Wilbur Tock Bing Heng v Tock Khee Song (WA-28NCC-949-09/2023)

TOCK KHEE SONG [Passport No.: K2282960Z]

YEW LEE BLASTING SDN BHD [Registration No.: 199401001506 (287184-K)] … RESPONDENTS JUDGMENT INTRODUCTION [1] The Petitioner filed this petition to wind-up the Second Respondent under section 465(1)(f) and (h) of the Companies Act 2016 (“CA 2016”). [2] The Petitioner thereafter filed an application in enclosure 5 to appoint Mr Chong Chuan Long of Messrs C L Chong Insolvency Services as an interim liquidator (“the Interim Liquidator”) of the second Respondent (“the Company”). [3] The grounds in support of enclosure 5 are inter alia: a) The Company’s assets are in jeopardy in the hands of the First Respondent (“R1”), who is the sole director of the Company. b) Since R1 is the sole director, there is no checks and balance to R1’s control over the Company’s assets. c) The conduct of R1 shows a serious risk of dissipation of assets pending the winding-up of the Company. [4] After hearing oral submissions by both counsel, this Court allowed the Petitioner’s application for the appointment of an Interim Liquidator. The grounds for this Court’s decision are given below. BACKGROUND FACTS [5] The Company is principally involved in the business of providing blast cleaning and coating services. The Company owns two (2) pieces of investment land, namely Lot 11120 and Lot 11147 in Mukim Dengkil, District of Sepang Selangor, and a number of bank accounts in the name of the Company. [6] The grandfather of the Petitioner, one Mr Tock Kai Chok (“TKC”) was a majority shareholder in the Company. TKC held 75% of the issued shares while R1 held 25%. [7] After the death of TKC, the Last Will and Testament (“the Will”) of TKC provided that the Petitioner shall inherit 50% of the shares of the Company and R1 shall inherit the balance 25%. At the date of the presentation of this petition, both the Petitioner and R1 hold 50% of the shares each. The Petitioners became the registered shareholder of the 50% issued shares of the Company on 10.03.2023. [8] Thereafter, the relationship between the Petitioner and R1 turned acrimonious and hostile. The Petitioner’s request to be appointed to the board of directors was rejected by R1. The Petitioner’s request for his mother to be on the board was also rejected by R1. Between the dates 07.04.2023 and 11.06.2023, the Petitioner made several requests to be appointed to the board but the requests were all rejected by R1. (see exhibit D5 to the Affidavit in Support (“AIS”) by the Petitioner. [9] At a physical meeting on 11.06.2023 attended by the Petitioner, his mother and R1, the Petitioner’s request for information regarding the collection of rentals and other documents concerning the Company was rejected by the R1 on the excuse that the Petitioner was not entitled to such documents and information since the Petitioner is not a director of the Company. FINANCIALS OF THE COMPANY [10] The Company has ceased its blast cleaning and coating services business since the financial year 2020. For the financial year 2020 (ending 31.12.2020), the revenue of the Company declined 59% from the financial year 2019. (see exhibit P7 of the AIS.) [11] The revenue for the financial year 2021 was only RM82 and there was no revenue generated for the financial year 2022. (see exhibit P8, for the Company’s Report and financial statements for the year 2021 and 2022). [12] From the above undisputed financial documents, it is apparent that the Company has ceased its business operations and thus, is dormant except for the collection of rentals. [13] Despite the lack of business activities, the financial statements show an increase in current liabilities from RM383,427.00 to RM1,310,064.00 for the financial year 2021 to 2022. Out of the liabilities of RM1,310,064.00 under trade and other payables, a sum of RM981,643.00 is recorded as a debt owing to a related party. It is odd that the Company would incur such a large debt in the year 2022 when the Company has stopped active business operations except for the collection of rentals. No details were provided of the alleged “related party”. [14] During the meeting on 11.06.2023, R1 had repeatedly told the Petitioner that he would not allow the Petitioner to mess up the Company’s accounts. R1’S AVERMENTS IN HIS AFFIDAVIT IN REPLY [15] One of the main grounds given by R1 to oppose the appointment of an Interim Liquidator is that he is co-executor of the estate of TKC and that the executors are tasked with having to discharge the assets belonging to the Company currently charged to financial institutions. [16] R1 referred to clause 3.2.1 of the Will which is reproduced verbatim from paragraph 4 of R1’s written submission: “3.2.1 The aforesaid beneficiaries who received my shares and become the shareholders of the said Company shall within twelve (12) months from the date of become the shareholders of the company, to cause the Company to discharge any of the said Assets that currently charged to the financier(s) as security for any loans and/or facilities obtained by the Company, for the purpose to facilitate my joint Executors and Trustees to carry out the disposal/sale of the said Assets accordingly.” [17] R1 further submits as follows:

