Mak Lin Kum and Mohd Faizal Izzul Faris for the Applicants [Messrs Syed Ibrahim & Co.] Gavin Jay Anand Jayapal, Tanusha Ratnam and Santhyaa Venugopal for the Respondents [Messrs Gavin Jayapal] PENCELAH Justin Ong for the Intervener [Messrs

IN THE HIGH COURT OF MALAYA IN KUALA LUMPUR COMMERCIAL DIVISION ORIGINATIONG SUMMONS NO.: WA-28JM-12-03/2020 In the matter of Coconut Three Sdn Bhd (Company No: 1176027-X) And In the matter of section 404 and 405 and Ninth Schedule of the Companies Act, 2016 And In the matter of Companies (Corporate Rescue Mechanism) Rules 2018 BETWEEN SPACIOUS GLORY SDN BHD …APPLICANT (Company No: 1176027-X) AND COCONUT THREE SDN BHD …RESPONDENT (previously known as Nexgram Land Sdn Bhd) (Company No: 1016195-X) JUDGMENT (Judicial Management and Leave To Commence) 1. There are before this court 2 applications, which are enclosure 1 and enclosure 14 with the former being an application by Spacious Glory Sdn Bhd (Applicant) for the appointment of a judicial manager 1 known as En Mohd Afrizan (Proposed JM) to be appointed for the respondent, Coconut Three Sdn Bhd (Respondent) pursuant to sections 404 and 405 of the Companies Act 2016 (Enclosure 1) and the latter an application by the same Applicant and one Lau Tian Kiat (Lau) for leave to continue with its proceedings against the Company pursuant to section 410(c) of the Companies Act 2016 (Enclosure 14). 2. The grounds for Enclosure 1 are as follows:- a) the Applicant is a judgment creditor of the Respondent for a sum of RM12.5 million; b) by an announcement dated 14.2.2020, the Respondent’s holding company, Nexgram Holdings Sdn Bhd (NHB) announced that Messrs Justin Faye had presented a winding up petition (WU Petition) against the Respondent; c) it would be in the interest of the creditors of the Respondent if a judicial management order is granted; d) the creditors of the Respondent would be better served if a judicial management order is granted. 3. Whilst the grounds for Enclosure 14 are as follows:- a) there is a cross appeal filed by the Applicant and Lau against the Respondent at the Court of Appeal vide Civil Appeal No. W- 02(NCC)(W)-1622-08/2018 (1622 Appeal); 2 b) there is a counter claim filed by the Applicant and Lau against the Respondent at the Kuala Lumpur High Court vide suit no, WA-22NCC-210-04/2019. Background 4. The Applicant had brought a claim against the Respondent in the Kuala Lumpur High Court vide Suit No. WA-22NCC-291-07/2017 (Suit 291) claiming a sum of RM12.5 million pursuant to a share sale agreement between the Applicant and the Respondent and obtained judgment (Suit 291 Judgment) upon conclusion of a full trial. 5. The Applicant is also the single largest unsecured creditor of the Respondent. 6. The Respondent has appealed vide Appeal 1622 against the Suit 291 Judgment. 7. On 14.8.2018 an order for the stay of the Suit 291 Judgment was granted (Stay Order) to the Respondent upon the undertaking that the Respondent does not dispose or transfer its single largest asset, being a building registered under its name and having an address at Tower 7, Avenue 3, The Horizon, Fasa 1, Bangsar South, No. 8 Jalan Kerinchi, 59200 Kuala Lumpur (Nexgram Tower) without the leave of the court pending the disposal of Appeal 1622 . 8. On 14.12.2018, leave was granted to the Respondent to dispose off Nexgram Tower to one Dato Idrus bin Mohd Satha (IMS) at a price 3 of RM67 million and the sum of RM12.5 million to be segregated from the sale proceed to Messrs Haq & Associates Law Offices (HALO) the solicitors for the Respondent (14.12.2018 Order) 9. On or around 15.11.2019 a sum of RM12.5 million was deposited with HALO pursuant to the 14.12.2018 Order. 10. In February 2020, the Respondent’s former solicitors, Messrs Justin Faye (MJF), had filed a winding up petition alleging that there are outstanding legal fees to be paid by the Respondent which was not disputed. Applicant’s Submissions 11. The Applicant submits that the respondent has vigorously opposed Enclosure 1 herein but has failed to provide a sensible solution for the issues in question and that it cannot be denied that the Respondent has failed to appoint a solicitor to oppose the WU Petition. 