Azman & Tay Associates Sdn Bhd

- vs -

Sentul Raya Sdn Bhd

Judgment

Vincent KK Ng, J

1. This is an appeal against my decision refusing the application (Encl 5) by the respondents Sentul Raya Sdn Bhd (the respondents) for an injunction to restrain the petitioners, their agents, etc., from advertising or otherwise publishing the existence or contents of the winding-up petition. The application was supported by the affidavit affirmed by Hamidah Maktar on August 24, 2001 (Encl 4). I had initially directed that the application be heard inter partes but upon the insistence of the respondents Encl 5 was heard ex parte though somehow the petitioners' lawyer was present when the petition was heard on August 30, 2001 (presumably, notice was given to him as indicated under paragraph 20(b) of Encl 4).

2. After hearing an oral submission only from counsel for the respondents, Mr. Michael Chow, I dismissed the ex parte interlocutory orders sought without calling on counsel on the other side, Mr. Richard Tee, who indicated at the outset that he wished to have Encl 5 treated as an opposed ex parte application (see Pickwick International [1972] 3 All ER 384). Incidentally, an ex parte injunction may be dissolved on an ex parte application (see Lim Hean Pin v Thean Seng Co Sdn Bhd [1991] 2 MLJ 564).

3. It is important to note that the Companies Act 1965 (the Act) has provided, a respondent company in a winding-up petition, ample recourse or mode of relief which would include the invocation of s 221 of the Act, which reads:

   (1)	On hearing a winding up petition the Court may dismiss it with or without costs or adjourn the hearing conditionally or unconditionally or make any interim or other order that it thinks fit, but ...
   (2)	The Court may on the petition coming on for hearing or at any time on the application of the petitioner, the company, or any person who has given notice that he intends to appear on the hearing of the petition- .... (f) give such directions as to the proceedings as the Court thinks fit. [Emphasis added]

4. It is beyond question that the respondents did not frame their application in Encl 5 under s 221 of the Act (of course, upon a certificate of urgency) for a stay which they could have done, and there was no explanation for this.

5. At this juncture, I am reminded of the dicta of Raja Azlan Shah Ag LP in Land Executive Committee of Federal Territory v Syarikat Harper Gilfillan Bhd [1981] 1 MLJ 234, who had this to say:

   As a general rule where a statute creates a new obligation and provides a special mode of enforcing it, no other court has jurisdiction to enforce that obligation. The case generally referred to, as establishing that rule is Pasmore v Oswaldtwistle Urban District Council ([1898] AC 387). We quote from the speech of the Earl of Halsbury LC: The principle that where a specific remedy is given by a Statute, it thereby deprives the person who insists upon a remedy of any other form of remedy than that given by the Statute, is one which is very familiar and which runs through the law. I think Lord Tenterden accurately states that principle in the case of Doe v Bridges (I B&Ad, 847, at p 859). He says: where an Act creates an obligation and enforces the performance in a specified manner, we take it to be a general rule that performance cannot be enforced in any other manner. .... We now ask ourselves, what is there in the National Land Code which bars declaratory relief. Section 418 of the Code must now be looked at. If on a proper reading of it leads one to the conclusion that it is the intention of Parliament to create the right absolutely and independently of any specific form of remedy, the respondents' action is well maintained. If on the other hand the proper interpretation is that the right and the remedy are uno latu, that they are not mutually exclusive, that they are part and parcel of the remedy, then the action is misconceived. Reading s 418 of the Code, we are satisfied that the latter is the correct interpretation.

6. Though Syarikat Harper Gilfillan Bhd was referred to and adopted by me in Shell Malaysia Trading Sdn Bhd v Pemungut Duti Setem Pulau Pinang [1998] 1 AMR 616, it ought to be made clear here that for the purpose of the instant matter I do not propose — and neither is it necessary — to adopt the ratio in Syarikat Harper Gilfillan Bhd.

