Schedule
Schedule Table A, which is part of the Articles of Association of the Claimant, says: 18 "89. All acts done by any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director." (emphasis added) [24] Therefore the construction contracts entered into by the Claimant and executed on its behalf by the bankrupt director Bernard Lim, are nevertheless valid construction contracts upon which adjudication may proceed. It is not null and void or illegal and because of the saving provision, the adjudication decision given is not one improperly procured through fraud under section 15(a) CIPAA under which provision the Respondent Sazean Engineering has sought to set it aside. Whether the Claimant's Counsel Mr. Steven Seah Shu Keen and the legal firm of Messrs. P.Y. Hoh & Tai have due authority to act for the Claimant in these proceedings before this Court. [25] Learned counsel for Sazean Engineering as Respondent in the adjudications had raised this preliminary objection based on the fact that Bumi Bersatu, at the material time i.e. from the time the 3 adjudications were commenced right to the present time when these applications were 19 filed in Court, did not have a valid Board of Directors as required under the Companies Act, 1965 in that the company did not meet the requirement of a minimum of two (2) directors to be in compliance with Section 122 of the Companies Act, 1965. Thus, it was submitted that the said counsel and the said solicitors did not have instructions to act for Bumi Bersatu and/or any such instructions received was improper and unauthorized. [26] It was argued that the invalid Board had arisen from the fact that at the material time, in fact long before the adjudication process was commenced, i.e. since 5 October 2012, one of the only two directors, that is one Bernard Lim Peng Hong had already been adjudicated a bankrupt. It was highlighted that no official sanction from the DGI as required under the bankruptcy laws was obtained for Bernard Lim Peng Hong to continue to act as a Director of the Claimant company. The only other director of the Claimant company was one Rosnah Binti Madan. [27] Therefore, in law, it was argued that the Claimant Company cannot function with only one Director since the Claimant was in breach of Section 122(1) of the Companies Act, 1965. The discovery of the bankruptcy of Bernard Lim was made by Sazean Engineering through a bankruptcy search dated 28 July 2016 wherein it was discovered that he had been made a bankrupt on 5 October 2012. Bernard Lim Peng Hong 20 had affirmed an Affidavit on 6 September 2016 in opposing the setting aside Originating Summons wherein at paragraph 5 thereof he has admitted that he only came to know on 6 February 2014 that he has been made a bankrupt. [28] In support of the above proposition, learned counsel for Sazean Engineering had referred to the case of Basi Controls (M) Sdn Bhd v Nirex Engineering & Automation (M) Sdn Bhd [2009] 10 CLJ 48 at page 52, where the Court observed as follows: "[10] Menurut s. 125(1) Akta Syarikat 1965 seorang bankrap, dalam kes ini Ravindranathan T Subramaniam, hendaklah memperolehi kebenaran mahkamah untuk bertindak sebagai pengarah syarikat bagi Basi Controls (Malaysia) Sdn Bhd. Larangan yang sama juga terdapat dalam s. 38(1)(d) Akta Kebankrapan 1967. Namun saya dapati tiada keterangan yang dikemukakan untuk menunjukkan bahawa kebenaran untuk beliau bertindak sebagai pengarah itu telah diperolehi. ... [13] Memandangkan fakta bahawa salah seorang pengarah telah pun dijatuhkan bankrap dan dua pengarah yang lain telah pun meletakkan jawatan sebagai pengarah-pengarah Basi Controls 21 (Malaysia) Sdn Bhd, dan tiada pula keterangan yang adanya pengarah-pengarah lain yang dilantik, maka amatlah nyata hanya tinggal seorang sahaja pengarah iaitu Thavaratnaraja T Subramaniam di dalam Syarikat Basi Controls (Malaysia) Sdn Bhd; syarikat plaintif. [14] Fakta tentang jumlah pengarah yang ada di dalam syarikat Basi Controls (Malaysia) Sdn Bhd amat penting untuk menentukan sama ada T/n K Mano & Associates mempunyai autoriti untuk bertindak bagi pihak syarikat plaintif itu. Jika diteliti lagi peruntukan Akta Syarikat 1965, s. 122(1) nya jelas memperuntukkan bahawa "every company shall have at least two directors who each has his principal or only place of residence within Malaysia". Berdasarkan kepada peruntukan s. 122(1) ini, adalah jelas bahawa sebenarnya tiada kuorum di dalam Syarikat Basi Controls (Malaysia) Sdn Bhd sejak awal lagi, iaitu sebelum tindakan ini difailkan pada 26 Disember 2007 dan juga dalam memberikan autoriti kepada Tetuan K Mano & Associates untuk memfailkan tindakan ini. ... 22 [17] Di dalam kes William Jacks & Co (M) Sdn Bhd v Chemquip (M) Sdn Bhd & Anor [1991] 1 CLJ 184; [1991] 4 CLJ (Rep) 218 mahkamah telah memutuskan bahawa: In my view the correct proposition is that the method of raising the question of want of authority is usually by a substantive application to stay proceedings. That is not the only permitted manner. The Court may in its inherent jurisdiction entertain the challenge made orally at any stage of the proceedings and may refuse to proceed further with the proceedings if the Court can come to a conclusion on sufficient or admitted evidence that there is no action properly before it. In this case the challenge had been made. The burden of proving that the suit had been instituted with proper authority therefore rests on the plaintiff company (see United Investment & Finance Ltd, v. Tee Chin Yong & Ors [1966] 1 LNS 207; [1967] 1 MLJ 31) Counsel for the plaintiff did not produce any evidence to show that there was proper authority. I find there is sufficient evidence before me to