Tremendous Entertainment Holdings Berhad v Leong Wei Lun (WA-24NCC-511-09/2023)

This is an appeal to the Court of Appeal dated 13.1.2026 (“Encl 111”) from my decision on 9.12.2025 dismissing the application of the Applicant dated 16.12.2024 (“Encl 26”) for sanction of a proposed scheme of arrangement (“the Proposed Scheme”) under s. 366(4) of the Companies Act 2016 (“CA 2016”).

Save where the context otherwise provides, all references to sections herein are with reference to sections in CA 2016. The contents of these Grounds are set out in the Table below. Contents Para No INTRODUCTION 3-4 BACKGROUND FACTS 5-8 SANCTION & ENCL 26 9-10 Sanction & the Buckley Test 11-12 THE CHALLENGES & ENCL 26 13-14 THE FIRST STAGE & THE STATUTORY MAJORITY 15-31 THE FIRST STAGE & CLASSIFICATION 32-36 S/N a6JXLVZpokakZ1kHb2ksUg Waiver & Wrongful Classification 37-44 THE SECOND STAGE & MALA FIDES BY A ‘SIDE DEAL’ 45-58 POSTSCRIPT - Adjudication 59-61 ADJUDICATION FOR VOTING PURPOSES 62-66 The Objective of the Adjudication Process 67 Provisioning of the Debt 68-69 The Rough & Ready Adjudication 70-75 The Expert Adjudicator 76-83 The POD process under CA 2016 84-90 ADJUDICATION FOR DISTRIBUTION PURPOSES 91-98 CONCLUSION 99

On 27.09.2023, the Applicant obtained an Order of Court (“the Convening Order”) granting the Applicant leave to convene a meeting of its creditors under s. 366(1) for the purpose of considering and if thought fit, approving the Proposed Scheme between the Applicant and its creditors, whose debts are to be compromised under the Proposed Scheme (“the Scheme Creditors”).

The scheme meeting was held on 20.3.2024 (“the Scheme Meeting”). At the Scheme Meeting, the Respondent voted against the Proposed Scheme. BACKGROUND FACTS S/N a6JXLVZpokakZ1kHb2ksUg

On or about 1.3.2024, the Respondent was served with the following documents: a) the “Notice of Court Convened Meeting” dated 27.2.2024 providing that the Scheme Meeting will be held on 20.3.2024 at 10.00am; and b) the Explanatory Statement under s. 369 dated 27.2.2024 to the Scheme Creditors (“the ES”) explaining the Proposed Scheme.

In the ES, it was stated that: a) the Applicant was unable to comply with the terms and conditions in the subscription agreements entered into between the RCPS holders to convert the RCPS into ordinary shares of the Applicant; b) upon completion of the Proposed Scheme, all debts owing by the Applicant and/or any collateral securities, indemnities and undertakings provided by the Applicant shall be fully and irrevocably settled, satisfied, discharged and/or cancelled; c) the value of the Scheme Debts for voting at the Scheme Meeting, were as set out in Annexure 2 to the ES. It was, inter alia, provided in Annexure 2 that the amount due and S/N a6JXLVZpokakZ1kHb2ksUg owing to the Respondent was RM10,820,822.00 (which was denied). d) Annexure 2 also contained a list of the Scheme Creditors and their Scheme Debts; and e) it was proposed that the indebtedness owed to the Scheme Creditors was to be resolved by way of the issuance of new “RCPS E” (“RCPS E”) by the Applicant.

The ES demonstrated that the terms of RCPS E are different from the terms of RCPS C under the RCPS C Share Subscription Agreement. In particular, it was provided in the RCPS C Share Subscription Agreement that if the Applicant failed to redeem the RCPS C for any reason whatsoever, the Applicant was under a separate and independent obligation to make payment in respect of the RCPS C.

However, there is no similar obligation in relation to RCPS E, and as such, the Applicant would not be obliged to make any payment for failure to redeem the RCPS E. This is an important difference.

The Applicant then filed Enclosure 26 on 8.4.2024 for sanction of the Proposed Scheme (“Encl 26”). Encl 26 provoked a response from the Respondent. The Respondent applied for S/N a6JXLVZpokakZ1kHb2ksUg and was granted leave an Order dated 12.7.2024 to intervene and to oppose Encl 26.

The issue before me was whether I should grant Encl 26 sanctioning the Proposed Scheme under s. 366(3).

I had occasion to consider the test for sanction of a scheme of arrangement under s. 366(3) in KNM Group Bhd & Anor v Hitachi Zosen Corporation & Ors [2025] MLJU 1234, at paras 130 to 141. I began with the consideration of the test for convening orders in light of sanction under s. 366(4). I said this: “The Merits & Fairness [130] In ASM (supra), I began the analysis with what David Richards J (as he then was) said in Re Telewest Communications plc (No 1) [2005] 1 BCLC 752 at para 14: “[14] … it is important to keep in mind the function of the court at this stage. This is an application by the companies for leave to convene meetings to consider the schemes. It is emphatically not a hearing to consider the merits and fairness of the schemes. Those aspects are among the principal matters for decision at the later hearing to sanction the schemes, ... [136] The ‘merits’ are generally issues that are dealt with by the S/N a6JXLVZpokakZ1kHb2ksUg Court at sanction. They go to the exercise of discretion and are rightly left to the Court at sanction, see Justice Ong Chee Kwan in Airasia X at para 39. [137] What is within the remit of the sanction Court is generally outside the remit of the Convening Court. These are ‘the merits’, which comprise the four (4) stages of the Buckley test, as set out by Snowden J in Re Noble Group Ltd (No. 2) [2018] EWHC 3029 at para 17. “[17] There are, accordingly, four stages to be gone through under the Buckley test:

At the first stage, the Court must consider whether the provisions of the statute have been complied with. This will include questions of class composition, whether the statutory majorities were obtained, and whether an adequate explanatory statement was distributed to creditors.

