Syarikat Kemacahaya Sdn Bhd v Konami Sdn. Bhd. (B-02(A)-1727-09/2021)

PYWATEC (M) SDN BHD (Company No: 218895-X)

ASIAMET (M) SDN. BHD (Company No. 200601027164 (442341-P) ... RESPONDENTS [In the High Court of Malaya at Shah Alam Post Winding up No: BA-28PW-7-02/2021 Companies Winding up No.28-365-09/2012 In the matter of Kemacahaya Development Sdn Bhd (Company No.:296751-P) And In the matter of Section 218 of the Companies Act, 1965 PYWATEC (M) SDN BHD (Company No: 218895-X) ...Petitioner KEMACAHAYA DEVELOPMENT SDN BHD (Company No. 199401011072 (296751-P) ...Respondent ASIAMET (M) SDN. BHD (Company No. 200601027164 (442341-P) (formerly known as Masterskill [M] Sdn Bhd) ...Applicant Heard Together With IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO. B-02(A)-1727-09/2021 SYARIKAT KEMACAHAYA SDN BHD (Company No.: 141317-W)

KONAMI SDN BHD (Company No.: 110571-K)

ASIAMET (M) SDN BHD (Company No. 200601027164 (442341-P) (formerly known as Masterskill [M] Sdn Bhd) ...RESPONDENTS [IN THE HIGH COURT OF MALAYA AT SHAH ALAM IN THE STATE OF SELANGOR DARUL EHSAN, MALAYSIA (CIVIL DIVISION) POST WINDING UP NO: BA-28PW-12-02/2021 COMPANIES WINDING UP NO: BA-28NCC-317-07/2016 IN THE MATTER OF SYARIKAT KEMACAHAYA SDN BHD (COMPANY NO.:141317-W) IN THE MATTER OF SECTION 218(1)(e) AND (i) COMPANIES ACT, 1965 KONAMI SDN BHD (COMPANY NO.:110571-K) ...PETITIONER SYARIKAT KEMACAHAYA SDN BHD (COMPANY NO.:141317-W) ...RESPONDENT ASIAMET (M) SDN BHD (Company No. 200601027164 (442341-P) (FORMERLY KNOWN AS MASTERSKILL [M] SDN BHD) ...APPLICANT CORAM HAS ZANAH BINTI MEHAT, JCA CHE MOHD RUZIMA BIN GHAZALI, JCA SEE MEE CHUN, JCA JUDGMENT OF THE COURT Introduction [1] There are 2 appeals heard before the Court. Documents and issues involved are the same and both appeals emanate from the decision of the High Court Judge (HCJ) made on 1-9-2021. [2] Appeal 1726 is the appeal by the Liquidator of Kemacahaya Development Sdn Bhd (Developer). Appeal 1727 is the appeal by the Liquidator of Syarikat Kemacahaya Sdn Bhd (Proprietor). The Respondent here is the $ 2^{n d} $ Respondent as both the $ 1^{s t} $ Respondents in the appeals were removed as parties. They were the Petitioners in the winding up. [3] Parties have prepared 1 set of submissions and relied on the documents filed in appeal 1726. [4] We allowed both appeals and give our reasons as follows. Background facts [5] The Developer was the developer of a mixed development project held under a freehold Master Title GM 5105 Lot 13158 (the Land). The Proprietor is the registered proprietor of the Land and had granted the Developer the right to develop the Land. The Developer and the Proprietor are related companies with common directors and shareholders. [6] On 10-12-2012, the Developer was wound up followed by the Proprietor on 9-11-2006. When the Developer was first wound up, the Official Receiver was the provisional liquidator and was replaced by Datuk Tee Guan Pin (Datuk Tee) on 1-11-2016. Datuk Tee was the liquidator for the Proprietor on its winding up. Effective 16-1-2019, Augustine TK James replaced Datuk Tee and became the Liquidator for the Developer and the Proprietor. [7] The Respondent says it purchased 81 units of the properties built on the Land including a car park, (the properties) at various points in time. Subsequently, the Respondent entered into a Sale and Purchase Agreement dated 25-2-2020 with Ascent Resources Holdings Sdn Bhd (Ascent, Ascent SPA). Pursuant to Ascent SPA, the Respondent agreed to sell and Ascent to purchase the properties for the purchase consideration of RM35 million. Clause 3.1.2 Ascent SPA requires the Respondent to obtain the written consent or approval of the Liquidator for the sale, transfer and assignment of the properties by the Respondent to Ascent within a stipulated time frame. The Liquidator refused to give its endorsement and consent to the proposed sale of the properties. [8] The Respondent filed its application pursuant to section 279 of the Companies Act 1965 (CA 1965) to reverse the Liquidator's decision not to act and inter alia to provide the confirmation of its legal and beneficial interests in the properties and sign the relevant consent/endorsement. The application was allowed by the HCJ while the appeal by the Liquidator was allowed. HJC decision [9] The HCJ was of the considered view that the Deed of Assignments/Sale and Purchase Agreement between the Respondent and the previous purchasers which was duly endorsed by the Developer and/or with the Proprietor's consent are sufficient documentation/evidence of the transfer of the beneficial interest to the Respondent. Similarly the Deed of Assignments/Sale and Purchase Agreement between the