Bar Council Life Insurance for Members

Nomination Form

Application for Termination of Winding Up

 
Mode: Summons in Chambers (Understanding: Notice of motion is only for those matters listed in the winding up rules), supported by Affidavit in Support

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Lee Shih stated on 4.12.2017 that "The Companies Act 2016 only provides for the prescribed form under section 493 for lodging the court order for termination. This is found on the SSM website. The procedure for such termination would have to be governed generally under case law as well as the Winding Up Rules 1972. The winding up rules do not explicit set out the procedure for termination (and neither does it set out the stay procedure), but I am of the view that the application can be made by way of Summons in Chambers under Rule 6 read together with Rule 7 (2) of the Winding Up Rules.

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So the story was, we applied by SIC, and proposed to make all payments to Insolvency Department. 

Insolvency had no objections to a stay, pending their preparation of a report. 

In the end, client had to pay fees of approximately RM115K to the Insolvency Department for the termination to be granted (fees charged by the Insolvency Department).

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Moral of the story: Don't ignore demands from creditors, if you're wound up and wish to revive the company, it would be a more challenging task. 

But we managed to get the Winding Up Order terminated within 1 month of its grant, which was not bad at all. 

Settlement Proposal

1. We refer to the above matter, wherein we act for +++, the +++.

2. We also refer to your letter dated +++ and the telephone conversation between +++.

Strictly on a without prejudice basis, we are instructed by our client to propose the following terms and conditions, as full and final settlement of the above matter:-

(a) Our client is agreeable to pay the sum of +++ to your client, as full and final settlement of the above matter (“Settlement Sum”).

(b) The Settlement Sum shall be released to you as the solicitors for your client, as stakeholder on or before +++ subject to the following terms and conditions:-

(i) Your client shall forthwith withdraw +++ upon receipt of the Settlement Sum by you as stakeholder;

(ii) Upon the +++, you may proceed to release the Settlement Sum to your client; and

(iii) Both parties shall bear their own costs in relation to the above matters.

(c) This Settlement constitutes a full final settlement of all claims and/or liabilities between +++ and +++, and all Parties shall have no further claims and/or liabilities whatsoever against each other.

4. Pending negotiation between Parties, we would be grateful if your client can hold +++ in abeyance.

5. We trust you will impress upon your client that our client is prepared to resolve the above matter amicably and we would be grateful if you could revert with your client’s agreement on the above terms within seven (7) days from the date hereof.

6. For the avoidance of doubt, our client expressly reserves all its rights.

Joint and Several Liability by Farina Hanim

In a relationship between a creditor and debtor, the issue of liability is always a cause of concern. This is made even more apparent when there is more than one debtor involved as the terms of liability is not necessarily clear. Among the popular issues of contention is whether the debtors’ liability is joint or joint and several. In this commentary, we will explore this artificial distinction through the recent Federal Court case of Lembaga Kumpulan Wang Simpanan Pekerja v. Edwin Cassian Nagappan @ Marie [2021] 1 LNS 928.

1. Background facts

A suit was commenced by the Employee’s Provident Fund Board against a company and its directors, Edwin Cassian and one other, for the failure of their company to make employer contributions on behalf of its employees. A consent judgment was recorded where each of the three defendants agreed to pay arrears amounting to RM133,697.00 together with dividends and interests.

However, the judgment did not expressly specify the type of liability to be borne by them i.e. whether the defendants would be “jointly and severally” liable for the judgment sum.

When the defendants failed to comply with the terms of the judgment, the EPF Board commenced a bankruptcy action solely against Edwin Cassian who then applied to set aside the action which was allowed by the Senior Assistant Registrar of the High Court. An appeal to the judge in chambers was dismissed by the judge of the High Court.

On appeal to the Court of Appeal, the main point of contention by the EPF Board is for the court to read in the words “jointly and severally” as stipulated in Section 46 (1) of the Employees Provident Fund Act 1991 (“EPF Act”) into the judgment which reads as follows:

Joint and several liability of directors, etc

“Where any contributions remaining unpaid by a company, a firm or an association of persons, then, notwithstanding anything to the contrary in this Act or any other written law, the directors of such company including any persons who were directors of such company during such period in which contributions were liable to be paid, or the partners of such firm, including any persons who were partners of such firm during such period in which contributions were liable to be paid, or the office-bearers of such association of persons, including any persons who were office-bearers of such association during such period in which contributions were liable to be paid, as the case may be, shall together with the company, firm or association of persons liable to pay the said contributions, be jointly and severally liable for the contributions due and payable to the Fund.”

