Tutorial 8

1. Discuss the following cases:

(i) Lai Yak Kee v Pembinaan Alam Cemerlang Sdn Bhd [2012] MLJU 1802

(ii) Malaysia Air Charter Co Sdn Bhd v Petronas Dagangan Sdn Bhd [2000] 2 MLJ 98

Facts:

This is an appeal by Malaysia Air Charter Co Sdn Bhd ('the appellant') against the decision of the High
Court given on 6 May 1996 wherein the learned judge ordered the winding-up of the appellant on a
petition presented by Petronas Dagangan Sdn Bhd ('the respondent'). On 18 October 1989, the
respondent obtained a judgment in default of appearance against the appellant in the Kuala Lumpur
High Court for a sum of RM334,118.79 together with interest thereon at the rate of 8% per annum
rom 28 October 1988 until date of payment. There was no effort made to apply to have the
judgment in default of appearance set aside. On 16 October 1991, the respondent's solicitors served
on the appellant a statutory notice of demand pursuant to s 218 of the Companies Act 1965. Then
on 27 February 1992, the respondent presented a petition for winding-up of the appellant, on the
ground that the sums demanded in the notice have not been paid by the appellant company. The
appellant disputed the validity of the s 218 notice. On 6 May 1996 the High Court ordered that the
appellant be wound-up. By consent, the winding-up order was stayed pending appeal to this court.

The issue to be decided is whether s 218(2)(a) of the Companies Act 1965, is to be interpreted
literally and strictly or liberally and widely.

The presumption under s 218(2)(a) that the company was unable to pay its debts and hence
insolvent arose once it is established that: (i) a sum exceeding RM500 was due; (ii) a demand had
been made in the manner provided by s 218(2)(a); and (iii) the debtor company neglected to pay the
amount demanded within three weeks.

It is the submission of learned counsel for the appellant that s 218(2)(a) ought to be interpreted
strictly. He further submits that the statutory demand under s 218 requires the 'sum so due' to be
clearly specified and quantified and that no sums whatsoever ought to be left to be calculated
and/or ascertained by the recipient of the notice. Failure to do this would result in the statutory
notice to be invalid to raise the statutory presumption under s 218(2)(a) of the company's inability to
pay its debts.

On the contrary, learned counsel for the respondent submits that failure of the respondent to
quantify the interest due on the judgment sum, does not render the statutory notice invalid and that
the amount mentioned in the notice is sufficient compliance with the requirements of s 218(2)(a)
and not uncertain.In other words the submission on behalf of the respondent is that s 218(2)(a)
ought not to be interpreted strictly but to be interpreted liberally or widely.

Althought the court took the view that s 218(2)(a) of the Act should be strictly interpreted, it made
no difference whether the interest was quantified or not. As the respondent's notice was made in
writing, signed and delivered by the respondent's authorized agent at the appellant's registered
address and it specified the actual sum due which was undisputed, it was a good and valid notice.
Even by the non-quantification of the interest in the notice, the respondent had strictly complied
with the requirements of s 218(2)(a) (see pp 102F–G, 103C); Sri Hartamas Development Sdn Bhd v
MBf Finance Bhd [1992] 1 MLJ 313 (folld) followed.
2. On 31 December 2019 Coldplay Bank Bhd obtained a judgment against Hardtodie Sdn Bhd
for the amount of RM500,000 as at 31 December 2019 together with interest thereon at the rate of
8% per annum from 31 December 2019 until full and final realization arising from the company’s
default of a corporate loan granted to the company by Coldplay Bank Bhd.

Consequent to this on 1 February 2020 Coldplay Bank Bhd served a notice under s.466 (1) of
the Companies Act 2016 on Hardtodie Sdn Bhd for “the outstanding sum of RM500,000 as at
31 December 2019 together with interest thereon at the rate of 8% per annum from 31
December 2019 until full and final realization.” The affidavit verifying the petition was
affirmed on 15 February 2020 and filed on the same day. On 18 February 2020, Coldplay

Bank Bhd filed a winding up petition to court.

