LIEW JUI HUA & ORS V. JOHOR PROPERTY (M) SDN BHD

HIGH COURT MALAYA, JOHOR BAHRU
ABDUL MALIK ISHAK J
[COMPANIES WINDING-UP NO: 28-126-1995]
8 APRIL 1996
 

JUDGMENT

Abdul Malik Ishak J:

The respondent was incorporated as a limited company under the Companies Act, 1965 on 27 May 1974 with its registered office at No: 28B, Jalan Abiad Satu, Taman Pelangi, 80400 Johor Bahru, Negeri Johor Darul Ta'zim. The authorised capital of the respondent was said to be in the region of RM2,000,000 divided into 2,000,000 shares of RM1 each. In terms of capital that was said to be paid up, the respondent had a credit value of RM2,000,000. The respondent was established with varied objects, typical of Malaysian companies incorporated under the Companies Act, 1965 and these objects, inter alia, included:


To purchase, take on lease, hire or otherwise acquire for purposes of investment in Malaysia or elsewhere any real or personal property or any rights or interest therein, which the company may think necessary or convenient and in particular any lands, plantations, estates, houses, buildings, flats, factories, warehouses, plant, machinery, patents, concessions, trade marks, trade names, copyrights, licences, stocks, material or property of any description, and to work, use, maintain and improve, let, surrender, mortgage, charge, vary or dispose of the same or any other property of the company, including in respect of any patent or patent rights belonging to the company, the grant of licences or authorities to any person, corporation, or company to work the same; and all other objects set forth in the Memorandum of Association thereof.

On 12 October 1985, the first petitioner signed a sale and purchase agreement to buy a piece of land and a house to be erected by the respondent on the said land for the sum of RM75,900 vide title no: H.S (M) 1937, P.T.D. 6821, private lot 30, district of Pontian, Johor. The second petitioner too signed a sale and purchase agreement dated 15 October 1985 with the respondent for the purchase of a piece of land and a house scheduled to be erected by the respondent at a price of RM25,000 and this was in relation to title no: H.S (M) 1955, P.T.D. 6839, private lot 56, district of Pontian, Johor. Earlier on, on 26 March 1986 a similar sale and purchase agreement was signed between the third petitioner and the respondent for the same purpose wherein the purchase price was at RM22,000 vide title no: H.S (M) 1970, P.T.D. 6854, private lot 71, district of Pontian, Johor. Like all house buyers, the three petitioners must have been elated at the prospect of purchasing these houses and lands from the respondent. All three of them dutifully paid the following sums to the respondent supported by the necessary receipts:

The First Respondent

3 October 1985 vide receipt no: 3197 RM 500

3 October 1985 vide receipt no: 3198 RM 7,090

19 November 1986 vide receipt no: 3307 RM 7,590 RM15,180

The Second Respondent

25 November 1986 vide receipt no: 3816 RM 2,500

14 March 1987 videreceipt no: 3394 RM 66.05 RM2,566.05

The Third Respondent 22 January 1986 vide receipt no: 3267 RM2,200

By a stroke of misfortune, the respondent defaulted in completing the housing project leaving the three petitioners high and dry. To put it bluntly, the respondent abandoned the housing project and failed to deliver vacant possessions to the three petitioners contrary to the standard cl. 18 of the sale and purchase agreements entered between the parties. It is appropriate, at this juncture, to set out in verbatim the standard cl. 18 of the sale and purchase agreement and it is as follows:


18(1) The said Building shall be completed by the Vendor and vacant possession delivered to the Purchaser within twenty-four (24) calendar months from the date of this Agreement.


(2) If the vendor fails to deliver vacant possession of the said Building in time the Vendor shall pay immediately to the Purchaser liquidated damages to be calculated from day to day at the rate of ten per centum (10%) per annum of the purchase price.

It was said that despite numerous demands, the respondent persistently ignored and failed to perform their side of the bargain. The petitioners were said to be entitled to the damages under the sale and purchase agreements and, finally, it was said that the respondent had committed a fundamental breach of the contract. On these grounds, the petitioners argued that it was just and equitable that the respondent be wound up and filed a petition in encl. 2 to that effect.

