CX Grocery Sdn Bhd v Teng Yue Overseas Construction Sdn Bhd (JA-28PW-30-04/2024)

This is CX Grocery Sdn. Bhd. (“the Applicant”)’s application for leave to proceed and continue with the Arbitration Proceedings between MCC Overseas (M) Sdn. Bhd. (“MCC”) and Teng Yue Overseas Construction Sdn. Bhd. (“the Respondent”) pursuant to subsection 486(2) of the Companies Act 2016 [Act 777].

After considering all cause papers and the written submissions of the parties, I allowed the Applicant’s application and gave no order as to costs.

Below are the grounds of my decision.

The background facts in this application are gathered from the Affidavits and submissions filed by the parties and stated in chronological order.

The Respondent (in Liquidation) was wound up on 21.11.2023. (see pages 28-29 of Enclosure 2)

The Applicant is the sole contributory of the Respondent (see pages 12-17 of Enclosure 2)

One Baltasar bin Maskor [Approval No.: 02918/08/2026 P], was appointed as the liquidator of the Respondent (the “Liquidator”).

As at 26.6.2025, there are 13 proof of debts filed amounting to RM13,749,755.11. The details are as tabulated below: No. Date. Creditor POD Sum (RM) 1 29.01.2024 SP Construction & Marketing Sdn. Bhd. 2,816,147.08 2 07.02.2024

(M) Sdn. Bhd. 47,334.94 3 01.03.2024 Great Formwork Sdn. Bhd. 1,343,611.19 4 11.03.2024 APCC (M) Sdn. Bhd. 45,323.55 5 07.05.2025 KPMG Plt 43,772.19 6 29.07.2024 Lim Khai Wen 31,473.55 7 13.08.2024 Wang, Desheng 279,000.00 8 13.08.2024 Wang, Jinfu 63,772.00 9 28.10.2024 Yin, Rui 504,000.00 10 07.11.2024 Qin Jianong 324,833.52 11 13.11.2024 CMS Concrete Products Sdn. Bhd. 7,732,662.44 12 15.11.2024 Paint Marketing Co (M) Sdn. Bhd. 207,264.13 13 10.12.2024 Oriental Shoring Solutions Sdn. Bhd. 310,560.77 13,749,755.11

At the material time, the Respondent was involved in an ongoing construction dispute with MCC which was being adjudicated through Arbitration Proceedings.

The Arbitration Proceedings arises from disputes between MCC, being the main contractor and the Respondent, being sub-contractor, in respect of a construction project.

MCC’s claim was in the region of approximately RM24 million, while the Respondent’s counterclaim amounted to approximately RM30 million, exclusive of interest and costs.

Prior to the winding-up order, witness statements in the Arbitration Proceedings had been exchanged and hearing dates had been fixed for August and September 2024. However, following liquidation, the Arbitration Proceedings were halted due to the issue of court sanction under subsection 486(2) of Act 777.

The Applicant being the sole shareholder and contributory of the Respondent, filed an Amended Notice of Motion seeking leave of Court to proceed with the arbitration on behalf of the Respondent.

The Applicant as the sole contributory/shareholder of the Respondent seeks to ensure the completion of the Respondent’s pending arbitration as the Respondent has a substantial counterclaim amounting to RM30,610,934.52 against MCC.

The Applicant then filed this proceeding to obtain the Court Order to grant the Applicant sanction to proceed with the arbitration registered as AIAC/D/FTR-1053-2022 between MCC and the Respondent, to set aside the Judgment In Default dated 01.04.2023 (“JID”) and to commence court proceedings against SP Construction & Marketing Sdn. Bhd. (see pages 177-320 of Enclosure 1) (the “Proposed Legal Proceedings”).

The Liquidator opposed the Applicant’s application on the basis that statutory authority to conduct litigation vests exclusively in the liquidator, and that the application was premature and prejudicial to creditors.

It is the contention of the Applicant that despite the Applicant’s letter to the Liquidator on 14.03.2024 (see pages 177-316 of Enclosure 2), the Liquidator failed to inform the Applicant whether the Liquidator would provide their consent to the Applicant’s application (Enclosure 1).

