Tuesday, 27 September 2011

MALAYSIA-UPDATE-COMPANIES WINDING-UP PETITION

Can a winding-up order be set aside or rescinded?

In the Court of Appeal case of Sinarlim Sdn Bhd v Waja Destinasi (M) Sdn Bhd [2011] 5 MLJ 416, it was held that:-

"...[17] On the jurisdictional issue, this court is of the view that the learned judge of the KL-D8 court clearly has no jurisdiction to set aside or rescind a winding up order earlier made and perfected by another High Court, in this case the Ipoh High Court on 21 June 2007. The KL-D8 Court had already been functus officio and the matter is res judicata. Even if the decision of the Ipoh High Court in granting the winding up order is wrong, it should have been dealt with by the Court of Appeal (on appeal by the respondent), but not to be set aside or rescinded by another High Court of concurrent jurisdiction.
[18] The above principle was stressed by the Court of Appeal in Vijayalakshimi Devi d/o Nadchatiram v Jegadevan s/o Nadchatiram & Ors [1995] 1 MLJ 830.
[19] The Companies Act 1965 or the Companies (Winding-Up) Rules 1972 make no express provision enabling the High Court to set aside or rescind a winding up order after it had been made and perfected. The scheme of the Act is such that an aggrieved party may under s 253 of the Act appeal against a winding up order, or apply to stay to proceedings under s 243 of the Act altogether or for a limited time, under terms and conditions which the court thinks fit (see Perdana Merchant Bankers Bhd v Maril Rionebel (M) Sdn Bhd [1996] 4 MLJ 343; and Sri Hartamas Development Sdn Bhd v MBf Finance Bhd [1991] 3 MLJ 325).
[20] In this respect, the court is in agreement with the learned author Derek French in his book Applications To Wind Up Companies -- (2nd Ed) at p 289 para 4.4.3 when he says:

A winding-up order is a final order. In subsequent proceedings in the winding-up, the Court will not consider whether the order was properly made; that can be considered only on an appeal against the order.

The same principle was adopted and applied in Re Michael P Georges Co Ltd [1948] OR 78; Re Reliance Properties Ltd [1951] 2 All ER 327; Re Overend, Gurney and Co Ltd, ex parte Oakes and Peek (No 2) (1876) 36 LJ Ch 413; Re London Marine Insurance Association (1896) LR Eq 176, Re Cosmopolitan Life Association (1893) 15 PR 185; and Re Mid East Trading Ltd [1998] 1 All ER 577....".


Can there be more than 1 winding-up petition against the same respondent company?

In the Court of Appeal case of Sinarlim Sdn Bhd v Waja Destinasi (M) Sdn Bhd [2011] 5 MLJ 416, it was held that:-

"...[22] The next issue is whether the Ipoh winding up petition can validly be filed at the date when the D2 winding up petition in the KL-D2 High Court had earlier been filed but no winding up order been made yet.
[23] In the present case, the D2 winding up petition was filed on 26 May 2005 and the winding up order was made by the KL-D2 High Court on 2 February 2007; while the Ipoh winding up petition was filed in court on 5 January 2007. In other words, when the Ipoh winding up petition was filed in court, there is no winding up order in existence against the respondent in any court. The KL-D2 winding up order was only made about one month after the Ipoh winding up petition was filed.
[24] The learned judge of the KL-D8 was of the view that there cannot be more than one winding up petition to be filed against the respondent at any one time and held that the Ipoh High Court petition was wrongly filed.
[25] With respect, this court cannot agree with the learned judge on this point. It is a settled legal principle that in law there is nothing against the filing of more then one winding up petition against the same company at any one time. There is no leave required for the filing of the second and subsequent winding up petitions if the company has not been wound up yet. However, the court must stress that at no time a company which has been wound up can subsequently be wound up again.
[26] This matter concerning the position of several petitions for the winding up of the same company was considered in In re European Banking Company: Ex parte Baylis (1866) LR 2 Eq 521 where Sir RT Kindersley VC, observed:
However desirable it is to avoid a number of petitions being presented for the winding up of a company, I am not aware of any rule having been established with a view to limit the number of them. But still every one of these petitions ought to be looked at separately upon its own merits as if it were the only petition presented.

[27] The above proposition was adopted and followed by Dulat J in Ladli Prasad Jaiswal v Karnal Distillery Co Ld (1954) Comp Cas 77, where he held:
It is not shown that this view has been departed from in the English Courts. There is thus no authority for concluding that the appellant's petition for the winding-up of this company is not maintainable because a previous petition by him of a similar kind is pending and has not yet been decided.

[28] The above principle was accepted and followed by the Court of Appeal in Maril-Rionebel (M) Sdn Bhd & Anor v Perdana Merchant Bankers Bhd and other appeals [2001] 4 MLJ 187; [2001] 3 AMR 2893, where it was held by Gopal Sri Ram JCA, inter alia, that:
I require no clearer authority for the proposition that more than one winding up petition may be presented against a company. Of course, the provision of r 33 is available to a petitioning creditor. And if he does not take advantage of the rule to have him substituted for a lethargic petitioner, he may find himself out of pocket for his costs. But on no account is his petition bad in law. Nor is it an abuse of the court's process.

