Imbangan Utama Sdn Bhd

- vs -

Lotan Engineering Works Sdn Bhd

Judgment

Vincent KK Ng, J

1. This is an appeal against my decision on October 30, 2001 allowing the petitioner's petition under s 218 of the Companies Act 1965 (the Act) to wind-up the respondent company.

2. I would begin by stating the guiding principles governing such petitions. A winding-up court should not allow itself to be used by an intended litigant as a machinery for trying a common law action or as a short-cut alternative to suing under common law on an alleged debt due (see Re Imperial Guardian Life Assurance Society [1869] (Vol IX) p 447 at 450). Yet, if it is crystal clear that such debt is due, for example, upon clear uncontroverted evidence or acknowledgement of indebtedness on a quantified or liquidated sum, it would waste the civil courts' valuable time to require that the claimant/petitioner first proceed under common law and secure judgment on the debt before proceeding to petition to wind-up the company. Indeed, such an approach would in effect render nugatory and purposeless s 218(1)(e) read in conjunction with s 218(2)(a) of the Act.

3. Firstly, a preliminary objection was taken by the respondent, being that the affidavit verifying petition was affirmed on September 28, 2000, which was the same day as the date of the petition, in breach of Rule 26 of the Companies (Winding-Up) Rules 1972 (the Rules). Counsel submitted that the key words are "must be sworn after and filed within 4 days" (see Lim Tok Chiow v Dian Tong Credit & Development Sdn Bhd [1994] 2 AMR 1324 and Chin Yoon Timber Co v Overseas Lumber Bhd [1978] 2 MLJ 173).

4. I however decided to exercise my discretion under Rule 194 of the Rules to overrule this preliminary objection as I am obliged to apply the principles laid down by the Federal Court in Lai Yoke Ngan v Chin Teck Kwee [1997] 3 AMR 2458 (which adopted the landmark ratio in the judgment of Lord Woolf MR in Nicholls v Nicholls [1997] 147 NLJ 61). 

   The principles being:

   1. Although under Order 2 r 1(1) [the equivalent being Rule 194 of the Rules] of the Rules of the High Court 1980, non-compliance with the rules of procedure is to be regarded as mere irregularity and not a nullity, the curative powers of the court over such procedural irregularity must in the words of Lord Woolf MR, "be exercised in a way which in all the circumstances best reflects the requirements of justice". And, in determining this the court must not only take into account prejudice to the interests of the applicant who seeks the cure but also the interest of the other parties and the interest of upholding the due administration of civil justice in general.

   2. In the absence of prejudice the court may discount "any error, defect or irregularity whether in the decision or otherwise not affecting the merits or the jurisdiction of the court" - not to do so is to derogate from that discretion.

   3. Thus, defects affecting merits or the jurisdiction of the court ought not to be cured in an exercise of discretionary power.

   (See also Maril-Rionebel (M) Sdn Bhd v Perdana Merchant Bankers Bhd [2001] 3 AMR 2893 and YPJE Consultancy Service Sdn Bhd v Heller Factoring (M) Sdn Bhd [1996] 2 AMR 2013).

5. The respondent's counsel then applied for his second and third preliminary objections (b) and (c) to be withdrawn - which was allowed. He then proceeded with his other preliminary objection (d), namely, that the affidavit-in-reply by the petitioner (Encl 2B) was filed 17 days late on December 13, 2000 and should not be read at the hearing of the petition. This late filing was conceded by the petitioner's counsel, but he said this defect was waived by the respondent as they did not raise this issue in their subsequent affidavit, and in any event, the exclusion of Encl 2B would not affect the merits of the petition. I again overruled this preliminary objection under (d) by adopting principle (ii) above and invoking Rule 194 of the Rules.

6. In the case at hand, the petition was based on s 218(1)(e) and grounded on an acknowledgement of indebtedness dated February 24, 2000 for RM125,348.76 by fax and a further acknowledgement dated April 3, 2000 for RM81,684.77 by letter signed by the director of the respondent company. I had to allow the above petition as prayed as it is beyond question that the acknowledgement of indebtedness in both the respective sums was signed by an authorised officer of the company. This due execution of the acknowledgement was never denied or challenged and indeed, the second acknowledgement in the sum of RM81,684.77 was for a lesser amount because after the first acknowledgement the respondent paid a sum of RM43,663.99 into account (see Chip Yew Brick Works Sdn Bhd v Chang Heer Enterprise Sdn Bhd [1988] 2 MLJ 447).

7. To resist the winding-up application, the respondent raised only two issues for this court's adjudication, namely:

   1. while the respondent company acknowledged that they had signed the acknowledgement of debt dated April 3, 2000, they pleaded non est factum as they said that they had signed same under mistake and "without knowledge that the joint survey was not conducted"; and

   2. the respondent company have a counterclaim against the petitioner "for loss due to the flooding of the mines".

8. It really takes a litigant of unusual temerity or cheerful insouciance to register a plea of non est factum, for such plea rarely if ever succeeds. There is a whole pack of legal cards stacked against such plea. As a defence or a cause of action the onus rests heavily and onerously on the party who alleges non est factum. The signer must establish his lack of competence due to illness or innate incapacity or defective education and he was not negligent or had acted nonchalantly or with want of care (see Sounders v Anglia Building Society [1971] AC 1004 HL). And, he must further establish that he had thought that he was signing a document which was so radically or fundamentally or basically or essentially different in substance or in kind from the document signed (see also Polygram Records Sdn Bhd v The Search [1994] 3 AMR 2060 and Goh Jong Cheng v MB Melwani Pte Ltd [1991] 1 MLJ 482).