The Liquidator had stated that he required further information regarding the Proposed Legal Proceedings (see pages 319-320 of Enclosure 2) (paragraph 8 of Enclosure 6).

The Applicant submits that throughout these proceedings (from April 2024 to to-date), the Liquidator had the opportunity to inform this Court on whether the Liquidator would bring, continue with or defend the Proposed Legal Proceedings, but the Liquidator refused/failed to do so.

The Applicant submitted the following reasons justify why Amended Notice of Motion should be allowed in the interest of justice with costs to be borne by the Liquidator:

it is clear from the Respondent’s solicitors letter dated 03.09.2024 (at pages 6-7 of Enclosure 34) that the Liquidator does not intend to proceed with the Arbitration Proceedings which is evident from the Liquidator’s inaction;

as a result, the Arbitration Proceedings (commenced on 17.01.2022) (see pages 81-83 of Enclosure 2) between MCC and the Respondent are at a standstill; and

therefore, the Applicant has clearly demonstrated why the Amended Notice of Motion should be allowed in the interest of justice with costs to be borne by the Liquidator. ISSUE TO BE DETERMINED

I find the only issue to be determined is whether leave should be granted to the Applicant, as contributory, to proceed and continue with the Arbitration Proceedings on behalf of the wound-up company under subsection 486(2) of Act 777.

In order to determine the issues, I have to examine whether the statutory and factual threshold for granting leave had been satisfied by the Applicant, as contributory, to proceed and continue with the Arbitration Proceedings on behalf of the wound-up company under subsection 486(2) of Act 777. ANALYSIS AND COURT’S FINDINGS The Law on the application for sanction from the Court

The law on the application for sanction from the Court is governed by subsection 486(2) of Act 777 which provides as follows: “486. Powers of liquidator in winding up by Court

…

The exercise by the liquidator in a winding up by the Court of the powers conferred by this section is subject to the control of the Court and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of those powers.” [Emphasis added]

The general rule is that once a company has been wound up by an order of the Court, the locus standi to bring or proceed with an action or proceeding is vested with the liquidator. See the seminal Federal Court decision in the case of Zaitun Marketing Sdn. Bhd. v Boustead Eldred Sdn. Bhd. [2010] 3 CLJ 785 where the Federal Court held the fundamental principle as follows: ''once a limited company is wound up, its assets and liabilities vest in the liquidator. It is up to him to decide whether to institute, continue the prosecution of or defend legal proceedings. However, there is jurisdiction in the court to authorise other persons to conduct litigation in the name of the company.”. [Emphasis added]

I further refer to the recent case of Small Medium Enterprise Development Bank Malaysia Bhd v Oren Venture Sdn. Bhd. & Ors and Another Case [2022] 6 CLJ 148 where it was held that only the Court is empowered to give sanctions to parties involved in the liquidation other than the liquidator to commence an action on behalf of the wound-up company.

The relevant parts of the judgment in Small Medium (supra) is reproduced below: “.. [16] The Act - including s. 486 and the Twelfth Schedule - does not contain any express provision giving a liquidator the power to delegate or abrogate the exercise of any of his powers, or the power to issue a sanction to someone else to exercise any of those powers. This necessarily means that Parliament had intended for only the liquidator to have those general powers, including that power to "bring or defend any action or other legal proceedings in the name and on behalf of the company. … [25] Nevertheless, I am also of the view that the Act does provide for giving a sanction to a creditor or contributory - and only a creditor and contributory - to bring an action on behalf of a wound-up company. However, that power to issue such sanction is only exercisable by the court. The basis for this is s. 486(2) of the Act and Zaitun Marketing. … [39] Fourthly, as the court's power to sanction a creditor or contributory to bring, continue with or defend and action is derived from s. 486(2) of the Act by which it controls the exercise of the powers by the liquidator, then a liquidator is in a subservient position to the court and cannot be placed on par with the court in having that power.”. [Emphasis added]

