Judgment

Abdul Malek Ahmad, JCA

(delivering the judgment of the court)

1. In the original originating summons dated September 10, 1997, the first respondent/plaintiff had applied for an order against the appellant / first defendant for a declaration that the sale and purchase agreement dated July 2, 1996 between the plaintiff and the defendant for the sale of the plaintiffs lease of the land held under a qualified title HS(D) 143155 PTD 80563 in the Mukim of Plentong, District of Johore Bahru, State of Johore, which said lease was duly registered on January 15, 1992 vide Presentation Number 2474/92, Volume 12, Folio 39 is valid and binding on the plaintiff and defendant and for such further or other relief and costs.

2. In an amended originating summons on September 24, 1997, the second respondent was brought in as second defendant and the main prayer was amended to read that the receiver and manager of the plaintiff is duly empowered to sell the plaintiffs lease of the said land as described in the original originating summons.

3. As stated by learned counsel for the appellant and learned counsel for the first respondent in their respective skeletal submissions, the agreed facts were as follows:

   1. the first respondent is the registered proprietor of the lease of the said land;

   2. the first respondent had created in favour of the second respondent a debenture;

   3. the first respondent has also created in favour of the second respondent a legal charge registered under the National Land Code 1965 ("the Code");

   4. the second respondent had pursuant to the provisions of the said debenture appointed a receiver and manager in respect of all the assets and undertakings of the first respondent;

   5. the said receiver and manager had, as the receiver of the first respondent, entered into a sale and purchase agreement dated July 2, 1996 with the appellant to sell the said lease to the appellant subject to the terms and conditions contained therein;

   6. the appellant did not wish to proceed with the said agreement on the grounds that the receiver and manager did not have the right or the capacity to sell, by contract only, the said lease in view of the Federal Court decision in Kimlin Housing Development Sdn Bhd v Bank Bumiputra (M) Bhd [1997] 3 AMR 2361 ("the Kimlin case").

4. What is disputed is the fact that the receiver and manager of the first respondent is entitled to sell the lease on behalf of the first respondent.

5. The learned trial Judge in his brief judgment said:

   The question for the court before granting the prayer as sought is to look at the memorandum and articles of the said company to see as to whether or not the company has an object clause to sell its land; and whether or not the articles of the company have reserved any provisions in the granting of the lawful power of attorney in favour of the receivers / managers. I find as a fact that the administrative receivers / managers are the authorised agents of the company under the debenture and as such are authorised to enter into any sale and purchase agreement on the assets of the company; subject however to the obtaining of the prior consent of the debenture holders and which consent was freely given by the second defendants to the court. Therefore, the need on the part of the receivers/managers in any way invoking the Orders of the High Court, 1980 only become applicable where such sale is proceeded by the chargee under its foreclosure proceedings and not where the chargor so proceeds with the sale by consenting parties. I hold, that under these circumstances the administrative receivers/managers as agents of the company are absolutely free and empowered to dispose of the assets of the company; and their act binds the company. In passing, I also take the opportunity to make my comments on a point of procedure to be adopted where administrative receivers are appointed and proceedings filed in court. Such proceedings should only be taken in the name of the company, and not in the name of the company in bracket (under-receivership) in the heading of the action. That heading should only be reserved for cases where the company is in liquidation; to distinguish early and easily as to the status of the company in winding-up. This can be done by placing the details of the administrative receivership in the supporting affidavit. I accordingly make and grant the declaration as amended, with no order as to costs.

6. Our task was made easier by the fact that the presiding Judge hearing this appeal was a member of the panel in the Kimlin case and we are in total agreement with the learned counsel for the first respondent's skeletal submissions as to the distinguishing features in that case and in this appeal that we found it quite unnecessary to hear his reply nor the reply from learned counsel for the second respondent.

7. The distinguishing features are:

   1. in the Kimlin case, the chargor company was wound up and consequently, the receivers and managers ceased to be agents of the chargor company;

   2. in the present case, the chargor was not wound up;

   3. the debenture under consideration here empowers a receiver and manager appointed under the debenture to act as agent of the first respondent, in the exercise of the powers accorded to the receiver and manager under the debenture;

   4. the debenture under consideration here contains a validly constituted power of attorney clause, irrevocably appointing the receiver and manager the lawful attorney of the first respondent;

   5. the provisions of the Code deal with the powers of a chargee to sell land charged under the Code so that any receiver and manager appointed by the creditor of the charged property must conform to the Code;

   6. at any time before an order for sale is made, a chargor can sell land charged under the provisions of the Code by way of private treaty where the proceeds of sale are sufficient to settle the outstanding debt or where the chargee consents;

   7. where an order for sale has been obtained, the charged land must be sold by public auction, subject to the right of the chargor to pay off its indebtedness to the chargee in full to the Registrar of the court before the sale of the charged land, under the provisions of section 266 of the Code;

   8. the first respondent in the present case, as the registered proprietor of the lease, is entitled to deal with the lease in such manner as a registered proprietor would, subject to the rights of the encumbrancer, namely, the second respondent.

8. We hasten to add that in the Kimlin case, it was the borrower company that was complaining about the sale apart from being wound up  whereas here it is the borrower company that is asking for the sale order and it has never been wound up.

9. Although subsection (3) of s 183 of the Companies Act 1965 gives the power to a receiver and manager of the property of a company to apply to  the court for directions in relation to any matter arising in connection with the performance of his functions, this is merely discretionary and it was our considered opinion that the borrower company here need not even apply to the court for their receiver and manager to sell the lease of the said land to the appellant. In short, we would even venture to say that the appellant had been wrongly brought to court.

10. We only wish to point out two typographical errors.

    • First, the name of the appellant is spelt as "Melantrans" in all the headings of the appeal records and the cause papers, except for the skeletal submissions of learned counsel for the first respondent, whereas in actual fact it should be "Melatrans" as stated in the relevant agreement dated July 2, 1996.

    • Secondly, the correct title of the second respondent should be "Perdana Merchant Bankers Bhd" and not "Perdana Merchants Bankers Bhd".

11. We unanimously dismissed the appeal and although learned counsel for the first respondent asked for costs, we felt that in these circumstances, each party should bear their own costs while we ordered the refund of the deposit to the appellant.[a]

Cases

Kimlin Housing Development Sdn Bhd (Appointed receiver and manager) (In liquidation) v Bank Bumiputra (M) Bhd [1997] 3 AMR 2361

Legislations

Companies Act 1965: s.183(3)

National Land Code 1965: s.266

Representations

C.H. Ng (lqbal Hakim, Sia & Voo) for Appellant

DP Naban, Nitin Nadkarni and Karen Wilfred (Lee Hishamuddin) for First Respondent

Alan Gomez (Skrine & Co) for Second Respondent

Notes:-

[a] The appellant appealed against this decision. The Federal Court (Wan Adnan Ismail CJ (Malaya), Steve LK Shim CJ (Sabah & Sarawak), Mohamed Dzaiddin Abdullah FCJ) on 13/3/2003 dismissed the appeal. See Melantrans Sdn Bhd v Carah Enterprise Sdn Bhd @www.ipsofactoJ.com/appeal/index.htm [2003] Part 2 Case 9 [FCM].

This decision is also reported at [2000] 3 AMR 2743