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Zul Rafique & Partners succeeds in High Court ruling that Industrial Court has no jurisdiction to order Notice Pay

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22 September 2021

Please click HERE for the Mandarin version of the case update.

P. Jayasingam and Jude Pravin Peters from Zul Rafique & Partners’ Employment and Industrial Relations Practice Group successfully represented Megasteel Sdn Bhd (“the Applicant”) in an application for Judicial Review for amongst others, an order of certiorari to quash a portion of Industrial Court Awards No. 761, 762 and 763 of 2020 before the High Court of Malaya.

Brief facts

At the Industrial Court
In 2016, the Applicant retrenched the First Respondents and at the time paid to the First Respondents all sums due save and except for their respective 3 Months’ Salaries in Lieu of Notice of Termination (“the Notice Pay”).

The Applicant began to restructure their debts through Schemes of Arrangement with a Secured and Unsecured Scheme for Secured Debts and Unsecured Debts respectively. The First Respondents were invited to submit their proof of debts with 65 out of 70 of them deciding to do so. The debt in respect of the Notice Pay for all 70 First Respondents was included under the Unsecured Scheme as an Unsecured Debt.

Accordingly, a meeting of unsecured creditors was first called where the statutory majority as required under the Companies Act 2016 was achieved, approving the Unsecured Scheme. By an order of the High Court of Malaya, the Unsecured Scheme of Arrangement was sanctioned subject to the Secured Scheme of Arrangement.

Following their retrenchment, the First Respondents had filed a claim that they were dismissed without just cause and/or excuse. These were Industrial Court Cases Nos: No. 7/4-1704/16, 7(30)(3)/4-1420/16 and 7(30)(3)/4-1731/16 which were all heard together.

The Industrial Court in its decision held that the First Respondents were dismissed with just cause and/or excuse and their claims dismissed. However, the Industrial Court also found that the “heart” of the dispute was the non-payment of the Notice Pay, and went on to include in the Awards an Order (“the Impugned Orders”) that the Applicant pay the First Respondents the Notice Pay within 60 days from the date of the Award. This, in effect, placed the debt in respect of the Notice Pay ahead of even the debts owed to the Secured Scheme creditors.

Being dissatisfied, the Applicant filed its Application for Judicial Review praying for, amongst others:
 
1. An order of certiorari to quash the Impugned Orders; and
2. A declaration that the Schemes of Arrangement superseded the Awards, and that the priority of the creditors therein be preserved.

Judicial Review
Before the High Court, Mr. P. Jayasingam, counsel for Applicant argued that:
 
(i) The Industrial Court, is a creature of the Industrial Relations Act 1967 (‘IRA’), and hence, its powers are discovered only from the four corners of the IRA. As such, its powers to adjudicate are limited to the dispute referred to it by the Minister of Human Resources under Section 20(3) of the IRA and the duty or function of the Industrial Court is to determine the matter referred to it by the Minister, which in this case was whether the termination of the First Respondents was done with or without just cause or excuse. Upon making a finding that an employee was terminated or dismissed for just cause or excuse, the Industrial Court ought to dismiss the employee’s claim. The Industrial Court has no power or authority whatsoever to deal with a matter outside the reference;
 
(ii) Prior to the said Award, the Schemes of Arrangements had been sanctioned by the High Court of Malaya vide Orders dated 7.8.2019 and 10.9.2019. Hence, the Schemes of Arrangements are binding on all parties to the Schemes, unless the Orders are stayed or set aside;
 
(iii) Notwithstanding that, at the time of the Awards, the Unsecured Scheme had not been lodged, the Schemes ought to be read together, and the Settlement of the Secured Scheme was a condition precedent to the lodgement of the Unsecured Scheme; and
 
(iv) Given that the dismissal of the First Respondents was found to have been with just cause and excuse, and their claims dismissed, the Industrial Court ought to have been guided by Paragraph 2 of Industrial Court Practice Note No. 3 of 2019, and the Industrial Court ought not to have ordered any “backwages, compensation or benefit” to the First Respondents.

The High Court allowed the Applicant’s application
YA Datuk Noorin binti Badaruddin, judge of the High Court of Kuala Lumpur found in favour of the Applicant and granted an order of certiorari to quash part of the Industrial Court’s Awards, specifically, the Orders that the Notice Pay was to be paid to the First Respondents 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 Orders, had acted in excess of and/or without jurisdiction.

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

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