(ii) At the second stage, the Court must consider whether the class was fairly represented by the meeting, and whether the majority were coercing the minority in order to promote interests adverse to the class whom they purported to represent.

(iii) At the third stage, the Court must consider whether the scheme is a fair scheme which a creditor could reasonably approve. Importantly it must be appreciated that the Court is not concerned to decide whether the scheme is the only fair scheme or even the ‘best’ scheme.

(iv) At the fourth stage the Court must consider whether S/N a6JXLVZpokakZ1kHb2ksUg there is any ‘blot’ or defect in the scheme that would, for example, make it unlawful or in any other way inoperable.” [138] In Re Telewest Communications plc (No 2) [2005] 1 BCLC 772, David Richards J (as he then was) explained the Buckley test at sanction thus: “[20] The classic formulation of the principles which guide the court in considering whether to sanction a scheme was set out by Plowman J in Re National Bank Ltd [1966] 1 All ER 1006 at 1012, ; [1966] 1 WLR 819 at 829 by reference to a passage in Buckley on the Companies Acts (13th edn, 1957) p 409, which has been approved and applied by the courts on many subsequent occasions: ‘In exercising its power of sanction the court will see, first, that the provisions of the statute have been complied with; secondly, that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent, and thirdly, that the arrangement is such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. The court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting; but at the same time the court will be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interests of the class which it is S/N a6JXLVZpokakZ1kHb2ksUg empowered to bind, or some blot is found in the scheme.’”

I entirely accept that the test for sanction in Malaysia comprises the 4 stages of the Buckley test. The issue is whether the Buckley test has been satisfied.

As I saw it, the Respondent’s main challenge was under the first stage of the Buckley test (supra) for failing to satisfy the statutory requirements, being: a) the classification of the Scheme Creditors was flawed. The Respondent ought to have been placed in a different class as it had different rights against the Applicant when compared to the other Scheme Creditors; and a separate meeting ought to have been convened for this new class; b) the 75% statutory threshold under s. 366(3); c) the ES contained inaccurate and/or misleading or insufficient information to enable the Scheme Creditors to make an informed decision.

The second ground was a failure to act bona fide within the second stage of the Buckley test, as it attempted to ‘buy’ Scheme Creditors’ votes in favour of the Proposed Scheme. S/N a6JXLVZpokakZ1kHb2ksUg This would amount to unlawfully buying votes to ‘cram down’ and thus coercing the minority in bad faith.

As an overview, I accepted the submission of the Respondent that the financial position of the Applicant is unclear. It was pointed out that the “Total Current Assets”, “Total Non-Current Liabilities”, “Total Liabilities”, Total Assets” and “Total Equity and Liabilities” of the Applicant as at 13.12.2021 as set out in the ES dated 27.2.2024 are markedly different from the said assets and liabilities as listed in the Applicant’s 2021 Audited Financial Statements.

A brief summary of the discrepancies as provided by the Respondent is set out in the table below: No Item Amount in the Explanatory Statement Amount in the Applicant’s 2021 AFS Difference i) “Total Current Assets” RM30,414,679 RM35,628,383 RM5,213,704 ii) “Total Non-Current Liabilities” RM37,278,455 RM37,030,291 -RM248,164 S/N a6JXLVZpokakZ1kHb2ksUg No Item Amount in the Explanatory Statement Amount in the Applicant’s 2021 AFS Difference iii) “Total Current Liabilities” RM5,909,396 RM11,371,264 RM5,461,868 iv) “Total Assets” RM116,375,822 RM121,589,526 RM5,213,704 v) “Total Equity and Liabilities”

These discrepancies gave rise to some doubt as to the financial information provided by the Applicant. This is worrying given the first stage of the Buckley test as to whether the statutory majority is met may crudely be described as a ‘numbers game’.

Under s. 366, the burden is on the Applicant to prove that the Proposed Scheme has been agreed to by a majority of 75% of the total value of the Scheme Creditors. It is trite that if the statutory majority is not met, I could not possibly sanction the Proposed Scheme. That was the complaint of the Respondent.

The Respondent’s case is that at the Scheme Meeting, only 71.1% of the Scheme Creditors voted in favour of the Proposed Scheme. In contradistinction, the Applicant alleges that 75.4% voted in favour. S/N a6JXLVZpokakZ1kHb2ksUg

It is common ground that the difference stems from the debt allegedly due to the Respondent by the Applicant. The Applicant alleges that debt is RM10,820,822.00. The Respondent the debt to be RM13,600,000.00, as stated in the Respondent’s Statement of Account dated 20.11.2023.

The “Breakdown of Polling Results” exhibited by the Applicant for the voting at the Scheme Meeting reveals that RM10,820,821.92 (the Applicant’s figure) was used to calculate the percentage of Scheme Creditors who voted in favour of the Proposed Scheme.

The Respondent submitted that mathematically, if the Applicant had used the sum of RM13,600,000.00 in calculating the denominator to determine the percentage of Scheme Creditors voting for the Proposed Scheme, the percentage of Scheme Creditors approving would only be 71.1% and not 75.4% as the Applicant claims.

The difference in the 2 amounts allegedly owing was admitted by the Respondent to be by reason of the interest imposed: simple interest (as claimed by the Applicant based on the ES) and 18% default interest (as claimed by the Respondent), see para 12 of the Applicant’s Affidavit in Encl 56.

