed to proffer any explanation as to the purpose and role of the liquidator in the leave application when their functions as liquidators have been stayed. [48] In fact, learned counsel for the Defendant candidly acknowledged that they are instructed by the directors of the Defendant in the instant case in respect of Enclosures 7 and 11 and not from the liquidators. If the legal effect of the Ex Parte Order continues to be in force notwithstanding the Ad Interim Stay Order as contended by learned counsel for the Defendant, surely their authority to act for the Defendant must come from the liquidators? [49] Hence, with respect, I am not persuaded by the positions held in CIMB Bank Bhd v Wisma Rakyat Holdings Sdn Bhd (supra) and Pengurusan Danaharta Sdn Bhd v Kasawa (M) Sdn Bhd (supra) which being decisions emanating from the High Court are not binding on me. [50] Accordingly, I hold that the Plaintiff’s Writ of Summons was validly filed as no leave from the Winding Up Court was required by reason of the Ad Interim Stay Order that was operating at the material time. [51] For the aforesaid reasons, on 20.2.2023 after hearing oral submissions from counsel and having read their respective written submissions, I dismissed Defendant’s Enclosure 11 with costs fixed at RM 5,000.00 subject to payment of allocator. Plaintiff’s Enclosure 7 [52] On 15.3.2023, this Court proceeded with the hearing of the Plaintiff’s summary judgment under Enclosure 7. [53] Learned counsel for the Defendant raised only 1 triable issue before this Court, namely that the Defendant’s obligation to refund the Plaintiff the sum of RM 4.5 million is subject to the Defendant having received the Acquisition Proceeds from the authorities. The objection taken to the admissibility of the letter dated 9.12.2021 was rightly withdrawn. [54] With respect, Clause 9A which is relied upon by the Defendant in support of its aforesaid contention simply does not bear out the position taken. [55] Clause 9A merely stipulates that the Defendant undertakes within 7 days from the receipt of the Acquisition Proceeds, to place RM 5 million or RM 4.5 million as the case maybe out of the Acquisition Proceeds with its erstwhile solicitors, Messrs Thomas Philips as security to the Defendant’s obligation to refund the Plaintiff the said RM 5 million or RM 4.5 million as the case maybe. The receipt of the Acquisition Proceeds is not a prerequisite to the obligation to refund at all. [56] In fact, this was clearly understood even by the Defendant when the Defendant’s said erstwhile solicitors wrote to the Plaintiff’s solicitors on 9.12.2021 to record the terms of the settlement, amongst others, that the Defendant shall pay RM4.5 million to the Plaintiff by 30.4.2022. This was even before the Defendant had received the Acquisition Proceeds from the authorities. [57] In any case, having reached a full and final settlement with the Plaintiff on terms, inter alia, that the said RM 4.5 million would be paid to the Plaintiff by 30.4.2022, it is no longer open to the Defendant to contend that the Defendant’s is only obliged to refund the Plaintiff the RM 4.5 million when the Defendant receives the Acquisition Proceeds. [58] Thus, it is my judgment that the Defendant has not raised any bona fide triable issue to merit a trial for the Plaintiff’s claims in this action. [59] Accordingly, this Court grants the Plaintiff’s application under Enclosure 7 with costs fixed at RM 5,000 subject to the payment of allocator. Dated on the 16th day of March 2023 ONG CHEE KWAN J Judge of the High Court of Malaya High Court of Kuala Lumpur, NCC2 COUNSEL:

Mr. Harjit Singh with Mr. Navinjit Singh for Plaintiff Messrs Harjit Sandhu, Wan & Associates (Kuala Lumpur)

Mr. Eldarius Yong for Defendant Messrs. Ting & Yong (Shah Alam)

Pantai Towers Management Corporation v. Metroplex Berhad [2011] 1 LNS 1931]

Ganda Selat Sdn Bhd (in Liquidation) v. MPDT Capital Bhd [2022] 2 CLJ 412 3. CIMB Bank Bhd v Wisma Rakyat Holdings Sdn Bhd [2019] 1 LNS 182 4. Pengurusan Danaharta Sdn Bhd v Kasawa (M) Sdn Bhd [2004] 5 CLJ 474 5. CGU Insurance Bhd v Asean Security Paper Mills Sdn Bhd [2001] 1 CLJ 305 6. Vijayalakshmi Devi d/o Nadchatiram v. Jegadevan s/o Nadchatiram & Ors [1995] 1 MLJ 830

Section 471(1) of the Companies Act 2016 2.