Salak Park Development Sdn Bhd

- vs -

Fajar Menyensing Sdn Bhd

Judgment

Shaik Daud, J

1. This is an application by the plaintiff Salak Park Development Sdn. Bhd. against  Fajar Menyensing Sdn Bhd. For an order that a notice issued under Section 218 of the Companies Act 1965 by the defendant on 26.1.94 be set aside. The facts leading to this application are not in dispute.                              

2. The defendant through their solicitors served a Statutory Notice of Demand pursuant to Section 218 of the Companies Act 1965 on the plaintiff for payment of a sum of RM439,750.88 being a debt allegedly due by the plaintiff to the defendant. At the material time of the service of the notice i.e. 26.1.94 the defendant company had been ordered to be wound up which order was given a day earlier i.e. 25.1.94 upon an application by the defendant presumably under Section 307 of the Companies Act 1965, the Winding up order was subsequently set aside on 8.3.94. It is the contention of the plaintiff that it is apparent that at the material date when the defendant issued the Section 218 Notice i.e. 26.1.94, they had no locus standi to issue such a notice, as the order to wind them up had already been given a day earlier.

3. The learned counsel for the defendant concedes that on the date the notice was issued the court had in fact ordered the defendant to be wound up but nevertheless defendant had locus standi to issue that notice since the winding up order was later annulled and rescinded. She cites the case of Hj Mohd. Muslim Othman v Shuaib Lazim [1993] 1 AMR 9. In that case the petitioner filed an election petition seeking various declarations, inter alia, that the first respondent, who was elected at a by-election in Alor Setar, was an unfit and disqualified person on the day of filing of the nomination papers as it was alleged that he was an undischarged bankrupt at the material time. It would appear that the bankruptcy order had in fact been annulled and rescinded by a later order dated 16.3.90. The Court, inter alia, held that the annulment and rescission order dated 16.3.90 wiped out the bankruptcy of the first respondent altogether and put him in a position as if there had been no adjudication.

   • First and foremost in the above case the court was dealing with an election petition.

   • Secondly Section 105 of the Bankruptcy Act 1967 empowers the court of its own volition to annul adjudication even without the respondent making any application, in my view it is more relevant to consider Section 307 of the Companies Act 1965 as this case is not a case of bankruptcy but one for winding up of a company.

   Section 307 provides:-

   (1)

   Where are company has been dissolved the court may at any time within two years after the date of dissolution, on application of the liquidator of the company or of any other person who appears to the court to be interested, make an order upon such terms as the court thinks fit declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

4. The provisos of Section 307 is in pari materia with the provisions in Section 223 Companies (Consolidation) Act 1908 of the United Kingdom. The effect of that section came to be decided in Morris v Harris [1927] AC 252 PC. The facts of that case is quite lengthy but I will sum it up by saying that a company went into voluntarily liquidation after which it took certain actions but later the dissolution was held to be void under Section 223 of the English Act. Lord Summer at page 257 held that:-

   The words 'to have been void' in Section 223, appear, it is true, so far as they go, to have some retrospective effect, and tend to some extent to support the respondent's argument.  On the other hand, the remaining words, which define the order, point rather to a declaration removing a bar to such action as might otherwise have beep taken, than to one validating past proceedings, taken since the dissolution through ignorance or disregard of it and consequently invalid.  The remaining words, "and thereupon such proceedings may be taken, as might have been taken if the company had not been dissolved,' seem to me to point conclusively in the same direction. They describe an authority given to the parties concerned to do, 'thereupon' and accordingly thereafter, things which might have done but obviously had not done theretofore, and, but for the order, could not have done after the dissolution. I think these words, do not affect the validity or the contrary of steps taken during that interval. They must still depend on the facts existing and the rights arising before and independently of the order ...

   At page 269 Lord Blanesburgh states:-

   I think, my Lords, that the terms, in which these consequences are described are exhaustive and emphatic. They are intended to show that an order under that section made, it may be, as long as two years after a dissolution which up to that moment was completely effective, is not at once and as of course to ratify acts done during the interval, which if done at all, must necessarily have been acts of mere usurpation, by a liquider or other pretended agent with no office knowingly done on behalf of a company which had no existence. On consideration, it appears I think, clear that automatically to validate such acts as being the acts of a duly constituted officer on behalf of a duly incorporated company might involve consequences too disastrous to be even envisaged. These are avoided by the terms of the section. The company is restored to life as from the moment of dissolution but, continuing a convenient metaphor, it remains buried, unconscious, asleep and powerless until the order is made which declares the dissolution to have been void. Then, and only then, is the company restored to activity.

5. From these it seems clear to me that an order annulling and rescinding a dissolution order does not automatically invalidate acts done during the interval between dissolution and annulment of the dissolution. Therefore applying that principle to the present case when the defendant issued the Section 218 notice it had no locus standi to do so as it had already been ordered to be wound up. That being the case the plaintiff on whom the notice was served need not even respond to that notice and they can safely and Simply ignore it. Therefore there was no need for them at that stage to challenge the debt.

6. Following the decision in Morris v Harris (supra) the order annulling the dissolution of defendant does not automatically validate that notice, in my view the notice remain invalid and upon the annulment order being given, the defendant "thereupon" can issue a Section 218 notice as if they had not been wound up. It is my view that a company which has been ordered to be wound up has no, locus standi to issue any notice including a Section 218 notice.

7. In the light of this I hold that the Section 218 notice issued by the defendant in this case after an order of its winding up had been given is an invalid notice and ought to be set aside which I hereby do. I therefore allow the plaintiff's application with costs.

Cases

Morris v Harris [1927] AC 252 PC; Dato Haji Mohd. Muslim Othman v Shuaib Lazim [1993] 1 AMR 9

Legislations

Malaysia

Bankruptcy Act 1967: s.105

Companies Act 1965: s.307

England

Companies (Consolidation) Act 1908: s.223

Representation

AK Lee (AK Lee & Co) for Plaintiff

Havinder Kaur (Paul Ong & Associates) for Defendant