Lembaga Kumpulan Wang Simpanan Pekerja v Azimuddin Bin Ab. Ghani, 10-03-2011

• Judge: Y.A. TUAN LEE SWEE SENG
• Judgment Date: 10 March 2011
• Court: High Court (Malaysia)
• Record Number: S-21-2-2006

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

(CIVIL DIVISION)

CIVIL SUIT NO. S-21-2-2006

BETWEEN

LEMBAGA KUMPULAN WANG SIMPANAN PEKERJA …PLAINTIFF

AND

1. AZIMUDDIN BIN AB. GHANI

2. TAN MEE NGOR

3. TAN YOK WA

4. TEO TECK SIM

5. MOHD. NOOR BIN ABDUL RAHMAN

6. ABDULLAH FARROFF BIN HUSEIN ABDULLAH …DEFENDANTS

Judgment of Judicial Commissioner

Y.A Tuan Lee Swee Seng

Judgment

Prologue

Parliament, in its wisdom and wielding its vast powers, has made directors of companies to be jointly and severally liable for the contributions due and payable to the Employees Provident Fund under the Employees Provident Fund Act 1991 (EPF Act) for the period they were directors of the companies during such period in which contributions were liable to be paid by the companies. Such is the broad ambit of section 46(1) of the EPF Act. ‘Contributions” under section 46(2) of the Act shall be deemed to include any dividend and interest due on any contributions.

Whilst directors are generally separate entities from the companies and their shareholders, yet Parliament in exercising its paternalistic powers, has made directors to be personally and jointly and severally liable. Such a provision like section 46(1) of the EPF Act is also found in varying forms in various statutes such as in section 22C of the Customs Act 1967, section 108A of the Employees Social Security Act 1969, section 26 of the Sales Tax Act 1972 and section 17 of the Service Tax Act 1975; to name but a few. Perhaps the underlying commonality is that in most of these cases the payments, collections or deductions have already been made and it is for the companies to forward the amounts to the authorities or body concerned. Hence the law looks to the directors personally where liability is concerned.

This action by the Plaintiff against the directors of the George Town Chemist Sdn Bhd (company) brings into focus the validity of such a provision and other issues in the context of a summary judgment application for unpaid contributions under the EPF Act.

All the 1^st to the 6^th Defendants were directors of the company during the relevant period.

Problem

The company went into financial problems and on 9 March 2005, obtained a restraining order under section 176(10) of the Companies Act 1965 to restrain legal action against it for a temporary period pending the approval of a scheme of rearrangement under section 176(1) of the Companies Act.

The company who is the employer within the meaning of the EPF Act failed to make contributions to the tune of RM270,127.00 for the period from August 2004 to March 2005.

Prayer

By way of Enclosure 35 the Plaintiff claimed under an O 14 Rules of the High Court 1980 (RHC) application for the following:

1. Judgment be entered against the 1^st Defendant and the 2^nd Defendant for the sum of RM270,127.00 being the EPF contribution for the period from August 2004 to March 2005;

2. Judgment be entered against the 3^rd Defendant and the 4^th Defendant for the sum of RM148,249.00 being the EPF contribution for the period from August 2004 to November 2004;

3. Judgment be entered against the 5^th Defendant for the sum of RM121,878.00 being the EPF contribution for the period from December 2004 to March 2005;

4. Judgment be entered against the 6^th Defendant for the sum of RM93,156.00 being the EPF contribution for the period from December 2004 to February 2005;

5. Dividends on the EPF contribution due for the period from August 2004 to March 2005 at the rate of 4.750% per annum for 2004 and the dividends for the subsequent years at the rate declared by the Plaintiff for each year calculated from 22 December 2004 until full settlement;

6. Interest on the EPF contribution for the period from August 2004 to March 2005 at the rate of 5.500% per annum for the period from 22.8.2004 to 17.2.2005; at the rate of 5.750% per annum for the period from 18.2.2005 to 21.3.2005 and interest for subsequent periods as may be declared by the Plaintiff for each year calculated from 22.8.2004 until full settlement;

7. Costs.

Principles

In an O 14A RHC application the correct approach to follow is as set out by his Lordship Mohd. Azmi SCJ in Bank Negara Malaysia v. Mohd. Ismail Ali Johor & Ors [1992] 1 CLJ (Rep) 14 at p.19:

​“ Under an O 14 application, the duty of a judge does not end as soon as a fact is asserted by one party, and denied or disputed by the other in an affidavit. Where such assertion, denial or dispute is equivocal, or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable in itself, then the judge has a duty to reject such assertion or denial, thereby rendering the issue not triable. In our opinion, unless this principle is adhered to, a judge is in no position to exercise his discretion judicially in an O 14 application. Thus, apart from identifying the issues of fact or law, the court must go one step further and determine whether they are triable. This principle is sometimes expressed by the statement that a complete defence need not be shown. The defence set up need only show that there is a triable issue."

I am also conscious of the procedure to be followed in an O 14 RHC application as succinctly summarised in Cempaka Finance Bhd v. Ho Lai Ying (trading as KH Trading) [2006] 2 MLJ 685, at p 689-690 by his Lordship Steve Shim CJ (Sabah & Sarawak) who when speaking for the Federal Court said:

" We think it appropriate to remind ourselves once again that in every application under O 14, the first considerations are (a) whether the case comes within the order and (b) whether the plaintiff has satisfied the preliminary requirements for proceeding under O 14. For the purposes of an application under O 14, the preliminary requirements are:

1. the defendant must have entered an appearance

2. the statement of claim must have been served on the defendant; and

3. the affidavit in support of the application must comply with the requirements of r 2 of the O 14.

…If the plaintiff fails to satisfy either of these considerations, the summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he becomes entitled to judgment. This burden then shifts to the defendant to satisfy the court why judgment should not be given against him.”

With that in mind I shall proceed to consider each of the so-called triable issue raised by the Defendant.

That the restraining order under section 176(10) Companies Act 1965 effectively restrains the Plaintiff from proceeding against the directors of the company.

Counsel for the Defendants, Mr Sivasankar Chelliah, argued that as the company was under a restraining order under section 176(10) Companies Act 1965, no action can be proceeded with against the company. As the company cannot be sued during the period when the restraining order was in force, so too the directors of the company.

The matter can be resolved by asking whether the restraining order issued covered action against directors as well. Nowhere in the restraining order is the word ‘directors’ referred to. Indeed section 176(10F) of the Companies Act 1965 provides:

“An order made by the Court under subsection (10) shall not have the effect of restraining further proceedings in any action or proceeding against any person other than the company that had applied for the restraining order.”

I agree with the Plaintiff’s counsel, Encik Shahinuddin bin Shariff, that an action against the directors of the company cannot in any way be interfering with the restructuring of the company and more so when the restraining order made no reference to proceeding against the directors of the company. In all the technicalities, it must not be forgotten that the deductions from the employees’ salaries had been made by the company and yet the amounts deducted had not been forwarded to the Fund.

The reliance by the Defendants’ counsel on the dicta of his Lordship Peh Swee Chin SCJ in Puan Bee Hong (F) & Anor v Pentadbir Tanah Daerah Wilayah Persekutuan Kuala Lumpur & Anor [1994] 2 CLJ 705 at p 713 is thus misplaced:

“We are of the considered view that an order of a superior Court such as High Court, even if it is e.g. and order obtained ex-parte or a default judgment, until it is set aside, must be obeyed by everyone whether its validity is challenged or not, and “it is the plain and unqualified obligation of every person against, or in respect of whom an order is made by a Court of competent jurisdiction to obey it unless and until the order is discharged”, per Romer, L.J. in Hadkinson v Hadkinson [1952] 2 All ER 567. This passage was quoted with approval and adopted by this Court in Pembinaan KSY Sdn Bhd v Lian Seng Properties Sdn Bhd [1991] 1 MLJ 100. It was stated in Issacs v Robertson [1984] 3 All ER 140 that it was misleading to describe such an order of competent jurisdiction as void or voidable, for every order must be obeyed until it was set aside and “these are not orders which are void ipso facto without the need for proceedings to set them aside”. One of the reasons is that such a superior Court must be presumed to have the jurisdiction to make an order which it had made. Every order made by a superior Court must be regarded as an order of competent jurisdiction.

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