[29] The above authorities clearly support the findings of this court that the Ipoh High Court winding up petition filed on 5 January 2007 is valid in law, even though at the time of filing there was another winding up petition earlier filed and pending in the KL-D2 High Court. No leave is required for such filing under s 226(3) of the Companies Act 1963...".


What is the legal effect of a stay of a winding-up order?

In the Court of Appeal case of Sinarlim Sdn Bhd v Waja Destinasi (M) Sdn Bhd [2011] 5 MLJ 416, it was held that:-

:... [30] The court will now deal with the last issue ie whether the Ipoh winding up order can be granted by the Ipoh High Court on 21 June 2007 after the D2 winding up order in the KL-D2 High Court had been stayed on 15 June 2007 under s 243(1) of the Companies Act 1965. In other words: what is the legal effect of a stay order on a winding-up order?
[31] In this case, the D2 winding up order was made by the KL-D2 High Court on 2 February 2007 and later on 15 June 2007 was stayed by the same court due to mutual consent of the parties pursuant to s 243(1) of the Companies Act 1965 because the debt in question was fully settled. The Ipoh winding up petition was filed on 5 January 2007 and a winding up order was granted on 21 June 2007 (six days after the D2 winding up order in the KL-D2 Court was stayed).
[32] Learned counsel for the appellant submitted that the stay order granted by the KL-D2 court on 15 June 2007 had the effect of total discontinuance or termination of the D2 winding up proceedings, as if there was no winding up order against the respondent at all, and therefore on 21 June 2007 the learned judge in the Ipoh High Court was at liberty and correct in granting a winding up order against the respondent.
[33] In the present case, the KL-D2 winding up order was stayed wholly by consent, the debt was fully settled the KL-D2 petition has now outlived its purpose. It has the effect of being totally discontinued or terminated. In law, the effect of such a stay order was clearly narrated by NH Chan JCA in the case of Vijayalakshmi Devi d/o Nadchatiram v Jegadevan s/o Nadchatiram & Ors [1995] 1 MLJ 830 (at p 833) as follows:
The effect of an order to stay proceedings under the winding up order altogether after a winding up order has been made is a total discontinuance or termination of the winding up proceedings. In 2 Jowitt's Dictionary of English Law (2nd Ed) under 'Stay' at pp 1701-1702, after stating that the term 'stay of proceedings' can mean a total discontinuance of an action, it says this: '... but in strictness it is only accurate when a decree or judgment has been given, for in such a case the suit or action cannot be dismissed, because the Court has adjudicated on it, and therefore all that can be done is to stay proceedings under the decree or judgment ... the stay operation of an order means that the order which has been stayed would not be operative from the date of the passing of the stay order.

[34] The same principle was laid down in the case of Krextile Holdings Pty Ltd v Widdows (1974) VR 689, in that the order of a stay of the winding up, if expressed in unlimited terms (as in the present case), would put an end to the winding up process and the respondent company can thereupon resume the conduct of its business and affairs as if no winding up existed at all. If proceedings in the winding up are stayed by order of the court, any duty of the official receiver to send report ceases (see Halsbury's Laws of England (4th Ed Reissue) para 1528)...".

Can another high court make a second winding-up order against the same respondent where an earlier winding-up order issued against the said respondent had been stayed?

In the Court of Appeal case of Sinarlim Sdn Bhd v Waja Destinasi (M) Sdn Bhd [2011] 5 MLJ 416, it was held that:-

"...[35] Now, the question is: can the Ipoh High Court make a winding up order against the respondent after the KL-D2 winding up order was stayed wholly?
[36] The above authorities are clear indicators that the answer to the above question is in the affirmative. The Court of Appeal's decisions in Vijayalakshmi Devi d/o Nadchatiram v Dr Mahadevan s/o Nadchatiram  and Maril-Rionebel (M) Sdn Bhd  are very clear on this issue and are binding on the High Court. The learned High Court judge (KL-D8) should have followed those decisions.

CONCLUSION
[37] The above consideration leads the court to only one conclusion ie the decision of the Kuala Lumpur High Court (KL-D8) on 17 January 2008 ought to be reversed because the learned judge has failed to appreciate the legal effect of the stay order in the D2 petition granted by the KL-D2 Court, which totally terminated the winding up order against the respondent. Consequently the Ipoh High Court Winding Up Order on 21 June 2007 was correctly granted and valid in law....".

Talk on 'Negligence'

Subject: Talk on 'Negligence'
To:



SBC/CIR/078/11
27th September, 2011



Dear Members and Chambering Pupils,


Thank you,

Secretariat
Selangor Bar Committee



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