previous purchasers and the Developer and/or Proprietor duly endorsed or the consent are sufficient evidence of the Respondent's beneficial interest of the properties. The Respondent was thus a bona fide purchaser of the properties. Submissions of the Appellants [10] It was contended that the Respondent was unable to show the Liquidator that the full purchase price had been made for the purchase of the properties. What was relied on was the endorsements by the Developer and the Proprietor and the Sale and Purchase Agreements (SPA) with the various purchasers. These could not be evidence of payment of the consideration of the properties and were insufficient to determine the Respondent was the beneficial owner. The discrepancies in the purported purchases were set out. Further, the transactions were carried out by related parties. [11] The Court should not interfere in the investigative exercise, duties and decisions of the Liquidator unless there are elements of fraud, collusion and absurdity, of which there was none here. Wong Sin Fan & Ors v Ng Peak Yam @ Ng Pyak Yeow & Anor [2013] 2 MLJ 629 is the clear authority on this. [12] Upon the Liquidator's appointment, inquiries were made and investigative measures taken on the affairs of the Developer and the Proprietor, particularly on the properties. There was no response from the Respondent who instead entered into Ascent SPA. [13] The Liquidator has a duty to be thorough in the investigation and to ensure documents are in order before providing consent. The parties executing the SPAs are the same party providing the endorsement and the undertaking in the Deed of Assignment such that these raises doubts. In total, there was a shortfall of RM17,918,554.00 payable to the Proprietor. [14] Ultimately, the Liquidator is not obliged to provide consent when the Respondent had not provided sufficient documents to prove ownership of the properties. Submissions of the Respondent [15] The Respondent has pitched its opposition to the appeal on what it termed as the pivotal legal issue namely; whether in a sale of property without an individual title, the developer who has endorsed and consented to the assignment by the previous purchaser to the new purchaser; and agreed to deliver a valid and registrable Memorandum of Transfer in respect of the property in favour of the new purchaser upon the issuance of the issue document of strata title; is entitled in law to impose a burden on the new purchaser to prove that the previous purchaser has paid the purchase price to the developer/proprietor. The answer has to be in the negative. [16] This pivotal issue relates to 75 out of the 81 units of properties. For these 75 units, the SPAs between the Respondent and the previous purchasers together with the Deeds of Assignment containing the Appellants' endorsement (Endorsement), were provided to the Liquidator. By the Endorsement, the Appellants had confirmed the assignment of rights, title and interest in the sale and purchase agreement to the Respondent and undertake to deliver a valid and registrable Memorandum of Transfer in respect of the properties in favour of the Respondent. This meant the Appellants have recognised and confirmed the Respondent to be the legal and beneficial owner of the Properties. [17] The legal effect of an absolute assignment has been set out in CIMB Islamic Bank Bhd v Khairuddin bin Hassan [2021] 4 CLJ 375 where the person has absolute discretion in dealing with the property. [18] Estoppel by deed therefore applies for which reliance was placed on Labracon Pty Limited v Cutrich & Anor [2013] NSWSC 97 as well as estoppel generally. [19] The Respondent has been given vacant possession and it has been in occupation since 2006 and has paid quit rent and assessment. [20] The remaining 6 units were purchased directly by the Respondent from the Appellants. During the trial of Civil Suit No. S6-22-96-2007 (suit 2007) filed by the Respondent, the director of the Appellants had given evidence that the Respondent had paid the full purchase price of the 6 units. [21] The Developer's former Liquidator had not disputed the Respondent's beneficial interest. [22] The Liquidator had acted unreasonably in refusing consent to Ascent SPA and had made clear errors in law with respect to the legal effect of the Endorsement and had taken into account irrelevant considerations. Its decision could therefore be varied by the HCJ. Reference was made to Angkutera Sdn Bhd v Jurimba Sdn Bhd & Anor [2016] 5 MLJ 242. Our decision Preliminary issue: whether Respondent an aggrieved person and whether leave required [23] The Respondent's application to reverse the Liquidator's decision not to give its consent is premised on section 279 CA 1965. The provision states as follows: "Appeal against decision of liquidator

