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EQUITICORP HOLDINGS LTD (In Statutory Management)
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W-02(IM)(NCC)-1542-10/2020
Court of Appeal of Malaysia26 Apr 2021
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“ed and the debts paid and the only issue is the disposal of the Surplus Proceeds. [12] Equiticorp as a fully paid up creditor is also disqualified from being a member of the COI. Section 242 of the Companies Act 1965 (CA 1965) states that that members of COI are creditors or contributories. [13] The next argument was t”
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EQUITICORP HOLDINGS LTD (In Statutory Management)
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UNITED SECURITIES SDN BHD (In Liquidation)
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CITY CENTRE SDN BHD (In Liquidation)
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LIM KENG PEO (Liquidator for City Centre Sdn Bhd, In Liquidation)
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YEOH SIEW MING (Liquidator for City Centre Sdn. Bhd, In Liquidation)
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CHAN SIEW MEI (Receiver of United Securities Sdn Bhd (In Receivership and in Liquidation) … RESPONDENTS 2 [In the Matter of Suit No.: WA-22NCC-682-12/2019 In the High Court of Malaya at Kuala Lumpur] Between United Securities Sdn Bhd …Plaintiff (In Liquidation)
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United Overseas Bank Limited (Company Registration No: 193500026Z)
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UOB 2006 Nominees (Tempatan) Sdn Bhd (Company Registration No: 197801001377 (38411-M))
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City Centre Sdn Bhd (In Liquidation)
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Lim Keng Peo (Liquidator for City Centre Sdn Bhd, In Liquidation)
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Yeoh Siew Ming (Liquidator for City Centre Sdn. Bhd, In Liquidation)
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Chan Siew Mei (Receiver of United Securities Sdn Bhd (In Receivership and in Liquidation)) 3
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Equiticorp Holdings Ltd …Defendants (In Statutory Management) CORAM LEE SWEE SENG, JCA RAVINTHRAN A/L PARAMAGURU, JCA SEE MEE CHUN, JCA GROUNDS OF JUDGMENT Introduction [1] This is the Appellant’s (UOB Nominees) appeal against the decision of the High Court Judge (HCJ) to allow the application by the 1st Respondent (Equiticorp) to intervene in the High Court proceedings (USSB suit). [2] We had allowed the appeal and we now give our reasons as follows. Background facts [3]
Preamble
Pursuant to a court order dated 25.4.2000, the 3rd Respondent (CCSB) was wound up. By a subsequent court order dated 23.12.2003, a Committee of Inspection of CCSB (COI) was appointed. There were 4 subsequent change of members but UOB Nominees, the 2nd Respondent (USSB), and Equiticorp are still members. [4] Arising from the sale of CCSB’s lands and after accounting for all the liabilities due and payable by CCSB including the liquidation costs, there was a surplus of RM434,000,000.00 (Surplus Proceeds). The CCSB Liquidators filed an application in the CCSB winding up application seeking for directions concerning the distribution of the Surplus Proceeds. The respondents in that application were UOB Nominees, USSB and Equiticorp. Ultimately the Court of Appeal in its grounds of judgment dated 7.8.2019 inter alia said at paragraphs 125 and 127 (ACB, tab 12) that the CCSB Liquidators ought to have first settled the list of contributories of CCSB before filing the application. [5] On 9.12.2020 USSB filed the USSB suit against amongst others UOB Singapore and UOB Nominees. [6] On 22.5.2020 Equiticorp applied to intervene in the USSB suit which was allowed by the High Court on 23.9.2020. This is the subject matter of the appeal. Finding of the HCJ [7] The reason for the HCJ allowing the application to intervene was that Equiticorp was a member of the COI. The HCJ took into account the winding up process of CCSB has yet to be completed and that the COI is still very much alive (paragraph 29 of the grounds). Reference was made to a case concerning CCSB and its liquidators, that of Cheah Theam 5 Kheng v City Centre Sdn Bhd (in liquidation) [2012] 1 MLJ 761. This concerned the sale of CCSB lands to North Plaza without consulting the committee of inspection. There the Court of Appeal went into the role of such a committee where the liquidators have to take into account its wishes. [8] In paragraph 40 of the grounds, the HCJ stated that that as a member of the COI, Equiticorp has the requisite legal interest in this writ action which concerned the assets of CCSB i.e, the Surplus Funds; and that Equiticorp is a necessary party to assist the court in determining the issues in relation to the Surplus Funds effectually and effectively. Submissions of UOB Nominees [9] It was submitted by UOB Nominees that Equiticorp has no direct interest in the USSB suit as the dispute therein concerned the Loan Agreement dated 17.12.1982 (the Loan Agreement) and the Debenture dated 17.12.1982 (the Debenture) which were both between USSB and UOB Singapore (UOB). It is not disputed that Equiticorp is not a party to either agreement. [10] Further, CCSB’s winding up proceedings are unrelated to the USSB suit such that Equiticorp being a member of COI is not relevant. The CCSB’s winding up proceedings related to CCSB’s indebtedness to its creditors and the remitting of surplus proceeds under the winding up regime. 