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Court allows merits of company's challenge of govt's move allowing deferred payments

KUALA LUMPUR (June 29): A Penang-based construction company that is challenging the government's decision that effectively exempted companies from having to pay their creditors for six months, following the imposition of the movement control order (MCO), will get to have its arguments heard in court.

This follows the Penang High Court's decision today that granted leave to the company, Wabina Construction & Engineering Sdn Bhd, to have the full merits of its judicial review application heard.

Justice Datuk Rosilah Yop granted the order after Senior Federal Counsel Rahazlan Affandi Abdul Rahim made no objection to the leave application.

Those seeking a judicial review of a government's decision typically will have to first obtain leave from the court for the full merits of the application to be heard before the court decides whether it will allow the judicial review. This is to ensure that the application is not frivolous, vexatious or an abuse of the court process.

Wabina Construction's counsel Ong Yu Shin confirmed the court's decision when contacted by theedgemarkets.com.

The company filed the legal challenge in May, and named the Malaysian government, Domestic Trade and Consumer Affairs Minister Datuk Alexander Nanta Linggi, the Companies Commission of Malaysia (CCM) and its debtor Seal Properties (KL) Sdn Bhd as respondents.

The challenge came after the minister issued an order that allows businesses in debt to defer their payment to creditors for six months (180 days). Previously, a creditor could initiate a winding-up petition against a debtor who cannot pay after 21 days. Now, creditors have to wait for 180 days before being able to initiate such a petition.

This is the first such challenge by a company over the government's directive, which was gazetted as an order on April 23 without having been passed by Parliament.

Ong informed Justice Rosilah orally that his client intends to refer the case to be heard directly in the Federal Court, under Section 84 of the Courts of Judicature Act 1964 (CJA). Section 84 deals with the reference of constitutional questions by the High Court to the apex court — to have the latter hear directly matters on the constitutionality of an order or directive.

However, Justice Rosilah told Ong to file a proper written application to refer the matter to the apex court, and fixed July 14 for case management.

Company wants April 23 exemption order quashed

Wabina Construction is also seeking to quash the government's gazetted directive, and an order from the court to compel the respondents it named to comply with the judicial review order.

In its judicial review application, Wabina said it had been appointed the main contractor of Seal Properties, which it claimed failed to pay a sum owed. The matter, it said, subsequently went for adjudication at the Asian International Arbitration Centre (AIAC).

On Feb 24, the AIAC issued a decision in favour of Wabina, in which it ordered Seal Properties to pay a sum in excess of RM7.338 million to Wabina by or before March 26. But up to May 12, Seal Properties had failed to pay the amount, and Wabina wants to initiate further legal action to recover the sum.

Wabina said it had, since March 27, a statutory right to serve a winding-up notice on Seal Properties. However, due to the gazetted order from the government, it has been prevented from doing so. This, it further stated, violated its constitutional right as a creditor to recover the sum it was owed.

It further alleged that the ministry and the minister had acted ultra vires or beyond their powers in issuing the order, which it claimed is unproportional, illogical and void to the extent of being inconsistent with the Interpretation Acts 1948 and 1967, which provide for the commencement, application, construction, interpretation and operation of written laws.

The company also claimed the ministry and the minister had violated the separation of powers principles in issuing the order as such a legislation can only be passed with the approval of Parliament.

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