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Case Update: Court of Appeal determined the cause of action arose in a winding up matter

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CIVIL PROCEDURE
Jurisdiction – High Court – Company wound up by High Court Sabah and Sarawak (HCSS) – Party commenced originating summons at High Court of Malaya (HCM) – Whether HCM had jurisdiction to hear matter – Whether action ought to be instituted at HCSS – Courts of Judicature Act 1964 (CJA), sections 23(1)(a), (b) & (c)

Waris Selesa Sdn Bhd v Tradelift Indopalm Industries Sdn Bhd & Another Appeal
[2019] 6 CLJ 816, Court of Appeal
- see the grounds of judgment here

Facts The appellant, Waris Selesa Sdn Bhd and the respondent, Tradelift Indopalm Industries Sdn Bhd, had executed a management agreement of a palm oil mill (‘the mill’) (‘the management agreement’). The appellant was later wound up by the Kota Kinabalu High Court (KKHC) pursuant to a petition filed by the respondent and Dato’Chong was appointed as the liquidator for the appellant. The respondent was also ordered to be wound up by the Muar High Court (MHC). Given that the appellant was wound up by the KKHC, the respondent obtained leave to bring the action against the appellant, from the High Court of Sabah and Sarawak (HCSS). Following the winding-up of the appellant, Dato’ Chong appointed the respondent to continue the operation of the mill pursuant to a tenancy agreement (‘the tenancy agreement’). However, Dato’ Chong terminated the tenancy and management agreements, on the basis that the respondent defaulted in rental payments, and forfeited the deposits paid towards the outstanding rentals. The respondent commenced originating summons (OS) at the High Court of Malaya at Kuala Lumpur (HCM), claiming for sum of money allegedly appropriated by the appellant, received and retained by Dato’ Chong, in violation of section 223[1] of the Companies Act 1965 (‘the Act’). The appellant applied to strike out the OS, pursuant to Order 18 rule 19[2] of the Rules of Court 2012 (ROC). The High Court, (i) allowed the claim by the plaintiff for restitution of monies under section 223 of the Act; and (ii) dismissed the appellant’s application on the ground that the KLHC, instead of the HCSS, has the jurisdiction to hear the OS. Hence, this appeal.

Issues Whether the HCM has the jurisdiction to hear the OS or whether the same ought to be instituted at the HCSS; and   Whether the payments of the rentals and forfeiture of deposits, subsequent to the winding-up of the plaintiff, was contrary to s. 223 of the Act.

Held In dismissing the appeal, the Court held that HCM is the correct jurisdiction to hear the OS because the same fulfils the requirement of section 23(1)(a)[3] of the Courts of Judicature Act 1964. Secondly, the Court stated that since there was application for a validation order under section 223 of the Act, thus, the payments of the rentals and forfeiture of the deposits after the presentation of winding up petition is void.

 
 
[1] Avoidance of dispositions of property, etc.
[2] Striking out pleadings and endorsements
[3] Civil jurisdiction – general (a): the cause of action arose

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