The Respondent’s computation is set out in the following table: S/N a6JXLVZpokakZ1kHb2ksUg No. Scheme Creditor Amount that the Applicant owes to the Scheme Creditor Supporting (RM) Opposing (RM) 1 Leong Wei Pin 1,250,000.00 1,250,000.00 2 Leong Wei Lun 1,250,000.00 1,250,000.00 3 Njoo Bek Tien 251,315.06 4 Christopher Chin Teck Kwang 502,630.14 502,630.14 5 Chan Kok San 2,193,753.42 2,193,753.42 6 Dato' Loo Chee Wee 251,315.07 7 Jeremy Tan Yi-Wee 253,397.26 253,397.26 8 See Ser Chia 1,300,000.00 1,300,000.00 9 Tee Sook Sing 1,096,876.71 1,096,876.71 10 Tieu Wei Long 502,630.14 502,630.14 11 Debut Supreme Capital Sdn. Bhd 9,918,878.89 9,918,878.89 12 Top-Ten Collection Sdn. Bhd. 2,027,178.08 2,027,178.08 13 Advance Opportunities 2,193,753.42 2,193,753.42 S/N a6JXLVZpokakZ1kHb2ksUg Fund 14 Tan Pey Ern 864,000.00 864,000.00 15 Khoh Thong Bu 864,000.00 864,000.00 16 Hong Zi Shen 432,000.00 432,000.00 17 Koh Chee Meng 270,000.00 270,000.00 18 Law Wai Cheong 572,400.00 19 MyCreative Ventures Sdn Bhd 13,600,000.00 13,600,000.00 20 Crossroads Live, Inc. 10,292,679.45 10,292,679.45 The total value of the supporting Scheme Creditors: RM34,709,147.37 The total value of the opposing Scheme Creditors: RM14,102,630.14 The total value of the Scheme Creditors who attended and voted: RM48,811,777.51 The total value of the supporting Scheme Creditors who appear to have supported the Proposed Scheme.

71.1% S/N a6JXLVZpokakZ1kHb2ksUg

As such, it was submitted that the 75% statutory threshold was not met.

The Applicant sought to explain the difference of the Respondent’s debt as calculated by the Applicant of RM10,820,822.00 when compared with the calculation of the Respondent of RM13,600.000.00, in this way. a) the Applicant’s figure is the principal sum owed with simple interest; b) the Respondent’s figure includes Default Interest of 18%.

The difference is easily reconciled. The Applicant’s calculation is based on clauses 4.1.1 and 4.1.2 of the ES (at Encl 56, p. 160). Clause 4.1.1 recognises the principal amount and simple interest owing to the Scheme Creditors. Clause 4.1.2(b) provides for the waiver of Default interest. But such waiver will only take effect as a term of the Proposed Scheme once sanctioned.

As such, without sanction, there is no basis for excluding the 18% default interest when calculating the Respondent’s debt prior to Sanction. It is clear to me that the Respondent's case for using RM13,600,000.00 as part of the denominator instead of RM10,820,822.00, is therefore correct. S/N a6JXLVZpokakZ1kHb2ksUg

In an alternative argument, the Applicant submitted (at para 28, Encl. 56) that the Respondent’s calculation merely takes into account Default Interest of 18% in favour of the Respondent alone. The argument is that Default Interest of 18% should be imposed in favour of all Scheme Creditors. If so, the percentage of total votes in favour of the Proposed Scheme would mathematically be the same, that is, 75.4%.

However, there is insufficient evidence to support the allegation that the debts of the other Scheme Creditors also carry default interest of 18%. This alternative argument therefore fails.

In the circumstances, I find that the Applicant has not proven that the statutory majority had been achieved. If anything, the evidence suggests the contrary.

I return to the challenge for wrongful classification. I had occasion to consider the test for classification in KNM Group v Hitachi Zosen (supra). It is undoubtedly a ‘rights’ test and not based on interests, as formulated by Bowen LJ in Sovereign Life Assurance Co (in Liq.) v Dodd [1892] 2 QB 573 at paras 582-3. I held: S/N a6JXLVZpokakZ1kHb2ksUg “[47] The classic formulation of the ‘rights’ test is that of Bowen LJ in Sovereign Life Assurance Co (in Liq.) v Dodd [1892] 2 QB 573 at paras 582-3: “It seems plain that we must such meaning to the term ‘class’ as well as prevent the section being so worded as to result in confiscation and injustice, and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest”.

The test in Sovereign Life Assurance Co (in Liq.) v Dodd (supra) was followed and applied by the Federal Court in Francis a/l Augustine Pereira v Dataran Mantin Sdn Bhd & Ors and other appeals [2014] 6 MLJ 56. It is the law in Malaysia. It was also applied by the Court of Appeal in Singapore in TT International Ltd (supra).

Further, an important aspect of the dissimilarity principle as explained in TT International (supra) is this. If a creditor’s position were to improve or decline in relation to other creditors pursuant to the terms of the proposed scheme, then the creditor ought to be placed in a different voting class. The Court of Appeal held: “[140] Therefore, the dissimilarity principle (see above at [131]) means that if a creditor’s (or a group of creditors’) position will improve or decline to such a different extent vis-à-vis other creditors simply because of the terms of the scheme (and not because of its own unique circumstances, ie, its “private interests”) assessed against the most likely scenario in the absence of scheme approval S/N a6JXLVZpokakZ1kHb2ksUg (“the appropriate comparator”), then it should be placed in a different voting class from the other creditors. We should highlight here that the appropriate comparator depends on the facts of each case and is not necessarily an insolvent liquidation.”

Here, if the Proposed Scheme is sanctioned, the Respondent’s position would decline to a greater extent when compared to other creditors holding RCPS C. This is because the Respondent would lose the right to rely on a “separate and independent obligation” clause in its RCPS C Subscription Agreement, whereas the rights of the RCPS B holders without such a clause will remain unchanged.

In the circumstances, I agree with Counsel for the Respondent that the Respondent (and the other RCPS C holders, if any) should have been placed in a separate voting class apart from the rest of the Scheme Creditors. Accordingly, the classification was flawed and as such, I declined to sanction the Proposed Scheme.

I also note that at para 38 of its subs dated 23.7.2025, the Applicant raised the objection that the 6th Respondent was placed in the same class as the other creditors and voted on the Proposed Scheme. But it did not raise any objections as to classification at the Convening Hearing. There is therefore an issue as to waiver. S/N a6JXLVZpokakZ1kHb2ksUg

In Capital Dynasty Sdn Bhd (in liquidation) v Chiang Bing & Ors [2009] 8 MLJ 841 at 854, the Court held that failure to vote at the Scheme Meetings meant that the failure to vote at the Scheme Meetings meant that the creditors had waived their right to object to sanction of the Schemes, including for wrongful classification.

