The Court of Appeal in Westech Sdn Bhd (in voluntary liquidation) v Thong Weng Lock (as surviving partner of Thong Kee Trading Co) [2014] 3 MLJ 427 [“Westech”] was confronted with the question of whether the leave of Court is required for a party to commence/proceed with any action/proceeding against a company after the commencement of a members voluntary winding up.[1]
The Court of Appeal answered the question in the affirmative and its decision was premised upon the following:
“[34] In our view the language in s 263(2) of the Companies Act 1965 is patently clear that no action or proceeding is to be commenced or proceeded with against a company after the commencement of a winding up is made except with leave of the court. The section makes no distinction between a voluntary winding up by members of the company or winding up by a creditor on the ground of the company’s insolvency.”[2] (underline mine)
Section 263(2) of the Companies Act 1965 (“CA 1965”) provides that:
“Property and proceedings
…
263 (2) After the commencement of the winding up no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.”
At first glance, the Court of Appeal in Westech appears to have gotten it right. After all, as Abdul Aziz Abd Rahim JCA points out, Section 263(2) of the CA 1965 does not make any distinction between members’ voluntary winding up and creditors’ voluntary winding up.
Even the marginal note[3] for Section 263 merely states “Property and proceedings,” which appears to leave room for the section to be applicable to both members’ voluntary winding up and creditors’ voluntary winding up.
However, the Court of Appeal in Westech went wrong when it failed to take into account the relevant sub-divisions and relevant sub-section of the CA 1965.
Relevant Sub-divisions
Pursuant to Section 70 of the Interpretation Acts 1948 and 1967, the Courts are required to take notice of “Sub-divisions of Acts of Parliament, Ordinances and Enactments”:
“When an Act of Parliament, Ordinance or Enactment is divided into parts, chapters, titles or other sub-divisions, the fact and particulars of such division shall, with or without express mention thereof in the Act of Parliament, Ordinance or Enactment, be taken notice of in all courts and for all purposes whatsoever.” (underline mine)
Sections 260 to 263 of the CA 1965 are located within Subdivision (3) of Division 3 of Part X of the CA 1965, which relates to “Provisions applicable only to Creditors’ Voluntary Winding Up”:
If the Court of Appeal in Westech had looked at Subdivision (3) of Division 3 of Part X of the CA 1965, it would/should not have concluded that Section 263(2) applies to voluntary winding up by members of the company.
Since Parliament has expressly included Section 263 in a subdivision that only applies to creditors’ voluntary winding up, pursuant to Section 70 of the Interpretation Acts 1948 and 1967, the Court of Appeal in Westech was mistaken to have answered the question in the affirmative based on Section 263(2) of the CA 1965.
If Section 263(2) of the CA 1965 was located in Subdivision (2) of Division 3 of Part X of the CA 1965 [on Provisions applicable only to Members’ Voluntary Winding up] or Subdivision (4) of Division 3 of Part X of the CA 1965 [on Provisions applicable to every Voluntary Winding Up], then the Court of Appeal could argue that its conclusion is justified. However, as it stands, the only reasonable inference is that the Court of Appeal in Westech was in error.
Relevant Sub-section
In Lembaga Tatatertib Peguam-Peguam v Hoo Lin Coln & Anor [2008] 4 MLJ 1, the Federal Court noted that:
“It is a rule of statutory interpretation that a section must be read as a whole. In this regard reference may be made to Bindra’s Interpretation of Statutes (7th Ed) where it says at pp 62-63:
Every section must be read as a whole and self-contained, with the inclusion of saving clauses and provisos (Venkataswami Naidu v Narasram AIR 1966 SC 361). ‘It is an elementary rule,’ says Subbarao J, ‘that construction of a section is to be made of all the parts together (Gurmej Singh v Pratap Singh AIR 1960 SC 122) and that ‘it is not permissible to omit any part of it’ (State of Bihar v Hiralal AIR 1960 SC 47). Sub-sections in a section must, therefore, be read as part of an integral whole and as being inter-dependant, each portion throwing light, if need be, on the rest (Madanlal Fakir Chand v Changdeo Sugar Mills AIR 1962 SC 1543), and a harmonious construction should be placed on them for the purpose of giving effect to the legislative intent and object (Asharfi Lal v Board of Revenue [1977] AWC 454.)”[4] (underline mine)
More recently, the Federal Court in Kesatuan Pekerja-Pekerja Bukan Eksekutif Maybank Bhd v Kesatuan Kebangsaan Pekerja-Pekerja Bank & Anor [2018] 2 MLJ 590 reaffirmed the need to read subsections of a section as a whole:
“In interpreting s 12 of the TUA 1959, an interpretation which meets the purport and design of that provision ought to be considered. It is a cardinal rule of interpretation of statutes that the provisions must be read as a whole. Section 12 of the TUA 1959 consists of three subsections and in our view all the same must be read together and as a whole. To read in isolation sub-s (1) of the same would lead to an unnatural meaning to that provision.[5] (underline mine)
This means that Section 263(2) of the CA 1965 has to be read together with other sub-sections in Section 263 of the CA 1965, namely Section 263(1) of the CA 1965 which states that:
“263. (1) Any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of a creditors’ voluntary winding up shall be void.” (underline mine)
Since Section 263(1) of the CA 1965 makes explicit reference to a creditors’ voluntary winding up, this leans in favour of interpreting the phrase “the winding up” in Section 263(2) of the CA 1965 as being limited to creditors’ voluntary winding up.