conclude that there was lack of authority to 23 institute the proceedings. I therefore find the action irregular and should be struck out. [18] Sentimen yang sama telahpun diikuti di dalam kes Yukilon Manufacturing Sdn Bhd & Anor v. Dato' Wong Gek Meng & Ors [1997] 2 CLJ 467 di mana telah diputuskan antara lain bahawa: The lack of authority of the solicitors to act can be challenged at any stage of the proceedings. Once the challenge has been advanced, like the present case, the burden of proving that the suit has been instituted with proper authority must rest on the plaintiffs. [19] Pihak plaintif telah cuba menunjukkan satu resolusi pengarah yang bertarikh 20 Disember 2007 di dalam kandungan (24) eks. TVR1 bahawa persaraan tiga orang pengarah, Bengt - Olof Crister Sten, Edna Concepcion atas alasan sudah tidak berada di Malaysia selama lebih 15 tahun dan Ravindranathan a/l T Subramaniam telah diterima dan diluluskan serta pelantikan T/n K Mano & Associates sebagai peguam syarikat dan juga pelantikan Sahadevan a/l Munusamy sebagai setiausaha syarikat. Namun soalnya, siapakah yang menerima dan memutuskan ini bagi pihak lembaga pengarah? Pada pandangan saya lembaga pengarah syarikat plaintif pada ketika itu telah tidak tertubuh 24 dengan sempurna. Malahan setiausaha pun tidak ada. Jadi di manalah autoriti lembaga pengarah untuk membuat keputusan? [20] Jadi berdasarkan fakta-fakta yang ada di hadapan saya, saya dengan jelasnya berpendapat bahawa sama ada plaintif mahu pun peguamnya T/n K Mano & Associates sendiri telah gagal untuk mengemukakan autoriti dalam memfailkan tindakan ini bagi pihak Basi Controls (Malaysia) Sdn Bhd memandangkan keadaan Syarikat Basi Controls (Malaysia) Sdn Bhd yang tidak teratur ketika itu. Sebagai peguam beliau sepatutnya peka dengan situasi syarikat itu yang sudah tidak mematuhi peruntukan undang-undang yang berkaitan. ... [27] Mahkamah telah memutuskan bahawa kos tindakan ini dibayar oleh T/n K Mano & Associates. Peguamcara defendan dalam hujahan telah merujuk kepada dua keputusan Mahkamah Tinggi yang akan saya perturunkan di bawah. [28] Pertamanya, dalam kes Mohd Yusof Awang & Anor v Malayan Banking Bhd & Anor [1995] 1 LNS 296 YA Zakaria J (ketika itu) telah mengikut prinsip yang diputuskan dalam 25 kes Yonjee v Toynbee [1909] 1 KB 215 dan menyatakan seperti yang berikut: ... The Court of Appeal allowed the plaintiff's appeal on the ground that the solicitors who had taken on themselves to act for the defendant in the action had thereby impliedly warranted that he had authority to do so, and therefore were liable personally to pay the plaintiff's costs of the action. [29] Keduanya, dalam kes Syawal Enterprise Sdn Bhd & Anor v Davasari Sdn Bhd [1993] 2 CLJ 568 Mahkamah Tinggi telah memutuskan seperti yang berikut: [1] The writ having been caused to be issued by the solicitors purporting to act as agents of the plaintiffs and it having been found that the plaintiffs had not in fact appointed the solicitors to cause the writ to issue or at all, the solicitors have to bear the consequences of their unauthorized dragging of the defendants to Court. [2] The defendants are entitled to have an order against the solicitors in respect of the costs of the action." (emphasis added) 26 [29] The above case can be distinguished from the present case. There, when challenged on the authority of solicitors to act for the Plaintiff company, the remaining one director was not able to produce any affidavit of the last director agreeing to the action being commenced. If the last director that resigned or vacated the office would leave the company with fewer than 2 directors, then his resignation or vacation of office is ineffective under section 122(6) Companies Act 1965. Presumably that director would still be a valid director and he could agree to the action being taken if he had wanted to. [30] It would appear that it was the bankruptcy of the director that was the act that had caused the number of qualified directors to fall below 2, for the other 2 directors had resigned earlier as they had left the country. For the purpose of the validity of the action of the company, the so-called disqualified director shall still be considered a director of the company as there is no automatic vacating of an office. If he had authorized the action of the company, the authority to appoint the said solicitors could still be given. From the facts narrated that does not seem to have been obtained. [31] It does not appear that the significance and saving provision of section 127 Companies Act 1965 has been brought to the attention of the Court in Basi Controls case (supra). Section 127 reads as follows: 127. Validity of acts of directors and officers 27 The acts of a director or manager or secretary shall be valid notwithstanding any defect that may afterwards be discovered in his appointment or qualification. [32] The other equally relevant provision is section 122(6) Companies Act 1965 which provides that the resignation or vacation of office as a director is not valid if the result would be that the remaining number of directors is just one. [33] There were initially 2 directors of the Claimant i.e. Bernard Lim and Rosnah. After Bernard Lim had been adjudicated a bankrupt, though he is disqualified as a director, his office as a director is not vacated immediately. He would have committed an offence both under section 125(1) of the Companies Act 1965 as well as under section 38(1)(d) of the Bankruptcy Act 1967. [34] However his action continues to bind the company that he represents. It would have, of course, been prudent for a new director to be appointed in his place as his offence would be a continuing offence with a continuing fine for each day the offence is being committed. His actions bind outsiders who would be dealing with the company, unaware of his disqualification. 