The petition was later served on Hardtodie Sdn Bhd on 19 February 2020 at its principal
business address.

(i) Hardtodie does not deny it owes Coldplay Bank Bhd but argues that the
presumption of “inability to pay its debts” did not arise because the notice was
defective as it did not quantify the interest on the principal amount owing by
Hardtodie to Coldplay Bank Bhd;

(ii) the petition can be challenged as the affidavit verifying the petition is defective and
the petition was not properly served on Hardtodie.

Advice Hardtodie on the above matters.

Secibd qiuestio, not withstanding with above the presumprtion of inability tak rise becaue Tarikh tu
1 february-snd

18 feb serve petition

So presumption dia tak arise

S466(1)(A)umBC-SND IS NOT A MERE irregulity

Re fabo apa tah-tapi ni case yang direfer oleh case lain, YPGE, Malaysia charter case

Appplication-tak payah quantify SND not like banckrupty notice in insolvency act- Notice by cold play
is valid

b-issue 1st Non comply of affidavit(bila sworn)-affodavit is a mere irregulaty r194 (CWU) , so as og as
you apply from the court to invoke for extension to be filed, kalau tak file petition boleh struck off.

Issue 2- not properly served r25 CWU-even r25 saus that if there is no company registred office you
can serve on the last place known of business. But first you have to deal with the requirement of the
registerd office, if question is silent on whethere there is a register office or not, say assuming takde
registered office,
Issue: Whether Hardtodie may oppose the notice of demand based on

Quantify

 The statutory notice of demand need not quantify the amount to the exact cent,
like bankruptcy petition

[UMBC Berhad v Richland Trade & Development [2000] 1 MLJ 385 (FC)]
Fact :The statutory notice of demand to the company claimed for 'interest of
RM64.69 per day from 26 October 1991 till date of full settlement'.
The High Court Judge held since the amount is not quantified (till date
of full settlement'), such mistake is fatal.
Held : The High Court judge ought not to apply principles enunciated in
bankruptcy cases, in cases of winding up. The demand need not
exactly quantify the amount unlike in the bankruptcy notice.
Unlike a Bankruptcy notice, there is no prescribed form of the statutory
demand or notice as the whole object of the statutory notice of demand
is to warn the debtor of an impending petition.
: For the notice to be valid, the requirements are that
i. the demand must be in writing under the hand of the creditor or
his authorised agent,
ii. it must specify the sum due (no requirement for quantifying it
to the last cent),1 and
iii. the demand must be served on the company by leaving it at the
registered office.

-masa

 What happen after a statutory demand has been issued?

1. Once a statutory demand has been issued in compliance with the statutory
requirements under the CA, if the company fails to settle the debt within the
stipulated 21-day* period after the service of the demand, the law raises a
presumption that the company is unable to pay its debts. (Because of the covid-19
pandemic, there is a new gazette on 24/4/2020, the period is now not 21 days of
compliance but is 6 months.)
2. The creditor is then entitled to present a winding up petition against the
company.
3. S.466(2) CA provides that the creditor has to file the winding up petition within 6
months from the expiry of the 21 days [or 6 months (Covid-19)] period under the
s.466(1)(a) CA. If the creditor fails to do so, then it will need to file and serve a
fresh s.466(1)(a) demand on the debtor company. It then has to wait for the expiry
of the fresh 21 days period to expire before it can file a winding up petition.
Eg : if your statutory notice of demand was served on 1/5/2020, based on the
current gazetted dated 23/4/2020, the debtor’s company has 6 months to
1
In practice, they actually will state the exact amount. Just amount without calculation
 comply instead of 21days. 6 months from 1/5/2020 would be 31/10/2020. If
there is no payment, the creditor or petitioner can file their petition beginning
from 1/11/2020. You have 6 months period and the last date to file the petition
would be 30/4/2021.
 So, if it is companies winding up by the court initiated under s466(1)(a) read together
s465(1)(e) , you need to issue out statutory notice of demand. If there is no compliance
the statutory notice of demand within the period stipulated, then you issue out your
petition.
Ground 1: Rebutting ‘Unable to Pay it’s Debts’
 This is where the company rebuts the presumption under s.446(1)(a) that the
company is “unable to pay its debts.”
 Under s.466(1)(a) CA 2016, if a claim is not paid within 21 days there can be a
presumption that the company is unable to pay its debts. The company may
challenge the petition by rebutting this presumption by showing that the
company is able to pay the debts.