In Peninsular Park Sdn Bhd v Ai-Af Holdings Sdn Bhd [2015] MLJU 745 at para 34, the Court followed Capital Dynasty (supra) on this point.

If correct, this would mean that the failure to raise objections at the Convening Hearing could be taken as a waiver to object for wrongful classification.

In my judgment and with the greatest of respect, I decline to follow both decisions if they decide that the creditors could waive the right to complain against classification. I have held that classification is jurisdictional, see KNM Group v Hitachi Zosen (supra) at para 44 following the Federal Court in MDSA Resources Sdn Bhd v Adrian Sia Koon Leng [2023] 5 MLJ 900 at para 198. Whether classification is jurisdictional and could be waived was recently reviewed by the Court of Appeal of Singapore in UT Singapore Services Pte Ltd v Goh Thien Phong and others and another appeal [2025] 1 SLR 687 at paras 55 to 60. The Court held that wrongful classification is indeed jurisdictional and the failure to object at the convening hearing cannot the basis of a waiver. S/N a6JXLVZpokakZ1kHb2ksUg

As such, the failure to properly classify the creditors will mean that I will have no jurisdiction to sanction the scheme. No amount of waiver, acquiescence or failure to object at the Convening Hearing can confer jurisdiction on me where none exists.

I agree that the Scheme Creditors were wrongly classified and as such, I had no jurisdiction to grant sanction.

My findings on the failure to achieve the statutory majority under s. 366(3) and the flawed classification, were enough for me to decline sanction and to dismiss Encl 26. As such, there was no reason to determine the final ground of objection under the first stage, being whether there was proper disclosure in the ES. THE SECOND STAGE & MALA FIDES BY A ‘SIDE DEAL’

Notwithstanding that, I should consider the effect of ‘side deals’ with selected creditors and the submission that there was an attempt to ‘buy’ certain Scheme Creditors affirmative vote. If proved, this would be a breach of the second stage of the Buckley test and would be an attempt to coerce the minority Scheme Creditors by buying the votes of Scheme Creditors to ‘cram’ them down. The allegations are these.

On 20.2.2024, the Applicant issued an email to a Scheme Creditor, Dato’ Loo Chee Wee (“Dato’ Loo”), enclosing, inter S/N a6JXLVZpokakZ1kHb2ksUg alia, a letter entitled “Letter Agreement”. The letter stipulated that it recorded the “agreement as to certain matters relating to the subscription in Tremendous Entertainment Holdings Berhad ... by Dato’ Loo Chee Wee”. It was proposed that RM279,059.02 was to be paid to Dato’ Loo and in “consideration”, Dato’ Loo was required to support the Scheme.

The issuance of this “Letter Agreement” was not disclosed by the Applicant to the Respondent nor any other Scheme Creditor. Additionally, the amount of RM279,059.02 which the Applicant proposed to pay to Dato’ Loo was greater than the amount of RM251,315.00 which the Applicant alleges is due to Dato’ Loo. It is said that this is a secret special deal.

Furthermore, the Respondent claims that the Applicant provided a secret benefit to another Scheme Creditors by way of a “backdated share transfer.”

These ‘side deals’ are perhaps the most egregious misconduct of any debtor and participating creditors in the scheme process. The Courts will simply not stand for this behaviour.

This is an important aspect of schemes and the negotiations between the creditors and the debtor in the negotiation phase of the scheme process. It is perhaps worth stating the repercussions of a ‘side deal’ and to issue a warning against S/N a6JXLVZpokakZ1kHb2ksUg any debtor attempting to persuade creditors to support and vote in favour of a scheme by special secret concessions.

The general rule is that there is a duty to act in good faith by the debtor owed to the creditors and owed by the creditors inter se. A secret ‘side deal’ will breach this principle. This is not merely an application of the rule that the creditors must share in the assets of the debtor pari passu, it includes a situation where a third party confers a collateral undisclosed benefit to a creditor, which is not offered to the other creditors as a whole, see Gertner v CFL Finance Ltd [2018] BPIR 1605 at para 65.

The start of the analysis is McKewan v Sanderson (1875) LR 20 Eq 65 at 72-73, where Malins V-C said this of secret side deals: “Now I take it to be thoroughly settled, both in Courts of Law and Equity, that where there is a bankruptcy, or an arrangement with creditors by composition or insolvency, when insolvency exists as contradistinguished from bankruptcy, it is the duty of all creditors who have once taken part in the proceedings of bankruptcy or composition to stand to share and share alike. Equality is the only principle that can be applied, and if one creditor, unknown to the other creditors -- not unknown to one or two, but to the general body -- enters into an arrangement by which he gets for himself from the debtor, or from any one on behalf of the debtor, any collateral advantage whatever, that is a fraud upon the other creditors. … That principle cannot be too well understood. I am sorry to find it is not better understood; and I hope this will be a lesson to bankers … that where there is once a bankruptcy of a customer, they are not S/N a6JXLVZpokakZ1kHb2ksUg to stipulate for private advantage to themselves, but must stand with the other creditors and participate equally with them.”

