Announcement

Court of Appeal affirms that Industrial Court has no jurisdiction to order Notice Pay

Share:

Print
5 January 2023

“Trite law that parties are bound by a Court order until the same is set aside”

P. Jayasingam, and P. Thavaselvi, together with Reyna Lim Khang Yen from Zul Rafique & Partners’ Employment and Industrial Relations Practice Group successfully represented Megasteel Sdn Bhd (“the Company”) at the Court of Appeal in respect of an appeal filed by ex-employees of the Company (“the Appellants”) against the decision of the High Court of Malaya to quash part of Industrial Court Awards No. 761, 762 and 763 of 2020 via the Company’s Judicial Review application.

THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:

In 2016, the Company, facing serious financial difficulties, was forced to retrench the Appellants from service with the Company (“the retrenchment exercise”). At the time of the retrenchment exercise, the Company paid to the Appellants all the sums due to them, save and except for their respective Three (3) Months’ Salaries in Lieu of Notice of Termination (“the Notice Pay”).

Facing difficulties in meeting its debts, the Company began restructuring its debts through Schemes of Arrangement with a secured scheme encompassing its Secured Debts, and an unsecured scheme for its Unsecured Debts. 65 of the 70 Appellants submitted their Proofs of Debt to the Company between 8.6.2018 and 8.8.2018, and under which only the debt for the Notice Pay was approved and included under the Unsecured Scheme.

On 21.9.2018, the High Court of Malaya vide Originating Summons WA-24NCC-481-09/2018 had granted a 2nd Restraining Order  for a period of three (3) months from 21.9.2018 until 21.12.2018 and gave the 1st  Respondent liberty to convene meetings of the Scheme Creditors pursuant to Section 366(1) of the Companies Act 2016. Accordingly, a meeting of the unsecured creditors was convened on 10.7.2019 and majority of the unsecured creditors (i.e. equivalent to 99.42% of the value of the debt) voted in favour of the Unsecured Scheme, achieving the statutory majority required.

By an Order of the High Court of Malaya dated 7.8.2019, the Secured Scheme was sanctioned by the High Court of Malaya. By an Order of the High Court of Malaya dated 10.9.2019, the Unsecured Scheme was sanctioned subject to the Secured Scheme. At all material times, the Appellants’ Notice Pay, which is classified as unsecured debts, was the subject matter of the Unsecured Scheme sanctioned by the Order of the High Court of Malaya dated 10.9.2019 and which in turn is subject to the Secured Scheme.

The Industrial Court

Following the Appellants’ dismissal from the services of the Company, the Appellants filed representations under Section 20 (3) of the Industrial Relations Act 1967, claiming that their dismissals were without just cause and/or excuse.

On 4.6.2020, the Industrial Court handed down its decision that the retrenchment of the Appellants was done in good faith and the termination was with just cause and excuse. Accordingly, the claims of the Appellants were dismissed. Notwithstanding that, the Industrial Court went on to find and ordered as follows (“the Impugned part of the said Awards”) [paragraphs 64 and 65 of the said Awards] :
 
 “64.   However, this Court finds that the Claimants are entitled for the payment of the three (3) months’ salary in lieu of the termination notices as agreed by the Company. These payments are contractual in nature which were not denied by the Company during the trial. Although the Company submitted that this Court does not have the jurisdiction to address the issue as it is now the subject matter of an order of the High Court, this Court is of the view that acknowledging those rights does not go against any clause or part of the said scheme. Furthermore, the scheme shall only become effective on lodgement date which, as submitted by the Claimants, has yet to be done by the Company.
 
65.   This Court in making this Award, by its powers under s.30(6) of the IRA, which this Court thinks necessary or expedient for the purpose of settling the disputes, includes an order that the amount of three (3) months’ salary in lieu of the termination notices to be paid in full to each Claimants listed therein according to the last drawn salary amount tabulated in paragraph 6 by the Company within 60 days from the date of this Award.”

Dissatisfied with the Impugned part of the said Awards, the Company filed separate Judicial Review applications in respect of each of the said Awards, namely, Judicial Review Applications Nos. WA-25-223-08/2020, WA-25-224-08/2020 and WA-25-225-08/2020, for an order of certiorari to quash part of the said Awards. By an Order of the High Court of Malaya dated 23.9.2020, the Judicial Review Applications were consolidated, with Application No. WA-25-223-08/2020 being the parent case.

High Court of Malaya in Judicial Review Application No: WA-25-223-08/2020

On 15.9.2021,  YA Datuk Noorin binti Badaruddin found in favour of the Company and granted orders of certiorari to quash the Impugned part of the said Awards, specifically, that the Notice Pay was to be paid to the Appellants within 60 days from the date of Awards; and a declaratory order that the terms of the Scheme of Arrangements as sanctioned by the High Court of Malaya vide Orders dated 7.8.2019 and 10.9.2019 takes precedence over the Award made by the Industrial Court and the priority of the Secured Creditors be preserved. In conclusion, the High Court held that the Industrial Court, in making the Impugned part of the said Awards, had acted in excess of and/or without jurisdiction. This ultimately led to the Appellants’ appeal.

Court of Appeal

On 13.12.2022, the Court of Appeal with the quorum YA Azizah Binti Nawawi, YA Ravinthran A/L Paramaguru, and YA Nantha Balan A/L E.S. Moorthy unanimously dismissed the Appellants’ appeal without costs and upheld the decision of the Learned High Court Judge handed down on 15.9.2021.

Key Takeaways
  • The Industrial Court is a subordinate tribunal, over which the High Court of Malaya has supervisory jurisdiction. It is trite that the Award of the Industrial Court cannot override an Order of the High Court.
  • The Appellants did not file any application in the High Court of Malaya to set aside the Order dated 10.9.2019. Hence, it is trite law that parties are bound by a Court order until the same is set aside.

For more insight into this area of law, please contact our Partner in our Employment & Industrial Relations Practice Group:
P Jayasingam
Wong Keat Ching
Thavaselvi Pararajasingam
Teoh Alvare

Please email your details to [email protected] if you would like to subscribe to our Knowledge Centre.

Let's Connect!
➭ LINKEDIN: Zul Rafique & Partners
➭ INSTAGRAM: @zrplaw