High Court: Order to Annul Company Dissolution Must be Made within Two Years from Date of Dissolution
30 May 2019
In Ketua Pengarah Hasil Dalam Negeri v Suruhanjaya Syarikat Malaysia & Anor [2019] 3 AMR 347, the High Court ruled that it has no jurisdiction under section 535(1) of the Companies Act 2016 (‘CA2016’) to grant an order declaring the dissolution of a company void after the expiry of two years from the date of the company’ dissolution.
The directors of the subject company commenced proceedings for voluntary winding up of the company in 2016. The dissolution was completed on 20 August 2016. On 17 May 2018, the plaintiff filed an originating summons under section 535(1) of CA2016 seeking a declaration that the dissolution of the company was void. Due to a dispute of facts in the matter, the second defendant being the liquidator of the company, successfully applied to convert the originating summons into a writ action. Before commencement of the trial in early-2019, by which time a period of more than two years had lapsed since the date of completion of the dissolution of the company, the second defendant applied to the court seeking determination of the following question of law:
“Whether the court has the jurisdiction under section 535 of the CA2016 to grant an order declaring the dissolution of a company void after the expiration of the two year period from the date of the company’s dissolution as prescribed within section 535(1) itself.”
Section 535(1) of CA2016 provides as follows:
“Where a company has been dissolved, the Court may, at any time within two years after the date of dissolution, on an application of the liquidator of the company or of any other person who appears to the Court to be interested, make an order upon such terms as the Court thinks fit declaring the dissolution to have been void, and such proceedings may be taken as might have been taken if the company had not been dissolved.”
Wong Chee Lin, JC (as she then was) answered the question posed in the negative and dismissed the action against the defendants.
The learned justice held that it was clear from the section itself that the order declaring the dissolution void must be made within two years from the dissolution and it is not the case that the application for such a declaration must be made within two years from the date of dissolution.
Her Ladyship noted that there are at least two decisions of the High Court which state that pursuant to section 535(1) of CA2016 (in pari materia with section 307(1) of Companies Act 1965 (‘CA1965’)), the requirement is that the application to declare the dissolution void must be made within two years from the date of the dissolution. However, C L Wong JC declined to follow those decisions. According to Her Ladyship:
“In my view, the wording of s 535(1) CA2016 is very clear and it provides that the court's power to make the order declaring the dissolution void can only be made at any time within two years after the date of dissolution. As more than two years had expired from the date of dissolution of the company in the present case, the court has no power to make any order declaring the dissolution of the company void.”
The learned Judicial Commissioner also rejected the plaintiff’s submissions that the Court had the inherent jurisdiction to grant the order or declaration sought by the plaintiff. The Court held that it did not have the jurisdiction to extend the time frame prescribed in section 535(1) of CA2016 under the following provisions:
- Order 92 of the Rules of Court 2012 – According to the Court, the inherent power under this Order to grant an order or declaration to prevent injustice or to prevent an abuse of the process of the Court applies only in relation to procedural law and not substantive law; the court cannot have the inherent power to do something which the substantive law prohibits and will not invoke its inherent powers to override the provisions of a specific law or act in conflict of the law;
- Order 1A of the Rules of Court 2012 – This provision, which confers discretion on the court to have regard to the overriding interest of justice and not only to the technical non-compliance with the Rules of Court, was inapplicable as the matter at hand did not involve compliance with the rules of court but with construing the meaning of section 535(1) of CA2016; and
- Section 582 of CA 2016 – This provision, which is in pari materia with section 355 of CA1965, empowers the Court to make a validating order in respect of any omission, defect or irregularity in the management of a company, was inapplicable as the instant case did not concern the management or administration of the company.
Comments
Arising from this decision, there are now conflicting decisions made by the High Court on two aspects of section 535(1) of CA2016 (and section 307(1) of CA1965).
One line of authorities, such as Mohd Bakri @ Bakhari bin Mohd Noor v Ketua Pengarah Insolvensi bagi aset dan liabiliti Syarikat Taba Silver Sdn Bhd [2015] 3 CLJ 1114 and Carlson White (M) Sdn Bhd v Mutiara Metropolis Sdn Bhd [1999] 3 CLJ 395, state that the application to declare a dissolution void under section 307(1) of CA1965 (in pari materia with section 535(1) of CA2016) must be made within two years from the date of the dissolution whilst the present case states that the order declaring a dissolution void must be made within two years from the date of the dissolution.
Further, Mohd Bakri also held that the court has a discretion to allow an application made after the expiry of the two year period if the applicant provides convincing reasons for the delay, whereas the Court in the present case has ruled that it has no jurisdiction to extend the two year time period specified in section 535(1) of CA2016.
It remains to be seen which view will prevail in the Court of Appeal or the Federal Court.