[Sri Hartamas Development Sdn Bhd v MBF Finance Bhd [1992] 1 MLJ 318 SC]
Held : The presumption of inability to pay its debts only arises if

i. the requirements (the 3 requirements mentioned above2) of the section

relating to the demand have been complied with, and
ii. the company has for 3 weeks (under Covid-19, it is 6 months 3) after
service of the demand neglected to pay the sum or to secure or
compound for it to the reasonable satisfaction of the creditor.4

Service

Issue: Defective affidavit

R.26 Companies (Winding-Up) Rules 1972: 5

i. The notice is made in writing and was signed by the petitioner or its agent;
ii. It was served/delivered to the company at the company’s registered address
iii. It has specified the actual sum due which was not disputed.

3
Former CA 1965 provides for “3 weeks”, current CA states 21 days. Cases under CA1965 on this point remain
good law. The period now has been extended to 6 months as provided by the Federal Government Gazette
dated 23.4.2020 [P.U.(A) 123] on Companies (Exemption)(No.2) Order 2020 issued by Ministry of Domestic
Trade and Consumer Affairs
4
see page 318 para F
5
26. Verification of petition
Every petition for the winding-up of a company by the Court shall be verified by an affidavit referring thereto.
The affidavit in Form 7 shall be made by the petitioner or by one of the petitioners, if more than one, or, in
case the petition is presented by a corporation, by some director, secretary or other principal officer thereof,
and shall be sworn after and filed within four days after the the petition is presented, and the affidavit shall
be prima facie evidence of the statements in the petition.
 : Every petition for the winding-up of a company by the Court shall be verified by an affidavit.
Such affidavit must be in Form 7 of the Companies (Winding-up) Rules 1972. 6
: Such affidavit shall be sworn after and filed within 4 days after the petition is filed.

 But can an affidavit be sworn BEFORE a petition is filed? There are 2 approaches:

[YPJE Consultancy Services Sdn Bhd v Heller Factoring (M) Sdn Bhd [1996] 2
MLJ 482]
Fact7 : (fact)8
Held : An affidavit which is sworn before the presentation of the petition would
cause the petition to be void. (however, in this case, the affidavit was held to
be sworn prior to the petition)9

Cf
[Sam Hin Timber Co v Perusahaan Sri Duyong Sdn Bhd [1983] CLJ Rep 838]
Fact : A petition for the winding up of Sri Duyong Sdn Bhd was presented on 24
March 1983. The affidavit verifying the petition was affirmed on 8 March
1983. There was non-compliance or r.26 (As the affidavit verifying the
petition was affirmed before the presentation).

An application was made by the petitioner for extension of time for filing the
affidavit, that is for leave to reaffirm and reswear the same affidavit. The
company opposed the application.

Held : The court has the power to extend the time asked for under rr.193 and 194 of
the Companies (Winding-up) Rules (Rule 193 confers a discretion on the court
to allow extension of time). A premature swearing or affirming of such an
affidavit is a mere irregularity curable by granting an extension of time
and compensating the victim with costs.

Service affidavit

SERVICE OF THE PETITION (r.25 Companies (Winding-up) Rules 1972

6
basically the reason of this is to affirm every statement that you have in the petition.