12. The Applicant further submits that as of to-date the Respondent has chosen not to settle the legal fees owed to MJF despite having obtained the sum of RM67 million and having a surplus of RM8 million upon payment of the redemption sum and setting aside the RM12.5 million. Thus the court should infer from the same that the Respondent intends for the company to be wound up. 13. It is contended by the Applicant that since the Respondent has taken the position that the Applicant is not a creditor of the 4 Respondent, the respondent has no intention to cause the payment of RM12.5 million to the Applicant even if Appeal 1622 is dismissed and the Stay Order lifted and hence the conduct of the Respondent amplifies the need for a judicial manager to safeguard the interest of the creditors particularly the Applicant as the single largest creditor of the Respondent. 14. The Applicant also submits that the Respondent has failed to provide an explanation as to why the interest of the creditors would be better served by resorting to the winding up of the company as the judicial manager acts as an independent third party to safeguard the interest of the company and creditors. 15. It is also contended by the Applicant that the interest of the Respondent would not be prejudiced if the OS is granted as the Respondent has completely disregarded the interest of creditors by opposing this application when there was no reason in doing so, and that the Respondent was denying the Applicant of its fruits of the litigation 16. The Applicant has also submitted that the court should weigh the interest of the creditors of the Respondent as opposed to the Respondent who has no genuine interest in the company Respondent’s Submissions 17. In respect of Enclosure 1, the Respondent contends that: 5 i. the Applicant does not have the requisite locus standi to initiate Enclosure 1 since it is not a creditor of the Respondent as Suit 291 Judgment has been stayed; ii. the Applicant has utilized the judicial management for a corollary purpose to gain control over the Respondent; iii. the proposed Judicial managers are not fit and proper. 18. The Respondent further submits that it is actively negotiating to settle the legal fees owing to MJF. 19. It is also contended by the Respondent that the NHB had in its announcement on 14.2.2020 stated that the Respondent had been served with the WU Petition and intended to oppose it. Courts Findings 20. This Court will firstly deal with Enclosure 1 and subsequently rule on Enclosure 14 should the Court allow Enclosure 1. Issue of Locus Standi 21. Under section 405 of the Companies Act 2016 any member or the board of directors, or a creditor, including any contingent or prospective creditor or all or any of those parties, together or separately, may make an application under section 404 as the said section 405 reads: 6 “1) Where a company or its directors, under a resolution of its members or the board of directors, or a creditor, including any contingent or prospective creditor or all or any of those parties, together or separately, makes an application under section 404, the Court may make a judicial management order in relation to the company …”. 22. The Stay Order which can be found at exhibit LTK-4 of the Applicant’s Affidavit In Support in enclosure 2 hereof, shows that the Judgment has been stayed, the effect of which in this Courts view is that there is technically no judgment obtained by the Applicant against the Respondent. 23. Even though section 405 of the Companies Act 2016 or the said Companies Act 2016 itself does not define the term “contingent or prospective creditor”, I agree with the Applicants solicitors and respectfully adopt that guidance maybe taken from the Singapore case of Re People’s Parkway Developmenty Pte Ltd [1992] 1 SLR 413 where LP Thean J following various cases in other jurisdictions had held “The expression ‘contingent or prospective creditor’ has not been defined in the Act”. In the case of Re William Hockley Ltd [1962] 1 WLR 555; [1962] 2 All ER 111 at p 558, Pennycuick J expressed his view as follows: “The expression ‘contingent creditor’ is not defined in the Companies Act 1948, but must, I think, denote a person towards whom under an existing obligation, the company may or will become subject to a present liability on the happening of some future event or at some future date”.