6 [11] It was also argued that the COI is defunct as all the assets of CCSB have been disposed and the debts paid and the only issue is the disposal of the Surplus Proceeds. [12] Equiticorp as a fully paid up creditor is also disqualified from being a member of the COI. Section 242 of the Companies Act 1965 (CA 1965) states that that members of COI are creditors or contributories. [13] The next argument was that the CCSB Liquidators had in the application for directions of the Surplus Proceeds affirmed an affidavit on 15.9.2017 (paragraph 18, ACB, tab 20) they will not be consulting the COI because the members are conflicted. [14] After the application to intervene was allowed, there was no relief or remedy sought against Equiticorp in the amended statement of claim. Where no relief or remedy is sought, the court ought not to add a party as a defendant. Submissions by Equiticorp [15] It was submitted by Equiticorp that as a member of COI and a creditor of USSB it had an interest and is entitled to be heard in these proceedings. In the application for directions on the distribution of the Surplus Proceeds, the Court of Appeal had said that there had to be a proper determination of the legal entitlement of UOB Singapore and UOB Nominees. The present USSB suit is to determine those rights and entitlement. 7 [16] CCSB is required by court order to act with the COI. As a member of the COI, Equiticorp is entitled to be heard on matters relating to the distribution of the Surplus Funds. [17] Equiticorp is a creditor of USSB and has a direct interest in the liquidation of USSB. Our Decision The Law on Intervention [18] Order 15 Rule 6(2)(b) Rules of Court 2012 provides as follows- “Subject to this rule, at any stage of the proceedings in any cause or matter, the Court may on such terms as it thinks just and either of its own motion or on application order any of the following persons to be added as a party, namely-
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any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon; or
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(ii) any person between whom and any party to the cause of matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which, in the opinion of the Court, would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.” [19] The test on an intervention application was laid down by the Privy Council in Pegang Mining Co Ltd v. Choong Sam & Ors [1969] 2 MLJ 52, 56 which reads: 8 “…A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?” [20] In Hong Leong Bank Bhd (formerly known as Hong Leong Finance Bhd) v. Staghorn Sdn Bhd and other appeals [2008] 2 MLJ 622, 671 the Federal Court said that: “… the interest of a would-be intervener in the subject matter of the action in which he seeks to intervene must be shown to exist. He is not to be allowed to intervene merely on a claim that he has an interest in the subject matter. The ‘flexibility of approach’ mentioned in Pegang Mining is not to be taken to mean laxity in the standard for the qualification to intervene.” [21] Arising from the above, it is clear that the party who seeks to intervene must have a direct legal interest in the USSB suit. Whether direct legal interest in the USSB suit [22] Here, the dispute between USSB and UOB in the USSB suit relates to the Loan Agreement and the Debenture. Both agreements do not concern Equiticorp and it was not a party to the agreements. UOB is not a party to this appeal, but UOB Nominees. [23] After Equiticorp was allowed to intervene, the amended statement of claim did not disclose any relief or remedy claimed against it. In Dato’ 9 Dr Haji Mohamed Haniffa bin Haji Abdullah & Ors v. Koperasi Doktor Malaysia Bhd & Ors and another appeal [2008] 3 MLJ 530, 539: “…KDMB is not a necessary party because it will not be directly affected by any order that might be made by the High Court on the merits of the plaintiffs’ claim against the existing defendants. Further, since no claim had been made against it by the plaintiffs or any other existing party to the action, it had failed to bring itself within the sub-para (ii) of the rule. Accordingly the High Court had no jurisdiction to permit KDMB to intervene and be added as a party to the suit.” [24] Since there is no relief or remedy sought against Equiticorp, we find it cannot be said it has a direct legal interest in these proceedings. [25] However Equiticorp stated its presence was necessary to ensure that all matters in dispute may be effectually and completely determined and adjudicated upon and as such there need not be a remedy sought against it. We do not agree with such a contention as the underlying factor must always be an interest in the dispute. Interest from being a member of the COI [26] With regard to Equiticorp being a member of CCSB’s COI, which was the ground for it being allowed to intervene, we were of the considered opinion that the CCSB’s winding up proceedings are unrelated to the USSB suit. This is because CCSB’s winding up proceedings relate to its indebtedness to its creditors and the disposal of the Surplus Proceeds under the winding up regime. It was in that context that the application for directions were made and the Court of Appeal held that it 10 behoves upon the Liquidators to settle the list of contributories before they could avail themselves to section 237(3) CA 1965. [27] On the other hand, the USSB suit concerns the issue of USSB’s indebtedness to