Any person aggrieved by any act or decision of the liquidator may apply to the Court which may confirm, reverse or modify the act or decision complained of and make such order as it thinks just." [24] We are satisfied the Respondent is an aggrieved person within the meaning of section 279. In Angkutera this Court said at page 249: "[17] It is thus clear that s 279 can be applied if the appellant can show to the court that the act of the liquidator in obtaining the vesting order had wrongfully affected its title to the Cineplex. If the appellant succeeds, under s 279 the court may undo the transaction entered into by the liquidator." [25] Here, the Respondent is aggrieved in that the refusal of the Liquidator to give its consent has indeed affected the Respondent's legal and beneficial ownership of the properties. [26] The objection of the Appellants by way of a Preliminary Objection (PO) that the Respondent ought to first apply for leave of the winding up court to institute an action is met squarely by the fact that this is not an action against the Liquidator whether in his personal capacity or for breach of contract or tort or to hold him personally liable in damages. This is also not a new proceeding but a proceeding within the winding up proceeding. It is in fact an appeal against the Liquidator's decision not to act in giving consent. It is clear from section 279 itself that no leave is required to inter alia apply to reverse the decision of the Liquidator. [27] In this regard, the cases referred by the Appellant that leave was required, were in relation to a claim against the company in liquidation for breach of contract and fraud (North Malaya Engineers Trading Company Sdn Bhd v Aik Holdings [2014] 4 CLJ 629) and civil action for damages against the liquidator personally (Chi Liung Holdings Sdn Bhd v Ng Pyak Yeow [1995] 3 MLJ 204, Tee Siew Kai v Machang Indah Development Sdn Bhd [2020] 4 CLJ 841 and Abric Project Management Sdn Bhd v Palmshine Plaza Sdn Bhd & Anor [2007] 7 CLJ 516). [28] In any event, it was eventually conceded by the Appellants' counsel that the HCJ was correct on the PO that no leave was required. Liquidator's refusal to give consent [29] The application is to reverse the Liquidator's refusal to act to give its consent. It has been made clear in Wong Sin Fan that courts should be slow to interfere with any act or decision of the liquidators in discharging their roles in company liquidation. This was said at page 639: "Based on the above principles of law, we are of the view that the court should be slow to interfere with any act or decision of the liquidators in discharging their roles in company liquidation and will do so only if it is so unreasonable and absurd that no reasonable person would have acted in that way." [30] Therefore, the issue really is whether the decision of the Liquidator is so unreasonable and absurd that no reasonable person would have acted in that way, thereby warranting the Court to interfere with the decision. [31] In Angkutera, it was said at pages 249-250: "[18] In Chin Ah Keow @ Chin Lai Sitt v Anggun Pintas Sdn Bhd & Ors [2005] 4 MLJ 747 at p 756, the court held that the function of the court under s 279 of Act 125 was to hear the matter as a strict appeal from the decision of the liquidator. The powers given to the court were to consider whether the act or decision of the liquidator was right or otherwise. To do this the court must have regard to the circumstances which were before the liquidator at the time of his act or decision and not to circumstances subsequently arising. The court in Chin Ah Keow, had followed the test applied in R Edennote Ltd; Tottenham Hotspur plc and others v Ryman and another [1995] 2 BCLC 248 where it was held that the court could only interfere with the exercise of a liquidator's decision to sell the assets of an insolvent company in very exceptional circumstances and would not do so unless it could be shown that he had acted utterly unreasonably or, though acting in good faith took into account considerations which he ought not to have taken into account or failed to take into considerations which he ought to have taken into account." [32] Earlier on, this Court in Andrew Christopher Chuah Choong Eng Chuan v Ooi Woon Chee & Anor [2007] 2 MLJ 12 had similarly stated: "[16] The court will not interfere with the decision simply because its opinion might differ from that of the liquidator. Generally, the court will recognize that the discretion has been vested by statute in the liquidator and will not interfere unless it is shown that he