28 [35] I cannot agree with the submission of learned counsel for Sazean Engineering that the Claimant company is non-functional, paralyzed or much less, non-existent altogether. According to learned counsel the reason is that there was insufficient quorum needed to form the Board of Directors and as such the Claimant could not have legitimately authorized the said solicitors. [36] Just because the number of directors has fallen below the minimum number of 2 does not mean that company is non-functional or paralyzed as the salaries will still have to be paid, contractual commitments have still to be met, statutory filings would still have to be and assets of the company are still available for judgment creditors to execute on. A company would exist until it is wound up, dissolved and finally struck out by the Registrar of Companies. Until then it could sue and be sued provided the last 2 directors would still authorise the action though an offence would have been committed by the disqualified directors. [37] The saving provision is not only to protect innocent third parties who do not know of the disqualification of any of its directors but also to protect the company itself which is a separate legal entity from its shareholders and directors from being taken advantage of by third parties. However any attempt to continue as a director after an act of disqualification such as being adjudicated a bankrupt would expose that 29 director to criminal prosecution. The company of which the bankrupt is a director is still safe and intact by virtue of the combined operation of section 122(6) and 127 of the Companies Act 1965. [38] Here work has been done by the Claimant as subcontractor for Sazean Engineering as main contractor in a construction contract with respect to the construction of link houses in Shah Alam and based on the evidence and in the absence of a payment response, the learned adjudicator had found a sum due to the Claimant from the Respondent. [39] Here both the 2 initial directors, Bernard Lim and Rosnah binti Madan have each affirmed affidavits to authorize the current actions and the adjudication. That alone would be sufficient as it is not denied that the said counsel and solicitors have prepared the various cause papers and affidavits filed in both the adjudication and the current court proceedings. [40] Leaned counsel for Sazean Engineering referred to the Court of Appeal case of Hoh Kiang Ngan & Ors v Hoh Han Keyet [2013] 4 MLJ 199 at p 210 and 212 where it held as follows with respect of a company having one director only: "[13] ... Issue 3 — Whether with the removal of the respondent as a director of the company, the company was in breach of s 122(1) of the 30 Companies Act 1965 in that the company did not have at least two directors who each has his principal or only place of residence in Malaysia. At the AGM held on 12 July 2011, four directors were elected on to the board of directors namely George Hoh, Frank Hoh ('the first appellant') Jonathan Hoh ('the fourth appellant') and Leonard Hoh ('the tenth appellant'). The respondent contended that with his non re-election as a director, the company did not have as at 12 July 2011, at least two directors whose 'principal or only place of residence' is in Malaysia in compliance with s 122(1) of the Companies Act 1965. It is not disputed that Jonathan Hoh and Leonard Hoh, the directors nominated and elected to represent the family branches of Derek Hoh and Richard Hoh respectively, do not reside in Malaysia as their principal place of residence is in Australia. It is also not disputed that George Hoh has his principal residence in Malaysia. However, what is in dispute and hotly contested is the principal residence of Frank Hoh (the first appellant). The learned judge found that Frank Hoh's principal place of residence was not in Malaysia but in Australia and consequently the company was in breach of s 122(1) of the Companies Act 1965. It would follow therefor that the resolutions passed at the AGM are null 31 and void and that pursuant to s 122(6) of the Companies Act 1965 the removal of the respondent as a director is invalid; ... [17] And that as Frank Hoh did not have his principal place of residence in Malaysia and with the removal of the respondent, the number of directors with a principal place of residence in Malaysia fell below two and the company was thus in breach of s 122(1) of the Companies Act 1965. Consequently the resolutions passed at the AGM are null and void." (emphasis added) [41] I have no problem with such a proposition of the law. The removal of the resident director is of course not valid under section 122(6) Companies Act 1965 as the removal or non-election leaves the company with just 1 resident director. Consequently the resolutions passed at the AGM were null and void. [42] In the present case the disqualification to be a director having set in with Bernard's bankruptcy, his vacating the office of a director is not valid until a new director is appointed in his place. His action in authorizing the adjudication proceedings and the court proceedings is nevertheless valid under section 122(6) read with section 127 Companies Act 1965 and 32 when raised, the remaining director Rosnah had affirmed her affidavit confirming the adjudication proceedings and the court proceedings. [43] To avoid the continuing commission of offences under the Companies Act and Bankruptcy Act, a new director Allan Loong has been appointed in place of Bernard Lim. [44] Learned counsel for Sazean Engineering also cited the case of Wong Ha & Anor v Albert Ng Keng Wan @ Ng King Wan & 3 Ors [2010] 1 LNS, 1830, where Justice Tengku Maimun Tuan Mat J. (now JCA) stated the following in respect of an undischarged bankrupt director and Section 122(1) of the Companies Act, 1965: "On 20.7.2010, a notice of change of solicitors acting for the plaintiffs was filed (end 10) and on 21.7.2010 an application was filed to substitute the 1st plaintiff (end 11). From the chronology, it is clear to me that there had been inaction on the part of the plaintiffs. In respect of the deceased 1st plaintiff, probate was granted on 11.1.2010 yet the application to substitute was not made until the action is fixed for show cause. No explanation was given as to the delay in taking the necessary steps to substitute the 1st plaintiff. 