7. Generally viewed, it is interesting to note that a company that is subject to a winding-up petition is endowed with the following ample reliefs or remedies to "throw a spanner into the works" of or to defeat a winding-up petition, namely, they may:

   (i)	apply to the court to exercise its equitable jurisdiction to restrain an abuse of process, which includes an application for winding-up, and an application for injunction may be applied for as soon as the s 218 notice is received but before the filing of the petition;
   (ii)	apply under s 221 for a stay or striking out of the proceedings for abuse of process;
   (iii)	oppose the winding-up at the hearing proper.

8. Indeed, even after a winding-up order has been made the subject company may also apply under s 243 for a stay of the proceedings "either altogether or for a limited time".

9. Incidentally, a discussion on s 221 would not be complete without also touching on s 222 of the Act, which has engendered considerable controversy in legal circles. With respect, after having carefully studied s 2221 must say that I am ad idem with the construction of the provision expressed by Abdul Aziz Mohd J in Shing Hup Hin Construction Sdn Bhd v General Soil Engineering Sdn Bhd [1999] 2 AMR 1688 but not that of Rekhraj J in Foursea Construction (M) Sdn Bhd [1998] 4 AMR 3508 which was repeated in Solid Kitchen Sdn Bhd v Regal Development Sdn Bhd [1998] 6 MLJ 417. While entirely agreeing with the close and succinct reasoning of my learned brother Abdul Aziz Mohd J let me add two further plus factors in favour of his view that the phrase "in the action or proceeding" in s 222 must be construed to mean the action or proceeding other than the winding-up petition in question, although it may be some other winding-up petition.

10. In my view the words "in the action or proceeding" after the words "to stay or restrain further proceeding" must mean "any action" or proceeding pending against the company. Thus, the words "to stay or restrain further proceedings in the action or proceeding" cannot upon true construction be construed to mean a stay of the particular winding-up action or proceeding in question then before the court but other action or proceeding before the same or other court. This intention of the Legislature is fairly clear, though, had they added the phrase "in which the action or proceeding is pending" — as appearing in a similar English s 226 of the Companies Act — to interpose between the phrase "apply to the court" and "to stay or restrain" in our s 222 such intention would have been made crystal clear and would have avoided the controversy.

11. The second further reason is that, s 223 notably, which closely follows s 222, proclaims a caveat against the disposition of property of the subject company sought to be wound up. Considering that s 222 is juxtaposed with s 223, it would be entirely logical to conclude that for practical reasons, the legislature intends to couple the caveat against such disposition of property of the particular company in question with a provision enabling the court to stay other proceedings against the same subject company in question that is sought to be wound-up.

12. At first blush, the contents of Encl 4 would indicate that the respondents are armed with persuasive factual grounds for this court to grant an injunction to restrain publication of the winding-up petition, upon terms that they deposit the sum of RM88,455.67 (being the sum claimed) into court — as was offered by the respondents in paragraph 15 of Encl 4. I dismissed the ex parte application in Encl 5 solely for the reason that I was of the considered view that this court cannot enjoin the petitioners from exercising their statutory right — and indeed a mandatory requirement — to advertise the petition, under Rule 24 of the Companies (Winding-Up) Rules 1972 (the Rules). Rule 24 reads:

    Every petition shall be advertised in Form 4 seven clear days or such longer time as the Court may direct before the hearing, as follows: (a) once in the Gazette and twice at least in two local newspapers circulating in Malaysia or in such other newspapers as the Court may direct; (b) .... and if the petitioner or his solicitor does not within the time hereby prescribed or within such extended time as the Registrar may allow duly advertise the petition in the manner prescribed by this rule, the appointment of the time and place at which the petition is to be heard, shall be cancelled by the Registrar and the petition shall be removed from the file unless the Judge or the Registrar shall otherwise direct.

