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CASE-LAW ON PUBLIC INTEREST ELEMENT IN JUDICIAL MANAGEMENT APPLICATIONS

Lui & Bhullar’s Judicial Management Miniseries Episode 2

By:

Harneshpal Karamjit Singh (Co-Managing Partner) [harnesh@luibhullar.com]

Image by Chathura Anuradha Subasinghe from Pixabay


INTRODUCTION

Section 405(5) of the Companies Act 2016 allows the Court to consider the public interest element in the making of a judicial management order and the appointment of a judicial manager.


Section 405(5) of the Companies Act states as follows:-

“(5) Nothing in this section shall preclude a Court:

(a) from making a judicial management order and appointing a judicial manager if the Court considers the public interest so requires; or

(b) from appointing, after the making of an application for a judicial management order and on the application of the person applying for the judicial management order, an interim judicial manager, pending the making of a judicial management order, and such interim judicial manager may be the person nominated in the application and may exercise such functions, powers and duties as the Court may specify in the interim order.”


CASE-LAW

Preliminarily, the public interest element in judicial management application ought to be pleaded for the Court’s consideration and failure to plead the said element may render it inapplicable in the said judicial management application as decided in Han Yeow Ming & Ors v Yu Chan Trading Sdn Bhd (In Receivership) (Malayan Banking Bhd, Secured Creditor) [2022] MLJU 596 as follows:-

“[19] As there is no element of public interest being pleaded nor do I find any such element, there is in the circumstances, no applicability of section 405(5) of the Companies Act 2016 before me.”


Secondly, as “public interest” is not defined in the Companies Act 2016, it is to be determined based on the circumstance of each individual case as held in Leadmont Development Sdn Bhd v Infra Segi Sdn Bhd and another appeal [2018] MLJU 1320 (“Leadmont”):-

“[45] What constitutes “public interest” is not defined in the CA 2016 and so must be determined on a case to case basis.”


The above position held in Leadmont was also followed in Monday-Off Development Sdn Bhd v Bumimetro Construction Sdn Bhd & Ors [2021] MLJU 915.


In Re Biaxis (M) Sdn Bhd [2022] 7 MLJ 443, Judicial Commissioner Wong Hok Chong held that the public interest element ought to be defined narrowly and applied only in exceptional cases wherein loss of employment and uncompleted contracts do not satisfy such element. His Lordship stated as follows:-

“[32] Given the implication of public interest in this context — it overrides all the checks and balance for the granting of a judicial management order — public interest is to be interpreted restrictively and should only apply in the most exceptional of circumstances. Generic reasons associated with wound up companies such as loss of employment, uncompleted contracts, etc do not fall within the meaning of public interest.


[33] If I may be permitted to illustrate ‘exceptional’ by way of a hypothetical example of what I would consider as public interest. As our nation, and indeed the world, struggles to contain the COVID-19 pandemic, if a company who alone possesses the vaccine for the virus makes an application for a judicial management order, the court may in such exceptional circumstances consider that public interest requires that the judicial management order be made.”


Similarly, in Federal Power Sdn Bhd v Dara Consultant Sdn Bhd [2022] 7 MLJ 563, the applicant being one of 12 companies in Malaysia with the capability to manufacture medium and high voltage cable does not satisfy the public interest element. The Court held as follows:-

“[30] From the applicant’s own admission, there are at least 12 companies in Malaysia who have the capacity to conduct a similar business as the applicant and this by itself would mean that the applicant is not only company in Malaysia who can manufacture medium and high voltage cable in Malaysia and that such business is therefore not exclusive to the applicant


[31] …I hold that the same is not applicable in the case before me due to my finding above that there is no element of public interest in the case before me.”


In Alam Teknokrat Sdn Bhd v Affin Islamic Bank Bhd [2022] MLJU 2250, the Court found that the applicant was also not the only company that provided such services and that the clientele of the company cannot be used to satisfy the public interest element, as follows:-

“[13] For the record, I further find no element of public interest applicable based on the facts of the matter before me and that the clientele of the Applicant per se does not in my opinion justify the public interest element as the Applicant is not the only company in the country who is able to provide the services mentioned. In the circumstances, I hold that the Applicant has failed to satisfy this Court that the requirements under section 404 and / or 405 of the Companies Act 2016 have been met.”


CONCLUSION

In conclusion, there has been no one case wherein the public interest element has been applied exclusively to grant a judicial management order or to appoint a judicial manager.


In the foreseeable future, it seems that the public interest element will still be considered based on the facts of each case and be applied strictly and in exceptional cases as reiterated and held in Gigatech Engineering Sdn Bhd v EnGreen Sdn Bhd (dahulunya dikenali sebagai ‘EG Chemicals & Engineering Sdn Bhd’) [2022] MLJU 2822 as follows:-

“[57] Thus, “public interest” must be determined on a case to case basis (see Leadmont Development Sdn Bhd v Infra Segi Sdn Bhd and another suit [2019] 10 CLJ 412 at paragraphs [45] and [46]). However, the Courts in considering public interest in a judicial management application have taken a strict approach where public interest is to be interpreted restrictively and should only apply in the most exceptional circumstances.”

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