SIOW MOON YEOW v. PANGLOBAL BERHAD & ORS
SIOW MOON YEOW v. PANGLOBAL BERHAD & ORS
HIGH COURT, KUALA LUMPUR
ABDUL HAMID MOHAMAD J
PETISYEN PEMULA NO: D2-26-4-2000
24 APRIL 2000
 1 LNS 311
CIVIL PROCEDURE :
Tay Hong Huat; M/s Tay, Helen Wong
Fadzillah with Izabella, MY Goh & Adlin; M/s Shook Lin & Bok
This Petition was filed in Commercial Court No. 2. The learned Judge had heard Enclosure 3. On 24th March 2000 an ex-parte Summons in Chambers (Enclosure 13) was filed with a certificate of urgency. As the learned Judge was on medical leave on 25th March 2000, I was asked to hear the application, which I did on the same day. I gave the order prayed for. The order was valid until 3rd April 2000, inclusive of that date.
On 28th March 2000 the Petitioner filed Enclosure 20 to vary the order of 25th March 2000 (Enclosure 13). I heard the application inter-parte on 29th March 2000 and granted the order.
On the same day, 29th March 2000, the Petitioner filed an inter-parte Summons in Chambers for various injunction orders. I was told that the application had to be heard by 3rd April 2000 as the ex-parte order was expiring on that day. It means that the application would have to be heard within five days from the date of filing, inclusive of a Saturday and a Sunday, not to mention from the date of service. The application, being an inter-parte application, it would be unfair to the Respondents for the Court to hear the application by 3rd April 2000, to suit the Petitioner’s wish. Nevertheless I fixed the application for mention on 31st March 2000 to see what would happen on that day. I would certainly not proceed to hear the application if the Respondents object to it as they would not have had ample time to file their affidavits in reply within a few days of service (that includes a Saturday and a Sunday) considering the bundles of thick affidavits filed by the Petitioner.
On the morning of the 31st March 2000, Respondents’ counsel appeared in Court pleading short service. They were served that morning itself. Learned Counsel for the Petitioner agreed that it would not be fair to the Respondents for the Application (Enclosure 15) to be heard on that day.
So, while agreeing that Enclosure 15 be heard on another day, he orally applied for a holding over injunction pending the hearing of the application. Even in this application, the Respondents were at a disadvantage. They had not had the opportunity to file their affidavits in reply to the Petitioner’s voluminous affidavits. So, in the interest of justice, I had to be rather flexible to learned counsel for the Respondents in particular relating to facts. I allowed them to make some statements of facts from the bar, otherwise it would all be one-sided.
The issue is whether the Court should make a holding over injunction pending the hearing of the inter-parte application (Enclosure 25).
The crux of the dispute is the sale of 40,000,000 ordinary shares of Econstates Berhad by the Sixth Respondent [AMMB International (L) Ltd.] to the Seventh Respondent [Road Builder (M) Holding Berhad] for a cash consideration of RM80,000,000. The shares were charged to the Sixth Respondent as security for a loan given by the Sixth Respondent to the First Respondent (Panglobal Berhad). As the First Respondent had defaulted in repaying the loan, the Sixth Respondent sold them to the Seventh Respondent on 22nd March 2000. The purchase price had to be paid within five days.
The Eight Respondent (Malaysian Central Depository Sdn. Bhd.) has no objection to the holding over injunction, even though it has a statutory duty to register the transfer, upon completion of the sale. Certainly, it does not mind not discharging its duty if so ordered by the Court as its non-action will be excused by the Court order.
Of course learned counsel for the Sixth and the Seventh Respondents (the vendor and the purchaser) vehemently objected to a holding over injunction.
Learned counsel for the Petitioner argued that as the ex-parte injunction would expire on 3rd April 2000 and as the inter-parte application could not be heard by that date, a holding over injunction is necessary to prevent parties from proceeding to complete the sale. If not granted the Sixth and Seventh Respondents will most likely proceed to complete the sale. The purpose is to maintain the status quo.
Learned counsel for the Seventh Respondent (the purchaser) argued that the purchase price had to be paid within five days of the contract for sale (22nd March 2000). As on that day the five-day period was over. The purchase price would have been paid by the Seventh Respondent. The Sixth Respondent are unable to collect the money until the shares are registered as having been transferred to the Seventh Respondent. In the meantime share certificates remain with the Eight Respondent.