The respondent challenged the petition for winding up. Without furtherado, the respondent filed a summons-in-chambers in encl. 12 supported by an affidavit affirmed by Kwong Lock King @ Kong Look Sen on 14 February 1996 in encl. 11 to set aside the petition in encl. 2 on the grounds that there was non-compliance to ss. 217 and 218 of the Companies Act, 1965 . Enclosure 12 also sought generally to injunct the proceedings in encl. 2. It was short lived. As encl. 12 runs counter to r. 7(1) of the Companies (Winding-up) Rules, 1972, it was set aside by this court but with liberty to file afresh. Costs were given to the petitioners. Rule 7(1) of the Companies (Winding-up) Rules, 1972 states as follows:


Every application in Court, other than a petition, shall be made by motion and shall be served on the party effected thereby not less than two days before the day named in the notice for hearing of the motion.
An application for leave to serve short notice of motion shall be made ex parte.

In setting aside encl. 12, it was purely a case of a rigid adherence to the rules. I was acutely aware of what Bowen LJ said in Cropper v. Smith[1884] 26 Ch. D. 700 to the effect that it was "a well established principle that the object of the courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by decidingotherwise than in accordance with their rights". That was said more than a century ago. Today lawyers should know the rules and cannot simply come to court and say that non-compliance with a rule of procedure can be treated as an irregularity "whether in respect of time, place, manner, form or content or in any other respect".

Though the legal position is that no irregularity or defect, whatever its nature, automatically renders the proceeding a nullity, yet a court of law is vested with the power to consider each case according to the circumstances and, consequently, make whatever decision it deems just. For instance in Leal v. Dunlop Bio-Processes [1984] 1 WLR 874, Stephenson LJ indicated in no uncertain terms that the seriousness of the irregularity could be a basis for not exercising the discretion to cure it whether real prejudice was caused or not. Be that as it may, the respondent filed a fresh application of a notice of motion in encl. 16 supported by an affidavit in encl. 15 and the prayers sought were identical to that of encl. 12. Enclosure 16 sought for the following prayers:


1. Petisyen untuk menggulung Syarikat Johor Property (M) Sdn Bhd di atas di buang dengan kos kerana gagal mematuhi seksyen 217(1) dan 218 Akta Syarikat ;


2. Satu injunksi untuk menghalang tindakan ini di teruskan dan apa-apa tindakan seterusnya di ambil dan juga satu injunksi menghalang pengiklanan untuk petisyen penggulungan diberikan kepada Responden agar Pempetisyen di halang dari mengeluarkan iklan;


3. Kos; dan


4. Lain-lain Perintah yang Mahkamah yang mulia ini anggap baik dan patut.

The petitioners opposed the notice of motion and through the first petitioner an affidavit in reply in encl. 18 was filed where it was deposed that there was no need to give notice of the petition to the respondent under s. 218(1)(i) of the Companies Act, 1965 . It was also deposed that the petitioners had waited for more then ten (10) years presumably for the houses to be built and that they have suffered damages and losses thereto. It was further deposed that with the appointment of the liquidator, the housing project could be revived within the spirit and ambit of ss. 236 and 246 of the Companies Act, 1965 , which in the long run would benefit all parties particularly all the creditors and contributories of the respondent's company as envisaged in s. 226(4) of the Companies Act, 1965 . Finally, Mr. Ong Ban Chai himself affirmed an affidavit in reply on 18 March 1996 as reflected in encl. 20 and there he categorically stated that the respondent was insolvent with numerous creditors charging the respondent's assets.

Mr. K.B. Rajah assisted by Puan Roha Mohamad Yusof argued for the respondent and they first took the point that the petition in encl. 2 was pivoted upon the ground that it was "just and equitable that the company (referring to the respondent) should be wound up." They argued, and rightly so, that the "just and equitable" ground was essentially for the benefit of the dissatisfied contributors and not creditors; and since there was no evidence that the petitioners were the dissatisfied contributors, the petition in encl. 2 should be dismissed with costs. Re Adrich Shipping Pte Ltd Companies Winding-Up reported in Mallal's 4th edn, para. 458 at p. 150 was cited for the proposition that the just and equitable ground is essentially for the benefit of dissatisfied contributors and not creditors. In that case the petitioning creditors applied for an order that AS Pte Ltd ('the company') be wound up. The petition stated that the company was indebted to the petitioning creditors in the sum of S$38,759.63 and that the petitioners had obtained a judgment for the debt. The petitioners further declared that an application to the company for payment of the debt was made by a letter of demand dated 16 July 1991. The letter was sent by "AR Registered" post. The grounds stated in the petition were that the company was unable to pay its debts and that it was just and equitable that the company should be wound up. No facts in support of the grounds relied on were stated in the petition. The Official Receiver of the company drew to the attention of the Court the fact that the statutory demand in s. 254(2)(a) of the Singapore Companies Act had been sent by "AR Registered" post and submitted that it might not have been 'served by leaving it at the registered address of the company'. The petitioners relied on an advice of delivery issued by Singapore Telecoms, showing that the envelope had been received by an organisation called computer secretarial service. It was held that there was an acknowledgement of the letter not by the company but a stranger named computer secretarial service. Therefore, it has not been proved that the statutory demand was served on the company by leaving at the registered office of the company.