9. The effect of the doctrine must be kept within a very narrow field of application (see Sounders (supra) and Petelin [1975] 132 CLR 355), and such plea is unlikely to be successful (see Norwich and Peterborough Bldg Soc v Steed (No 2) [1993] 1 All ER 330). It is also trite that if a man's signature on a document was obtained by fraud, or under the influence of mistake, or something of the kind, he may be able to avoid it up to a point - but not when it has come into the hands of one who has in all innocence advanced money on the faith of it being the signer's document, or otherwise has relied upon it as being the signer's document, as the latter had enabled it to be circulated by actually signing it. Thus, in a contest between the signer of a document and the innocent third party, the law has almost invariably chosen to prefer the latter.

10. The guiding principle which this court should adopt on this issue is as set out in Malaysia Assurance Alliance Bhd v Yearn Sai Meng [1996] 5 MLJ 345; UMW Industries (1985) Sdn Bhd v Kamaruddin Abdullah [1989] 2 CLJ 1278; Sounders v Anglia Building Society [1971] AC 1004; Chai Then Song v Malayan United Finance Bhd [1993] 1 AMR 907; Ming Lian Corporation Sdn Bhd v Haji Noordin [1974] 1 MLJ 52. In UMW Industries (supra) the dicta of Dato' Siti Norma Yaakob J (as she then was) is pertinent to quote, as follows:

    ... he has only himself to blame as the plea of non est factum does not work in favour of a person who has shown himself to be negligent.

11. In Sounders (supra) it was also held that:

    A person who signs a document and parts with it so that it may come into other hands, has a responsibility, that of a normal man of prudence, to take care what he signs, which if neglected, prevents him from denying his liability under the document according to its tenor.

    And therein, Lord Wilberforce went further to say:

    I would add that the onus of proof in this matter rests upon him (that is) to prove that he acted carefully, and not upon the third party to prove contrary.

12. Before me, the respondent had not attempted or even sought to discharge any of the aforestated onus. I would thus hold that the respondent's plea of mistake or of non est factum is no defence to avoid a clear admission of due execution of a document of indebtedness. In my view, this challenge to a winding-up order being made is not bona fide (see Re Sunshine Securities (Pte) Ltd: Sunshine Securities (Pte) Ltd v Official Receiver & Liquidation of Mosbert Acceptance Ltd [1978] 1 MLJ 57). 

13. As for the counterclaim, it is pertinent to note that until the date of hearing of the petition there was neither any notice of claim sent to nor suit filed against the petitioner pertaining to any tortious acts or for breach of agreement. It is trite that a counterclaim, if it exists, is a separate issue altogether especially where no claim has been filed by the petitioner under common law (see Permodalan Plantations Sdn Bhd v Rachuta Sdn Bhd [1985] 1 MLJ 157 and Mahkota Technologies Sdn Bhd v BS Civil Engineering Sdn Bhd [2000] 4 AMR 3917). Further, the respondent had not shown any terms in the contract dated September 16, 1999 (as there were no such terms) which gave them a right of set-off or of defence (see Mahkota Technologies Sdn Bhd (supra)).

14. In the event, prayers (a), (b) and (c) of the winding-up petition was allowed by this court.

Cases

Chai Then Song v Malayan United Finance Bhd [1993] 1 AMR 907; Chin Yoon Timber Co v Overseas Lumber Bhd [1978] 2 MLJ 173; Chip Yew Brick Works Sdn Bhd v Chang Heer Enterprise Sdn Bhd [1988] 2 MLJ 447; Goh Jong Cheng v MB Melwani Pte Ltd {1991] 1 MLJ 482; Imperial Guardian Life Assurance Society, Re [1869] (Vol IX) p 447; Lai Yoke Ngan v Chin Teek Kwee [1997] 3 AMR 2458; Lim Tok Chiow v Dian Tong Credit & Development Sdn Bhd [1994] 2 AMR 1324; Mahkota Technologies Sdn Bhd v BS Civil Engineering Sdn Bhd [2000] 4 AMR 3917; Malaysia Assurance Alliance Bhd v Yearn Sai Meng [1996] 5 MLJ 345; Maril-Rionebel (M) Sdn Bhd v Perdana Merchant Bankers Bhd [2001] 3 AMR 2893; Ming Lian Corporation Sdn Bhd v Haji Noordin [1974] 1 MLJ 52; Nicholls v Nicholls [1997] 147 NLJ 61; Norwich & Peterborough Bldg Soc v Steed (No 2) [1993] 1 All ER 330; Permodalan Plantations Sdn Bhd v Rachuta Sdn Bhd [1985] 1 MLJ 157; Petelin [1975] 132 CLR 355; Polygram Records Sdn Bhd v The Search [1994] 3 AMR 2060; Sounders v Anglia Building Society [1971] AC 1004; Sunshine Securities (Pte) Ltd, Re, Sunshine Securities (Pte) Ltd v Official Receiver & Liquidation of Mosbert Acceptance Ltd [1978] 1 MLJ 57; UMW Industries (1985) Sdn Bhd v Kamaruddin Abdullah [1989] 2 CLJ 1278; YPJE Consultancy Service Sdn Bhd v Heller Factoring (M) Sdn Bhd [1996] 2 AMR 2013.

Companies (Winding-Up) Rules 1972: R.26, R.194

Companies Act 1965: s.218, s.218(1)(e), (2)(a)

Rules of the High Court 1980: Ord.2 r 1(1)

Gnanamalar P (Zairina Loh & Wong) for Petitioner

Yusrin Faidz Yusoff (Faidz, Leong & Chong) for Respondent

This decision is also reported at [2002] 3 AMR 2647