(emphasis mine) 7 That definition was quoted (without any disapproval) by the High Court of Australia in the case of Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455” 24. This court is also of the view that the term ‘creditor’ in section 405 of the Companies Act 2016 must include all persons having any pecuniary claims against the Respondent. I find authority for this in the case of Re Butterworth Products & Industries Sdn Bhd (Khaw Saw Mooi & POrs, Petitioners) [1992] 1 MLJ 429 where Mohamed Dzaiddn J (as he then was) held: “the term 'creditor' has been given the widest possible meaning by the court, and has been held to include all persons who have, or who will or may have, any pecuniary claim against the company, whether the claim is liquidated or not; and whether it is subject to a contingency or not. (Re Midland Coal Coke and Iron Co Craig's Claim [1895] 1 Ch 267.)” 25. Following from the same and the fact that the said section 405 refers to the term creditor to include any “contingent or prospective creditor”, I find that the Applicant by virtue of Suit 291 is a creditor of the Respondent as not only does the Respondent have a pecuniary claim against the Respondent but the Respondent may or will become subject to a liability to the Applicant if the Suit 291 Judgment is affirmed in Appeal 1622 and accordingly for the purposes of the said section 404 of the Companies Act 2016, this court holds that the Applicant does have the locus to apply for the 8 application for a judicial manager pursuant to section 404 of the Companies Act 2016 Main Issues In Support of Enclosure 1 26. Section 404 of the Companies Act 2016 states:- “An application for an order that a company should be placed under a judicial management and for an appointment of a judicial manager may be made to the Court by the company or its creditor if the company or its creditor considers that: (a) the company is or will be unable to pay its debts; and (b) there is a reasonable probability of rehabilitating the company or of preserving all or part of its business as a going concern or that otherwise the interests of creditors would be better served than by resorting to a winding up”. 27. This Court will therefore pursuant to Section 405 of the Companies Act 2016 have to consider whether the Respondent company is or will be unable to pay its debts and it considers that the making of the order is likely to achieve one or more of the following purposes as stated in Section 405 (1)(b) of the Companies Act 2016 which are: i. the survival of the company or the whole or part of its undertaking as a going concern; 9 ii. the approval of a compromise or arrangement between the company and its creditors; iii. a more advantageous realisation of the company’s assets would be effected than on a winding up. 28. The term ‘likely’ has not been defined in the Companies Act 2016 but the term ‘likely’ has been held in the UK in the case of AA Mutual International Insurance Co Ltd Re[2004] EWHC 2430 (Ch) to mean the applicant to demonstrate on a balance of probabilities that it is ‘more probable than not’ that this criterion will be fulfilled. I respectfully adopt the same definition for the purposes of defining the term ‘likely’ under Section 405 of the Companies Act 2016. 29. In Leadmont Development Sdn Bhd v Infra Segi Sdn Bhd And Another Suit [2019] 8 MLJ 473, Wong Chee Lin JC (as she then was) had quoted Hansard in her grounds of judgment and stated that: "[21] It is clear from the Hansard, that the judicial management was introduced to rehabilitate companies that are under financial distress and to reduce the number of cases where companies are wound up: Datuk Liang Teck Meng (Simpang Renggam): minta Menteri Perdagangan Dalam Negeri, Koperasi dan Kepenggunaan menyatakan berapakah jumlah kes syarikat yang digulungkan sepanjang tempoh 2010 hingga 2014 dan apakah peranan kerajaan dalam menangani kes syarikat yang digulungkan? Timbalan Menteri Perdagangan Dalam Negeri, Koperasi dan Kepenggunaan (Dato’ Paduka Ahmad Bashah bin Md Hanipah): … Jumlah syarikat yang digulungkan sepanjang tempoh 2010 hingga bulan Ogos 2014 adalah sebanyak 9,010. Dari jumlah tersebut 10 sebanyak 3,396 syarikat telah digulungkan secara sukarela manakala sebanyak 5,614 syarikat telah digulungkan melalui perintah mahkamah. Kementerian Perdagangan Dalam Negeri, Koperasi [2019] 8 MLJ 473 at 481dan Kepenggunaan prihatin berhubung keperluan memperkenalkan satu mekanisme untuk menyelamatkan syarikat-syarikat yang mengalami masalah kewangan. Namun masih boleh dipulihkan untuk beroperasi secara sedia kala. Dalam hal ini, Suruhanjaya Syarikat Malaysia yang merupakan agensi kementerian ini telah mengambil inisiatif untuk memperkenalkan beberapa mekanisme penyelamat korporat melalui pembaharuan yang sedang dilakukan kepada Akta Syarikat 1965. Mekanisme yang dicadangkan ini akan menjadi satu alternative kepada penggulungan atau pembubaran syarikat. Antaranya ialah pengurusan kehakiman …” 30. Taking parliaments intention and the criteria’s mentioned in the said section 405 of the Companies Act 2016, this court will now examine each of the components referred to in the said section. 