13. In law, the requirement under Rule 24 is triggered into operation as soon as the winding-up petition is filed. As such, bearing in mind the abiding and trite maxim "Equity follows the law", I would hold that the court is not empowered to make any order to restrain or enjoin the petitioners from carrying out their statutory obligation to comply with Rule 24. In this regard it would perhaps be illuminating to quote from a passage in Snell's Equity (13th Edn) p 29 which reads:

    The Court of Chancery never claimed to override the courts of common law. 'Where a rule, either of the common or the statute law, is direct, and governs the case with all its circumstances, or the particular point, a court of equity is as much bound by it as a court of law, and can as little justify a departure from it.

14. In that case the respondent company had also applied for an injunction to restrain the appellant from advertising the petition and this was granted by the High Court.

15. A recourse to injunction relief by the company upon receipt of the s 218 notice but prior to the filing of a winding-up petition is entirely appropriate. However, in my judgment, once a winding-up petition is filed, the court is precluded from granting an injunction against advertisement or gazettal of the petition. Due to the deliberate choice of the words

    Every petition shall be advertised ...

    in Rule 24 of the Companies Winding-Up Rules 1972 (the Rules) in contradistinction to the words in the dissimilar provision for advertisement in the English and Australian Rules, I would hold that our Legislature had intended gazettal and advertisement to be mandatory procedures concomitant with the petition itself which debars the courts from restraining it. In England, (post-1979) Rule 4.11(1) of the Insolvency Rules 1986 (the precursor to Rule 28 of the Companies (Winding-Up) Rules 1949 under which such advertisement was mandatory) provides that unless the court otherwise directs every petition is to be advertised in gazette not less than seven clear days after it has been served on the company and not less than seven clear days before the day fixed for the hearing (see Practice Direction No 1 of 1986; [1986] 1 WLR 286). This 'seven clear days after service on the company' rule is designed:

    (1)	to give a company served with a winding-up petition the opportunity to discharge the debt in question, if it is undisputed, before advertisement takes place, with all the necessarily potentially damaging consequences to the company; and
    (2)	to enable the company, if it wishes to dispute the debt, to apply to restrain advertisement (see Re Signland Ltd [1982] 2 All ER 610; Re A Company (No 0013925 of 1991) [1992] BCLC 562).

16. Indeed, under these rules advertisement may be restrained until there has been hearing on merits. Thus, if there is a court order forbidding advertisement of a petition, then its non-advertisement is not in itself a ground for dismissing the petition (Re Five Oaks Construction Ltd [1968] 112 SJ 86) (see also Applications to Wind Up Companies by Derek French B Sc - Blackstone Press Ltd).

17. The position concerning advertisement of a petition under Australian law is also similar to that obtaining in England. Rule 8.10 of the Rules of Court for State of Victoria provides that a notice of motion for "winding-up shall be gazetted and advertised in Form 16 not earlier than fourteen days after the notice of motion is filed and not less than fourteen days before the hearing". Clearly, Rule 8.10 is designed to ensure that the respondent company has ample time to apply to the court for an injunction which will be effective to prevent advertising and gazettal. The relevant Rules of Court in New South Wales (Rule 18(4) of Part 80 of the Rules) provides that "unless the court otherwise orders" notice of a winding-up petition application under s 364(1) of the Companies (NSW) Code

    be published once in the Government Gazette and once in a prescribed newspaper not earlier than three days after the date of service on the company of the summons claiming the order and not later than three days before the hearing.

    Thus, the English cases, namely. Re A Co. (No 008725 of 1991 & No 008727 of 1991) [1991] BCLC 633, Re A Co. (No 007923 of 1994); Re A Co. No 007924 of 1994) [1995] 1 BCLC 440, and Australian cases such as Re DR Electrical & Engineering Pty Ltd 15 ACLR 700 - September 6 and 20, 1989 - Melbourne; Commissioner of State Revenue of Victoria v The Roy Morgan Research Centre Pty Ltd 24 ACSR 73 May 30, 1997-Melbourne; and In The Matter of the Corporations Law of Victoria & In The Matter of Brick Link Pty Ltd 4524 of 1991- 1991 Vic Lexis 505, BC 9100684 are of no assistance in resolving the issue before me.