Despite the express statutory provision, this was unsuccessful in the Court of Appeal on the basis that the bankruptcy action commenced against Edwin Cassian was for the whole judgment sum, instead of only the portion owed by him.

2. Federal Court decision and the diverging authorities before it

The sole question posed before the Federal Court is on the point of law:

“Whether this Court should give effect to the liability on a “joint and several” basis as provided under Section 46 of the Employees Provident Fund Act 1991 in a situation where “joint and several” were not specially stated in the court judgment.”

The court unanimously answered in the affirmative and to analyse the court’s reasoning behind this, we must dive into the diverging authorities before it:-

• Sumathy A/P Subramaniam v Subramaniam A/L Gunasegaran & Anor Appeal [2017] 6 MLJ 753

In Sumathy, the court took the view that where bankruptcy proceedings were simultaneously initiated against two judgment debtors, they could not both be held liable for the whole judgment sum if the judgment did not specify that liability was joint and several.

In other words, the court cannot insert the feature of “joint and several” liability if such phrase were never inserted into the judgment in the first place.

• Kejuruteraan Bintai Kindenko Sdn Bhd v Fong Soon Leong [2021] 2 MLJ 234

In Kejuruteraan Bintai, Fong and four other petitioners were ordered to pay cost of RM50,000 to the company. When this was not paid, Kejuruteraan Bintai commenced bankruptcy proceedings against Fong for the sum of RM50,000. This was challenged by Fong on the basis that since the order for cost never specified that liability was joint and several, he was only liable for an equal portion of the sum with the rest of the petitioners.

Despite acknowledging the preponderance of judicial laws where unless stated otherwise, judgement debtors are regarded as jointly and severally liable under a judgment or order, the Court of Appeal abided by the doctrine of stare decisis and held that it is bound by the previous decision of Sumathy. The bankruptcy action was subsequently set aside.

3. Analysis in Edwin Cassian

The Federal Court in its reasoning drew a distinction between the intertwined terms:

Joint liability: Where two or more persons jointly promise to do the same thing. It refers to one obligation or promise and consequently, performance by one discharges all.

Joint and Several liability: Where two or more persons jointly promise to do the same thing and also severally make separate promises to do the same thing.

The important point to note is the difference in the number of promises made.

Critically, the Federal Court emphasised that the term “joint liability” in a judgment does not render liability of each of the debtors to be halved or divided into equal portion according to his interest or obligation, unless clearly and expressly stated to that effect.

The court went further and noted that although a judgment for joint and several liability does not prevent a creditor from bringing several actions against several debtors separately, if any of the debtors satisfies the whole judgment sum, the right of a creditor to bring an action against another is extinguished. This prevents double recovery by the creditor and addresses the issue of a creditor being “overpaid” in Sumathy.

In the instant appeal, Section 46 of the EPF Act has expressly made clear of the joint and several liability of the directors of a company for unpaid contributions and therefore must be fully implemented over the terms of the judgment.

Fortunately, the law is even made clearer on account of Section 44 of the Contracts Act 1950 which provides as follows:

Any one of joint promisors may be compelled to perform

(1) When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of the joint promisors to perform the whole of the promise

In short – all joint contracts essentially imposed complete accountability for the obligation on each of the promisors unless the contract expressly states otherwise. Therefore, when debts are incurred jointly, each promisor is responsible for the entire amount. There was no indication that a joint liability situation renders the obligation to be somehow halved or according to portion. This was the misconception that prevailed in Sumathy.

4. Conclusion

It is pertinent to note that the point of law in Edwin Cassian was decided in the context of Section 46 of the EPF Act which manifestly imposes joint and several liability. Nevertheless, adopting the court’s analysis above and by virtue of the statutory law provided in Section 44 of the Contracts Act 1950, it is reasonable to conclude that joint and several liability prevails in any contracts or agreement unless a judgment or order stipulates otherwise.

By: Tay & Partners - Farina Hanim

Purchase Bar Council Sticker

Letter of Authorisation Template :)

Counter Settlement Proposal

Remember to mark it as WITHOUT PREJUDICE.

1. We refer to the above matter and to your letter dated 27 April 2020 (“Proposal”).

2. Our client maintains that the amount due and owing by your client to our client is RM222,861.89 (“Outstanding Sum”) as claimed by our client in the Writ and Statement of Claim dated 9 January 2020. Our client is therefore not agreeable to the Proposal.