Under s. 218(1)(i) of the Companies Act, 1965 , the court may order the winding-up of the respondent if it is of the opinion that this would be "just and equitable." The scope and ambit of the "just and equitable" ground are wide and the courts are vested with a wide discretion to decide whether to order a winding-up or not. Indeed it is common knowledge that an oppressed minority shareholders would resort to the "just and equitable" ground to wind up the company. It is a drastic measure for the minority shareholders who have been harshly treated by the controllers of a company to apply for a winding-up as "killing the company is a singularly clumsy method of ending oppression in its operation and it may be suicidal for the petitioners" (see Gower's Principles of Modern Company Law (4th edn., 1979) at p. 665). It is my considered view that in determining whether it is "just and equitable" to wind up the company, a fair consideration of all the circumstances connected with the formation and carrying on of the company is required and in the event of a stalemate between two conflicting versions, the decisive question to ask would be whether at the date of the presentation of the petition there is any reasonable hope that the company could be carried on at a profit : Loch v. John Blackwood[1924] AC 783; D. Davis & Co. Ltd v. Brunswick (Australia) Ltd36 SR.(NSW) 215 Privy Council; Insurance Commissioner v. Associated Dominions Assurance Society Ltd [1953] 89 CLR 78. Now, applying Re Adrich Shipping Pte Ltd Companies Winding-up (supra) the question to ask is this. Are the petitioners dissatisfied contributors? In my judgment, the petitioners cannot be labelled as dissatisfied contributors as there was no evidence to that effect. There is no definition of the word "contributor" in the Companies Act, 1965 . However, s. 4(1) of the Companies Act, 1965 defines contributory in relation to a company as "a person liable to contribute to the assets of the company in the event of its being wound up, and includes the holder of fully paid shares in the company and, prior to the final determination of the persons who are contributories, includes any person alleged to be a contributory." Be that as it may, it was argued that the petitioners took a drastic step to wind up the respondent as there were other available remedies open to the petitioners and, consequently, it was urged upon me that the petitioners were acting unreasonably in seeking the winding-up order instead of pursuing that other remedy. This seems to be the principle of law propounded in Morgan v. 45 Flers Avenue Pty Ltd [1995] 2 CLJ 471. The petitioners' legal rights as against the respondent in relation to the purchase of the houses are akin to that of the plaintiff in the case of Kang Yoon Mook Xavier v. Insun Development Sdn Bhd [1995] 1 AMR: 667; [1995] 2 MLJ 91; [1995] 2 CLJ 471 where I said that:


Applying the above principles to the present case, as time was provided to be of the essence of the S & P agreement, the stipulated time period within which the said house had to be delivered to the plaintiff became an essential condition of the S & P agreement. The failure of the defendant to fulfil this condition would entitle the plaintiff to have an option of treating the S & P agreement either: (a) as having been repudiated and sue for damages; or (b) as still continuing.
The plaintiff rightly exercised his option to proceed under (a).


In my judgment, the plaintiff is entitled to terminate the S & P agreement and obtain the 10% of the purchase price; this course of action would place the plaintiff in a position like as though he did not enter into the S & P agreement at all. By virtue of section 56 of the Contracts Act, 1950 , the S & P agreement is said to be voidable at the option of the plaintiff (promisee), if the intention of the parties was to make time the essence of the S & P agreement, but if it were otherwise, the plaintiff (promisee) is entitled to compensation from the


defendant (promisor) for any loss occasioned to the plaintiff by the defendant's failure to deliver the said house on or before 18 August 1988. In my judgment, time was the essence of the contract here, and as such, the contract between the parties was voidable.
Since on the due date, that was on 18 August 1988, there was a failure on the defendant's part to deliver the said house, the plaintiff in law had the option of either to continue with the contract or to rescind it (see Chye Fook & Anor v. Teh Teng Seng Realty Sdn Bhd[1989] 1 MLJ 308 and Tan Yang Long & Anor v. Newacres Sdn Bhd [1992] 3 CLJ 666 (Rep) ).

Faced with a formidable obstacle, counsel for the defendant conceded that prayers 1 and 2 set out above should rightly be given to the plaintiff, and I so ordered accordingly.