33 Further, in respect of the 2nd plaintiff, he was adjudged a bankrupt on 6.5.2009. Nothing was done to obtain leave of the court pursuant to section 38 (1) of the Bankruptcy Act 1967. Again there is no explanation on why nothing was done to regularize the proceedings in respect of the 2nd plaintiff. As submitted by learned counsel for the defendants, the Notice of change filed in respect of the 2nd plaintiff is in effect a nullity (see Chin Kon Nam & Anor v Chai Yun Phin Development Sdn Bhd [1996] 1 CLJ 444). The burden is on the plaintiff to explain the reason or reasons for his inaction if he does not desire the action to be dismissed. If no satisfactory explanation is offered by the plaintiff for the delay it would mean that his action amounts to intentional and contumelious conduct warranting the Court to strike out the suit. In the instant case, there is no explanation for the delay as no affidavit was filed by the plaintiffs on the show cause. The fact that there is an application pending in the court file to substitute the plaintiff does not in itself offer any explanation on the delay. Further, it must be noted that essentially the relief sought by the plaintiffs against the defendants is to reinstate the 1st plaintiff who had since died and the 2nd plaintiff who is an undischarged bankrupt as directors of the 3rd and 4th defendant. 34 Under section 38(1)(d) of the Bankruptcy Act, the 2nd plaintiff shall not, except with the previous permission of the Director General of Insolvency or of the Court become the director of any company. Similar provision is present in section 122 of the Companies Act. There is no evidence that the previous permission of the DGI or the Court has been obtained. Given that the 2nd plaintiff is incompetent to be a director, the only other person left is the 1st plaintiff, the deceased. Pursuant to section 122 of the Companies Act, every company shall have at least two directors. In the circumstances, no purpose would be served to allow the action to remain. To conclude, I was satisfied that there was an intentional and contumelious default on the part of the plaintiffs in prosecuting the action. I accordingly made the order as stated above." (emphasis added) [45] In the above case, there was of course, nothing that could prevent death from overtaking a director or for that matter, anyone. If the remaining single director had been interested in continuing with the action, he could have asked the company to convene a meeting of the shareholders for 2 new directors to be appointed or to apply to court for a 35 new directors to be appointed even though the quorum has fallen below 2. His disinterest has resulted in the Court striking out the action. [46] Whilst it is true that Bernard Lim Peng Hong is an undischarged bankrupt at all material times and that he did not obtain a sanction from the DGI to continue to act as a director, that is not the equivalent of no board of directors being functional as Parliament has intervened in section 127 Companies Act 1965 to prevent incapacity or paralysis of a company to set in, affecting the rights of innocent third parties and rights of the company itself that has accrued. If the company has assets, the assets would still belong to the company in spite of a director's disqualification so that creditors are not prejudiced. Likewise amounts due and owing to the Claimant for work done and certified under a Certificate of Payment does not cease to be due and owing merely because a director is disqualified and there is only one remaining director. [47] Learned counsel for Sazean Engineering also referred to the Memorandum and Articles of Association ("M & A") of the Claimant company, Bumi Bersatu wherein Regulation 1 at page 4 of the said M & A incorporates Table A of the Fourth Schedule of the Companies Act, 1965 to be applicable to the Claimant company. The relevant regulations of the Table A in the Fourth Schedule are reproduced below for easy reference: Regulation 66 which states: 36 "The company at the meeting at which a director so retires may fill the vacated office by electing a person thereto, and in default the retiring director shall, if offering himself for re-election and not being disqualified under the Act from holding office as a director, be deemed to have been re-elected, unless at that meeting it is expressly resolved not to fill the vacated office unless a resolution for the re-election of that director is put to the meeting and lost." Regulation 72(b) which states: "72. The office of director shall become vacant if the director - (b) becomes bankrupt or makes any arrangement or composition with his creditors generally.” Regulation 83 which states: "83. The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall be two." [48] Learned counsel for Sazean Engineering submitted that the Claimant was not in compliance