7
On 15 June 1993, the respondent had obtained a judgment in default against the appellant. Consequent to this,
the respondent had served a notice under s 218 of the Companies Act 1965 on the appellant. No payment was
made by the appellant.

8
Fact: The respondent presented a winding up petition against the appellant in the High Court. The appellant's
counsel opposed the petition inter alia, on the grounds that the respondent's petition contravened r 26 of the
Companies (Winding-up) Rules 1972 and was defective as the verifying affidavit and the petition contained
similar dates. The High Court dismissed the appellant's preliminary objection and ordered that the appellant's
company be wound up. The appellant appealed to the COA.

9
: In this case, both the affidavits and the petitions contained the date of 10 July 1995. The trial judge was
correct for holding that the affidavit was made after the petition was presented, as the affidavit referred to the
petition which was attached to the affidavit. The trial judge was also correct in stating that r 26 had not been
infringed because the affidavit that verified the petition had been filed on 11 July 1995. Furthermore, there
was no evidence to show that the affidavit had been sworn before the petition was presented.
(a) Every petition shall be served at the company’s registered office or if none, then at its
principal or last known place of business. It can be left with any member, servant or officer of the
company. If they are not available, it can be left at the premises.

(b) The petition must also be served on the DGI and the Registrar of Companies.

(c) Upon service of the petition on the company, the DGI and the Registrar of Companies, the
petitioner must file in court an affidavit of service. (Form 5 or 6)

When a Company is deemed “unable to pay its debts”? – (s.466(1)(a) Companies Act)

S466(1): A company shall be deemed to be unable to pay its debts if

(a) when the company is indebted in a sum exceeding the amount as prescribed
by the Minister.
(b) execution or other process issued on a judgment, decree or order of any court
in favour of a creditor is returned unsatisfied
(c) the company is unable to pay its debts.

 If the creditor can show any of these 3 circumstances, it will be deemed that the
company is unable to pay its debts.
 S466(1) is a presumption provision. If any of the circumstances under s 466(1)(a)-
(c) can be shown by the creditor, it is presumed that the company is unable to pay
its debt.

• A. Rebutting the presumption under s.446(1)(a) that the company is “unable to pay its
debts.”

Under s.466(1)(a) CA 2016, if a claim is not paid within 21 days* there can be a presumption that the
company is unable to pay its debts.

 The company may challenge the petition by rebutting this presumption by showing
that the company is able to pay the debts.

 The test applied by the court is the commercial test of insolvency.

*depending on when the statutory notice was served, can be 21 days or 6 months
How to know if a company is unable to pay its debt in order to allow you to initiate a
winding up proceeding against the company.

 Under S466(1), the words “Unable to pay its debts” is a commercial test of
insolvency.
 Therefore, the question asked by the court is whether the company has money
presently available to the company, to meet the debts as they become due?
 The test is not whether the court looks at the company’s book to show that its
assets exceed its liabilities.

[Gulf Business Construction (M) Sdn Bhd v Israq Holding Sdn Bhd [2010]
5 MLJ 34 (COA)]
Fact : The petitioner obtained an order against the respondent on 3 June
2005 ('the 3 June order') directing the respondent to repay the
petitioner trust money with accrued interest. The petitioner thereafter
issued and served a notice under s 218(1)(e) of the CA 1965 (now
s.465(1)(e) CA) on the respondent's secretary. The respondent failed to
pay the sum within three weeks of the notice prompting the petitioner
to file a winding-up petition against the respondent.
Held : The test to ascertain commercial insolvency is whether the
company is unable to meet its current debts as they fall due. Such
a company would be categorised as 'unable to pay its debts' even
though:
i. it has substantial wealth which cannot be immediately
realised; and
ii. on liquidation it would be able to meet all its liabilities.
P/s: so it means that notwithstanding of the company’s financial statement
which shows that it owns various properties (missionaries, factories etc), if it
cannot pay its debt now as it dies not have enough liquidated assets to pay its
debts now, this can amount to a company’s inability to pay debts.