In addition to that, an order for post-rescissionary damages in favour of the plaintiff was also made, and these should be assessed by the senior assistant registrar by virtue of O. 28 r. 4 of the Rules of the High Court, 1980 (see also Tan Yang Long's case). Incidentally, the post-rescissionary damages (prayer 4 of encl. 3) relate to the compensation which the plaintiff sustained through the non-fulfilment of the contract as envisaged under section 76 of the Contracts Act, 1950 .

It would appear from the affidavits filed by the parties, the petitioners in the present case chose to continue with the contract instead of pursuing their rights to rescind it. Indeed the petitioners had waited for ten (10) long years for the houses to be built and when the respondent had applied to the Tabong Projek Perumahan Terbengkalai ('TPPT') to revive the housing project as reflected in exh. "KLK 1" in encl. 15, the petitioners should be happy and not resort to filing the petition to wind up the respondent. I cannot help but feel constrained to hold and I so hold that in filing the petition to wind up the respondent, the petitioners were in fact putting pressure to bear on the respondent and in the circumstances this court has the jurisdiction to prevent an abuse of process and accordingly will injunct the petitioners from fulfilling their nefarious scheme: Re A Company [1894] 2 Ch 349. It is also my judgment that the petitioners here are using this court as a debt collecting agency and nothing else and this court will not blindly let that happen : Re Lympne Investments Ltd [1972] 2 All ER at p. 389. In fact the respondent through their solicitors had by letter conveyed their willingness to refund RM19,946.50 to the petitioners and this very letter was exhibited by the first petitioner in his affidavit in reply in encl. 18 which was marked as exh. "LJH 1". Unfortunately, there was no response to this offer.

In Re Dalkeith Investments Pty Ltd [1985] 3 ACLC 74, where a divorce between two major shareholders resulted in a breakdown in the mutual trust and confidence between members. The court there held that as this was irreconciable, the applicant shareholder was entitled to have the company wound up under the then Australian equivalent of s. 218(1)(i) . However,

McPherson J sounded a warning, which warning should apply to all Companies Courts that " ... winding-up is to be regarded as a remedy of last resort and one which ought not to be granted if some other less drastic form of relief is available and appropriate." It is germane at this juncture to interpolate and say that the courts have over the years made a winding-up order on the "just and equitable" ground in a number and in a variety of different circumstances which include:

(1) A break down in the mutual trust and confidence of its members (Loch v. John Blackwood Ltd [1924] AC 783; Re Newman and Howard Ltd [1962] Ch 257; Thomson v. Drysdale [1925] SC 311; Re Lundie Brothers Ltd[1965] WLR 7051);

(2) A complete deadlock (Re Yenidje Tobacco Co [1916] 2 Ch 426; Re National Drive-in Theatres [1954] 2 DLR 55; Re Bambi Restaurants Ltd [1965] 1 WLR 750; Re Expanded Plugs Ltd [1966] 1 WLR 514);

(3) Fraud, misconduct or oppression in the conduct and management of the company's affairs (Re T.E. Brinsmead & Sons [1897] 1 Ch 45; and on appeal it was reported in [1897] 1 Ch 406);

(4) A failure of substratum. This would be in a situation where the whole substratum of the company has gone down the drain (Re German Date Co. [1882] 20 Ch D 169; Re Haven Gold Co. [1882] 20 Ch D 151, Re Red Rock Gold Mining Co. [1888] 61 LT 785; Re Bleriot Aircraft Co. [1916] 32 TLR 253; Re Eastern Telegraph Co. [1947] 2 All ER 104; Re Merchant Navy Supply Assn Ltd [1947] 1 All ER 894; Galbraith v. Merito Shipping Co. [1947] SC 446; and Re Kitson & Co. Ltd[1946] 1 All ER 435). The substratum has been held to be gone when the main object for which the company was formed has become impracticable: Re Suburban Hotel Co. [1867] 2 Ch App 737. In Re Stratton's Independence Ltd [1916] 33 TLR 98 where the substratum had gone, but the company had the widest possible powers, the court allowed the petition to stand over for a scheme to be considered by the shareholders. Finally, where the company was a "bubble" a winding-up order would also be allowed by the court: Re London and County Coal Co. [1867] LR 3 Eq 355.

To recapitulate, it is appropriate to say that the "just and equitable" ground are well known words and there may not be an adequate substitute for these words. By its very nature these words give the court a wide discretion which from the long line of authorities must be exercised judicially. At the end of the day, it is purely a question of fact and the court is required to look at all the circumstances surrounding the whole case.

