Wong Kien Ching v Seng Kim Huat (S-02(IM)-1943-09/2017)

Seng Kim Huat

Tan Boo Seng …

Rasamutu Sdn Bhd (Company No. 318911-A)(In Liquidation)

Wong Kien Ching 3. Chew Ching Tong 4. Chew Ching Foo 5. Chew Ching Chong … Respondents Decided by the Honourable Judicial Commissioner Yang Arif Datuk Mairin Idang @ Martin given in the High Court of Sabah and Sarawak at Sandakan on the 6th day of September 2017] 2 CORAM: TENGKU MAIMUN BINTI TUAN MAT, JCA MARY LIM THIAM SUAN, JCA YAACOB BIN HAJI MD. SAM, JCA JUDGMENT OF THE COURT Introduction [1] The respondents, who successfully petitioned to wind-up Rasamutu Sdn Bhd at the High Court at Sandakan on 6.6.2016, filed an application before the winding-up Court seeking several orders under section 368A (1)(a) and (4) of the Companies Act 1965. Those orders, in effect, serve to mandatorily order the appellant, to deliver to the Official Receiver or any Court appointed Liquidator, the appellant’s 208 subleases held over 208 freehold Native Titles together with his 208 Native Titles and other duplicate charges and duly executed discharge of charge over those 208 Native Titles. [2] The order was allowed by the High Court. On appeal, we unanimously allowed the appeal after careful consideration of the submissions, the records of appeal and the applicable principles. These are our reasons in detail. 3 Relevant background facts [3] Vide separate petitions, Rasamutu Sdn Bhd and Ria Realti Sdn Bhd were respectively wound-up on 15.4.2016 and 6.6.2016. In winding-up first, Ria Realti, the winding-up Court held that “…the “just and equitable” ground to wind up a company is sufficiently wide enough to encompass a situation where the business of a company is carried on for an illegal purpose.” The winding-up Court followed the decision in Perbadanan Pertanian Selangor v Megafores Sdn Bhd & Others [2011] 8 CLJ 484 which had in turn applied Re Thomas Edward Brinmead & Sons Ltd [1897] 1 Ch 406. [4] The petition to wind-up Ria Realti was on the basis that all the Native titled lands purchased by the company and part-financed by Public Bank Berhad and registered in the name of Wong Kien Ching, were null and void because the purchases were designed to circumvent sections 17 and 64 of the Sabah Land Ordinance. After hearing evidence of one Seng Kim Huat who is in fact the 1st respondent in this appeal, and upon certain documentary evidence, the Court concluded that “certain provisions of the Land Ordinance in particular Section 17 and Section 64 may have been breached.” [5] According to the winding-up Court, since the company “was no longer able to legally to [sic] carry out its main object i.e. to run the Sugut Estate, its substratum was [sic] gone and any member may petition for a winding-up order on just and equitable ground. The fact that the majority of the shareholders may wish to keep the company in existence and 4 exercise the powers to carry on either a similar business elsewhere or a different kind of business will not prevent the petitioners from petitioning for a winding up order. This would be so even if the company’s memorandum specifically provide that each of the objects should be a principal object, because the court must determine the real object for which the company was formed and would allow a winding up petition if that object had for all interest and purpose has been tainted with illegality.” [6] For the same reasons, Rasamutu was wound-up, with the Court referring to its decision to wind-up Ria Realti. The Court found that the two companies had a common Managing Director, at least one common director and 5 common shareholders. Concurrent with the purchase of 2,723.71 acres of Native titled lands by Ria Realti, Rasamutu bought 208 contiguous lots. [7] Vide application in enclosure 425, the petitioners sought the following orders: i. an injunction that the 2nd respondent Wong Kien Ching do deliver to the Official Receiver or any Court appointed liquidator the 208 subleases over the 208 freehold Native Titles as particularized in the Schedule hereto within 3 days of the date of the order; ii. an injunction that the 2nd respondent Wong Kien Ching do deliver to the Official Receiver or any Court appointed liquidator the issue documents of title over the 208 freehold 5 Native Titles as particularized in the Schedule hereto within 3 days of the date of this order; iii. an injunction that the 2nd respondent Wong Kien Ching do deliver to the Official Receiver or any Court appointed liquidator the duplicate charges and the duly executed charges and the duly executed discharge of charge over the 208 subleases and the 208 freehold Native Titles as particularized in the Schedule hereto within 3 days of the date of this order; iv. costs of this application be paid to the petitioners by the 2nd respondent Wong Kien Ching. [8] It is the grant of these orders that is the subject matter in the present appeal. [9] At the hearing of this appeal, learned counsel for the Liquidators urged this Court to dismiss the appeal on the ground that the appeal was incompetent under Rules 6, 18(7) and 18(9) of the Rules of the Court of Appeal 1994. The Liquidators, being an interested party had not been served with the Notice of Appeal. At the proceedings before the High Court, it had filed two affidavits in support of the application under section 368A. The decision of this Court in Chen Kong Theatres Sdn Bhd & 2 Others v Lee Giok Tee @ Kee Kim Hong & Another [Civil Appeal No. W-02(NCC)(A)-2319-12/2016] was cited in support. 6 [10] We declined. We found the underlying circumstances in the present appeal of much contrast to those in Chen Kong Theatres. There, the appeal was against the order to wind-up Chen Kong Theatres. The Notice of Appeal was not served on the liquidator, a party who was directly affected by the appeal while the record of appeal was served late. There was also no application for extension or abridgment of time for service of either the Notice or the record of appeal. On that basis, the Court could not deal with the irregularity complained of and consequently allowed the respondent’s application to strike out the appeal. [11] In the instant appeal, there is no similar application moved by any of the respondents, including the liquidators. The appeal further is in respect of an order moved by the petitioners, to which the liquidators chose to associate themselves with and support. For the purpose of Rule 6 of the Court of Appeal Rules 1994, it is the respondents who are the parties who are directly affected by the appeal; the liquidators, are indirect parties so affected. We say, for the purposes of Rule 6, as the intent of the liquidators’ complaint is to move this Court to strike out the appeal in limine, without the liquidators having taken any effort. This is quite unlike the circumstances in Chen Kong Theatres where the Court was moved to strike out the appeal on the application of the liquidator. The far-reaching effect of the liquidators’ arguments must be carefully weighed when considering whether to accede to its preliminary objection. [12] Moving then to the substantive issues in this appeal, and that is the question of whether the High Court had properly construed section 7 368A of the Companies Act 1965. With respect, we answer that poser in the negative. [13] The Court was moved under section 368A(1)(a) and (4) of the Companies Act 1965 which reads as follows:

Where a person has engaged, is engaging or intends to engage in conduct that constituted, constitutes or would constitute-

a contravention of this Act;

an attempt to contravene this Act;

an attempt that aids, abets, advises or procures a person to contravene this Act;

an attempt to induce, whether by threats, promises or otherwise, a person to contravene this Act;

an attempt by which any person would be in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or

an attempt of conspiracy with others to contravene this Act, the Court may, on application of the Registrar or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the court it is desirable to do so, requiring that person to do any act or thing.

Where a person has refused or failed, is refusing or failing, or is intending to refuse or fail, to do an act or thing that the person is required by this Act to do, the Court may, on the application of the Registrar or any person whose interests have been, are or would be affected by the refusal or failure to do that act or thing, grant an injunction, on such terms as the Court thinks appropriate, requiring the first-mentioned person to do that act or thing.

The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised whether or not-

it appears to the Court that the person intends to engage again or continue to engage, in conduct of that kind;

the person has previously engaged in conduct of that kind; or 8

there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.

The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised whether or not-

it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing;

the person has previously refused or failed to do that act or thing; or

there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or thing.

Where the Registrar …

Where an application for an injunction under subsection (1) or (2) has been made, the Court may, if the Court determines it to be appropriate, grant an injunction by consent of all parties to the proceedings, whether or not the Court is satisfied that that subsection applies.

Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).

The Court may revoke or vary an injunction granted under subsection

(1), (2) or (7).

In granting an injunction restraining a person from engaging in particular conduct, or requiring a person to do a particular act or thing, the Court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person. [14] We do not see the learned Judge addressing section 368A in any degree anywhere in his grounds of decision. Instead, what we found was this - after identifying the appellant/2nd respondent’s submission at paragraph 6 of the grounds, the learned Judge proceeded to accept the petitioners/respondents’ submissions of what had transpired at the earlier winding-up proceedings, where the winding-up Judge “did not set 9 aside the VOID titles. The subleases and freehold titles registered in Rasamutu Sdn Bhd’s name and Wong Kien Ching’s name respectively were LIABLE to be set aside, but were not set aside/cancelled by the Learned Judge. His Lordship left it to another forum to deal with the consequence of void title.” [15] At paragraph [7], the learned Judge noted that when the winding-up Court “…ordered the winding up of Ria Realti, he said: “Having read the submission by Pearl Lee counsel for the Public Bank Berhad particularly on Section 221 of the Companies Act and the cited authorities, I shall not deal with the consequential orders sought for but instead confine myself to the issue of illegality vis a vis contravention of Section 17 and Section 64 of the Land Ordinance and the effect of Section 24 Contract Act…” [16] The learned Judge turned next to the case authorities that were cited to him. Upon examination, His Lordship found them not to be of any assistance as the cases such as the Federal Court’s decision in Malayan Banking Berhad v Neway Development Sdn Bhd & Anor [2017] 2 CLJ 401 did not deal “with illegality as a basis to wind up a company where the winding up Court under s 221 could not order any consequential orders to void the transfer of the said 208 Native Titles to the 2nd respondent or the subleases registered with Rasamutu or the banking charges. The petitioners submitted “The fate of the estate lands and the documentary titles pertaining to them have to be determined in another forum.” His Lordship added that he was “also of the view that any interested parties are at liberty to file an action to declare void all 10 those dealings involving the 208 Native Titles. But none has done so far.” And, because Rasamutu had been wound-up and liquidators have been appointed and “Rasamutu is still the registered subleasee of the 208 Native Titles and all these titles are kept by the 2nd respondent and since he refused to hand over the same to the liquidators, such application ought to be allowed so that the liquidators could do their jobs as required under the law expeditiously. The liquidators also supported this application.” [17] The learned Judge granted the respondents’ application, enclosure 425 on the basis that since Rasamutu had been wound-up and since it is still the registered sub-leasee of the 208 Native titles which are kept by the appellant, and since the appellant has refused to hand over the titles, the application “ought to be allowed so that the liquidator could do their jobs as required under the law expeditiously.” [18] From paragraph 8 of the judgment, it is further quite apparent that the learned Judge saw the application in enclosure 425 as one seeking for consequential orders, that the application was now properly before “another forum”, and that it ought to be granted “so that the liquidator can do his job.” [19] With respect, we cannot agree with the learned Judge. Rasamutu was wound-up pursuant to section 218(1)(i) of the Companies Act 1965, that it was just and equitable to do so given the Court’s views on the tripartite arrangements in respect of the purchase and subleasing of the 208 Native Titles. However, that basis is entirely different from the power under section 368A which the Court was invited to invoke. It was 11 incumbent on the learned Judge to determine whether the application fell properly within the terms of section 368A and not, consider the application as if it was a continuation of the earlier application under section 218. [20] As was pointed out earlier, the respondents’ application is pursuant to section 368A(1)(a) and (4). Section 368A(1)(a) deals with a situation where a person is alleged either to have engaged or intends to engage in conduct that constituted, constitutes or would constitute a contravention of this Act. In such a situation, the Court is moved to grant an injunction requiring that person to do a particular act or