with its own M & A when the number of directors fell below 2 with the directorship of Bernard Lim falling vacant because of bankruptcy. However the Articles of Association of a company 37 is subject to the Companies Act 1965 and here the Act itself has provided by way of section 122(6) that such a vacation of office would be invalid if it causes the number of directors to fall below 2. [49] Section 122 reads as follows: "122. Directors (1) Every company shall have at least two directors, who each has his principal or only place of residence within Malaysia. (1A) In subsection (1), "director" shall not include an alternate or substitute director. (2) No person other than a natural person of full age shall be a director of a company. (3) The first directors of a company shall be named in the memorandum or articles of the company. (4) Any provision in the memorandum or articles of a company which was in force immediately before the commencement of this Act and which operated to constitute a corporation as a director of the company shall be read and construed as if it authorized that corporation to appoint a natural person to be a director of that company. 38 (5) On the commencement of this Act any corporation which holds office as a director of a company shall cease to hold office and the vacancy may be filled as a casual vacancy in accordance with the articles of the company. (6) Notwithstanding anything contained in this Act or in the memorandum or articles of a company or in any agreement with a company, a director of a company shall not resign or vacate his office if, by his resignation or vacation from office, the number of directors of the company is reduced below the minimum number required by subsection (1) and any purported resignation or vacation of office in contravention of this section shall be deemed to be invalid. (7) Subsection (6) shall not apply where a director of a company is required to resign or vacate his office if he has not within the period referred to in subsection 124(1) obtained his qualification or by virtue of his disqualification under this Act or any other written law." (emphasis added) [50] Section 122(6), starting as it does with the words "Notwithstanding anything ...", is in the nature of a non-obstante clause in that it has the power to override other provisions of the same Act or the memorandum 39 or articles of association of the company. This is so in spite of the fact that an offence would have been committed by giving section 122(6) an overriding effect over other provisions of the Act in the event of a conflict. [51] Thus whilst Bernard Lim cannot continue to act as a director and it would be an offence for him to do so by virtue of section 125(1), yet he cannot effectively vacate the office of a director under section 122(6) Companies Act 1965. [52] This is in spite of Regulation 72 Table A that seems to provide for an automatic vacating of a director's office for it reads: "72. The office of director shall become vacant if the director— (a) ceases to be a director by virtue of the Act; (b) becomes bankrupt or makes any arrangement or composition with his creditors generally; (c) becomes prohibited from being a director by reason of any order made under the Act; (d) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental disorder; (e) resigns his office by notice in writing to the company; 40 (f) for more than six months is absent without permission of the directors from meetings of the directors held during that period; (g) without the consent of the company in general meeting holds any other office of profit under the company except that of managing director or manager; or (h) is directly or indirectly interested in any contract or proposed contract with the company and fails to declare the nature of his interest in manner required by the Act" (emphasis added) [53] As stated above, the non-obstante clause prevails over a contrary provision even in the memorandum and articles of association as well. Parliament provides an exception in section 122(7) where failure to attain share qualification of a director is concerned under section 124(3) Companies Act 1965. [54] It is not a case of Parliament encouraging the breaking of the law in allowing an offence to continue under section 125(1) but that it has to protect outsiders having a contractual relationship with the company and the company having continuing rights as well as obligations. In other words, both the outsiders and the company should not suffer just because a director of the company has been adjudged a bankrupt. 41 [55] Little wonder that there is Regulation 68 in Table A to allow for this impasse to be ironed out in that the remaining single director may have the power to appoint another director to fill the vacancy caused by the bankrupt director's disqualification. This is normally done by the bankrupt director resigning and a new director being appointed. [56] Regulation 68 Table A reads as follows: "68. The directors shall have power at any time, and from time to time, to appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors, but so that the total number of directors shall not at any time exceed the number fixed in accordance with these regulations. Any director so appointed shall hold office only until the next following annual general meeting, and shall then be eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at that meeting." [57] Learned counsel for Sazean Engineering had referred the court to Regulation 83 which requires a quorum of 2 directors to transact the business of the directors without referring to Regulation 84 Table A which is pertinent to the issue at hand and it reads as