Prolink Marketing Sdn Bhd v Ambank Islamic Bhd [2022] 10 CLJ 247
Court of Appeal
The court case Prolink Marketing Sdn Bhd v Ambank Islamic Bhd [2021] 1 LNS 282 involved an application made by Prolink Marketing Sdn Bhd (the Applicant) under the Companies Act 2016.
Ambank Islamic Bhd (the respondent) obtained a final judgment against Prolink Marketing Sdn Bhd (the appellant) at the High Court for, inter alia, certain sums and late payment charges.
The respondent subsequently served on the appellant the statutory notice of demand pursuant to ss. 465(1)(e) and 466(1)(a) of the Companies Act 2016 ('CA'), demanding the judgment sums.
In the same notice, the respondent also gave notice that unless the appellant paid the said sums to the respondent within 21 days from the date of the service of the notice, the appellant should be deemed unable to pay the appellant's debt and winding-up proceedings may be taken against the appellant.
The appellant, however, failed to pay the sum demanded in the said notice.
Consequently, the respondent filed the winding-up petition at the High Court and served on the appellant the sealed copy of the petition. As the petitioner, the respondent applied to wind up the appellant pursuant to ss. 465(1)(e), (h) and 466(1) of the CA.
Having considered the submission by the parties and all the evidence on 5 August 2020, the High Court Judge ('HCJ') ordered a conditional winding-up order against the appellant.
Aggrieved, the appellant appealed. The main issue was whether the HCJ was empowered to make the conditional winding-up order.
The background of the case
In Prolink Marketing Sdn Bhd v Ambank Islamic Bhd [2021], 1 LNS 282, the Applicant sought to stay the order for winding up that was issued on August 5, 2020, and requested that the order be postponed until the outcome of another court proceeding seeking to set aside a summary judgment obtained in a previous case.
The Applicant argued that the winding up order would drastically impact its business, prevent it from carrying out its operations, and hinder its ability to satisfy its debts.
The Applicant opposed the winding up petition, claiming it was due to receive payments under several investment agreements/contracts. Still, the realisation of these payments was halted due to the implementation of the Movement Control Order (MCO).
The Applicant filed the current application to seek a variation of the winding-up order and argued that it had secured new investments and contracts that would enable it to satisfy its debts.
The Applicant presented various submissions, including procuring a SGD 30 million investment, a rice supply contract worth USD 52,000,000, and evidence of its ongoing business activities.
The Applicant also mentioned other legal actions it had initiated against the Respondent and OCBC Bank.
The Respondent, Ambank Islamic Bhd, argued that the Applicant's collateral action seeking to set aside the summary judgment did not meet the requirements of the law and that the issues raised by the Applicant were already considered during the hearing of the winding-up petition.
The Respondent contended that the application was misconceived, scandalous, and oppressive, and the court's process was abused.
The court's findings highlighted that the Applicant had applied for the orders under the wrong provision of law.
The court also stated that the issues raised in the current application were not new but had already been raised and considered during the previous hearing.
The court cited precedents and held that a stay of execution should only be granted in the presence of special circumstances, which were not demonstrated in this case. The court emphasised that the focus should be on the Applicant's ability to meet its current liabilities rather than relying on potential future assets.
Based on these findings, the court concluded that the Applicant failed to establish special circumstances justifying the stay of the winding-up order.
The court held that it was not bound by a previous decision of a court of coordinate jurisdiction. It stated that the applicable test for granting a stay required the Applicant to show something that goes to the execution of the judgment rather than its validity or correctness.
The court dismissed the Applicant's application, stating that the winding up order should proceed, and encouraged the Applicant to settle its judgment debt.
In summary, the impact of this case is that the court refused to grant a stay of the winding up order against Prolink Marketing Sdn Bhd, as the Applicant failed to establish special circumstances justifying the stay. The court emphasised the importance of considering a company's ability to meet its current liabilities and upheld the decision to proceed with the winding-up order.
In Ambank Islamic Bhd v Prolink Marketing Sdn Bhd [2021] 10 CLJ 281, the court had made an order that the Respondent be given a period of 5 months from the date of the order, i.e. up to the 5.1.2021 to settle the debt due to the Petitioner failing which the Respondent will be wound up on 5.1.2021.
Court of Appeal's Findings
The Judgment has not been stayed or set aside and thus should be obeyed by the Respondent. Every Judgment is enforceable unless and until it is set aside; see Lee Tain Tshung v. Hong Leong Finance Bhd [2000] 4 CLJ 15; 3 MLJ 364.
In Prolink Marketing Sdn Bhd v Ambank Islamic Bhd [2022] 10 CLJ 247, the Court of Appeal took the position that the determination of the appeal centred on the interpretation of section 469(1)(c) of the Companies Act 2016.
Section 469(1) of the Companies Act 2016 provides as follows: -
“On hearing the petition for winding up, the Court may, by order: -
dismiss the petition with or without costs;
adjourn the hearing conditionally or unconditionally; or
make an interim order or any other order that the Court thinks fit.”
The Court of Appeal interpreted section 469(1)(c) of the Companies Act 2016.
It concluded that the phrase "any other order that the court thinks fit" grants the court discretion to make any order it deems appropriate in relation to the winding-up petition. The court's power is not limited to granting interim orders but extends to other types of orders, as indicated by the presence of the word "or" in the provision.
Having interpreted the relevant provision, the Court of Appeal proceeded to apply it.
In this instance, the Court of Appeal determined that the condition imposed by the High Court was not an independent remedy separate from the winding-up petition.
The ultimate consequence of the order, if Prolink Marketing Sdn Bhd failed to comply with the condition (i.e., making payment of the judgment sum within five months), would be the winding up of the company.
Therefore, the Court of Appeal concluded that the conditional winding-up order, which was granted under section 469(1)(c) of the Companies Act 2016, fell within the powers of the Court.
In the view of the Court, the Respondent has failed to satisfy the court that the Respondent can meet its current liabilities and therefore is unable to pay its debts. In a winding-up petition, the court is not concerned with whether the Respondent has sufficient assets that can be realised to meet the Respondent's liabilities but that it can meet its current liabilities.
Accordingly, the Court ordered that the Respondent be given a period of 5 months from the date of this order, i.e. up to 5.1.2021, to settle the debt due to the Petitioner failing which the Respondent will be wound up on 5.1.2021.
In conclusion, we can see that the decision in the Prolink Marketing Sdn Bhd case allows debtors to have more time to pay their debts, creditors to have a better chance of receiving payment, and courts to handle cases more efficiently by issuing conditional winding-up orders based on credible evidence.
In simpler terms, the decision of this case has some benefits for both debtors and creditors.
It allows debtors more time to pay their debts instead of facing immediate liquidation. This gives them breathing space and a chance to make the payment.
Similarly, creditors also benefit because they have a higher chance of receiving payment, even if it's delayed, compared to going through a lengthy winding-up process with other creditors.
The Court of Appeal's decision in this case also benefits the courts.
When a debtor company is willing to pay the debt but needs more time, the courts can issue a conditional winding-up order under section 469(1)(b) of the Companies Act 2016. This order takes effect immediately if the payment is not made within the specified time. This helps the courts manage their workload and avoid adding to the backlog of cases.
However, to prevent abuse of this option by debtor companies, the courts should require credible evidence that the debtor can and plan to pay the debt within the additional time.
Once a conditional winding-up order is granted, the debtor company will have the constant threat of liquidation hanging over them until they pay what they owe.
Comments