But one must not forget and must not lose sight of the fact that the facts rendering it just and equitable for a company to be wound up cannot be resolved by compartmentalising it into the categories as listed above (Re Straw Products Pty Ltd [1942] VLR 222 at 223; [1942] ALR 361; Re Wondoflex Textiles Pty Ltd [1951] VLR 458 at 464; [1951] ALR 460). The categories can never be closed. It is not surprising that in future some new or additional category makes it just and equitable for a company to be wound up.

In my judgment, a decisive question to pose would be whether there was a reasonable hope that the respondent could survive and churn profit. Reasonable hope presented itself in the form of financial aid that might come from TPPT and so long as that reasonable hope persists, the petition for winding-up of the respondent would not be acceded to.

Next, the affidavit of Mr. Ong Ban Chai in encl. 20 was criticised as it pleaded insolvency to support the petition of winding-up which ran counter to the petition itself where the just and equitable rule was applied. It was argued by Mr. K.B. Rajah that insolvency was not pleaded in the petition and, consequently, this point should be ignored by this Court. The then Supreme Court in the case of Yew Wan Leong v. Lai Kok Chye [1990] 1 CLJ 330 (Rep) had occasion to say and to lay emphasis on the importance of pleadings. His Lordship Gunn Chit Tuan SCJ (as he then was) delivered the judgment of the then Supreme Court and on this point he had this to say:


The learned judge had therefore erred in holding that there was a new substituted contract, and reference was made to Janagi v. Ong Boon Kiat[1971]1LNS42 in which Sharma J (as he then was) had made observations on the function of pleadings and the duty of Courts to follow rules of procedure and practice.
We agreed with the following passage in the judgment of the learned judge in that case in which his Lordship stated:

The Court is not entitled to decide a suit on a matter on which no issue has been caused by the parties. It is not the duty of the Court to make out a case for one of the parties when the party concerned does not raise or wish to raise the point. In disposing of a suit or matter involving a disputed question of fact, it is not proper for the Court to displace the case made by a party in its pleadings and give effect to an entirely new case which the party had not made out in its own pleadings.

The trial of a suit should be confined to the pleas on which the parties are at variance.

Counsel also referred to Wisma Punca Emas Sdn Bhd v. Dr. Donal R O'Holohan [1987] 1 MLJ 393 at page 395 in which case this Court had also referred to Janagi v. Ong Boon Kiat [1971]1LNS42 and considered that Sharma J. had rightly held that the trial of a suit should be confined to the pleas on which the parties are at variance.

In Anuar bin Mat Amin v. Abdullah bin Mohd. Zain [1989] 3 MLJ 313, KC Vohrah J said of the need to stick to one's pleadings in the following words:


In my view the learned judge of Sessions Court, as she readily conceded in her grounds of decision, was wrong in considering contributory negligence in the case when contributory negligence was not pleaded nor otherwise properly made an issue of during the course of the trial.
Since she did find the defendant to blame for the accident she should not have paid regard to any fault on the part of the plaintiff and she was consequently wrong in holding that she should have dismissed the claim after having found the plaintiff substantially to blame for the accident. I must add, in fairness to the learned judge, that had she had the advantage I had, at the appeal, of considering the authorities she probably would not have come to the conclusion that she made.

In the State Government of Perak v. Muniandy [1986] 1 MLJ 490 SC, Hashim Yeop A Sani SCJ speaking for the then Supreme Court had this to say:


Parties are bound by their pleadings and we do not think that the appellant should on the admitted facts of this case be allowed to avoid vicarious liability merely on the bare fact that there was such an administrative circular relating to the prohibition.

In Ang Koon Kau & Anor v. Lau Piang Ngong FC, on the question of an imprecise pleadings Wan Suleiman FJ had this to say:


The learned trial judge made a lucid analysis, if we may say with respect, of certain English authorities which dealt with the scope of Order 18, rule 7, which is substantially similar to our Order 18, rule 7, commencing with Waghorn v. George Wimpey & Co. Ltd (1969) 1 W.L.R. 1764 as authority for the proposition that where the evidence at the trial establishes facts different from that pleaded by the plaintiffs as constituting negligence which are not just a variation, modification or development of what has been alleged but which constituted a radical departure, the action will be dismissed.

Finally, in Red and Yellow Omnibus Co. Sdn Bhd & Anor v. Chuah Lay Boon [1993] 2 CLJ 480 , I had occasion to say:


Looking at the Statement of Claim (page 5 of the appeal record) it is clear that the injury under this head was not pleaded.
Learned Counsel for the respondent sought to justify this error by saying that when the Statement of Claim was drafted it was based entirely on the medical report of the district hospital, Taiping dated 1 April 1986, which report was silent in regard to the injury under this head.