He further argued that a holding over injunction would not benefit anybody. Econstates Berhad is in a financial problem. It needs capital injection. The Seventh Respondent is “very rich”. The Seventh Respondent is a developer of two projects in Seremban. Econstates Berhad owns the Holiday Villa in Subang and 1540 acres of land in Seremban. That land is very close to the Seventh Respondent’s projects. The Seventh Respondent is interested in the said shares because it would give the Seventh Respondent control of Econstates Berhad. By taking control of Econstates Berhad, the Seventh Respondent can provide the finance required by Econstates Berhad. Otherwise the hotel and the land will be foreclosed. The income from the hotel will be lost. If the holding over injunction is given and the Petitioner does not succeed, the damages will be enormous. She mentioned a figure of RM1 billion (that is a matter to be proved later, if and when it becomes relevant. I do not make any finding of fact on the amount). On the other had if the Petitioner succeeds all he gets is damages. The Seventh Respondent is able to pay the damages.
She informed the Court that the Seventh Respondent was prepared to give an undertaking to Court not to deal with the shares upon the Seventh Respondent being registered as owner of the shares until the disposal of Enclosure 25. Once the shares are registered in the name of the Seventh Respondent, the Seventh Respondent can “pump” in money to save the situation. If the Petitioner succeeds the shares will be handed over to the Petitioner.
Learned counsel for the Sixth Respondent (the vendor) submitted that the Sixth Respondent sold the shares as a chargee as the First Respondent had defaulted in making repayment of the loan. The right of the Sixth Respondent to sell the shares had crystallised. There is no reason for a holding over injunction to be granted as the Sixth Respondent was only exercising its rights as a chargee.
The Court stood down for the learned counsel for the Petitioner to take instruction from his client whether the he agrees to accept the undertaking given by the Seventh Respondent. The reply was that he (the Petitioner) was not agreeable because it would mean that the Seventh Respondent would have the control and management of Econstates Berhad.
I agree with the submissions of learned counsel for the Sixth and the Seventh Respondents and shall not repeat them. Besides, the Petitioner is only the holder of 2% – 3% shares of the First Respondent. Prior to the sale, Econstates Berhad was a 32.75% associated company of the First Respondent. The 40,000,000 shares represents 26.67% of equity interest in Econstates Berhad. Through the purchase of the said shares the Seventh Respondent would obtain control of Econstates Berhad. I fail to understand how the Petitioner, a mere 2% – 3% holder of the First Respondent would want to determine who has control over Econstates Berhad or even the First Respondent.
I also doubt that the Petitioner, if he fails in the application for injunction in Enclosure 25, will be able to make good the damages suffered by the eleven Respondents he named. Further, it is not a question of maintaining the status quo as the purchase price has been paid and all that is left to be done is for the Eight Respondent to register the transfer, which is its statutory duty to do. The Seventh Respondent is prepared to and gives an undertaking not to deal with the shares until Enclosure 25 is determined. Once registered the Seventh Respondent will be able to save Econstates Berhad and the First Respondent from financial ruin.
In the circumstances the balance of convenience is clearly in favour of not granting the holding over injunction. On these grounds I dismissed the application for a holding over injunction until the disposal of Enclosure 25 upon the Seventh Respondent giving an undertaking, which was given, that the Seventh Respondent would not deal with the said shares upon they being registered in its name, until the disposal of Enclosure 25. In the circumstances I also did not make an order for a holding over injunction against the Eight Respondent even though the Eight Respondent did not object to it. To do so would defeat my order in aspect of the Sixth and Seventh Respondents as stated earlier.
After I dismissed the Petitioners application for a holding over injunction, learned counsel for the Petitioner applied for an Erinford injunction to restrain the Seventh Respondent from exercising its rights in respect of the management of the company and its right to vote in respect of the shares bought by the Seventh Respondent.
The principal governing an Erinford injunction is that should the applicant succeed in the appeal, the appeal will be rendered nugatory unless an interim order is granted to preserve the status quo pending the determination of the appeal. In determining whether an Erinford injunction should be granted, the Court should consider whether there is a reasonable ground of appeal and whether there are special circumstances justifying the grant of an Erinford injunction – see Erinford Properties Ltd. v. Cheshire County Council  2 ALL ER 448, Ooi Meng Sua v. Actua Universal Insurance Sdn. Bhd,  1 AMR 467, Cocoa Processors Sdn. Bhd. v. Limited Malayan Banking Corporation Berhad & Ors (No. 2)  1 CLJ 436 (Rep);  1 CLJ 183;  3 MLJ 497.