3. Notwithstanding the above, our client is willing to settle the above matter amicably and instructed us to propose the following terms and conditions:-

(a) Your client should pay the sum of RM250,759.39 to our client as full and final settlement of the above matter. The particulars of the Settlement Sum are as set out in Annexure A and are briefly as follows:-

(i) Outstanding Sum of RM222,861.89; and

(ii) Interest at the rate of 5% per annum from the due date of the invoices until full and final settlement, amounting to RM27,897.50 (“Interest”),

(b) The sum of RM250,759.39 should be paid by your client to our client by 6 instalments as follows:-

(i) 1st instalment on 15 May 2020 RM41,385.91

(ii) 2nd instalment on 15 June 2020 RM42,157.28

(iii) 3rd instalment on 15 July 2020 RM42,388.87

(iv) 4th instalment on 15 August 2020 RM40,697.50

(v) 5th instalment on 15 September 2020 RM42,349.00

(vi) 6th instalment on 15 October 2020 RM41,780.83

(c) The payment stated in paragraph 3 (b) above shall be made by 6 post-dated cheques all of which shall be payable to our client and forwarded to us, as solicitors for our client, on or before 14 May 2020 (“Post-Dated Cheques”).

(d) In the event of default or non-payment of any one of the instalments as stated in paragraph 3 (a) to (c) above, the sum of RM222,861.89 (less actual amount paid) shall become immediately due and payable by your client to our client, and in this respect, our client shall be at liberty to commence legal proceedings against your client for the recovery of the sum of RM222,861.89 (less actual amount paid) together with interests, without further reference to your client, in which event, your client shall be fully and solely responsible for all further costs and interest incurred in the same.

(e) Parties should enter a Consent Judgment within 7 days of your client’s acceptance of paragraphs 3 (a) to 3 (d) above.

4. Kindly take note that the terms set out in paragraph 3 above are final and revert with your client’s agreement on the above terms on or before 11 May 2020, failing which this settlement proposal will automatically lapse. We look forward to your client’s favourable response.

5. For the avoidance of doubt, our client expressly reserves its rights.

6. Kindly acknowledge receipt of this letter and its enclosures.

How To Draft a Settlement Proposal

TIPS

1. Remember to mark the proposal as WITHOUT PREJUDICE. Without prejudice means it cannot be produced as an exhibit in Court (unless the maker voluntarily discloses it first).
2. Identify what your client wants, how he/she wants it.
3. Identify what your client can offer to your opponent's client, how your client wants to do it, and when.
4. Include dateline to accept offer!
5. No further claims.
6. Expressly reserve your client's rights.

SAMPLE CONTENT

We refer to the above matter, to our letter dated [when] / telephone conversation between [who] and [who] on [when].

Strictly on a without prejudice basis, we are instructed by our client to propose the following terms and conditions, as full and final settlement of the above matter:-     

(a) Your client should pay a sum of [amount] to our client, particulars of which are as follows:-

(i) A sum of [amount], being our client's initial share capital contribution.

(ii) A sum of [amount], being commission owed to our client for the period of [date]

(iii) A sum of [amount], being our client’s salary for the period of [date] to [date] or until date of the settlement.

(b) The payments stated in paragraph 2 (a) above shall be made by your client to us as solicitors of our client, on or before [date].

(c) In consideration of payment under paragraph 2 (a)(i) above, our client will transfer all its shares to a person nominated by your client. In this respect:-

(i) Kindly forward the relevant shares transfer form duly executed by your client to us for our client’s execution on or before [date]; and

(ii) Upon receipt of payment stated in paragraph 2 (a) above and within 5 days from the date of receipt of payment, we should forward the duly executed shares transfer form to you for your onward transmission to your client.

(d) In relation to paragraph 2 (a)(ii) above, your client is required to provide our client with the actual total number of sales which has been audited by your client’s auditor on or before [date].

(e) Our client should withdraw the above matter against your client with no liberty to file afresh and with no order as to costs.

(f) The above terms shall constitute full and final settlement of all claims, rights, actions and/or recourse that our client may have against your client, and your client may have against our client.

3. Kindly revert with your client’s agreement on the above terms on or before [date], failing which this settlement proposal will automatically lapse. We look forward to your client’s favourable response.

4. For the avoidance of doubt, our client expressly reserves all its rights.