18. Hence, clearly, in both Australian and English (after 1979) jurisdictions due to the particular wording in the proviso "unless the court otherwise directs/orders", the requirement of publication and gazetting of the petition has never been construed by the English and Australian courts as mandatory - only directory. Whereas Rule 24 of our Rules makes mandatory the publication and gazettal of the petition, as it is couched as "every petition shall be advertised (in Form 4) 7 clear days or such longer time as the court may direct before hearing". Indeed, a fortiori as it is further provided in the same rule that upon failure to duly advertise, "the petition ... shall be cancelled by the Registrar and the petition shall be removed from the file unless the Judge or the Registrar shall otherwise direct."

19. Thus, in so far as advertisement and gazettal are concerned English and Australian case authorities are inapplicable in our jurisdiction since advertisement and gazettal are mandatory procedures here, and are thus not amenable to injunctive reliefs. Indeed, in Australia, in the event an injunction is granted against advertisement and gazettal a typical consequential order that is made stipulates that "the applicant refrain from gazetting or advertising the winding-up application and instead notify members and creditors of the company that the application has been made and of their right to support or oppose it" (as in the Roy Morgan case (supra)). And, in England such injunction may be made, subject to certain alternative notification procedure being carried out by the petitioner, in which event a winding-up order may be made without advertisement or gazettal. Whereas, in Malaysia there has never been a case where a winding-up order has been made without advertisement or gazettal.

20. Historically, the nearest that our courts first came to considering the question of an exemption of advertisement was way back in 1985 in the case of Re NKM Holdings Sdn Bhd [1985] 2 MLJ 390. In that case learned counsel Mr. WSW Davidson, in anticipation of the court arriving at a finding of fact that the petition had not been duly advertised in the Government gazette, asked the court to invoke s 221 (2)(b) of the Companies Act and make orders dispensing the need to advertise (that is, the first advertisement) the petition. This resulted in the learned Judge expressing the following views:

    I agree with Mr. Davidson that the need to gazette has indeed deteriorated into a mere formality and in the face of the existence of widely circulated daily newspapers has perhaps become an anachronism.

21. While confirming the exercise of the learned Judge's discretion to dispense with advertisement in the gazette and newspapers of the new date for hearing of the petition, Seah SCJ who delivered the judgment of the Supreme Court in the appeal against the judgment of the High Court struck down the tentative though implied suggestion of George J (see NKM Holdings Sdn Bhd v Pan Malaysia Wood Bhd [1987] 1 MLJ 39) with unusually strong language. This was how the mandatory nature of Rule 24(1) of the Rules was expressed by the learned Supreme Court Judge:

    With respect to the learned Judge, we are unable to agree with his view. Advertisement of a winding-up petition in the Gazette is a statutory requirement [see Rule 24(a) of the Companies (Winding-up) Rule 1972] and deliberate non-compliance with this provision may result in adverse consequences. It must always be borne in mind that we are Judges, not legislators. The constitutional function of the courts is not only to interpret but also to enforce the laws enacted by Parliament. In enforcing the law we must be the first to obey it. It should be noted that the power of a court to proceed in a particular course of administering justice, was one of substance and not merely of form. The duty of the court, and its only duty, is to expound the language of the Act in accordance with the settled rules of construction. The court has nothing to do with the policy of any Act which it may be called upon to interpret. That may be a matter for private judgment. It seems to us to be unwise as it is unprofitable to cavil at the policy of an Act of Parliament, or to pass a covert censure on the Legislature.

