Court says “no” to “chilled water” in ruling on ss. 392(6) and 392(7) of the Companies Act 2016
17 December 2018
In Boulevard Plaza Sdn Bhd (receiver & manager appointed) v Gas District Cooling (Putrajaya) Sdn Bhd  8 AMR 394, the High Court gave a restrictive interpretation to the expression “supplies” for the purposes of ss. 392(6) and 392(7) of the Companies Act 2016 (CA 2016).
The Plaintiff is the owner of a building in Putrajaya, whereas the Defendant is the exclusive supplier of chilled-water for all air-conditioning systems in Putrajaya. The Defendant had agreed to supply chilled water to the Plaintiff’s building under an agreement made in 2014. The Plaintiff was indebted to the Defendant for RM4,171,523.75 for chilled water supplied to its building by the Defendant from March 2017 to January 2018. A receiver and manager (R&M) was appointed in respect of the Plaintiff on 16 November 2017.
Despite a guarantee by the Plaintiff through the R&M for payment for chilled water to be supplied to the building during the receivership, discussions between the R&M and the Defendant for such supply broke down due to differences between the R&M and the Defendant as to when a proposal was to be made by the Plaintiff for the settlement of the moneys owed by it to the Defendant for the chilled water supplied before the receivership.
The Plaintiff commenced proceedings to compel the Defendant to continue supplying chilled water to the building during the period of the receivership. The Plaintiff contended that the guarantee satisfies the condition specified in s. 392(6) of CA 2016 and the Defendant is thus prohibited under s. 392(7) of CA 2016 from withholding the supply of chilled water until the arrears incurred prior to the receivership was paid. Ss. 392(6) and 392(7) of CA 2016 read as follows –
“(6) If a request is made by or with the concurrence of the receiver or receiver and manager for the giving of any of the supplies including water, electricity, gas and telecommunications, after the appointment of the receiver or receiver and manager, the supplier may make it a condition of the giving of the supply that the receiver or receiver and manager personally guarantees the payment of any charges in respect of the supply given after his appointment.
(7) Notwithstanding subsection (6), the supplier shall not make it a condition of the giving of the supply, or do anything which has the effect of making it a condition of the giving of the supply, that any outstanding charges in respect of a supply given to the company before the appointment of receiver or receiver and manager are paid.”
The High Court dismissed the Plaintiff’s application. The Judge held that, with the exception of the supply of gas, s. 392(6) deals with the supply of utilities, that is, products that are essential needs of everyday life in the country and are supplied by public utilities companies. The Judge opined that utilities, by its common understanding, are products for public consumption which are arguably, products which the public cannot live without and are crucial for any corporation to carry out its daily operations.
While acknowledging that air-conditioning is a necessary comfort, particularly in a tropical climate, and that the absence of chilled water would disable the building’s air-conditioning system, His Lordship agreed with the Defendant’s contention that the Plaintiff had other alternatives, such as installing air conditioners or renting portable units, which unlike water and electricity, could not be replicated or sourced other than from public utilities companies that supply them.
His Lordship then concluded that, chilled water, unlike electricity, is not for public consumption at large and ought not to be added to the list of supplies under s. 392(6). Accordingly, the Court held that ss. 392(6) and 392(7) govern public utilities and do not include the supply of chilled water.
The High Court has given a narrow and literal interpretation of the words “supplies including water, electricity, gas and telecommunications” in s. 392(6) by limiting the word “supplies” to only the four types of utilities mentioned in that sub-section, namely, water, electricity, gas and telecommunications. His Lordship has also declined to provide a wider interpretation of “water” to include chilled water.
Although the decision of the High Court Judge is not binding on any other court of equivalent or superior standing in Malaysia, it is nevertheless noteworthy as it is the first reported decision on ss. 392(6) and 392(7) of CA 2016.