PILECON ENGINEERING BERHAD v 1. ) CAHAYA KELANG CONSTRUCTION SDN BHD 2. ) PNSB ACMAR SDN BHD

Case Significance

Illustrates how the courts treat an assigned inter-company debt, restrictive clauses limiting the parties a claim may be brought against, and a disputed acknowledgment that would require oral evidence to resolve.

This Court of Appeal decision concerns a claim by Pilecon Engineering Berhad against Cahaya Kelang Construction Sdn Bhd and PNSB Acmar Sdn Bhd founded on a debt owed to a wholly owned subsidiary of the appellant. The subsidiary, Prizegard Geotechnics Sdn Bhd, had been engaged by the respondents as a contractor and was owed RM4,500,000 for works done. That debt was addressed in a Deed of Settlement dated 9 December 2004, under which the first respondent agreed to a partial cash settlement and the balance was to be satisfied through the transfer of properties registered in the name of the second respondent. The appellant asserted that the subsidiary's debt had been assigned to it and sought to enforce the claim; the High Court dismissed the claim on several grounds, including that the alleged assignment was invalid.

The appeal raised several issues. On undue preference, the appellant argued that although the High Court had applied section 528 of the Companies Act 2016, the claim was in any event affected by the position under the earlier legislation, a board resolution passed some two months before winding up being said to amount to an undue preference. On the restrictive clauses in the deeds, the point was that the clauses confined claims to the first respondent only, leaving no right of claim against the second respondent, and that a resolution seeking a property transfer rather than a monetary payment fell outside the scope of the deeds. Privity of contract and a time-bar/acknowledgment argument also featured, the appellant contending that a written acknowledgment of the debt had restarted the limitation period and estopped the respondents from disputing the debt.

The Court of Appeal declined to interfere. It agreed with the High Court's decision not to resolve the acknowledgment argument, which would have required viva voce evidence given the factual disputes, and held it was in any event sufficient to dismiss the claim on the other issues. Satisfied that the High Court's findings of fact were not plainly wrong, the Court dismissed the appeal with costs of RM30,000 subject to allocatur. The judgment is a useful illustration of how the courts treat an assigned inter-company debt, restrictive clauses limiting the parties against whom a claim may be brought, and a disputed acknowledgment that would require oral evidence to resolve.