UOB under the Loan Agreement and the Debenture. These proceedings are commenced by USSB’s Liquidators and not CCSB’s Liquidators. [28] Hence we find it matters not whether Equiticorp is a member of the COI. [29] Equiticorp submitted the Court of Appeal had recognised its interest in matters regarding the Surplus Proceeds when it stated the following in paragraph 22 of its grounds: “In the present appeals, the directions or orders sought by the liquidators seek specifically to order any surplus, if any, to be paid to USSB. As for Equiticorp, it is a member of the Committee of Inspection of CCSB, appointed on 23.12.2013, [a Committee of Inspection was formed consisting of TR Hamzah, Equiticorp, USSB [Liquidator] and UOB Nominees], a body which is still in existence and ought to have been consulted. Considering that the process of winding up of CCSB is obviously yet to be completed, we are in no doubt that both USSB and Equiticorp are interested and affected parties who have the requisite locus standi to be heard in the proceedings before the High Court and to prosecute their respective appeals.” 11 This passage was also referred by the HCJ in its paragraph 28 of the grounds. [30] On this, we say that the issue before the Court of Appeal then was in relation to CCSB’s liquidation and the application for directions by CCSB’s Liquidators. It was in that context that the passage in question came about. Hence it cannot support Equiticorp’s application to intervene in these proceedings. [31] The references to North Plaza Sdn Bhd and Equiticorp Holdings Ltd and other appeals [2013] 3 MLJ 617 and Cheam Theam Kheng (supra) illustrate the importance of a committee of inspection and that liquidators must act with the committee. We do not dispute such principles which will certainly apply if CCSB’s COI of which Equiticorp is a member, is found to be connected to this suit, which we have found to be unconnected and not relevant. [32] The same applies to the issue of the COI being conflicted and that the Liquidators had indicated they would not be consulting the members. [33] On the COI being defunct as its functions are spent with the sale of all the CCSB’s lands with the only outstanding matter being the disposal of the Surplus Proceeds, it has to be borne in mind that the Liquidators still have a role to play for which they have to act with the COI. So to that extent it is not defunct. But it does not detract from our earlier finding that membership in the COI does not confer upon it the direct legal interest to intervene. 12 [34] To conclude on this note, Equiticorp cannot be said to have any legal or commercial interest in the outcome of the USSB suit merely because it is a member of the COI. We further say that if at all their views in the COI are being disregarded by the Liquidators, they can always challenge the Liquidators’ decision in the winding up court. Whether disqualified as member of the COI [35] It may well be that Equiticorp is disqualified as a member of the COI. Here it is undisputed that Equiticorp’s debts have been fully paid by CCSB’s Liquidators. In this regard section 242(1) of CA 1965 clearly states that the committee of inspection shall consist of creditors and contributories of the company. [36] In Emporium Jaya (Bentong) Sdn Bhd (in liquidation) v Emporium Jaya (Jerantut) Sdn Bhd [2002] 1 MLJ 182, 193 and 194 it was said: “The word ‘creditor’ is not defined in detail under the Act. Section 217(1)(b) of the Act only mentions ‘any creditor, including a contingent or prospective creditor, of the company’. In the popular meaning of the word, ‘creditor’ is a person or company to whom money is owing. Zakaria Yatim J in Jurupakat’s case has said that ‘a creditor is a person who could enforce his claim against the company by an action of debt.’ The claim or debt in question must not be in the form of unliquidated damages (see Pennington’s Company Law (1985) 5th Ed, p 843)…” 13 [37] In the circumstances, Equiticorp is no longer a creditor of CCSB such that it is disqualified from being a member of the COI. It cannot therefore rely on its membership in the COI to intervene in the USSB suit which we have in any event found to be irrelevant. Creditor of USSB [38] It was also contended by Equiticorp that by virtue of being a creditor of USSB it had the legal interest to intervene. This was never raised in the affidavit in support affirmed on 18.5.2020 by Bruce Graham Stowell (ACB, tab 21) to support the application to intervene. All that was said was in relation to being a member of the COI. In paragraph 11 it was categorically stated that Equiticorp being a member of CCSB’s COI has an interest and is entitled to be heard in the proceedings. In any event we had earlier found that being a member of the COI did not bestow on Equiticorp the requisite legal interest. We are also unable to appreciate how being a creditor of USSB gives Equiticorp a legal interest to intervene. Conclusion [39] For the above reasons, we found merits in the appeal and the appeal was therefore allowed. The order of the High Court was set aside and we also ordered costs of RM10,000.00 to the Appellant subject to allocator. -sgd- (SEE MEE CHUN) Judge Court of Appeal Malaysia Dated: 5.8.2021 14 Solicitors for the Appellant Yoong Sin Ming (Poh Choo Hoe and Choy Kay Chun with her) Messrs Shook Lin & Bok Kuala Lumpur Solicitors for the First Respondent K Shanti Moganasundram (Liew Seong Yee with her) Messrs Shearn Delamore & Co Kuala Lumpur
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