Learned Counsel for the Petitioner submitted that if the Seventh Respondent is not restrained from the management of Econstates Berhad the Seventh Respondent will be free to make decisions affecting the company resulting in damages that cannot be compensated with cost.
Learned counsel for the Sixth Respondent argued that the terms of the Erinford injunction applied is not within the prayers of the inter-parte application for an interim injunction (Enclosure
25). There is no prayer in Enclosure 25 to prohibit the Sixth Respondent from the management of the company. He said that if the Erinford injunction is not granted and the Petitioner were to succeed in his application under Enclosure 25, the position is not irreversible as the Seventh Respondent has given an undertaking not to deal with the shares until Enclosure 25 is heard. This application for an Erinford injunction amounts to a back-door injunction after the application for a holding over injunction has been dismissed.
Learned Counsel for the Seventh Respondent drew the attention of the Court that RM80 million had been paid by the Seventh Respondent for the shares. This is a completed contract governed by the Stock Exchange Rules. But the shares have not been released to the Seventh Respondent and cannot be released until the Eight Respondent has made the book entry, ie, register the transfer. The Eight Respondent could not do it because of the ex-parteinterim injunction obtained by the Petitioner (which has now expired). She further said that the reason for the Seventh Respondent giving the undertaking is for the Seventh Respondent to deal with the creditors of Econstates Berhad which is in a bad financial state. If Erinford injunction is granted the Seventh Respondent cannot deal with the creditors. She further said that RM80 million cash is there. If the deal is reversed, the damages can be paid.
In the circumstances of this case I find no merit in the submission that the terms of the Erinford injunction applied should be similar to the remedies prayed in Enclosure 25. Enclosure 25 has not been heard. True that in Enclosure 25 the Petitioner does not specifically pray for an injunction to restrain the Seventh Respondent from the management of the company, but the prayers prayed for therein, if allowed, will have the same effect. Indeed the terms of the Erinford injunction prayed by the Petitioner is narrower than the prayers in Enclosure 25.
On the question whether there are merits in the intended appeal against my decision dismissing the holding over injunction, it would be presumptions on my part to say that I am right and the intended appeal against my decision will not succeed. I do not want to be my own judge.
There are also other points that should be considered. First, the Erinford injunction is applied for after I have dismissed the application for a holding over injunction. To allow it would render my decision in respect of the holding over injunction nugatory. It is really a back-door injunction, in the circumstances of this case.
It cannot be denied that, in normal circumstances, it will take a much longer time for an appeal from the High Court to the Court of Appeal to be heard and disposed of, compared to the time taken for an inter-parte application on a certificate of urgency to be heard and determined by the High Court. I have no doubt that Enclosure 25 will be heard and determined by the High Court long before the appeal against the refusal of the holding over injunction is heard and determined of by the Court of Appeal. So, if I were to grant to Erinford injunction, the period would most certainly be longer than the period of the holding over injunction applied for but dismissed.
Further, the reasons that I have given for the dismissal of the holding over injunction are equally applicable here. The Petitioner is a mere 2% – 3% holder of the First Respondent’s shares. He should not be talking about determining who controls Econstates Berhad. The Seventh Respondent has paid RM80 million for the shares in Econstates Berhad. But because of the ex-parte injunction obtained by the Petitioner the transfer could not be registered in the name of the Seventh Respondent. The Sixth Respondent who sold the shares in the exercise of its rights, as a chargee after the borrower (the First Respondent) had defaulted in the repayment of the loan, is unable to collect the money because the transfer has not been effected. The effect of my dismissal of the holding over injunction, upon an undertaking given by the Respondent, is that, the transfer can be registered, the Sixth Respondent can collect the purchase price. It is unfair to the Seventh Respondent, having paid the full purchase price, having been registered as owner of the shares, to be prohibited from managing Econstates Berhad, the control of which it has obtained after the purchase and not to be able to vote on those shares. Econstates Berhad is in a bad state, financially. The Seventh Respondent is in a position to arrange the finance required by Econstates Berhad and to deal with the creditors, thus saving the company. The Petitioner, a mere 2% – 3% holder of the First Respondent’s shares wants to abort the sale, that has been completed.
In all the circumstance, I do not think that there are special circumstances that justifies the granting of an Erinford injunction. Hence I dismissed the application.