In Somji v Cadbury Schweppes plc [2001] 1 BCLC 498, the Court summarised the position on ‘secret deals’: “[23] It is argued by Mr Anthony Mann QC on behalf of Mr Somji that these authorities, and any principle established by them, have no part to play in the law as it now stands, following the Insolvency Act 1986. I must address that argument presently, but it may be convenient if I summarise the position as it appears to me to have stood at the close of the nineteenth century: (1) any secret deal made in connection with a composition, or other similar arrangement for the settlement of debts, whereby a creditor was to receive more than the other creditors in return for supporting (or not opposing) the composition or arrangement, was illegal and void; (2) the existence of such a deal rendered the composition or arrangement voidable at the instance of an aggrieved creditor; (3) moreover, such a deal was wholly unenforceable as between the parties to it; (4) the principle was of entirely general application, and covered all forms of composition and arrangement, whether statutory or otherwise; (5) the principle was based on the fundamental rule that there must be equality between creditors in the distribution of the debtor's assets, and additionally on the equally fundamental rule that there should be complete good faith between the debtor and his creditors, and between the creditors inter se. It was therefore irrelevant that the inducement to the creditor came from a third party, and not out of the debtor's estate;

if the secret deal was not made by the debtor himself, all that was required was that it should have been made to his knowledge, and therefore with his concurrence, since concurrence must obviously be inferred where the debtor knows of the deal and does S/N a6JXLVZpokakZ1kHb2ksUg nothing either to stop it, or to inform his other creditors of it. The basis for this aspect of the principle was that, once the debtor knew of the secret deal, it became his duty to speak up and inform the other creditors of it.”

In Re PCCW Ltd (電訊盈科有限公司) [2009] 3 HKC 292, the Court of Appeal of Hong Kong held that the requirement of “bona fides” for a proposed scheme would not be satisfied where “a shareholder or group of shareholders is induced to vote in favour of a scheme of arrangement by special incentives that have not been made available to other shareholders in the relevant class.” In Re Econ Corp Ltd [2003] SGHC 288 the High Court of Singapore declined to sanction a scheme of arrangement by reason of, inter alia, the existence of set-off arrangements made privately with selected scheme creditors.

While the principles applicable and effect of ‘side deals’ are clear, I find that in this case, there is insufficient proof to show that these alleged side deals ever came into effect.

First, in relation to the secret deal with Dato’Loo, the flaw in the argument is that Dato’ Loo’s did not attend the Scheme Meeting nor vote in favour of the Proposed Scheme. No side deal was actually implemented. The mere fact that the offer was made is not, per se, enough. S/N a6JXLVZpokakZ1kHb2ksUg

Secondly, it is alleged that the Applicant and/or its subsidiary, Tremendous Entertainment (M) Sdn. Bhd. had entered into an arrangement to provide a benefit to one of its Scheme Creditors, Debut Supreme Capital Sdn. Bhd. (“DSC”) of RM9,918,879.00 by transferring 51% of shares held by its said subsidiary in Zebra Studio Sdn. Bhd. to DSC by way of a “backdated share transfer form”; this was said to be made without disclosure and without a similar benefit being conferred on the other Scheme Creditors. However, it appears from SSM searches, there was no transfer actually made. It is also difficult to accept that a disposal of Zebra Studio, a loss-making entity to DSC, could persuade it to vote in favour of the Proposed Scheme. There was also considerable dispute surrounding the proposed transfer of Zebra Studio.

As such, there is insufficient proof to show the side deals were actually implemented. The attack on the bona fides of the Proposed Scheme failed.

Given that the POD process here was perhaps ill conceived, I should say something on the procedures for the ascertainment of the creditors’ debts in a scheme of arrangement.

There are 2 aspects to this analysis. The first is the process to ascertain the scheme debts for voting purposes. The second is the ascertainment of scheme debts for distribution purposes. S/N a6JXLVZpokakZ1kHb2ksUg The distinction between ascertaining the debts for voting purposes and for distribution purposes was explained in the Australian decision of Lindholm, Re Opes Prime Stockbroking Ltd (admins apptd) (recs and mgrs apptd) (2008) 68 ACSR 88 at para 63. “[63] In estimating the value of a counterparty’s claim for voting purposes it is important to bear in mind that the task is not the same as determining whether to admit or reject a proof of debt for distribution purposes. In the former case the task does not involve a detailed inquiry. The decision-maker (the administrator or chairman of the creditors’ meeting) must do the best that can be done by reference to the factual material the claimant furnishes viewed in the total context with which the decision-maker is dealing: Selim v McGrath (2003) 117 FLR 85 at 115; 47 ACSR 537; [2003] NSWSC 927. If a claim cannot be quantified but it appears that the creditor is a creditor for at least some amount, then it is appropriate to admit the creditor for voting purposes at a nominal value of $1: Re Oriel Homes Pty Ltd [1998] 1 Qd R 652 at 654. By contrast, a proof of debt for distribution purposes is for the true liability that is enforceable against the company: Tanning Research Laboratories Pty Ltd v O’Brien (1990) 169 CLR 332; 91 ALR 180; 1 ACSR 510.”

This suggests a separate POD exercise for distribution purposes should be carried out after the scheme meeting is held and after sanction. More of this later. ADJUDICATION FOR VOTING PURPOSES S/N a6JXLVZpokakZ1kHb2ksUg

Ordinarily, there will be a proof of debt (“POD”) process to ascertain the scheme debts for voting purposes.

In this case, the scheme process did not provide for a prior scheme meeting POD exercise. Here, the adjudication of the PODs was to be carried out after the scheme meeting and sanction. Indeed, by clause 3.1.5 of the ES (at p 159 of Encl 51), the POD verification exercise was said to be carried out within 12 months from sanction.

This is peculiar as a POD exercise after sanction is to determine the debts due for distribution purposes, see for example Re Pan Atlantic Insurance Co Ltd. [2003] 2 BCLC

In my view, whether the percentage of creditors who voted in favour of the scheme met the statutory majority under s. s. 366(3) cannot be objectively ascertained without a POD exercise prior to the scheme meeting. The use of a POD exercise after the Scheme Meeting to ascertain the debts of the voting Scheme Creditors to determine the very outcome of the said Scheme Meeting, with respect, makes no sense.

The practice of a POD exercise for voting purposes prior to the Scheme Meeting was confirmed by the Court of Appeal of Singapore (“CA Sing”) in The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT

International Ltd and another appeal [2012] SGCA 9 at para It has also been applied in numerous schemes in Malaysia, S/N a6JXLVZpokakZ1kHb2ksUg notably the scheme for Sapura Energy Berhad and selected subsidiaries.