did not address himself to the correct questions or has made errors of law (see Avon Downs Pte Ltd v FC of T (1949) 78 CLR 353; Re Mineral Securities Ltd [1973] 2 NSWLR 207) or has not exercised his discretion bona fide or has acted in a way in which no reasonable liquidator would have acted (see Leon v York-O-Matic [1966] 1 WLR 1450) or has taken into account entirely irrelevant considerations (see Yeomans v Walker & Anor [1986] 10 ACLR 753) or when there is fraud." [33] Thus, the principles are that the Court is slow to interfere in the decision of a liquidator but will interfere if the decision is unreasonable, absurd, or did not take into account relevant considerations or conversely or is an error in law. The Court will not interfere simply because its opinion might differ from that of the Liquidator. No consideration by HCJ on the decision of Liquidator [34] With the above principles in mind, we find it most telling that the HCJ in his judgment did not consider whether the decision of the Liquidator was one that was reasonable or absurd, that is to say, not following the principles laid down in Wong Sin Fan. Instead, the HCJ had substituted his own finding and this is evident from paragraph 17 of the judgment that "I am satisfied that the Applicant (the Respondent in this appeal) is a bona fide purchaser for value of the 81 properties". The HCJ had thus made an error in fact and in law. Whether decision of Liquidator unreasonable or absurd [35] It therefore behoves upon this Court to now consider whether the decision of the Liquidator was one that was unreasonable, absurd or falling into any of those categories laid down in the cases referred to earlier. To us, this is the central issue where we would need to consider the circumstances under which the Liquidator did not give consent. In the course of it, the evidence and documents relied on by the Respondent to support its pivotal legal issue, will be considered. The 81 units of properties [36] At the heart of the problem is the 81 units of properties that the Respondent says it has acquired beneficial and legal ownership over. [37] Although the units were described differently where the Respondent refers to them by units such as the 6 units, the 51 units and so on, and the Appellants by way of Schedule A to D, these were only to show how the properties were eventually purchased by the Respondent. There was no dispute it referred to the same 81 units. i. The 6 units [38] For the 6 units of shop lots (which correspond to Schedule A) namely units G-11, G-12, 1-11, 1-12, 1-13 and 1-14, these were all purchased directly by the Respondent from the Appellants. The total purchase price was RM2.8 million. ii. The 51 units [39] The 51 units (which correspond to Schedule B) were transferred from the Appellants to Megatalent sometime in 1997 to 1999 and from Megatalent to the Respondent in 2006. The original purchaser is therefore Megatalent and the $ 2^{\mathrm{nd}} $ purchaser the Respondent. [40] 6 units were charged to Standard Chartered Bank Berhad (StanChart) and 9 to PBB. The Appellants contend there is a differential sum of RM531,000 and RM1.675 million for which there is no proof of payment. It says for the remaining 36 units, the total purchase price was RM9.540 million. These units are set out in pages 25 to 28 of the Appellants' submission dated 13-1-2021. The Appellants contend the money not proved by the Respondent is RM11.746 million. iii. The 7 units [41] The 7 units (which correspond to Schedule C) were sold by the Appellant to individual purchasers who are related parties to the Developer, Proprietor and Megatalent. These units are A-1-G, A1-1-F, A- 2-G, A2-1F, A-3-G, A1-1(B) and the car park. In particular the carpark was sold to Leong Choong Shin, who is director of the Developer, Proprietor and Megatalent for RM950,000. It is the Appellant's contention the total sum of RM1,446,119.00 has not been proved to be paid. iv. The 17 units [42] The 17 units (which correspond to Schedule D) were sold by the Appellant to other individual purchasers. These units are set out in pages 39 to 41 of the Appellants' submission dated 13-1-2021. For 4 units (G- 13 to 15 and A-15-1(C)) there was a difference between the purchase price and the loan where an amount of RM429,000 is said to be not proved. The other problems are detailed in pages 45 and 46 of the Appellants' submission along with the relevant enclosures and the total amount not proved as paid is RM2,323,554.00. The documents [43] It is not disputed the SPAs for the purchase of all the units by the Respondent were submitted to the Liquidator. For the 6 units, the SPAs were in exhibit "SA-9", enclosure 40/326-349, the 51 