Red Sea Housing Malaysia Sdn. Bhd. v Chew Soon Beng (JA-16A-1-07/2024)

This is an appeal under section 33C of the Industrial Relations Act 1967 [“Act 177”] against an Award of the Industrial Court which held that the Respondent’s dismissal from his position as Managing Director (“MD”) was without just cause or excuse and ordered payment of backwages and compensation in lieu of reinstatement.

The Appellant is a company involved in the modular building business. The Respondent was employed by the Appellant as its Managing Director (“MD”).

In early 2020, following discussions with MMC in relation to the Appellant’s future direction, the Respondent was informed that his position would be affected. By a letter issued on 19 May 2020, the Appellant served Notice of Termination to the Respondent’s employment, stating that the termination was due to restructuring and redundancy. The Respondent was placed on garden leave and subsequently paid a sum of RM211,497.40 representing salary during the garden leave period and accrued leave.

The Respondent then lodged a representation under Act 177. The matter was referred to the Industrial Court. After hearing evidence from both parties, including documentary exhibits and a recorded telephone conversation between the Respondent and the Appellant’s representative on 8 May 2020, the Industrial Court found that the dismissal was without just cause or excuse.

The Industrial Court held, in essence, that the Appellant had failed to prove that the Respondent’s position was genuinely redundant and that the real reason for the dismissal was MMC’s desire to have a new head of the company. The Court awarded the Respondent backwages and compensation in lieu of reinstatement.

Dissatisfied with the Award, the Appellant filed the present appeal under section 33C of Act 177.

The Appellant contends that the Respondent was lawfully retrenched as part of a genuine redundancy arising from business reorganisation and continuing financial losses. The Respondent maintains that redundancy was not proved and that the real reason for his removal was the desire of MMC to have a new head of the company.

It is trite that an appeal under s 33C of Act 177 is not a rehearing. The High Court will not interfere with the Industrial Court’s findings of fact unless the Award is shown to be tainted by an error of law, or is perverse, or there has been a failure to judicially appreciate the evidence such that the Award is “plainly wrong” (see Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Bhd and another appeal [2018] 2 MLJ 177 and Ng Hoo Kui & Anor v Wendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67).

In a complaint of dismissal without just cause or excuse, the burden lies on the employer to justify the dismissal (see Goon Kwee Phoy v J & P Coats (M) Bhd [1981] 2 MLJ 129).

Where the employer relies on redundancy, the court will recognise the employer’s managerial prerogative to reorganise its business (see William Jack & Co. (M) Sdn Bhd v S. Balasingam [1996] MLJU 641), but the employer must still produce concrete proof of genuine redundancy and not a mere label to remove an unwanted employee (see Bayer (M) Sdn Bhd v Ng Hong Pau [1999] 4 MLJ 361 and Food Specialities (M) Sdn. Bhd. and Esa bin Haji Mohamad [1989] 1 ILR 502).

Against this principle of law, this is the Court’s analysis and findings.

On the evidence, the Industrial Court found that at the time of dismissal in May 2020, the MD position had not in fact been abolished. This finding was based, among others, on the evidence of the Appellant’s own witness that the Board only decided there would be no MD at a meeting in or about November/December 2020, and that the post-restructuring organisation chart (showing no MD) was signed and dated 1 January 2021.

The Industrial Court also relied on the recorded telephone conversation of 8 May 2020, in which the Appellant’s representative told the Respondent that MMC wanted to replaced Respondent with someone from the MMC itself. Read with the chronology, the Industrial Court inferred that the operative reason for the dismissal was MMC’s desire for a change in leadership and that the redundancy explanation was at best secondary and at worst a pretext.

There was evidence on record to support these findings. The Appellant’s complaint is essentially that the Industrial Court should have accepted its explanation that the decision to abolish the MD post had been made earlier and only formalised later. That is an invitation to this Court to re-evaluate facts and credibility. However, applying the section 33C of Act 177 standard, this Court is unable to say that the Industrial Court’s conclusion that redundancy was not proved was perverse or plainly wrong.

As to the financial justification, the Industrial Court did not ignore the Appellant’s audited financial statements or the assertion of continuing losses. It noted the reduction in the magnitude of losses during the Respondent’s tenure and the lack of cogent documentary support for the alleged PNG project and “uncertain market conditions”.

On this point, the law does not require a company to be insolvent before it can restructure. However, consonant with Bayer (M) Sdn Bhd v Ng Hong Pau [1999] 4 MLJ 361 and Food Specialities (M) Sdn. Bhd. and Esa bin Haji Mohamad [1989] 1 ILR 502, the employer must still adduce concrete proof of genuine redundancy and not merely invoke financial difficulties or “reorganisation” as a label. In the present case, the Industrial Court was entitled to hold that the Appellant’s financial explanation, when viewed together with the timing of the dismissal and MMC’s role, did not amount to such concrete proof of redundancy. Therefore, this Court found that no misdirection of principle has been shown.

In the Court’s view, the complaint on the recorded call goes to weight, not admissibility. The witness accepted that it was his voice. The Industrial Court was entitled to give the conversation significant weight in determining the real reason for the dismissal. Its reliance on that evidence does not disclose any error of law.

On quantum, the sum of RM211,497.40 paid to the Respondent represented salary during garden leave and accrued leave, which are contractual entitlements upon termination. The Industrial Court was aware of this payment. Its decision not to treat that sum as part of statutory compensation for unfair dismissal and to award backwages and compensation having regard to the circumstances, falls within its remedial discretion (see KFC Technical Services Sdn Bhd v Industrial Court of Malaysia & Anor [1992] 1 MLJ 564). Therefore, the Award cannot be said to be manifestly excessive or to reflect double recovery.

Reading the Award as a whole, this Court finds that the Industrial Court correctly directed itself on the law, considered the oral and documentary evidence in some detail and gave coherent reasons for its conclusions on both liability and relief. The Appellant has not demonstrated any error of law, perversity or lack of judicial appreciation of the evidence that would justify intervention under section 33C Act 177.

The appeal is therefore dismissed with costs of RM 8,000.00 subject to allocator.

The Award of the Industrial Court is affirmed. Dated :10 December 2025 -sgd-Dr Noradura Binti Hamzah Judicial Commissioner High Court Civil 2 Johor Bahru Solicitors for the Plaintiff : Dato Thavalingam C. Thavarajah together with Manvuir Baljit Singh Messrs. T. Thavalingam & Co. Solicitors for the Defandant : Datuk Khutubul Zaman bin Bukhari Messrs. Syarizad Zaman & Seah