31. As to whether the Respondent company is or will be unable to pay its debts, the fact that the Respondent has the WU Petition filed against it, is in this courts view prima facie evidence of the same, and thus this Court is satisfied that the Respondent has been shown to be unable to pay its debt in accordance with section 405(1)(a) of the Companies Act 2016. 32. This Court will now consider whether the making of the order is likely to achieve one or more of the following purposes stated in section Section 405 (1)(b) of the Companies Act 2016. In coming to 11 my decision on the same, the burden of proving the fulfillment of the said purposes is upon the Applicant who has to convince this court that the making of the order as prayed for under Enclosure 1 is likely to achieve one or more of the purposes as stated in Section 405 (1)(b) of the Companies Act 2016. It has been said in the Court of Appeal case of CIMB Islamic Bank Bhd v Wellcom Communications (NS) Sdn Bhd & Anor [2019] MLJU 148; [2019] 4 CLJ 1, that: “[9] The effect of making a judicial management order in relation to an insolvent company which may have no prospect of recovering money or assets within a reasonable time indeed may be very drastic. Thus, the court's consideration at all stages, that is to say from the date the application is filed and from the date of the order, if any is given, must be based on strict proof and evidence and not merely surmise and conjecture..” 33. I have thus considered the Applicants contention that the Respondent has allegedly failed to provide a sensible solution for the issues in question and consequently that it cannot be denied that the Respondent has failed to appoint a solicitor to oppose the WU Petition. I find from this contention that the Applicant has pushed the burden of proving why the orders prayed for under enclosure 1 should not be given, instead of the Applicant itself having to prove to this Court that any one or more of the purposes as stated in Section 405 (1)(b) of the Companies Act 2016 has been fulfilled. It is not the duty nor the obligation of the Respondent herein in opposing Enclosure 1 to provide such a solution to the issues in 12 question, but , at the risk of repeating myself, the burden of proof is on the Applicant to show why Enclosure 1 should be granted premised on any one or more of the matters set out in Section 405 (1)(b) of the Companies Act 2016. In any event as can be seen in exhibit CT 8 of enclosure 9, which is the Respondents Affidavit In Reply, NHB had in its announcement on 14.2.2020 stated that the Respondent had been served with the WU Petition and intended to oppose it as per paragraph d therein 34. In this respect I am also of the opinion that even if the Respondent company was wound up, there is no bar to the Applicant making a claim for the alleged debt owed to them in the winding up process or that the Respondent’s assets which would include the RM8 million surplus cannot be dealt with by the Liquidator in the winding up instead of a judicial manager, and thus on this point the Applicant has not shown, to this court, based on the evidence before it, that a more advantageous realisation of the company’s assets would be effected than on a winding up of the Respondent. 35. I also find that that the allegation that the Respondent intends for the company to be wound up as the Respondent has chosen not to settle the legal fees owed to MJF despite having obtained the sum of RM67 million and having a surplus of RM8 million, does not in my view satisfy any of the purposes mentioned in Section 405(1)(b) of the Companies Act 2016 but is only evidence of the Respondent not settling its debts. It is for the Applicant prove to this Court that a more advantageous realisation of the company’s assets would be effected than on a winding up and not the issue of whether the Respondent does intend for the company to be wound up, which is 13 in my view wholly immaterial. In an application for judicial management which is premised inter