So long as the conditions of the Will have yet to be fulfilled by the shareholders, especially the Petitioner, the Petitioner is merely holding the shares as a bare trustee.

(ii) It is a bare allegation or mere speculation/fear on the part of the Petitioner that the Company’s assets i.e., two (2) pieces of investment land are in jeopardy solely because a notice for an extraordinary general meeting (“EGM”) to be held on 06.09.2023 was issued.

(iii) The sale of the two (2) pieces of investment land is actually carried out by all shareholders of the Company as trustees in accordance with the Will, whereby R1 would be merely carrying out his duty as an executor to facilitate the sale. This fact is known to the Petitioner and his parents. [18] With respect to R1’s submission that the Petitioner is merely holding his shares in the Company as a “bare trustee”, I find this submission to be misconceived. Once the shares are transferred to the Petitioner’s name, he becomes the legal and beneficial owner of those shares. Whether the co-executors of the Will have completed the tasks stipulated under the Will is irrelevant to the Petitioner’s legal interest in his shares. Additionally, the Will did not state that the shares given to Petitioner are to be held on “trust” and there does not appear to be any “beneficiary” to the purported “trust” save for the Petitioner. [19] In any event, it is trite law that once the shares in the Company have been transferred to the Petitioner and R1, both parties are the beneficial owners of those shares and the shares no longer belong to the estate of TKC. Thus, the ground given by R1 that any appointment of an Interim Liquidator for the Company would prevent R1 from discharging his duties is a non-starter. As co-executor, R1 has no business interfering with assets which have fallen out of the estate of the deceased. [20] Again, the attempt by R1 to sell the two (2) pieces of investment land without the consent of the Petitioner raises concern that R1 would not obtain a sale at a market value. R1 had accepted an offer to sell Lot 11120 at a price of RM15 million in March 2023 without first obtaining a valuation report on the market value of the land. The valuation in enclosure 18 was only done on 02.11.2023, about seven (7) months after R1 accepted the offer by the intended purchaser. It is to be noted that this valuation report was only obtained after the date of the presentation of this petition (see exhibit “TR5-5” of enclosure 18 page 10-54). [21] (i) The cumulative conduct of R1 after the death of TKC, especially in changing the constitution of the Company to make himself the sole director when he only holds 50% of the shares is clear indication of his intent to fully control the financial affairs of the Company. This conduct coupled with his refusal to provide any information on the apparent questionable items in the Company’s financials since R1 became the sole director of the Company is clear evidence of the risk of dissipation of assets pending the hearing of the petition and the making of a winding-up order, if that happens.

(ii) In fact, R1 only attempted to provide information about the financials of the Company in his affidavit in reply, i.e. after the filing of the petition. Had the Petitioner not filed the petition, R1 would have continued to withhold information about the financial affairs of the Company from the Petitioner who is a 50% shareholder. THE LAW [22] In Chai Yung Fei v Meto Steel Sdn Bhd & Ors (2019) LNS 1760, it was held, amongst others, that: “…when determining whether good prima facie evidence exists to justify the appointment of a provisional liquidator, the court ought to take the following steps:

First, to consider the sufficiency of the allegations contained in the petition. In doing so, the court may assume that the primary facts set out in the petition are true;

Second, the court must establish the uncontested evidence contained in the affidavits averred on behalf of the parties;

Finally, an evaluation must be made of the allegations contained in the petition and of the uncontested facts in order to ascertain whether:

The company would be likely to be wound up;