Now it has been stated time and again that where the trial Court had departed from the strict rules of procedure in deciding a case on an issue not raised in the pleadings the appeal will be allowed. (see Anjalai Ammal & Anor v. Abdul Kareem[1965]1LNS9 FC). The respondent's evidence in Court must tally with her averments in the pleadings and should not run counter to it


(see LewVoon Kong & Anor v. Mustafa bin Kamis[1978]1LNS98 FC and Hj. Mohd Dom v. Sakiman[1955]1LNS26 ). The respondent, in short, must be bound by her pleadings (see Miskinah bte Jaya & Ors v. Mohamed bin Salleh & Anor [1984] 1 MLJ 187). In the Federal Court case of Siti Aishah binti Ibrahim v. Goh Cheng Hwai [1982] 2 CLJ 544 his Lordship Abdul Hamid F.J. (as he then was) referred to the case of Menah binti Sulong @ Minah binti Sulong @ Aminah binti Sulong v. Lim Soo & Anor [1983] 1 CLJ 26 F.C. as authority for the proposition that a decision should be in strict accordance with the pleadings.
Lord Normand in Esso Petroleum Co. Ltd v. Southport Corporation [1956] AC 218 HL had this to say:


The function of the pleadings is to give fair notice of the case which to be met so that the opposing party may direct his evidence to the issue disclosed by them (see page 238).

I wish to associate myself with the observations of my noble and learned friend, Lord Radcliffe, on the value of pleadings.

To condemn a party on a ground of which no fair notice has been given may be as great a denial of justice as to condemn him on a ground on which his evidence has been improperly excluded (see page 239).


It is my considered view, in a motor accident claim where negligence is proved or admitted (as in the instant appeal), a plaintiff is entitled to be awarded damages only in respect of injuries which are pleaded and which are proved or admitted to have been caused by the negligence of the defendant.

Applying these authorities to the present case, I am constrained to hold that pleading insolvency in encl. 20 was against the grain of the petition that was filed in encl. 2 - a radical departure that should not be entertained by this court.

Next, it was argued that the petitioners had no locus standi to present the petition for winding-up the respondent as the petitioners did not come under the category of those people as stipulated in s. 217(1)(a) to (f) of the Companies Act 1965 . That particular section enacts as follows:


217(1) A company (whether or not it is being wound up voluntarily) may be wound up under an order of the Court on the petition of -


(a) the company;


(b) any creditor, including a contingent or prospective creditor, of the company;


(c) a contributory or any person who is the personal representative of a deceased contributory or the trustee in bankruptcy or the Official Assignee of the estate of a bankrupt contributory;

(d) the liquidator;


(e) the Minister pursuant to section 205 or on the ground specified in section 218 (1) (d) ;


(f) in the case of a company which is a licensed institution, or a scheduled institution in respect of which the Minister charged with responsibility for finance has made an order under section 24 (1) of the Banking and Financial Institutions Act, 1989 , or a non-scheduled institution in respect of which such Minister has made an order under section 93 (1) of that Act , Bank Negara Malaysia, or of any two or more of those parties.

Mr. Ong Ban Chai for the petitioners advanced an argument that the petitioners squarely fall under s. 217(1)(b) of the Companies Act, 1965 in that the petitioners were contingent creditors and, consequently, had locus standi to file the petition in encl. 2. In Re William Hockley Ltd [1962] 2 All ER 111, Pennycuick J said at p. 113:


The expression 'contingent creditor' is not defined in the Companies Act, 1948, but must, I think, denote a person towards whom under an existing obligation, the company may or will become subject to a present liability on the happening of some future event or at some future date: see BUCKLEY ON THE COMPANIES ACTS (13th Edn), notes at pages 461, 462.

In a book entitled The Law of Company Liquidation, 3rd edn, at p. 45, McPherson J succinctly said:


It is obviously not easy to formulate a test, at once both simple and comprehensive, for determining who is entitled to apply for a winding up in the capacity of creditor. The applicant must be one who has a claim to be paid a sum of money by the company, but that sum need not be liquidated and it need not be presently payable. Nor is it essential that it should be recoverable by action for in Re North Bucks Furniture Depositories Ltd (1939) Ch.D. 690, a local authority, to which the company was indebted for unpaid rates, was held entitled to present a petition, although payment of its rates could be enforced only by distress and not by action.
Conversely, the mere fact that there is some means of enforcing payment by the company is not itself sufficient to transfer the sum payable into a debt. A garnishee order does not as between the company and the garnishor create a relationship of debtor and creditor as to confer a right to have the company wound up. See the case of In re Combined Weighing And Advertising Machine Company[1889] 43 Ch.D. 99.