Indeed, the new amendments to CA 2016 (s. 369B) also stipulate that the POD exercise should be done before the scheme meetings, as confirmed by the Court of Appeal in Martin Bencher (M) Sdn Bhd v Sapura Energy Bhd & Ors [2025] MLJU 511 at paras 133 and 134.

The most important objective of a POD exercise is the need for the process (and the voting) to be expedited and not delayed. The authorities are ad idem. The driving force in formulating the procedure for the POD process is to ensure that the voting process and the holding of the scheme meeting are not unduly delayed. There are various alternatives to achieve this objective.

One approach is to allow the Scheme to proceed without being delayed by Court proceedings to determine the debt. One way would be to make a provision for the estimated distribution to a creditor with the disputed claim, assuming his claim were to succeed. This provisioned sum would be held by a stakeholder until the claim is adjudicated by the Courts or in arbitration. S/N a6JXLVZpokakZ1kHb2ksUg

The objective is to allow the scheme to proceed irrespective of the dispute, see for example, in Hong Kong, Re UDL Holdings Ltd & ors [2000] 4 HKC 778 (CA), where although the creditor’s debt was valued at nil for voting purposes, a fund was set aside to make good his claim if it was established in the pending arbitration. This may not be an entirely practical solution as it could tie up the debtor’s funds with the stakeholder for a prolonged period and indeed, such delay may affect the debtor’s solvency if the claim was large.

The alternative that has been generally accepted to ascertain scheme debts for voting is to relegate the POD process to a ‘rough and ready’ summary process. This is the description coined by Chadwick LJ in Re Hawk Insurance Co. Ltd [2001] 2 BCLC 480 at paras 47, 48 and 50. The CA Sing in TT International (supra) echoed this approach: “[108] We should emphasise that up to now, we have only been discussing the position regarding the chairman’s admission or rejection of claims for the purpose of voting in a s 210 creditors’ meeting. It must be made clear that even though the court may order (on appeal by a creditor) that his claim be admitted or rejected for the purpose of voting, this is in the nature of a “rough and ready” determination keeping in mind that a vote on the proposed scheme should not be delayed unnecessarily. … S/N a6JXLVZpokakZ1kHb2ksUg [139] In Re Hawk Insurance, however, the scheme crystallised the claims of the contingent creditors in a way that sought (via “rough and ready” just estimates) to pay the contingent creditors ….”

This ‘rough and ready’ approach was also adopted by Justice Ong Chee Kwan in Top Builders Capital Bhd & Ors v Seng Long Construction & Engineering Sdn Bhd & Ors (No. 2) [2022] 8 MLJ 604 at para 199 and 200 adopting this process as a method to determine a ‘just estimate’ of the claim in a ‘summary fashion’.

I entirely agree with this approach.

However, it is not without difficulty. In TT International (supra) at para 103, the CA Sing ruled that an appeal would lie from the decision of the chairperson. This right of appeal appears to be confirmed by Justice Ong in Re Top Builders Capital Bhd & Ors (No. 1) [2021] 10 MLJ 327 at para 79.

The disruptive effect of delays by an appeal to the Courts is a common problem.

However, the CA Sing went further to try to mitigate the effects of an appeal by adopting the approach of the Australian decision in Selim v McGrath [2003] NSWC 927 at para 140 in that an appeal to Court should only be taken after the votes have been counted and it can be seen whether the vote in question would affect the result (in that whether the appeal S/N a6JXLVZpokakZ1kHb2ksUg would be academic). And that the appeal should preferably be heard at the sanction stage. It seems clear to me that in adopting these qualifications, the CA Sing must have been concerned by the likely delays in the voting and the scheme.

There is another alternative. It is to limit or exclude access to the Courts altogether. This is the approach in England.

It allows for an appeal from the chairperson to an ‘adjudicator’ who is clothed with the powers of an Expert and whose decision may be made final with limited access to the Courts. Such exclusion may only be ‘insofar as the law allows’ permitting mandatory appeals prescribed by law, see Re Noble Group Ltd (No. 2) [2019] 2 BCLC 548 at para 74.

This alternative is attractive as it is said to be quick, fair and cheap. In Re Pan Atlantic Insurance Co Ltd. [2003] 2 BCLC 678, the Court held: “[22] The point about the independent adjudicator is that, as provided by cl 1.4.2 and the latter parts of cl 1.4, he is to reach a determination of the dispute in a manner that is fair, but also economical, and is to be reached as soon as it reasonably can be. The effect of his decision is prescribed by cl 1.4.6 in the following terms: 'The decision of the independent adjudicator on any dispute S/N a6JXLVZpokakZ1kHb2ksUg referred to him in accordance with the scheme shall be final and binding insofar as the law allows, and for the avoidance of doubt there shall be no right to appeal therefrom, nor shall there be any right to make any claim against the independent adjudicator in respect thereof, save in the case of loss arising from any negligence, breach of duty or trust or wilful neglect or dishonesty.' The reference to 'insofar as the law allows,' derives from a passage in the second judgment of Arden J in the Hawk Insurance case, and refers to the body of law dealing with the effect of expert determinations which are expressed to be final and binding, but which the courts have held are indeed final and binding, but subject to exceptions, one being fraud, and another being where the expert has gone beyond the terms of reference. I do not need to refer in any more detail to the exceptions to the final and binding effect of an expert determination, but it is that body of law that is brought into play by the words, 'insofar as the law allows'. Subject to that, however, the independent adjudicator's decision is binding, and will resolve the amount of the claim, if there is a claim at all. … [33] Although it is not for me, as I see it, to decide in a binding way that the scheme does not infringe art 6.1, it seems to me that I can take the view that, so far as appears, it is entirely legitimate, having regard to the human rights of the creditors under art 6, and that the limitation of access to the courts that is inherent in the scheme is not a reason for refusing to approve it.”