follows: 42 "84. The continuing directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to the regulations of the company as the necessary quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the company, but for no other purpose." (emphasis added) [58] As commented by the learned author Chen Thim Wai in "Guide to Table A - Articles of Association", LexisNexis 2012 at page 187: "Regulation 84 allows the continuing directors even if their number is less than the quorum to exercise the powers provided in regulation 68 to appoint additional directors to make up the quorum, but for no other purpose. The usefulness of regulation 84 is illustrated in Liwa Holdings Sdn Bhd v Chi Liung Holdings Sdn Bhd [1998] 4 MLJ 465 at p 471 where the remaining director, after the death of the other director, was able to invoke the article with provisions similar to regulation 84 to appoint a new director to fill the vacancy." (emphasis added) [59] Learned counsel for Sazean Engineering sees something suspicious and sinister when he submitted that the appointment of the 43 new director, namely Allan Loong Hock Meng on 11 July 2016 and the resignation of Bernard Lim Peng Hong on the same day is a deceptive and dishonest trickery on the part of the Claimant company and is an afterthought. [60] Learned counsel surmised that when he raised the issues of Bernard Lim Peng Hong's status at the hearing on 28 July 2016 and at subsequent hearings, presumably, the Claimant had, in order to show that there was a change in the company's records, i.e. prior to the objection being raised, the Claimant had via the Claimant's First Affidavit in Reply affirmed on 22 August 2016 produced the Form 49 as exhibit A-1 of the said affidavit. The said Affidavit affirmed by Lee Kee Loong verified that the Form 49 was dated 11 July 2016. However the Form 49 was not lodged until 8 August 2016. [61] Nothing turns on this. The statutory period for lodging the relevant Form 49 has been complied with. The Form 49 was signed by the other director Rosnah binti Madan on 11 July 2016. Under section 141(6) the Form 149 is to be lodged with the Registrar of Companies within a month from the date of a person ceases to be a director or becomes a director. The date of lodgment of the Form 49 being on 8 August 2016 is within the statutory prescribed timeframe. Section 141(6)(b) reads as follows: 44 "(b) within one month after a person ceases to be, or becomes, a director of the company, a return in the prescribed form notifying the Registrar of the change and containing, with respect to each then director of the company, the particulars required to be specified in the register;" [62] When a challenge is raised by an outsider that a certain director, in this case, Bernard Lim, has no authority to cause the Claimant company to bring this action or to commence the adjudication, the burden of proof of having such authority lies on the person claiming the authority. Going by the saving provision of section 127 read together with section 122(6) Companies Act, the said Bernard Lim, has the authority to bring the adjudication proceedings and these various actions in Court. The other director Rosnah Binti Madan had on 22 August 2016, affirmed an affidavit to that effect. In fact all the 3 Notices of Adjudication were signed by Rosnah. [63] Even assuming that the said Bernard Lim has no authority to commence these various actions, that has been ratified with the appointment of Allan Loong Hock Meng as a director in place of Bernard Lim and by the Affidavit of Allan Loong dated 22 August 2016. [64] It was also submitted that Bernard Lim Peng Hong had purportedly transferred his 50,000 shares in the Claimant company. [Please refer to 45 Exhibit "D-4" in the Afidavit Balasan Ketiga Defendan Pertama by Lee Kee Loong in O.S. No.: WA-24C-52-07/2016 affirmed on 5.8.2016]. This exhibit is Form 32 i.e. Form of Transfer of Securities to be lodged with CCM. This particular averment is not relevant with respect to the issue of the authority of solicitors to act. At any rate there is the other shareholder Rosnah Binti Madan with 50,000 shares. In any event this particular Originating Summons had been withdrawn by Sazean Engineering and struck out. [65] I agree that as Bernard Lim Peng Hong is an undischarged bankrupt, he cannot transfer his shares in a company which has become vested with the DGI and such transfer cannot be done without the sanction of the DGI. No such sanction has been obtained. However nothing turns on this with respect to the directors of the Claimant company authorizing and ratifying the action of the Claimant in the adjudication and in the current court proceedings. As was held in Malayan Land Investment Co (Pte) Ltd v Sathask Realty Sdn Bhd [2001] 1 MLJ 451, when the authority of a director is being challenged, the Court would, on an application made by the person claiming such authority, grant a stay of the action for the company to ratify the bringing of the action. 