In the present case, the respondent has not completed building the houses. The petitioners preferred, from the circumstances that can be inferred, to continue with the contracts. The post-rescissionary damages that the petitioners were entitled to have not been crystallised nor the quantum ascertained. Put differently there was a substantial bona fide dispute as to the debt incurred by the respondent and on the authority of Re Nima Travel Sdn Bhd[1986] 2 MLJ 374, the winding-up petition as filed in encl. 2 was not a legitimate avenue of seeking to enforce payment of a debt which was bona fide disputed by the respondent. In so far as the deposits that were paid by the petitioners, the respondent made an offer to refund the amount but there was no response to the proposal. It was the respondent's stand as reflected at para. 3 of the affidavit in encl. 15 that the petitioners were not creditors and had no locus standi to file the petition in encl. 2. Consequently, the respondent deposed in encl. 15 that since the petitioners were not creditors they were not entitled to file for petition for winding-up and that the petition was pure and simple, an abuse of the process of the court. The issue of creditor-debtor relationship must surely bring into focus the quantum of the debt. As I said earlier the quantum has yet to be crystallised. As Lord Oliver of Aylmerton said in Loh Wai Lian v. S.E.A. Housing Corporation Sdn Bhd[1984] 1 CLJ 223 (Rep) PC especially at p. 4:


A construction which would import into the clause a fresh obligation on the vendor to pay the calculated amount at the end of each day would be capricious, involving as it does a series of breaches of contract as each day passes without payment being made. The whole tenor of the clause is, in their Lordships' view, that the vendor is assuming as a matter of contract and subject to the occurrence of the condition precedent that the building remains uncompleted on the stipulated date, an express contractual obligation to pay a single sum which cannot become due, because it cannot be ascertained, until the building has been completed and possession can be delivered. If the question is asked "in the absence of such an express provision when would the purchaser's right of action for damages for breach of contract accrue ?", the answer is plainly the date on which the breach occurred.
But parties to a contract are, of course, entitled to regulate or modify their rights in the event of breach in any way that they think fit and accrual of any cause of action then becomes a matter of the correct construction of what they have provided.

The learned author of Palmer's Company Law, 23rd edn, at p. 1117 had this to say:


Where there is a bona fide dispute as to the debt, the company cannot be said to have neglected to pay on a statutory demand.
Coupled with this is a related general principle that a petition for winding-up with a view to enforcing payment of a disputed debt is an abuse of the process of the Court and should be dismissed with costs.

On the available evidence, it is my judgment that since the petitioners have yet to file an action against the respondent, the creditor-debtor relationship do not exist between them. Even if the petitioners were contingent creditors as

Mr. Ong Ban Chai wanted me to hold, I still have to consider whether it was "just and equitable" that the respondent be wound up. That would entirely be my sole discretion to decide. As Upjohn LJ said in Re P. & J. Macrae Ltd [1961] 1 All ER at p. 309:


Reported cases can only be quoted as examples of the way in which in the past Judges have thought fit to exercise the discretion, and judicial decision cannot fetter or limit the discretion conferred by statute or even create a binding rule of practice.

I have perused the affidavit in encl. 15 anxiously and it is my judgment that once financial aid arrived from TPPT, the respondent would be able to continue building the houses and within six (6) to eight (8) months the respondent would be able to complete, as they said they would, the project forthwith. Other buyers who have been anxiously waiting for the completion of the housing project would benefit. Seen in this perspective, it was not just and equitable that the respondent be wound up as the effect of a winding-up order would prejudice and jeopardize not only the petitioners but also other buyers of taking delivery of their houses. In any event the petitioners have not shown any special circumstances rendering a winding-up order desirable. But all is not lost. Without a winding-up order, the petitioners still have an option to pursue against the respondent within the scope and ambit of the case of Kang Yoon Mook Xavier v. Insun Development Sdn Bhd (supra) .

Next, Mr. K.B. Rajah and Puan Roha Mohamed Yusof argued that the statutory notice under s. 218 of the Companies Act 1965 was not served on the respondent. Such failure was said to be not only prejudicial to the respondent but would render the petition in encl. 2 to be defective. Section 218(2)(a) of the Companies Act 1965 enacts that:


218 (2) A company shall be deemed to be unable to pay its debts if -


(a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred ringgit then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereto lawfully authorized requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor.

