Bumimetro Construction Sdn. Bhd. v Datuk Mohd Afrizan Bin Husain (WA-28PW-517-08/2024)

MLJU 1266. 32. The 2nd Respondent argued that the Applicant’s debt of RM22,717,619 constitutes only 8.39% of MOD’s total indebtedness of RM270,746,152, falling below the 10% threshold under section 487(2) of the CA 2016. The Joint Liquidators were not obliged to convene meetings on Bumimetro’s request alone, and under section 519(1) of the CA 2016, they were not required to incur expenses personally without indemnification. 33. The 10% threshold point is legally correct, but I note that it was not advanced as the reason for refusal at the time; only “lack of funds” was given. The inconsistency between the refusal to fund creditors’ meetings and the ability to conduct multiple Scheme- related meetings and a Task Force is of some weight. This ground is not dismissed; it contributes to the overall picture. Ground 3 — Failure to Take Custody and Control of Assets 34. On 22 July 2022, the Joint Liquidators acknowledged in writing that they did not possess all documents, books, and records. Three areas of concern are raised: (a) three motor vehicles (two 13 Mercedes-Benz and a Nissan Sylphy) remain with MOD’s directors, and negotiations for their sale have been ongoing for over two years; (b) construction materials on the One Kiara site, estimated at over RM4 million, have not been inventoried or secured, and no documentary evidence has been produced; and (c) IT technicians were allegedly engaged to access MOD’s data, but no invoice, engagement letter, or report has been produced. The Applicant relied on Bina Puri Sdn Bhd v Jambulingam Sethuraman-Raki C/O Timbun Corporate Advisory Sdn Bhd [2011] MLJU 933. 35. The Respondents provided contextual explanations for each and noted that the main focus of resources was rightly on the One Kiara Project, the principal asset. Notably, however, there is a material inconsistency between the two Joint Liquidators: the 1st Respondent said the value of the site materials is “unascertainable” because the site is abandoned; the 2nd Respondent said the project consultant had confirmed that the materials are “intact and reusable”. These two positions cannot both be correct. This inconsistency is a matter of concern and warrants examination at a full hearing. Ground 4 — Failure to Adjudicate the Proof of Debt 36. The Applicant lodged its Proof of Debt on 18 July 2022. Over three years later, no formal decision has been communicated, nor has there been any admission or rejection. Rules 91 to 98 of the Companies (Winding-Up) Rules 1972 require the 14 liquidator to examine and determine every proof of debt promptly. Without a decision, the Applicant cannot exercise its right of appeal under rule 93 of the Companies (Winding-Up) Rules 1972. The Court of Appeal in Jagdis Singh (supra) held that a proof of debt “should not be kept up the sleeve of the liquidator and announced suddenly in proceedings launched for the purpose of his removal”. 37. What makes this ground particularly notable is the irreconcilable contradiction between the two Joint Liquidators on this issue. The 1st Respondent said the Proof of Debt can only be adjudicated after the final accounts are issued upon completion of the development. The 2nd Respondent said the debt is “not disputed” and is reflected in the Statement of Affairs. These two positions cannot coexist. In the meantime, the claims of Huashi, MCC, Enseval and the Landowners appear to have been informally accepted as the basis for the contra arrangements, without the same formal adjudication process being applied. This ground has clear merit and contributes materially to the prima facie case. Ground 5 — Undue Preference: the Contra Arrangements 38. This is the most substantial ground. The Joint Liquidators recognised and gave effect to contra arrangements under which approximately 80 units of One Kiara, valued at approximately RM135 million, were allocated to Huashi (40 units), MCC (12 units), the Landowners (12 units), and Enseval (16 units). This 15 was done without court sanction, COI approval, or notification to the general body of creditors. 39. The Applicant raised specific documented irregularities, namely— (a) Huashi: — The Mutual Termination Agreement was executed on 12 March 2021, while MOD was under judicial management, without board authorisation, by a director who personally stood to benefit from being released from his personal guarantee. The Applicant argued that this contravened section 410 of the CA 2016. (b) MCC: — The Sale and Purchase Agreements are undated and unstamped, and were signed by individuals who were not MCC directors at the time of the purported execution. (c) Landowners: — No Sale and Purchase Agreements were produced. The Joint Venture Agreements condition the Landowners’ entitlement on the physical completion of units, which never occurred. (d) Enseval: — The Joint Liquidators’ own affidavit stated that the agreement covered 12 units. Yet 16 units were allocated, valued at RM19,866,410, against a debt of only RM10,822,000, an unexplained discrepancy of 4 units and approximately RM9 million. 