It is unclear why Parliament and/or the draftsman failed to consistently employ the same phrasing, namely “creditors’ voluntary winding up”, in both Sections 263(1) and 263(2) of the CA 1965.
Nevertheless, in light of the rule of statutory interpretation that a section must be read as a whole, Section 263(2) of the CA 1965 cannot be read to apply to both members’ voluntary winding up and creditors’ voluntary winding up.
In view of the foregoing, the Court of Appeal in Westech was wrong to have decided that the leave of Court is required for a party to commence/proceed with any action/proceeding against a company after the commencement of a members voluntary winding up premised on Section 263(2) of the CA 1965.
Although the CA 1965 has been replaced by the Companies Act 2016, Section 451(2) of the Companies Act 2016 is in pari materia with Section 263(2) of the CA 1965 and the decision of the Court of Appeal in Westech remains a binding precedent,[6] albeit an incorrect one, on the issue of the necessity of leave vis-à-vis a company voluntarily wound up by its members.
The Court of Appeal in Ganda Setia Cemerlang Sdn Bhd & Anor v Maika Holdings Bhd (in liquidation) [2017] 6 MLJ 661 (“Ganda Setia”) had the opportunity to correct the error committed in Westech but failed to do so.
The Court of Appeal in Ganda Setia referred to Westech[7] and, unfortunately, took the same position that the leave of Court is necessary pursuant to Section 263(2) of the CA 1965 even in members’ voluntary winding up.[8]
Regrettably, both Westech and Ganda Setia remain good law until overruled by a Federal Court decision on this point.
[1] Westech Sdn Bhd (in voluntary liquidation) v Thong Weng Lock (as surviving partner of Thong Kee Trading Co) [2014] 3 MLJ 427, at pp. 436-437
[2] Westech Sdn Bhd (in voluntary liquidation) v Thong Weng Lock (as surviving partner of Thong Kee Trading Co) [2014] 3 MLJ 427, at p. 439
[3] Our Courts have accepted that marginal notes can be of use to identify the general purpose of a section. See Lim Phin Kian v Kho Su Ming [1996] 1 MLJ 1, at pp. 28-29: “In respect of sidenotes, I would refer to what Upjohn LJ said in Stephens v Cuckfield Rural District Council [1960] 2 QB 373 at p 383: While the marginal note to a section cannot control the language used in the section, it is at least permissible to approach a consideration of [the section’s] general purpose and the mischief at which it is aimed with the note in mind.”
[4] Lembaga Tatatertib Peguam-Peguam v Hoo Lin Coln & Anor [2008] 4 MLJ 1, at p. 23
[5] Kesatuan Pekerja-Pekerja Bukan Eksekutif Maybank Bhd v Kesatuan Kebangsaan Pekerja-Pekerja Bank & Anor [2018] 2 MLJ 590, at p. 613
[6] Public Prosecutor v Yong Thiam Fatt [1980] 2 MLJ 145, at p. 146: “The court was dealing with Regulation 3(2) of the Motor Vehicles (Third Party Risks) Regulations, 1946 but the provisions of that regulations are in pari materia with section 74(2) of the Road Traffic Ordinance. As a decision of the Court of Appeal is binding on all courts subordinate to it, it must be followed until otherwise altered by the Federal Court.”
[7] Ganda Setia Cemerlang Sdn Bhd & Anor v Maika Holdings Bhd (in liquidation) [2017] 6 MLJ 661, at pp. 669-670
[8] Ganda Setia Cemerlang Sdn Bhd & Anor v Maika Holdings Bhd (in liquidation) [2017] 6 MLJ 661, at p. 667
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