22. Then, about three years hence, the Supreme Court, in Chip Yew Brick Works Sdn Bhd v Chang Heer Enterprise Sdn Bhd [1988] 2 MLJ 447, had occasion to rule that advertisement, under our jurisdiction, is a mandatory requirement with the following dicta; 

    ... the Companies (Winding Up) Rules 1972 require that every petition should be advertised and it is immaterial whether the effect of such advertisement in a particular case would result in damage being caused to the company proposed for winding up. Even if the advertisement would in fact cause such damage, this is not a ground to prevent a bona fide petitioner from advertising.

23. It is noteworthy that certain other provisions of the Rules have already been construed to be mandatory in nature by our courts. The Court of Appeal in Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank Bhd [1997] 3 AMR 2321 had unequivocally held Rule 30(1) of the Rules — which required affidavits supporting the company's notice of intention to oppose the petition to be filed and a copy thereof served on the petitioner or his solicitors at least seven days before the hearing of the petition — to be a mandatory provision requiring strict compliance. Similarly, s 226(3) of the Companies Act has also been construed by the Court of Appeal in CGU Insurance Bhd v Asean Security Paper Mills Sdn Bhd [2001] 1 AMR 477 to be a mandatory provision. Although this decision of the Court of Appeal was reversed by the Federal Court, in CGU Insurance Bhd v Asean Security Paper Mills Sdn Bhd [2002] 2 AMR 1489, yet the ratio of the Court of Appeal that s 226(2) is a mandatory provision was not disturbed.

24. In the event, I held that Rule 24 of the Rules imposes upon the petitioner a mandatory rather than directory requirement to advertise and gazette the petition upon the filing of same, which debars this court from granting the injunction sought, and I dismissed the ex parte application in Encl 5.

25. In my considered opinion, ass 218 of the Act has prescribed a substantial period of 21 days grace period to enable the company to apply for an injunction against the filing of a winding-up petition, the intention of our Legislature is that once a petition is filed the question of solvency of a company is to be determined at the ultimate hearing of the winding-up application, and the fact that there is a matter of dispute ought not to give rise to a ground for the premature striking out or stay of a petition in limine. Further, in any event it is trite that equity is averse to assisting a party who sleeps on his rights.

26. Promptly after my decision the respondent lodged an appeal to the Court of Appeal (vide Mahkamah Rayuan Sivil No W-03-29-01) and applied for an injunction to restrain advertisement and gazettal of the petition. This was granted (to restrain advertisement and gazettal) for the period until the next date fixed for hearing of the petition before me. And, as under our Act and Rules no winding-up order could be made unless Rule 24 (the advertisement and gazettal requirement) is complied with, the petition had to be adjourned to another date and thus remained in permanent suspension as the result of the said injunction. This, it was envisaged, will result in the respondent making yet another application to the Court of Appeal for extension of the injunction for the period until the next fresh date for the hearing of the petition, which, in turn would, for the same reasons aforesaid be further adjourned again to a fresh date and so forth, ad infinitum. Due to the completely checkmated position that the court below (my court) and the court above was placed, I took it upon my self to call counsel for both parties to chambers to explain the situation. Fortunately, good sense prevailed - the petitioner withdrew its petition, and the respondent, its appeal to the Court of Appeal.