units in exhibit "SA-6", enclosure 25/47 to enclosure 34/323, the 4 units (part of Schedule C) in exhibit "SA-8", enclosure 34/329 to enclosure 36/435, the 19 units in exhibit "SA-9", enclosure 36/6 to enclosure 40/325 and the carpark in exhibit "SA-11", enclosure 40/350-389. Except for the 6 units, the DAs and the Endorsement of Consent and the Developer's and the Proprietor's consent were also in the aforesaid exhibits. The relevant loan documents and deed of receipt and reassignment were also produced. The 75 units [44] The 75 units related to those where the Respondent purchased from previous purchasers. We find that the documents referred to above cannot possibly be sufficient to prove beneficial or legal ownership of the Respondent. This is because the Respondent had not proved the payment of the purchase price or the 10% deposit and in the loan cases, the differential amount. These are required given the circumstances of the transactions as set out below. [45] We note the 51 units were purchased from Megatalent which in turn purchased from the Appellants. Megatalent and the Appellants share common directors and shareholders as the Developer and the Proprietor in Leong Choong Shin, Leong Chui Mei and Leong Chung Wah (collectively referred to as the Leongs). Refer to enclosure 104/272,274, 279 and 280 and as per the Company search in exhibit "AJ-6" averred in paragraph 38 of the Liquidator's affidavit (enclosure 104/116-117). These were related transactions. The 7 units sold by the Appellants to the individual purchasers and ultimately to the Respondent were also common directors and shareholders of the Developer, the Proprietor and Megatalent. These too were related transactions. For the 17 units there were instances where the loan amount did not match the purchase price. [46] These are where proof of payment of purchase price or deposit or differential amount come in. [47] The Respondent cannot rely on the Endorsement of Consent (an example of which is in enclosure 35/326). It is not disputed this Endorsement was from the Developer and the Proprietor and provides as follows: "We, KEMACAHAYA DEVELOPMENT SDN BHD (296751-P) and SYARIKAT KEMACAHAYA SDN BHD (141317-W) a company incorporated in Malaysia and having its registered address at C-15-1, Level 15, Megan Phileo Avenue, 12, Jalan Yap Kwan Seng 50450 Kuala Lumpur, being the developer and proprietor respectively of the Property do hereby acknowledge that on the 13th day of February, 2008 the within written Assignment was intimidated to us by the delivery of a true copy thereof and the same has been noted in our record. We further undertake to deliver the issue document of the strata title to the said property to the Assignee upon issuance of the same together with a valid and registrable memorandum of transfer in favour of the assignee." [48] Along with the Endorsement of Consent was also the Developer and Proprietor's consent (an example of which is in enclosure 104/364) which acknowledged the DA and even went on to state as follows: "Developer's and Proprietor's consent We confirm that the purchase price to the Property as stated in the Principal Sale Agreement has been paid in full and the Assignor has performed and complied with all the terms and conditions of the Principal Sale Agreement and we hereby consent to this Deed of Assignment and agree and undertake to cause to deliver a duly executed, valid and registrable but unstamped Memorandum of Transfer in respect of the Property in favour of the Assignee together with the issue document of title for the Property free from all encumbrances forthwith upon the issue document of strata title becoming available." [49] Despite this, we note that in the Developer and Proprietor's consent, the signatory for the Developer would be one of the Leongs and for the Proprietor another of the Leongs. Hence in the aforesaid page 364, Leong Chung Wah signed for the Developer and Leong Choong Shin for the Proprietor. We noted earlier their relationship to Megatalent. These were interested parties. [50] We find that due to the nature of these related transactions as set out above and the manner in which the acquisition and eventual disposal was carried out, the Liquidator's action in requiring more than the documents already provided, was reasonable, not absurd and not an error in law. This was the proof of payment of purchase price, or the deposit paid and the differential amounts. [51] We are certainly mindful of the effect of an absolute assignment as provided in section 4(3) Civil Law Act 1956 and stated in Khairuddin. The aforesaid section 4(3) states as follows: "4. Administration of insolvent estates, and winding up of companies