In Re Adrich Shipping Pte Ltd Companies Winding-up (supra), it was held that it was not necessary for the creditor to personally convey the statutory demand and leave it at the registered address of the company. It was also held that it would suffice if someone directed by or representing the creditor effects the service. If proof by direct but not hearsay evidence was given that the postal authority conveyed the letter of demand and left it at the registered office, there would be satisfactory service. Unfortunately, nothing of that nature transpired in the present case. If truly there was a statutory notice issued by the petitioners why was it not exhibited? And if the statutory notice was issued, which was not the case here, where was the proof of service that it had been served on the respondent by leaving it at the respondent's registered office?

In Re Yap Kim Kee & Sons Sdn Bhd [1990] 2 MLJ 108 , Zakaria Yatim J (now JCA) had occasion to remark that:


There is no prescribed form for a letter of demand either in the Companies Act, 1965 or in the Companies (Winding-up) Rules, 1972. Palmer's Company Precedents Part II (Winding-Up) (17th edn), in a commentary on section 223(a) of the English Companies Act, 1948, which is almost identical to our section 218(2)(a) , states that the demand in writing need not be in special form. I do not dispute the view expressed in Palmer's Company Precedents, but it must be borne in mind that the purpose of the demand is to warn the debtor of an impending petition : Bateman Television Ltd & Anor v. Coleridge Finance Co Ltd (1969) NZLR 794 at page 803.


The letter of demand must strictly comply with the requirements of s. 218(2)(a) : Re Willes Trading [1977-78] ACLC 434 and J.O'Donovan, The Law of Company Liquidation(3rd Ed) at p. 48. See also W.T. Henley's Telegraphic Works Co. Ltd v. Gorakhpur Electric Supply Co. Ltd AIR [1936] ALL 840.


In Re Willes Trading[1977-78] ACLC 434, Needlam J of the Supreme Court of New South Wales stated in his judgment that: "The deeming effect of the notice ... arises only if the notice is in full compliance with the conditions set out in the section itself ...". Needlam J, was referring to s. 222(2)(a) of the Companies Act which is identical to our s. 218(2)(a) . I respectfully agree with the view expressed by Needlam J.

Accordingly, the demand must be made in writing and signed by the creditor or his authorized agent, and it must specify the sum due. The demand must be served at the registered office of the company.

See J. O'Donovan, The Law of Company Liquidation, pp. 48 and 49. The normal practice is for the creditor to also state in the notice (1) that the company must pay the sum due within 21 days from the date of the service of the demand and (2) failing which the company will be deemed unable to pay its debt and action will be taken to wind up the company.

In Re Yap Kim Kee & Sons Sdn Bhd (supra) there was a letter of demand dated 19 November 1985 but the court there held that it was bad in law and that the company cannot be presumed to be unable to pay its debts. The court there also refused to make a winding-up based on unsatisfactory statutory demand.

With respect, I fully agree with the views expressed by Zakaria Yatim J (now JCA) in the case of Re Yap Kim Kee & Sons Sdn Bhd (supra) . It was, however, argued that in reliance to the just and equitable rule under s. 218(1)(i) of the Companies Act 1965 there was no necessity to serve a letter of demand by leaving that notice at the registered office of the respondent as required under s. 218(2)(a) of the Companies Act 1965 . I beg to disagree. One must realise the importance of the letter of demand under s. 218(2)(a) of the Companies Act 1965 as outlined by Zakaria Yatim J (now JCA) in the case of Re Yap Kim Kee & Sons Sdn Bhd (supra) . A statutory requirement spelling out a particular procedure to be followed must be enforced strictly. A statute which creates a duty is called "imperative" and "mandatory". There is no option left to take but to follow the duty that is imposed by the statute. Thus, for example in the case of Young v. Mayor, etc, of Leamington [1883] 8 App Cas 517 where there was a dispute as to whether s. 174(1) of the Public Health Act, 1875, which enacted that contracts made by an urban sanitary authority in excess of 50 pound should be in writing and sealed with the common seal of the authority, was imperative or directory. Both the Court of Appeal and the House of Lords decided that it was imperative, and that a contract that was not sealed was void although executed, and that, although the sanitary authority had obtained the benefit of it, they were free from the usually correlative obligation of payment. Applying Young v. Mayor, etc, of Leamington (supra) to the present case, it is my judgment that s. 218(2)(a) of the Companies Act 1965 must be strictly complied with and any breach cannot be construed in favour of the defaulter. As a mandatory provision, the petitioners have failed to comply with the spirit of that particular section. The net result was obvious. Prayers 1 and 2 of encl. 16 were allowed with costs.