    In postscriptum

27. A further reason why a company, upon service of a s 218 notice, should act with alacrity on its rights is that I have received complaints from lawyers that there are certain lawyers who, deliberately for added impact, withhold serving the winding-up petition until after it has been advertised and/or gazetted. Clearly, such an act should be deprecated in the strongest terms, as it borders on unethical conduct. A further observation is that I have often had to deal with a significant number of petitions for company winding-up grounded upon unacknowledged debts of a mere several thousand dollars. To curtail the number of such petitions I would suggest that the Legislature consider increasing the ridiculous threshold sum of a paltry RM500 in s 218(2) of the Companies Act 1965 to at least RM50,000 or RM100,000, bearing in mind that under the Bankruptcy Act such threshold sum had been increased from RM2,000 to RM10,000 many years ago — indeed, with suggestions for a further increase. Such increase in the threshold sum has now become even more feasible considering the perturbing tendency of corporate creditors to adopt the short-cut route, through the statutory court in enforcing what are essentially and clearly common-law court claims. Lastly, another observation which I had occasion to record is the peculiar motivation (not grounds) for resisting winding-up petitions that one at times encounter. I was recently surprised to hear counsel (as in Petition 28-926-2001) state that though the subject company was dormant and defunct, he was nevertheless instructed to resist the petition solely because if the winding-up order is made it would impinge on the directors' capacity to apply for loans from banks or finance companies in future — in other words, defunct companies should remain in the register of companies if only to serve the personal interests of directors.

A Company (No 0013925 of 1991), Re [1992] BCLC 562; A Company (No 008725 of 1991 and No 008727 of 1991), Re [1991] BCLC 633; A Company (No 007923 of 1994), Re A Company No 007924 of 1994) [1995] I BCLC 440; CGU Insurance Bhd v Asean Security Paper Mills Sdn Bhd [2001] 1 AMR477; CGU Insurance Bhd v Asean Security Paper Mills Sdn Bhd [2002] 2 AMR 1489; Chip Yew Brick Works Sdn Bhd v Chang Heer Enterprise Sdn Bhd [1988] 2 MLJ 447; Commissioner of State Revenue of Victoria v The Roy Morgan Research Centre Pty Ltd 24 ACSR 73; Crocuses & Daffodils (M) Sdn Bhd v Development & Commercial Bank Bhd [1997] 3 AMR 2321; DR Electrical & Engineering Pty Ltd, Re, 15 ACLR 700; Five Oaks Construction Ltd, Re [1968] 112 SJ 86; Foursea Construction (M) Sdn Bhd [1998] 4 AMR 3508; In The Matter of the Corporations Law of Victoria and In The Matter of Brick Link Pty Ltd 4524 of 1991 (1991) Vic Lexis 505 BC 9100684); Land Executive Committee of Federal Territory v Syarikat Harper Gilfillan Bhd [1981] 1 MLJ 234; Lim Hean Pin v Thean Seng Co Sdn Bhd [1991] 2 MLJ 564; NKM Holdings Sdn Bhd v Pan Malaysia Wood Bhd [1987] 1 MLJ 39; NKM Holdings Sdn Bhd, Re [1985] 2 MLJ 390; Pickwick International [1972] 3 All ER 384; Shell Malaysia Trading Sdn Bhd v Pemungut Duti Setem Pulau Pinang [1998] 1 AMR 616; Shing Hup Hin Construction Sdn Bhd v General Soil Engineering Sdn Bhd [1999] 2 AMR 1688; Signland Ltd, Re [1982] 2 All ER 610; Solid Kitchen Sdn Bhd v Regal Development Sdn Bhd [1998] 6 MLJ 417

Legislations

Companies (NSW) Code: s.364(1)

Rules of Court (NSW): R.18(4) of Part 80

Rules of Court for State of Victoria: R.8.10, Form 16

Bankruptcy Act 1967

Companies (Winding-Up) Rules 1972: R.24, R.24(1), R.30(1)

Companies Act 1965: s.218, s.218(2), s.221, s.221(2)(b), s.222, s.223, s.226(2), (3), s.243

Companies (Winding-Up) Rules 1949: R.28

Companies Act: s.226

Insolvency Rules 1986: R.4.11(1)

Practice Direction No 1 of 1986

Derek French B Sc, Applications to Wind Up Companies, Blackstone Press Ltd

Snell's Equity, 13th Ed

Representation

Michael Chow (Logon Sabapathy & Co) for Respondents

Richard Tee and Grace Chin (Richard Tee & Co) for Petitioners

This decision is also reported at [2002] 4 AMR 4161