(ii) The company’s assets are in jeopardy; or

(iii) There are other circumstances that make it imperative for the court to intervene. … [21] The court need not be satisfied that it would be inevitable that a winding up order will be made, in order for a provisional liquidator to be appointed. All that is required is for the applicant to show that such an order would be likely, based on the available evidence.” PETITIONER’S SUBMISSION [23] The Petitioners submits that there is a good prima facie evidence as disclosed in the petition that the Company would be wound-up. The petition to wind-up the Company is mounted on section 465(1)(f) and/or (h) of CA 2016 based on the following grounds:

There is a breakdown of mutual trust and confidence between R1 and the Petitioner as 50:50 shareholders. The communication and relationship between the parties have turned acrimonious and hostile in view of R1’s adamant behaviour in denying the Petitioner a board seat and participating in the management and affairs of the Company. R1 has gone as far as to threaten the Petitioner for criminal breach of trust;

There exists a deadlock and stalemate in the Company at the shareholder level;

The Company is dormant and is no longer in operation. Both R1 and the Petitioner have no intention to continue with the operation or business of the Company; and

R1 has acted in the affairs of the Company in his own interests rather than in the interests of the members as a whole or acted in any other manner which appears to be unfair or unjust to the Petitioner. [24] Therefore, an Interim Liquidator is essential to maintain the status quo of the Company. (see Wiraflor (M) Sdn Bhd v Bio Science Capital Sdn Bhd (2011) 2 MLJ 94. [25] In Zung Zang Trading Sdn Bhd v Zung Zang Holdings Sdn Bhd [2017] 1 LNS 858 it was held that: - “Balance of convenience [57] What then of the balance of convenience here. Now the onus is of course on the Petitioner to establish the urgency and the need for the appointment of the PL and the Court must have regards to the balance of convenience due to the devastating effect on the Respondent. It has also been held in the Australian case of Zempilas & Ors v J N Taylor Holdings Ltd & Ors [1990] 3 ACSR 528 that the appointment of a PL is not to be contemplated if other measures would be adequate to preserve the status quo. Hence alternative measures in preserving the status quo would shift the balance of convenience to justify the setting aside of the PL.” [26] The balance of convenience clearly lies in favour of the appointment of an Interim Liquidator. On one hand, there is: (i) good prima facie evidence that the Company will be wound-up and (ii) clear evidence of attempted dissipation of assets. [27] On the other hand, there is no prejudice to any party in the event this Honourable Court allows enclosure 5 based on the following reasons:

An Interim Liquidator is an officer of the Court who is subjected to the supervision and jurisdiction of this Honourable Court.

There is no adverse effect on the Company as the Company has ceased operation and is currently dormant; and

The appointment of an Interim Liquidator does not mean the end of the Company nor does it mean that the Court will make a winding-up order as it is only for an interim period i.e., pending the disposal of the petition and/or until further order. [28] Therefore, after having considered the submissions of both parties, this Court finds that the Petitioner has satisfied the test laid down by the cases for the appointment of an Interim Liquidator pending the hearing of the petition. (see the cases of Kok Fook Seong v Juta Vila (M) Sdn Bhd (1996) 2 MLJ 666 and Malayan Banking Bhd v Chip Lam Seng Enterprise Bhd (2015) 5 CLJ 260.) [29] I find on a balance of probabilities that there is prima facie evidence that there is a risk of dissipation of assets and a deadlock at the shareholders’ level. It is, thus, imperative that the status quo be preserved pending this Court’s final determination whether or not the Company should be wound-up. I also ordered costs to be in the cause of enclosure 1. Dated 16th April 2024 ……………..t.t……………... Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE PETITIONER: H’NG YEN JUN SOLICITORS FOR THE PETITIONER: TETUAN DENNIS NIK & WONG COUNSEL FOR THE RESPONDENT: PHAN YIT LENG SOLICITORS FOR THE RESPONDENT: TETUAN LEAW & PHAN Cases Referred to: ➢ Chai Yung Fei v Meto Steel Sdn Bhd & Ors (2019) LNS 1760 ➢ Zung Zang Trading Sdn Bhd v Zung Zang Holdings Sdn Bhd [2017] 1 LNS 858 ➢ Kok Fook Seong v Juta Vila (M) Sdn Bhd (1996) 2 MLJ 666 ➢ Malayan Banking Bhd v Chip Lam Seng Enterprise Bhd (2015) 5 CLJ 260. Legislation Referred to: ➢ Companies Act 2016 Decision Date : 09.04.2023