thing. [21] What is important is that section 368A(1) may only be invoked by the Registrar or by a person whose interests is either affected or would be affected by such conduct. It is therefore imperative that the applicants who are the respondents in this appeal, state how the conduct of the respondent to the application, that is, the appellant, affect their interests. Where and when that element has been established, the Court is then in the position to impose such terms as are appropriate when granting the relevant injunction. [22] It is not expressed in enclosure 425 or in the affidavit filed in support of the application, any information as required under section 368A(1)(a) or (4). There is no averment as to what interests, if any, of the petitioners are affected, and how such interests are affected. The notice of motion merely states that the Court is moved to hear the application of the petitioners made pursuant to section 368A(1)(a) & (4) of the Companies Act 1965 for the orders already alluded to earlier; 12 while the affidavit explains that it is to compel the appellant to deliver to the Official Receiver or the Court appointed liquidators the issue documents of title pertaining to the 208 Native Titles and subleases as registered in the appellant’s name. A schedule containing the details of the 208 Native Titles are attached. [23] According to the petitioners, by a letter dated 9.6.2016 [exhibit SKH-3], the then liquidator of Rasamutu had requested the appellant to hand over “the original land titles for 244 titles of land for the Sugut Estate together with supporting and ancillary papers and documents such as lease agreements and/or relevant documents.” This was refused vide appellant’s solicitors’ letter dated 15.6.2016. The petitioners claimed that the documents sought pertain to “the very important and valuable assets” of the 1st respondent company, Rasamutu. [24] Although the 1st petitioner who affirmed the affidavit for both petitioners had identified himself as “also a contributory and creditor of the 1st respondent company”, we are of the view that that is insufficient. There must be an express averment of how the petitioners’ interests are affected by the conduct of the appellant, after the particular conduct of the appellant has been identified. The Court should not be left to infer or worse, second guess. [25] Further, the respondents are required to identify what or which specific provisions of the Companies Act 1965 that the appellant is said to have contravened, for it is where there is contravention of this Act, that is, the Companies Act 1965 and not some other legislation, that the 13 reliefs under section 368A are available. See Puan Sri Datin Seri Grace Choong Foong Meng v Michael Chia Hock Meng & 5 Others [2009] 1 LNS 163. We do not see the Companies Act 1965 as a piece of composite or umbrella legislation under which all wrongs, offences or breaches are addressed and determined. It is apparent that the terms of section 368A do not make that claim, and we cannot accede to any submission along those lines. [26] From the affidavits filed, and as understood and accepted by the learned Judge, it was the contravention of sections 17 and 64 of the Land Ordinance considered in the context of section 24 of the Contracts Act 1950, which had led to the winding-up of Rasamutu. And, in the winding-up of Rasamutu, the Court did not find that the provisions of the Companies Act had been contravened. Neither did the petitioners allege there was any. Section 218 of the Companies Act 1965 was only the enabling platform upon which any company may be wound-up; it was not the provision upon which it was suggested that the tripartite agreement had been breached or offended. [27] The petitioners had alleged and relied on the contravention of the Land Ordinance as providing the just and equitable basis for winding-up Rasamutu. And, the winding-up Court agreed. However, that basis for winding-up Rasamutu is not and cannot be a contravention of the Companies Act 1965. In the context of section 368A(1)(a), there must be an allegation of contravention of the Companies Act 1965 with the specific provision identified. Since there is none, the application ought to have been dismissed. 