Furthermore, in the case of Hup Lee Coachbuilders Holdings Sdn. Bhd. v Cycle & Carriage Bintang Bhd. [2012] 10 CLJ 88 wherein the Court of Appeal explained the distinction between subsection 226(3) of the Companies Act 1965 (which is in pari material with subsection 471(1) of the Act 777) and subsection 236(3) of the Companies Act 1965 (which is in pari material with subsection 486(2) of Act 777) and held as follows: “..[9] In the present case, the suit in question is an action commenced or brought by the wound-up company (the appellant). The appellant was the plaintiff (not a defendant) in the said action. This is not a case where an action was brought against the wound-up company. Under s. 226(3) of the Companies Act 1965, leave of court is only required if the wound-up company is cited as a defendant. Therefore the issue of obtaining leave from the court under s. 226(3) does not arise. Section 226(3) is not applicable here. (See: HJ Industries Sdn. Bhd. & Anor. v. Wen Ken Properties Sdn. Bhd. [2005] 1 LNS 308). [15] Section 236(2) of the Companies Act 1965 strengthens the position that only the official assignee as the appointed liquidator has the power to bring or defend any action or other legal proceedings in the name and on behalf of the wound-up company. If for whatever reason, the official assignee as the liquidator is unwilling to initiate the action in the name of the wound-up company, a creditor or a contributory can apply to the court under ss. 236(3) or 279 of the Companies Act 1965 seeking an order that the liquidator be compelled initiate the action in the name of the wound-up company or that leave be given to the creditor or contributory himself to bring the action in the name of the company. (See: Abric Project Management Sdn. Bhd. v. Palmshine Plaza Sdn. Bhd & Anor [2007] 7 CLJ 516; and Zaitun Marketing Sdn Bhd v. Boustead Eldred Sdn Bhd (supra)). Again, to do so, the creditor or the must have obtained leave of the court before commencing the action in the name and on behalf of the wound-up company.”. [Emphasis added]

Hence, it is trite that pursuant to subsection 486(2) of Act 777, upon winding-up, the authority to commence, continue or defend proceedings on behalf of a company ordinarily resides with the liquidator.

However, subsection 486(2) of Act 777 expressly confers supervisory jurisdiction upon the Court to grant leave to creditors or contributories where circumstances justify such intervention.

The Federal Court in Zaitun Marketing (supra) affirmed that the Court possesses discretionary power to authorise such proceedings in appropriate cases for the protection of the company’s estate.

The power to grant leave is at the Court’s discretion based on cause shown by taking into consideration the circumstances of each case. In deciding such, I must be satisfied of the following:

where the liquidator refuses to act;

(ii) is unable to act;

(iii) lacks funding; or

(iv) is practically unable to advance the proceedings. Whether leave should be granted to the Applicant, as contributory, to proceed and continue with the Arbitration Proceedings on behalf of the wound-up company under subsection 486(2) of Act 777

The Applicant submits that the Liquidator had not taken any steps to continue or defend the Respondent’s substantial counterclaim in the arbitration notwithstanding repeated correspondence.

The Respondent says differently. The Respondent claims that in the present case, the Liquidator did not refuse to take such action. Neither did the Liquidator display a lack of interest in that respect.

The Liquidator’s position is that, to pursue the Proposed Legal Proceedings by the Applicant, sufficient details and information must be provided by the Applicant first before further legal action be taken.

It is clear from the affidavits and documents referred to by the parties, that the Liquidator has displayed a lack of interest in continuing the Arbitration Proceedings against MCC and instituting proceedings against SP Construction & Marketing Sdn. Bhd. due to the delay in responding and not taking a proactive approach to inquiring into the affairs of the Respondent.

The Liquidator also sought information from the Applicant who is a separate entity from the Respondent, which lends credence to the theory that the Liquidator is disinterested.

The contention of the Respondent that it was the Applicant’s own failure to cooperate and to provide the full documentation and information to the Respondent’s Liquidator in the first place is devoid of merits as the Applicant had provided whatever information that was within the Applicant’s knowledge.

Upon scrutinizing the cause papers filed in regards of this application, I find it is undisputed that numerous letters had been sent to the Liquidator of the Respondent.

The Respondent contended the documents provided by the Applicant is incomplete and limited documents were provided in respect of the Arbitration Proceeding.