46 [66] I also find that there is merits in the submission of learned counsel for the Claimant that indeed both Allan Loong and Lee Kee Loong were acting as de facto directors of the Claimant during the material time as confirmed by Bernard Lim and so they are both directors within the meaning of section 4 of the Companies Act 1965. [67] Section 4 under the definition of "director" reads as follows: "director" includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director” [68] It was submitted with considerable persuasion by learned counsel for the Claimant that a director is not defined by the label given to him but rather by his function in a company. The cases cited in support of this proposition are as follows: 1 Ravichanthiran Ganesan v Percetakan Wawasan Maju Sdn Bhd & Ors [2008] 9 CLJ 546 summarizes as follows in the headnotes: “(1) The plaintiff was in law a director of the first defendant in accordance with the definition of the word ‘director’ in s.4 as well as s.122 of the Companies Act 1965. From documentary evidence, 47 it was axiomatic that the plaintiff had voluntarily offered himself to be a director of the first defendant and had even procured steps to push / expedite for an extraordinary general meeting … Hence if the plaintiff was to be remunerated in his capacity as a director, then it was only fair and reasonable for him to assume and undertake the responsibilities attached to the said position, as a director of the first defendant company…” (emphasis added) 2 Peninsular Fibre Industries Sdn Bhd v Tan Yoke Chin [2013] 1 LNS 119 states as follows: “23. The existence de facto and a shadow director is also recognized by the Companies Act 1965…This could be gleaned from the interpretation of the word of ‘director’ in section 4 of the Companies Act 1965 which states that a ‘director’ includes any person occupying the position of a director and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director. ... 23. It is not necessary to demonstrate the existence of actual directions or instructions to constitute directorship. What the plaintiff 48 needed to do was to show evidence of controlling or commanding role exercised by the shadow director over the de jure directors” (emphasis added) 3 Cepat Wawasan Group Bhd & Anor v Tengku Dato’ Kamal Ibni Sultan Sir Abu Bakar & Ors [2008] 2 CLJ 620 states as follows: “[12] A director is not necessarily defined by his designation as such but rather by the dominant or controlling role that he plays in running the company. The above definition encompasses a de facto as well as a shadow director." (emphasis added) [69] It is not necessary for this Court to go down that road having found that the vacating of office of a director by Bernard Lim is ineffective and invalid. At any rate there was a valid board for the Claimant with respect to the adjudication and court actions filed, whether comprising of Bernard Lim and Rosnah Binti Madan or of the de facto directors Allan Loong and Lee Kee Loong. [70] With that too, both the counsel and solicitors for the Claimant have the proper authority to act for the Claimant. It cannot be seriously disputed that all the 4 of them, Bernard Lim, Rosnah Binti Madan, Allan Loong and Lee Kee Loong have instructed the said solicitors and all have signed affidavits prepared by the said solicitors upon their instructions. 49 [71] Much reliance was placed by the learned counsel for Sazean Engineering on the case of Foo Fatt Chuen v Jacobson Cheong Weng Hin & Ors [2012] 3 CLJ 632 and Lee Soo You (Trading Under The Name And Style Of Ak Piling Construction) v Pembinaan Wincon Sdn Bhd [2014] 5 MLJ 522. However those cases are not cases where a director of a company has subsequently become a bankrupt but rather cases involving an individual bankrupt contracting with a third party. Such a contract is void for illegality and unenforceable. [72] By way of passing, learned counsel for Sazean Engineering had submitted that the adjudication decisions should be set aside on ground of breach of natural justice. It has not been shown how natural justice has been breached in arriving at the decisions that the 3 Adjudicators did as there were no Payment Response nor Adjudication Response filed. It is too late in the day to now say that the learned adjudicators had not taken into consideration the effect of a "Stop Order" issued by PKNS or that there were 2 different versions of the Statement of Final Accounts. In any event these are matters that can be fully ventilated in the arbitration that the parties have agreed to proceed with. There is also no evidence to show that the 3 adjudicators had failed to act independently or impartially in arriving at their respective decisions. 50 Whether stay of the adjudication decision should be made in the circumstances of this case pending the disposal of the civil suit filed [73] There is no good reason shown in the affidavits for stay. The fact that there is a fresh suit just filed in WA-22C-33-05/2016 is only a threshold triggering condition under section 16 CIPAA. [74] Section 16 reads as follows: "16. Stay of Adjudication Decision (1) A party may apply to the High Court for a stay of an adjudication decision in the following circumstances: (a) An application to set aside the adjudication decision under section 15 has been made; or (b) The subject matter of the adjudication decision is pending final determination by arbitration or the court. (2) The High Court may grant a stay of the adjudication decision or order the adjudicated amount or part of it to be deposited with the Director of the KLRCA or make any other order as it thinks fit." 51 [75] Sazean Engineering must show special circumstance as in that should they pay now to Bumi Bersatu, they would not reasonably be able to get their money back. Nothing close to that has been shown. The Claimant is certainly not insolvent and if it is a case where the Claimant's account is not too healthy, that is partly attributed to the adjudicated sum of about RM3.2 million outstanding which has not been paid by Sazean Engineering. [76] The following guidelines propounded by Justice Peter Coulson QC in the Wimbledon Construction Company 2000 Ltd v Vago [2005] EWHC 1086 (TCC) are helpful in deciding how discretion for stay of an adjudication decision ought to be exercised having in mind always the special circumstances of each case: "26. In a number of the