14 [28] The appellant had in any case, averred that he had duly submitted all the relevant forms, that is, Form 61 and Form 62 of the Companies Act 1965 with the Official Receiver and/or liquidator and had already provided all relevant information to the same. This is borne out by the subsequent application of the respondents who initiated enclosure 540. Therefore, for the purposes of section 368A, there cannot be any contravention of any provisions of the Companies Act 1965. [29] We further agree with the submissions of the appellant that since the winding-up Court had found the tripartite agreements to be void, the 208 Native Titles cannot possible form part of Rasamutu’s assets. The titles are and have always been registered in the appellant’s name. His status as a Native is not in question or in doubt. Likewise, the non-Native status of Rasamutu. The respondents/petitioners are therefore not entitled to utilize section 368A for the purpose of wrenching those titles from the appellant. [30] In fact, we understand that prior to the application in enclosure 425, the petitioners/respondents had applied under section 305(1) of the Companies Act 1965 for an order to amend and/or rectify the Statement of Affairs (Form 61 and Form 62) to include the 208 Native Titles as assets of Rasamutu [enclosure 540], and this goes back to the point we made earlier about there being no contravention or allegation of any contravention of “this Act” under section 368A. In dismissing that application with costs, the High Court there had ruled that: “The learned High Court Judge Datuk Douglas Primus ruled that the tripartite SPA of the remaining unexpired lease for the 208 Native Titles to be illegal. There is no appeal against the said finding on illegality. As such this Court 15 cannot order the 208 Native Titles and the subleases of the 208 Native Titles as the assets of the 1st respondent company (Rasamutu Sdn Bhd). To do so, it would amount to sanctioning the contravention of the Sabah Land Ordinance. It would be against public policy if this Court is to enforce or grant any remedy under an illegal contract.” [31] There was no appeal against that decision. In our view, what stands obvious from these decisions is that the winding-up Court saw it just and equitable to wind-up Rasamutu for the reasons proffered by the respondents, and that the 208 Native Titles and related subleases were not assets of Rasamutu. With the latter order of the Court which is clearly not in the respondents’ favour, we cannot see how the respondents can now indirectly secure for Rasamutu what had been directly and expressly ruled otherwise. It certainly is not within the purview of the winding-up Court to grant the orders sought by the respondents. For sure, it cannot be made pursuant to section 368A and treated as it was by the learned Judge, as almost an application for some consequential or unfinished orders from its earlier decision when winding-up Rasamutu. Separate substantive action may have to be instituted as indicated by the first winding-up Court; but it is not for this Court to speculate or even provide any directions on the details or efficacy of such action. The fact that the liquidators supported the respondents’ in their application does not alter our findings and views. [32] It is in such action, if taken, that the ownership of the 208 Native Titles may be fully addressed and determined. We however, are prepared to agree with the appellant that it would be inconsistent for the respondents, to have argued so vehemently for the winding-up of 16 Rasamutu on the basis that the tripartite agreements to be illegal and void under the Sabah Land Ordinance, and in the immediate next breath, to assert that the Native Titles and subleases belong to Rasamutu and must be handed over to the liquidator. As opined by Lord Denning in Palaniappa Chettiar v Arunasalam Chettiar [1962] 1 LNS 115, parties cannot be allowed to “use the process of the Courts to get the best of both worlds – to achieve his fraudulent purpose and also to get his property back. The Courts will say: “Let the estate lie where it falls,” see Sajan Singh v Sardara Ali [1959] 1 LNS 90 and Kiriri Cotton Co Ltd v Dewani [1960] AC 192 at pp 202-3.” [33] For the purposes of section 368A, that is far from being satisfactory and is not within its purview and permit. The learned Judge was consequently plainly erroneous in law and on the facts to have acceded to the respondents’ application. [34] For all the above reasons, this Court is compelled to allow the appeal with costs. Dated: 17th December 2018 (MARY LIM THIAM SUAN) Judge Court of Appeal Malaysia 17 Counsel/Solicitors For the appellants: Serena Liew Chun Yean Messrs Serena Liew & Associates Suite 6AF13, 6th Floor, Block A Kompleks Karamunsing 88300 Kota Kinabalu Sabah For the respondents: Norbert Yapp Messrs Norbert Yapp & Associates 1st Floor, Shop No. 1, Block A Alamesra Plaza Permai, Jalan Sulaman 88400 Kota Kinabalu Sabah For the Liquidators: Catherine S P Chau Messrs Catherine Chau & Associates No. 9-1, 1st Floor, Block B Lorong Rampai, Taman Cantik Mile 3, Jalan Penampang 88200 Kota Kinabalu Sabah