The Respondent then vide few letters and e-mails kept on repeating their request for further information from the Applicant. The Respondent claimed that the Applicant did not respond and instead, approximately 11 days later, the Applicant has hastily commenced Enclosure 1 herein on 07.04.2024.

I have examined the documents filed through their affidavits and I find that throughout these proceedings (from April 2024 to to-date), the Respondent’s Liquidator had the opportunity to inform the Court on whether the Respondent’s Liquidator would bring, continue with or defend the Proposed Legal Proceedings, but the Respondent Liquidator refused/failed to do so.

After waiting for almost three (3) months from the date of the Winding-Up Order of the Respondent, I find that this application was filed to seek leave from the Court to proceed Arbitration Proceedings on behalf of the Respondent when the Liquidator for the Respondent failed to give consent to the Applicant to institute legal action on behalf of Respondent.

The Respondent has taken more than one (1) year from the date of receiving the application, and still refused/failed to inform this Court on whether the Respondent’s Liquidator would bring, continue with or defend the Proposed Legal Proceedings.

I find that the Respondent Liquidator did not act within a reasonable period of time despite the Respondent’s claim that the Applicant failed to cooperate and to provide the full documentation and information of the Arbitration Proceedings to the Respondent’s Liquidator as requested.

I find the reasons provided by the Respondent’s Liquidator is unreasonable and not justified. The Respondent is under the management of the Liquidator since it was wound-up on 21.11.2023 and therefore, the Respondent’s Liquidator is able to access the information that they tried to obtain from the Applicant. It is clearly showing that the Liquidator has failed to perform its duty to conduct the investigation on the affairs of the Respondent and to speed up the liquidation process since its appointment even though he has been in the office for almost four (4) months.

I am of the considered view that the Liquidator’s conduct to date, clearly demonstrates the Respondent’s Liquidator refusal to proceed with the Proposed Legal Proceedings (i.e. Arbitration & Writ) because the Respondent’s Liquidator is unable to and/or is advised not to and/or has no funds to proceed.

It is pertinent to note that the reason for the appointment of a liquidator is to speed up the liquidation process, to realize the assets of the company and to pay off the creditors and other dues before finally putting the company in dissolution within the reasonable time. The liquidator will be paid remuneration or salary pursuant to section 479 of Act 777. Therefore, the liquidator is expected to discharge their statutory duties by exercising a high standard of care, skill, diligence and competence commensurate with their professional standards.

The general duties of a liquidator appointed in a compulsory winding-up was explained by Marks J in the Australian case of Corporate Affairs v Harvey [1980] VR 669 in the following terms: “The duties of a liquidator need to be clearly understood. Fundamentally, he must administer the estate strictly in accordance with the duties and obligations specifically imposed on him by the Companies Act and its Rules. It is obvious that everything to be done in a competent administration is not and cannot be specifically prescribed. Preserving the assets, giving proper attention to the administration, acting with due dispatch and ensuring adequate knowledge and understanding of the affairs of the companies are matters of common sense. If there is a difficulty at any stage of the administration then it is the clear duty of the liquidator to inform the Court and take directions…”. [Emphasis added]

Applying the principles stated in the above case, the Respondent’s Liquidator is found to not have acted with promptitude to file an application under subsection 487(3) of Act 777 to seek direction of the Court regarding the delay in getting the information from the Applicant.

Hence, I find that the Respondent’s Liquidator has unreasonably delayed his duties where he must transact or dispose of the liquidation process promptly or expeditiously or as soon as practicable.

In this regard, I refer to the case of Re Keypak Homecare Ltd [1987] BCLC 409 where the liquidator was removed by the Court when he had failed to display sufficient vigor in carrying out his duties as liquidator, and in particular, although he had been in office for three (3) months he had failed to conduct a thorough investigation of the company’s affairs.

Further, the Applicant contended that the Arbitration Proceedings is at an advanced stage, and the Respondent’s counterclaim may recover sums capable of satisfying all creditors.

In the event an Arbitration Award in favor of the Respondent, it would settle all outstanding debts to the Respondent’s creditors and allow the Respondent to continue operations.

The Applicant contended that the Applicant was only able to obtain limited documents on the arbitration.