authorities which I have cited above the point has been made that each case must turn on its own facts. Whilst I respectfully agree with that, it does seem to me that there are a number of clear principles which should always govern the exercise of the court's discretion when it is considering a stay of execution in adjudication enforcement proceedings. Those principles can be set out as follows: a) Adjudication (whether pursuant to the 1996 Act or the consequential amendments to the standard forms of building 52 and engineering contracts) is designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute. b) In consequence, adjudicators' decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) should not generally be kept out of its money. c) In an application to stay the execution of summary judgment arising out of an Adjudicator's decision, the Court must exercise its discretion under Order 47 with considerations a) and b) firmly in mind (see AWG). d) The probable inability of the claimant to repay the judgment sum (awarded by the Adjudicator and enforced by way of summary judgment) at the end of the substantive trial, or arbitration hearing, may constitute special circumstances within the meaning of Order 47 rule 1(1)(a) rendering it appropriate to grant a stay (see Herschell). e) If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted (see Bouygues and Rainford House). 53 f) Even if the evidence of the claimant's present financial position suggested that it is probable that it would be unable to repay the judgment sum when it fell due, that would not usually justify the grant of a stay if: (i) the claimant's financial position is the same or similar to its financial position at the time that the relevant contract was made (see Herschell); or (ii) The claimant's financial position is due, either wholly, or in significant part, to the defendant's failure to pay those sums which were awarded by the adjudicator (see Absolute Rentals)." (emphasis added) [77] The fact that the parties have agreed to proceed with arbitration to resolve the issues that have arisen between the parties is merely the satisfaction of the threshold condition as to whether a stay of the adjudication decisions should be granted pending the disposal of the arbitration. The Court must always bear in mind the overarching purpose of CIPAA which is to facilitate cash flow in the construction industry by ensuring that employers that derive benefits from the construction works do pay the various progress claims as may be certified and that such payments should cascade down to the contractors and sub-contractors below the chain. The case of Subang Skypark Sdn Bhd v Arcradius 54 Sdn Bhd [2015] 11 MLJ 818 in instructive where her Ladyship Mary Lim J (now JCA) provided the rationale as follows: "[30] It is this court's view that in the exercise of discretion of whether to grant the stay or make an order for payment to the Director of KLRCA, the court must weigh into play in a fairly extensive way, the object of CIPAA; and that it is for a speedy disposal of a payment dispute. This is regardless of the fact that this is a payment dispute that arose in the final days of the construction contract, a point which the parties appear to have no issue with and there is no challenge in this respect anyway. Having gone through the hoops of adjudication, there is now decision in the defendant's favour. [31] This court is of the view that the defendant should not be deprived of the very benefit of why it resorted to adjudication in the first place; save if satisfactory reasons are present for a stay of that adjudication decision. [32] It is my further view that stay should only be granted in exceptional circumstances; and such circumstances must necessarily refer to the financial status of the other party. The merits of the case before the arbitration or the court; or even the chances of success in setting aside the adjudication decision are 55 not relevant considerations. The grant of any stay must always weigh in the primary object of the CIPAA 2012; that it is to ensure a speedy resolution of a payment dispute; that it is to inject much needed cashflow into the contractual arrangements between parties that saw progressive payments of claims as the recognised and accepted way of doing business in construction contracts. It would be futile to encourage parties to resort to adjudication and then deprive a successful claimant of its claim by staying the access to the cash simply because there is another proceeding of the nature described in sub-s 16(1) which is pending. The whole concept of temporary finality would be lost and the object of the Act defeated if such was the consideration." (emphasis added) Pronouncement [78] For all the reasons given above, this Court had dismissed this Originating Summons of Sazean Engineering for the setting aside of the 3 adjudication decisions with costs of RM5,000.00 to be paid to the Claimant. [79] As this Court had dismissed the application to set aside the 3 adjudication decisions, as a corollary, this Court had allowed the enforcement of the 3 adjudication decisions in the 3 Originating 56 Summonses as a judgment of the Court and correspondingly, had dismissed the 3 stay applications of Sazean Engineering with costs of RM1,000.00 each to be paid to the Claimant. Dated: 29 December 2016. - signed - Y.A. LEE SWEE SENG Judge Construction Court Kuala Lumpur For the Plaintiff : S. Ravichandaran, P. Tharuny and Mohd Khairul Azri bin Mohd Badroldin (Messrs S. Ravichandaran & Anuar) For the Defendant : Steven Seah (Messrs P.Y. Hoh & Tai) For the Official Assignee : Halim Shah (DGI Officer) Date of Decision: 20 September 2016.