16 40. The Respondents’ primary response was that these transactions predated the liquidation, and that the Joint Liquidators were recognising existing arrangements rather than creating new preferences. They relied on the principle in Majidee Park (supra) that a liquidator is not obliged to pursue claims without a reasonable prospect of success. 41. The 2nd Respondent further warned that denying the Landowners their units could trigger the Joint Venture Agreement's default provisions, with catastrophic consequences for the liquidation. The Respondents also relied on Lim Meow Khean & Ors v Pakatan Mawar (M) Sdn Bhd (in liquidation) & Ors [2021] MLJU 127 and on RHB Bank Bhd v Travelsight (M) Sdn Bhd & Ors and another appeal

1 MLJ 175 to support the proposition that purchasers have beneficial interests in their units under a constructive trust. 42. I accept that these are genuine legal defences that will require full argument at the substantive stage. However, for present purposes, I observe that the specific factual discrepancies, most strikingly the Enseval over-allocation of 4 unexplained units and RM9 million, are concrete, documented irregularities that have not been satisfactorily explained on affidavit. The question of whether court sanction was required under the Twelfth Schedule to the CA 2016 before these arrangements were given post-liquidation effect is a serious legal question. 17 43. The Court of Appeal’s caution in Jagdis Singh (supra), that a liquidator who surrenders a valuable asset to a creditor without notifying others calls into question his impartiality and objectivity in the conduct of his duty is apposite. This ground has real and credible merit. Ground 6 — Misapplication of Assets and Conflict of Interest in Remuneration 44. The Applicant does not object to the rehabilitation of One Kiara. Its concern is specific: the Joint Liquidators are deploying MOD’s own realisable assets, namely, the 11 unsold units valued at RM19,424,000, to fund the Scheme, while simultaneously proposing that no distribution be made to unsecured creditors. Yet, the Proposed Scheme allocates RM7.2 million in fees and RM2 million in expenses, totalling RM9.2 million, to the Joint Liquidators themselves. 45. The Applicant argued that the Joint Liquidators’ remuneration is to be determined by this Court under section 479 of the CA 2016, not by a scheme of arrangement, and that the structure may be a backdoor to secure higher remuneration without court oversight and without the consent of excluded creditors. The Applicant distinguished Francis a/l Augustine Pereira v Dataran Mantin Sdn Bhd & Ors and other appeals [2014] 6 MLJ 56 on the basis that, in that case, rehabilitation was funded by a white knight, not by the wound-up company’s own assets, and that excluded creditors retained access to the company’s 18 limited assets. It also relied on Hitachi Plant Engineering & Construction Co Ltd and Another v Eltraco International Pte Ltd and Another Appeal [2003] SGCA 38 for the proposition that, in a liquidation, the pari passu principle applies. 46. The Respondents’ argument was that: (a) a scheme may lawfully be proposed to a specific class of creditors, as affirmed in Francis Augustine Pereira (supra), Top Builders Capital Bhd & Ors v Seng Long Construction & Engineering Sdn Bhd & Ors [2022] 8 MLJ 604, and Jin Lin Wood Industries Sdn Bhd and Others v Mulpha International Bhd [2004] MLJU 497; (b) the RM9.2 million is not the Joint Liquidators’ section 479 remuneration but a management fee agreed by 92.2% of the Scheme Creditors for project completion work; and (c) any challenge to the Scheme should be brought before the scheme court. The Respondents also relied on the deference courts give to a liquidator’s commercial judgment: Tan Kim Chuan v Tan Kim Tian & Ors and another appeal [2022] 6 MLJ 888, Andrew Christopher Chuah Choong Eng Chuan v Ooi Woon Chee & Anor [2007] 2 MLJ 12, Sunrise Megaway Sdn Bhd (in liquidation) v Kathryn Ma Wai Fong [2021] 3 MLJ 602. 