Introduction
Typically, once an order has been drawn up and sealed, the court becomes functus officio and has no power to vary or set aside the same. However, an exception to this rule is where an order has been irregularly obtained. This exception was recently expounded in the leading Federal Court decision of Badiaddin bin Mohd Mahidin v Arab Malaysian Finance Bhd(1).
In its decision, the Federal Court reaffirmed that where a final court order is proved to be null and void on grounds of illegality or lack of jurisdiction, the court has inherent jurisdiction to set the decision aside, even in the absence of an express enabling provision.
However, is the rule different for winding-up orders?
In Vijayalakshimi Devi d/o Nadchatiram v Jegadevan s/o Nadchatiram(2), the Court of Appeal held that a winding-up order cannot be discharged or rescinded after it has been made. The only remedy is to apply for a stay of proceedings under the winding-up order pursuant to Section 342(1) of the Companies Act 1965.
This article examines how the Federal Court in Malayan Banking Berhad v Gan Bee San decided on the following question of law:
Does the principle established in Badiaddin confer jurisdiction upon a court to set aside a perfected winding-up order for breach of rule 5 of the Companies (Winding-Up) Rules 1972, having regard to the decision in Vijayalakshimi?
Facts
The respondents applied to a high court to set aside a winding-up order on the grounds that it had been made by the deputy registrar of the high court and not by a judge, in contravention of Rule 5(1)(a) of the Companies (Winding-Up) Rules 1972 (the Winding-Up Rules).
The high court dismissed the application, but this was subsequently reversed by the Court of Appeal, which set aside the winding-up order. Dissatisfied, the appellants applied to the Federal Court and obtained leave to appeal on the above question of law.
Breach of Winding-Up Rules
Rule 5(1)(a) of the Winding-Up Rules states:
Matters to be heard in Court and Chambers
5(1) The following matters and applications in Court shall be heard before the Judge in open Court:
(a) petitions.
The Federal Court noted that the words “Judge in open Court” are clear, precise, and unambiguous. Based on the facts, a deputy registrar — and not a high court judge in open court — had made the winding-up order. The deputy registrar’s name in the order was not a typographical error, thus constituting a clear breach of Rule 5(1)(a).
The Federal Court held that this breach related to a fundamental question of jurisdiction. Applying the principles in Badiaddin, the court found that a clear contravention of the Winding-Up Rules rendered the winding-up order null and void for lack of jurisdiction.
Can Courts Set Aside Winding-Up Orders?
The Court of Appeal had previously held that a winding-up order could not be discharged or rescinded after it had been made, and the only remedy was a stay of proceedings under the order (s342(1) Companies Act 1965).
However, the Federal Court disagreed. It reiterated that a court’s jurisdiction to set aside fundamentally irregular or seriously defective orders is inherent and not dependent on express statutory provision. The deputy registrar’s lack of jurisdiction to grant the winding-up order was so fundamental that the order had to be set aside in the interest of justice.
Comment
Based on the Federal Court decision, a court order must be pronounced to avoid challenges to the court’s jurisdiction.
The decision was based on the peculiar facts of the case: the deputy registrar’s name was reflected in the winding-up order instead of the judge’s name. Had the judge’s name appeared, it could have been argued that the judge had acted through the deputy registrar.
In short, no two cases are alike, and each case must be decided on its own facts.
For further information, please contact Gan Khong Aik at Gan Partnership by telephone (+603 2201 1130) or email (khongaik@ganlaw.my). Gan Partnership website: ganlaw.my
Article Author
Gan Khong Aik
Partner, Gan Partnership
Email: khongaik@ganlaw.my
Endnotes
(1) [1998] 1 MLJ 393
(2) [1995] 1 MLJ 830
