Injunctions against winding-up must be made before they are filed

The law as it now stands allows a creditor to issue a statutory demand under section 218 of the Companies Act to claim for an undisputed debt. After 21 days, the debtor company is deemed unable to pay its debts, and a winding-up petition can be filed.

Once a winding-up petition is filed, the creditor may advertise and gazette the petition, which would ordinarily result in the debtor's accounts being frozen by its banks. Even if the debtor disputes the debt, the dispute may be raised too late in the day because once its accounts are frozen, the debtor can effectively be driven out of business.

This method has caused many a debtor to pay up even on disputed debts, for fear of having its accounts frozen.

Of course, one possibility is to injunct the winding-up proceedings. By the latest decision of People Realty Sdn Bhd v Red Rock Construction Sdn Bhd, the Court of Appeal held that the Court has no power to injunct the advertisement and gazetting of the petition. This means that once a winding-up petition is filed, there is virtually no way for the debtor who disputes the debt to stop the advertisement, effectively rendering it virtually impossible for the debtor to stop the banks from freezing its accounts.

The only remedy, therefore, is to injunct the proceedings before the winding-up proceedings are commenced. This means that any debtor who receives a section 218 notice and who intends to dispute the debt must commence injunction proceedings immediately. Otherwise, justice may be delayed, and effectively denied.

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Choice of law and forum clauses held invalid

What happens when two parties from different countries decide to enter into a contract? Commonly, the contract would contain a choice of law and choice of forum clause. The choice of law clause stipulates which country's laws would apply, and the choice of forum clause stipulates which Courts would determine the dispute.

That's a simple and clear concept, right? Well, not anymore.

In ISC Technology Sdn Bhd v Premium Systems Technology Pte Ltd, a Malaysian company sued in Malaysia against a Singaporean counterpart although the contract between them stipulated that any disputes would be determined in accordance to Singaporean laws in a Singaporean court.

The Singaporean company sought to strike out the suit on the basis of the contractual provision.

The High Court disagreed. It held instead:

(1) A contractual provision in respect of choice of law and choice of forum does not oust the jurisdiction of the Court.

(2) If the Court is satisfied on the face of the suit that the Malaysian court had jurisdiction, then it would exercise jurisdiction notwithstanding the choice of law and choice of forum clauses.

(3) The relevant provision for the Court to consider when deciding on jurisdiction would be sec23 Courts of Judicature Act, and not any private contractual stipulation.

Who says the law is simple, eh?

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Court action necessary for removal of squatters from your land

The High Court held in Abdul Aziz Mohamed Ginan v Datuk Bandar Kuala Lumpur that if there are squatters on a land, the local authorities have no power to remove them unless these squatters are on State land. Coupled with the notion that the remedy of self-help is not available in Malaysia, this means that if there are squatters on your land, the only authority capable to remove the squatters would be the Court.

Frankly, this decision may not be the most friendly decision for land-owners in Malaysia. The Court process takes time and costs. At the end of the day, there is no one for land-owners to go against for damages, since the squatters would in most likelihood be without sufficient means. That means the land-owners would be prejudiced for matters which are basically not of their own doing.

A possibility that remains is for the police to take action against the squatters on the basis that they have committed criminal trespass. This legal possibility remains, although whether the police would actually take any action pursuant to a police report of this nature or otherwise seems sometimes to be arbitrarily decided.

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Arbitration Clause struck down by Court of Appeal

In many contracts, it is common to find both an arbitration clause and an exclusive jurisdiction clause. The arbitration clause would roughly state that any dispute should be referred to arbitration. The exclusive jurisdiction clause, on the other hand, would roughly state that parties submit to the exclusive jurisdiction of the High Court of Malaya which shall have the exclusive jurisdiction to hear and determine all actions and proceedings arising out of the contract.

In the case of TNB Engineering & Consultancy Sdn Bhd v Boccard Oil and Gas Sdn Bhd, the Court of Appeal made the incredible decision that the arbitration clause would be inconsistent with the exclusive jurisdiction clause, and therefore the arbitration clause would be a nullity.

This seems to be a decision that, with respect, could be deemed to be erroneous. Surely since the parties have included an arbitration clause, that would mean parties have agreed to arbitration as a dispute resolution process. That does not contradict with an exclusive jurisdiction clause because decisions of arbitrators may nevertheless be subject to review, and this review would be by the High Court.

To hold that the arbitration clause is void would be to negate the intention of the parties to resolve disputes by arbitration in the first place.

On the other hand, the clauses could be read together, by holding that parties must first resort to arbitration, subject to the High Court's powers of review.

Holding that the arbitration clause is inconsistent with the exclusive jurisdiction clause would, with respect, adversely affect the operation of a lot of contracts in Malaysia, and effectively curtail the development of arbitration as a form of dispute resolution.

At the end of the day, Courts should bear in mind that it is not the forum but the actual resolution of the dispute which is critical.

Appeals Court denies future earnings claim

In a landmark decision of Telekom Malaysia Bhd v Ramli Akim, the Court of Appeal re-instated some sense into the manner in which Industrial Courts would award compensation for dismissed employees.

Ramli Akim was dismissed by Telekom Malaysia Bhd, and thereafter ventured into business. However, he failed in his venture. In the Industrial Court, he sought not only backwages but also for the loss of future earnings due to his failed business venture.

The Court of Appeal held:

(1) Although the Industrial Court has the discretion to determine the quantum of backwages, it should do so in accordance with the principles of justice and fairness, which should ordinarily be limited to 24 months.

(2) Delay in the Industrial Court process, where it has not been caused by the employer, should not be held against the employer in any award for backwages.

(3) The employee's failed venture into business after his dismissal, and the unlikelihood for the employee to be employed in a similar position, were irrelevant considerations not to be taken into account by the Industrial Court.

(4) Future loss of earnings is not an established or recognised head for damages in the Industrial Court.
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