Of course, if recourse to the Court is to be removed or restricted, not by private agreement but by virtue of a scheme which compels consent at the instance of a statutory majority, the substitute for legal recourse in the Courts should be robust, S/N a6JXLVZpokakZ1kHb2ksUg satisfactory and justified, per Hildyard J in Lehman Brothers International (Europe) [2018] EWHC at paras 157 to 158.

The basis for restricting or excluding access to the Courts is that the parties may by consensual contractual arrangement, refer a dispute to an Expert without recourse to the Courts, see Kendall on Expert Determination (Freedman & Farrell) (5th Edn) at para 4.13-5 at p 86. In a scheme of arrangement, an Expert determination could be made binding on all creditors in a scheme which on sanction, will take effect as deemed consent of the creditors.

It can be seen from the above, that the various versions of the POD process as approved by the Courts in one form or another, is designed for speed. A delayed POD process will delay the scheme meeting and jeopardise the scheme itself.

In my judgment, the model which applies a ‘rough and ready’ summary process with an ‘Expert’ adjudicator with limited access to the Court, is the most practical model to determine debts for voting purposes.

However, legislation has intervened. The POD process under CA 2016

Under CA 2016, there is now a specific statutory provision in the form of 369B which now governs the POD process. S/N a6JXLVZpokakZ1kHb2ksUg

S. 369B (1) provides that the Notice Summoning the Scheme Meeting under s. 369(1) shall state the manner in which a creditor is to file a POD and the time within which the POD is to be filed. S. 368(B)(1) provides: “369B. (1) Where the Court orders a meeting under subsection 366(1) to be summoned, the company shall state in every notice referred to in subsection 369(1) summoning the meeting—

the manner in which a creditor is to file a proof of debt with the company; and

the period within which the proof is to be filed.

If a creditor does not file the creditor’s proof of debt in the manner and within the period stated in the notice summoning the meeting, the creditor is not allowed to vote, whether in person or by proxy, at the meeting.”

Some initial observations are necessary.

First, the adjudication is to be initially carried out by the chairperson of the Scheme Meeting under s. 369B(5) with the availability of an ‘appeal’ to the independent assessor (“Assessor”) under s. 369B(9). This POD process under s. 369B suggests that it is for voting purposes, see the Court of Appeal in Martin Bencher (supra) at paras 133 and 134.

Secondly, the problem with the s. 369B process is that by convention, the notice period summoning a Scheme Meeting S/N a6JXLVZpokakZ1kHb2ksUg is 21 days. However, s. 369(B)(1) suggests that the POD process will only commence when the s. 369(1) Notice is given and obviously, must be completed before the Scheme Meeting is held. The SSM Guidelines 1.4.2024 for the Adjudication of Proof of Debts under section 369B provides that the chairperson shall complete the adjudication of the PODs 28 days before the scheme meeting. The usual 21-day notice period would simply be too short, making it impossible for a large number of claims to be adjudicated in this 21 or 28 day period. This would mean that the giving of the s. 369 (1) Notice would have to be given months before the date of the scheme meeting to allow the POD process to complete.

Apart from the Notice period, there are other difficulties. S. 369B(9) provides, in substance, for a right of appeal to an Assessor. There is nothing specifically providing that the Assessor is an Expert nor that recourse to the Courts is excluded. This would mean an application to the Court would be available to challenge the decision of the Chairperson or the Assessor, with appeals to the Court of Appeal and the Federal Court. This process could last for years and disrupt the voting process. Further, a delay in the adjudication process involving large claims would lead to the total debt of the debtor being unresolved for prolonged periods. This could result in the solvency of the debtor remaining similarly unresolved and the business of the debtor company crippled in the interim. Indeed, the directors of the debtor would be reluctant to continue with S/N a6JXLVZpokakZ1kHb2ksUg the business of the debtor for fear of claims of fraudulent trading.

A possible solution would be to commence the POD process on a pro-forma basis, months in advance of the scheme meeting with the formal s. 369(B) process commencing once the s. 369(1) Notice is given. Further, a clause could be included as a term of the scheme making the decision of an ‘expert’ adjudicator for voting purposes final and excluding access to the Courts in the same way as the English approach. I cannot say how effective this approach would be given the express provisions of s. 369B, which will be open to contrary interpretation. Perhaps a legislative solution is needed.

The quantification of debts by a POD process for distribution purposes is more difficult.

The authorities appear to be divided on this issue. In Opus Prime (supra) it appears that a full contest on the merits would be allowed. The Court held: “If a claim cannot be quantified but it appears that the creditor is a creditor for at least some amount, then it is appropriate to admit the creditor for voting purposes at a nominal value of $1: Re Oriel Homes Pty Ltd [1998] 1 Qd R 652 at 654. By contrast, a proof of debt for distribution purposes is for the true liability that is S/N a6JXLVZpokakZ1kHb2ksUg enforceable against the company: Tanning Research Laboratories Pty Ltd v O’Brien (1990) 169 CLR 332; 91 ALR 180; 1 ACSR 510.”

This appears to be the position in Singapore after the decision of the Court of Appeal in TT International (supra) at para 108: “It must be made clear that even though the court may order (on appeal by a creditor) that his claim be admitted or rejected for the purpose of voting, this is in the nature of a “rough and ready” determination keeping in mind that a vote on the proposed scheme should not be delayed unnecessarily. Such an order does not bar the creditor from going back to the court subsequently to seek determinative final adjudication of the same claim on its merits.”

On the other hand, Justice Ong in Top Builders (No. 1) (supra) took a more pragmatic view of the problem.

His Lordship held that the summary determination of the scheme debts is Parliament’s preferred alternative in place of curial proceedings. In Top Builders (No. 1), Justice Ong held: “[95] Based on the aforesaid outline of the scheme of arrangement process, it is clear that Parliament has intended by s 368(1) of the CA for the scheme of arrangement proceedings to serve as the preferred alternative platform tor the determination and resolution of the claims by the creditors against the company which, if the scheme is to have any chance of succeeding, must take precedence over the normal legal proceedings filed in court or before an arbitral tribunal. The adjudication of the creditors’ claims under the scheme of arrangement is in a summary fashion as S/N a6JXLVZpokakZ1kHb2ksUg opposed to the normal legal proceedings where elaborate investigation into the evidence is conducted for establishing the merits of the claims.”

