Legal Update: Court of Appeal affirms that the Court May Order a Conditional Winding-Up (The Case of Prolink Marketing Sdn Bhd v AmBank Islamic Berhad)

The Court of Appeal recently upheld a High Court decision which allowed a conditional winding-up order to be granted against the Appellant, Prolink Marketing Sdn Bhd (“Prolink”). The terms of the conditional order required Prolink to satisfy the sums demanded by the Respondent Petitioner within 5 months from the date of the order, failing which Prolink would be wound-up by the Court. 

This decision clarifies the Court’s powers under Section 469 of the Companies Act 2016 and confirms that the Court is allowed to impose such conditions against companies when hearing winding-up petitions. 

Brief Facts

AmBank Islamic Berhad (“AmBank”) obtained judgment against the Appellant (“Prolink”). Arising from Prolink’s failure to satisfy the judgment sum, AmBank presented a Statutory Notice of Demand against Prolink and demanded that the judgment sums be paid to it within 21 days. When Prolink failed yet again to settle the judgment sum, AmBank presented a winding-up petition against Prolink pursuant to Sections 465(1)(e), (h) and 466(1) of the Companies Act 2016. 

At the hearing of the winding up petition, the High Court ordered a conditional winding-up order against Prolink. In essence, the High Court ordered that Prolink pays the monies owed to AmBank within 5 months from the date of the order, failing which Prolink shall immediately be wound up by the Court. 

Prolink was dissatisfied and appealed the High Court’s decision.

Findings of the Court of Appeal

At the Court of Appeal, the main question to be determined was whether the High Court was empowered to make a conditional winding-up order for Prolink to pay the judgment sum within 5 months or face winding-up. 

The Court of Appeal held that the Court had the power to do so. The Court of Appeal examined the wording of Section 469(1) of the Companies Act 2016 which states: 

    “469(1) On hearing the petition for winding-up, the Court may, by order: 

1. Dismiss the petition with or without costs; 
2. Adjourn the hearing conditionally or unconditionally; or 
3. Make an interim order or any other order as the Court thinks fit.”

The Court of Appeal held that the phrase “any other order as the Court thinks fit” was wide in its natural and ordinary meaning and allowed the Court the discretion to make any order as it thought fit, in relation to the winding-up petition. 

However, this wide discretion is somewhat limited as the order must still relate to the winding-up petition and must ultimately result in either the petition being allowed or dismissed. The Court of Appeal referred to the Court of Appeal decision of See Teow Guan & Ors v Kian Joo Holdings Sdn Bhd & Ors [1995] 3 MLJ 598 where, in consideration of English and Canadian provisions, it was held that the orders which the Court could grant when hearing a winding up petition must result ultimately in the dismissal or granting of the petition. 

The Court of Appeal also relied on the Federal Court decision of Pengarah Tanah & Galian, Wilayah Persekutuan v Sri Lempah Enterprise Sdn Bhd [1979] 1 MLJ 135 which considered similar wordings contained in the Town and Country Planning Act 1947. 

As such, the Court of Appeal in the present case found that the imposition of the condition against Prolink for the judgment sums to be paid within 5 months were relevant to the winding-up petition, as the ultimate result of the condition would have led to either the petition being dismissed (if Prolink had fulfilled the condition) or being granted (if Prolink had failed).