47. The Applicant has raised a legitimate and serious concern about the alignment of the Joint Liquidators’ financial interests with the structure they are advancing. The distinction the Applicant drew with Francis Augustine Pereira (supra) merits proper argument. Whether the RM9.2 million constitutes the Joint 19 Liquidators’ remuneration under the CA 2016 or a commercially agreed management fee is a question that cannot be decided at this leave stage. This ground is not frivolous. Ground 7 — Lack of Transparency 48. The Applicant complained that the Joint Liquidators filed the initial Scheme application ex parte on 20 September 2023 without notifying the Applicant, even though the Consent Order signed two days later on 22 September 2023 imposed a time- sensitive obligation on the Applicant and its related parties, triggered by the grant of a convening order. The Joint Liquidators relied on Mansion Properties Sdn Bhd v Sham Chin Yen & Ors [2021] 1 MLJ 527 (FC), which confirmed that ex parte scheme applications are standard practice and not inherently objectionable. The initial Scheme application was eventually withdrawn by consent. 49. I accept that ex parte scheme applications are entirely regular. Whether the specific circumstances of the Consent Order imposed an additional obligation to notify is an arguable point. This ground, standing alone, is not the strongest of the seven. However, it forms part of the overall picture of the relationship between the Joint Liquidators and the judgment creditor. 20 50. I have carefully considered the totality of the evidence and submissions before me. 51. I begin by acknowledging that the Joint Liquidators inherited a genuinely difficult assignment. MOD was hopelessly insolvent on the day they were appointed. Its only meaningful asset is an abandoned housing project on land owned by others, with over 95% of its units sold to purchasers who paid real money and are still awaiting their homes. The decision to pursue the Scheme of Arrangement rather than a conventional liquidation that would yield almost nothing has a clear commercial rationale, and I approach this application without any suspicion of the Joint Liquidators’ professional motives. 52. Having said that, having carefully evaluated the evidence, I am of the view that the Applicant has raised a number of complaints concerning the conduct of the liquidation that cannot, at this stage, be said to be plainly frivolous or devoid of merit. Among the matters raised are allegations relating to the administration of the liquidation, the adjudication of proofs of debt, the conduct of creditors’ affairs, the handling of assets, and matters connected to the Proposed Scheme of Arrangement. 53. Whether those allegations are ultimately sustainable is a matter for another day. For the avoidance of doubt, this Court makes no finding whatsoever on the merits of the allegations levelled against the Joint Liquidators. This Court also expresses no concluded view on the merits of those allegations and makes 21 no finding that grounds presently exist for the removal of the Joint Liquidators. The Respondents have provided explanations and rebuttals to each of the Applicant’s complaints. However, these competing positions demonstrate that there remain matters which warrant fuller ventilation and determination at the substantive stage. Those issues remain entirely open and will be determined at the substantive hearing. 54. I have also considered the three preliminary objections raised by the Respondents. For the reasons set out above, none of them is accepted as a basis for dismissal in limine. 55. I am satisfied that the application is neither vexatious, frivolous nor oppressive. The Applicant is the judgment creditor of MOD. It has raised specific, documented concerns based on contemporaneous materials and is not pursuing a collateral or abusive claim. 56. Having considered the totality of the evidence and submissions, I am satisfied that the Applicant has established a sufficient prima facie basis to warrant the grant of leave, and that the proposed proceedings cannot, at this stage, be characterised as frivolous, vexatious or oppressive. 22 CONCLUSION 57. For the reasons stated above, I allowed the Applicant’s application in Enclosure 1 at prayer 1. The Applicant is granted leave to proceed with the substantive application to remove the 1st and 2nd Respondents as Joint Liquidators of MOD pursuant to section 482(b) of the CA 2016. 58. I further ordered that the Applicant shall serve all cause papers relating to the substantive application on the creditors of MOD. This will ensure that creditors whose interests may be affected by the outcome of the substantive application are afforded an opportunity to participate or be heard. 59. The costs of this leave application shall be costs in the cause. Dated 6 August 2026 -sgd- JAMHIRAH ALI JUDGE HIGH COURT OF MALAYA COMMERCIAL 10 (INSOLVENCY 1) KUALA LUMPUR 23 To the parties’ solicitors: For the Applicant : Divesh a/l Kirit Mehta (MOB Intervener no 4 – 44) (Messrs Susan, Siong & Rita) For the 1st Respondent : Prakash a/l Lachimanan (MOB Intervener no 1 – 3) (Messrs Prakash Lachimanan) For the 2nd Respondent : Tan Jun Yu (MOB Intervener no 45 – 46) (Messrs Rosli Dahlan Saravana Partnership)