In respect to the availability of final determination after sanction, his Lordship held: “[87] So, if there is still available to the creditors an avenue of going back to the court for a ‘determinative final adjudication of the same claim on its merits’, practically, such application will have to be filed after the court has sanctioned the scheme. Of course, the application can also be made during the sanction stage but this would render the appeals against the decision of the scheme manager redundant. [88] If by the aforesaid, it means that between the approval of the proposed scheme by the creditors and the hearing of the application by the company to the court for sanction of the scheme, any of the scheme creditors may apply to the court for the final determination of their claims on its merits notwithstanding the determination by the court in respect of appeals made against the decision of the scheme manager in the first instant, then I would respectfully depart from the learned judge. To my mind, such an approach will impede instead of assist the achievement of the scheme of arrangement as this would result in undue delay to the application for sanction and or the distribution of the dividends. … [91] … The hearing of the appeal should be heard on an expedited basis and preferably together with the application to the court for the sanction of the scheme. This will obviate the need for another separate proof of debt exercise as determinative final adjudication of the creditors’ claims in respect of the quantum for the purpose of S/N a6JXLVZpokakZ1kHb2ksUg distribution of the payments under the scheme. Of course, it does not at all mean that the company cannot, if it deems fit, make appropriate provisions in the scheme for an adjudication process to determine the quantum of the creditors’ claims after the voting has been completed and the necessary approval for the scheme has been attained for the purpose of distribution.”

I have real sympathy with creditors who are deprived of a chance to have their claims finally determined in Court before distribution. However, the reservations of Justice Ong with respect to the delays caused by creditors seeking final determination of their claims after sanction are well taken. I would prefer a commercial solution providing for a quick and final solution to the dispute. A delayed resolution of disputed debts in a scheme in a scheme after sanction may be wholly disruptive of the debtor’s business.

I would suggest that in relation to the POD process in s. 368B, the debtor should, by the terms of a proposed scheme, be allowed to clothe the Assessor with the powers an expert and to exclude the appeals to the Courts with respect to the POD for voting purposes. I would also suggest that for practical reasons, the debtor should be allowed to exclude any recourse to the Courts for final determination of disputed debts but to be bound by the rough and ready adjudication in a summary fashion by the Assessor for voting purposes. CONCLUSION S/N a6JXLVZpokakZ1kHb2ksUg

To recapitulate, given my finding that the classification was flawed and the failure to meet the statutory majority under s. 366(3), I dismissed Encl 26 with costs of RM20,000.00. Dated the 9th day of March 2026 ...........................tt........................... YA TUAN SAHERAN SUHENDRAN JUDICIAL COMMISSIONER OF THE HIGH COURT (COMMERCIAL 11) (INSOLVENCY 2) OF KUALA LUMPUR, MALAYSIA Counsel for the Applicant: Solicitors: Mark Ho Hing Kheong & Lim Li Huang Messrs. Chellam Wong (Kuala Lumpur) Counsel for the Respondent: Solicitors: Tengku Nazmi bin Tengku Anuar Messrs. Azmi & Associates (Kuala Lumpur) S/N a6JXLVZpokakZ1kHb2ksUg Case References: • Capital Dynasty Sdn Bhd (in liquidation) v Chiang Bing & Ors [2009] 8 MLJ 841 • Francis a/l Augustine Pereira v Dataran Mantin Sdn Bhd & Ors and other appeals [2014] 6 MLJ 56 • Gertner v CFL Finance Ltd [2018] BPIR 1605 • Kendall on Expert Determination (Freedman & Farrell) (5th Edn) • KNM Group Bhd & Anor v Hitachi Zosen Corporation & Ors [2025] MLJU 1234 • Lehman Brothers International (Europe) [2018] EWHC • Martin Bencher (M) Sdn Bhd v Sapura Energy Bhd & Ors [2025] MLJU 511 • McKewan v Sanderson (1875) LR 20 Eq 65 • MDSA Resources Sdn Bhd v Adrian Sia Koon Leng [2023] 5 MLJ 900 • Peninsular Park Sdn Bhd v Ai-Af Holdings Sdn Bhd [2015] MLJU 745 • Re Econ Corp Ltd [2003] SGHC 288 • Re Hawk Insurance Co. Ltd [2001] 2 BCLC 480 • Re Noble Group Ltd (No. 2) [2019] 2 BCLC 548 • Re Opes Prime Stockbroking Ltd (admins apptd) (recs and mgrs apptd) (2008) 68 ACSR 88 • Re Pan Atlantic Insurance Co Ltd. [2003] 2 BCLC 678 • Re PCCW Ltd (電訊盈科有限公司) [2009] 3 HKC 292 • Re Top Builders Capital Bhd & Ors (No. 1) [2021] 10 MLJ 327 • Re UDL Holdings Ltd & ors [2000] 4 HKC 778 (CA) • Selim v McGrath [2003] NSWC 927 • Somji v Cadbury Schweppes plc [2001] 1 BCLC 498 • Sovereign Life Assurance Co (in Liq.) v Dodd [1892] 2 QB 573 • The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal [2012] SGCA 9 • Top Builders Capital Bhd & Ors v Seng Long Construction & Engineering Sdn Bhd & Ors (No. 2) [2022] 8 MLJ 604 • UT Singapore Services Pte Ltd v Goh Thien Phong and others and another appeal [2025] 1 SLR 687 S/N a6JXLVZpokakZ1kHb2ksUg Legislation References: • Companies Act 2016 (“CA 2016”) • The SSM Guidelines 1.4.2024 Decision Date: 16th December 2025 S/N a6JXLVZpokakZ1kHb2ksUg