alia on the ground that a judicial management order would be more advantageous than a winding up against the Respondent, as in this case, it is incumbent upon the applicant to show to this court that a more advantageous realisation of the company’s assets would be effected in a judicial management order than on a winding up, which I find that the Applicant herein has failed to do. 36. As to allegation that the respondent has no intention to cause the payment of RM12.5 million to the Applicant and hence the conduct of the Respondent amplifies the need for a judicial manager to safeguard the interest of the creditors particularly the Applicant as the single largest creditor of the Respondent, I hold again that this is not a factor to be considered under Section 405(1)(b) of the Companies Act 2016 and the said allegation does not promote or is evidence of any of the purposes mentioned therein being fulfilled. 37. I also with respect find that the issue of the Applicant being deprived of its fruits of the litigation or that the court should weigh the interest of the creditors of the Respondent as opposed to the Respondent who has no genuine interest in the company is not evidence nor the fulfillment of the survival of the company or the whole or part of its undertaking as a going concern, or evidence that a more advantageous realisation of the company’s assets would be effected than on a winding up. 38. In summary, this court has found: 14 a) no evidence placed before this court by the Applicant to support any of the purposes referred to in Section 405(1)(b) of the Companies Act 2016 and that the Applicant has failed to demonstrate on a balance of probabilities that it is likely i.e ‘more probable than not’ that these criterions will be fulfilled; b) from the lack of evidence before this Court, that there is no real prospect or possibility to achieve one or more of the purposes set out in section 405(1)(b) of the Companies Act 2016; c) the mere assertions that the Respondent should be placed under judicial management under section 404 of the Companies Act 2016 without any credible evidence supporting the same and merely playing lip service by repeating the words in section 405(1)(b) of the Companies Act 2016 in the application for judicial management is insufficient for the court to make any consideration in support of a judicial management application. I wish to quote Re Wan Soon Construction Pte Ltd [2003] 3 SLR(R)375 where it was stated by the Singapore High Court that the “Court is not mere rubber stamp in as much as it will accede to any every request to order such other sections or provisions to apply almost, or even wholly, as a matter of course” as well as the Singapore case of Re Genesis Technologies International (S) Pte Ltd [1994] 2 SLR 298 where the court held that a mere allegation of belief that the purposes of the judicial management would be satisfied without any substantiation would be insufficient to discharge its burden; 15 d) the application before me does not appear to this court to be honourable as the crux of Enclosure 1 is premised on the Applicant’s position as the largest single creditor of the Respondent which in my view does not necessarily take into account the view of the other creditors of the Respondent which this Court should also take into account in determining whether a judicial manager should be appointed so as to enable any one or more of the purposes under section 405(1)(b) of the Companies Act 2016 to be achieved; e) the Applicant has thus fallen short of proving to this court that any one or more of the purposes under section 405(1)(b) of the Companies Act 2016 can be achieved. 39. This court hereby finds in the circumstances of this matter that there is no need to appoint a judicial manager and thus the issue of whether the Proposed JM is fit and proper to be appointed the judicial manager under Enclosure 1 will not be addressed by this Court. Whereby this Court is dismissing Enclosure 1 with costs. Accordingly, Enclosure 14 is now academic and is hereby also dismissed with costs. Dated: 5th of November 2020 sgd. NADZARIN WOK NORDIN JUDICIAL COMMISSIONER KUALA LUMPUR HIGH COURT 16 Parties: Mak Lin Kum and Mohd Faizal Izzul Faris for the Applicants [Messrs Syed Ibrahim & Co.] Gavin Jay Anand Jayapal, Tanusha Ratnam and Santhyaa Venugopal for the Respondents [Messrs Gavin Jayapal] Justin Ong for the Intervener [Messrs Justin Faye & Partners] 17