In fact, the Respondent Liquidator has the authority to request all the relevant documents from the Respondent and/or the Arbitrator/AIAC.

I refer to section 486 and Twelfth Schedule of Act 777 which provide as follows: “Powers of liquidator in winding up by Court. 486 (1) Where a company is being wound up by the Court, the liquidator may-

without the authority under paragraph (b), exercise any of the general powers specified in Part I of the Twelfth Schedule, and

with the authority of the Court or the committee of inspection, exercise any of the powers specified in Part II of the Twelfth Schedule.". [Emphasis added] "Twelfth Schedule: "The liquidator may (without authority)-

bring or defend any action or other legal proceedings in the name and on behalf of the company; …

appoint an agent to do any business which the liquidator is unable to do;

appoint an advocate to assist him in his duties; and

(I) do all such other things as are necessary for winding up the affairs of the company and distributing its assets.". [Emphasis added]

The present case involved the financial disputes which led to winding up of the Respondent. No evidence was produced by the Respondent’s Liquidator to show that the documents of the Respondent were insufficient to reveal the information of Arbitration Proceedings, except numerous letters and e-mails sent to the Applicant kept on repeating the request for further documents.

Long after Enclosure 1 was filed by the Applicant, the Liquidator only via Supplemental Affidavit (Enclosure 37) affirmed on 20.2.2025 confirmed that MCC has not sought leave to proceed with the arbitration against the Respondent. The Liquidator also stated the Johor Bahru High Court vide Order dated 30.10.2024 directed the Liquidator to take necessary action to set aside the JID and acting on the said Order, the Liquidator has on 10.02.2025 finally filed an application to set aside the JID.

Upon the Court’s instructions on 26.05.2025 and 02.07.2025 respectively, the Liquidator has via Supplemental Affidavit No. 2 (Enclosure 47) apprised the Court of the arbitration payment history. The Liquidator has informed that the total sum of RM345,074.00 has been paid to AIAC. He also averred that the future fees/charges to be incurred amounting to RM120,000.00 consisting of balance of estimated professional fee at RM100.000.00 and refresher fee of RM20,000.00 and also the estimated legal fees of RM30,000.00 [excluding the disbursement and Sales Service Tax “SST”)] to be paid to the Respondent’s resident solicitor to supervise, liaise and monitor the conduct of the Arbitration Proceedings. The Liquidator also confirmed that as of June/July 2025, no further deposits were required by Asian International Arbitration Centre (“AIAC”) unless the amount in dispute changes.

According to the Applicant, the total fees paid to AIAC is RM347,574.10 based on the documents attached to the exhibit in Enclosure 47 and the amount RM345,074.00 as stated by the Liquidator in paragraph 6 of Enclosure 47 is incorrect. The Applicant also informed that the total fees to be paid to an Arbitrator based on the calculation on the website is RM234,114.76 and which include 8% of the SST. The Applicant questioning the amount of the legal fees quoted for the resident solicitor as there is no invoice or proposed fees quoted. Further, the Applicant argued that there is no necessity to pay the legal fees to the resident solicitor of the Respondent to supervise the Arbitration Proceedings since the Respondent is represented by a representative in the Arbitration Proceedings.

Considering the payment history to the AIAC and total claim against the MCC is approximately RM30 million and MCC’s claim against the Respondent was in the region of approximately RM24 million, I am of the considered view since a substantial amount has been paid to AIAC for the Arbitration proceedings, the leave should be granted for the Applicant to continue with the Arbitration Proceedings. If the Respondent succeed in the Arbitration proceedings, the amount of their counterclaim can be used to settle their debts.

I find the Liquidator has no interest to proceed with the Arbitration Proceedings when he averred that MCC has not sought any leave to proceed with the Arbitration Proceedings against the Respondent. He did not take any initiative to seek further information on the Arbitration Proceedings and choose to remain silent and idle.

The Liquidator only sought the information from the MCC’s solicitor and AIAC regarding the status of the Arbitration Proceedings and the payment history to AIAC upon the direction of the Court on 26.05.2025. The Liquidator has only acted to file the application to set aside JID only upon the Court Order on 30.10.2024.

I find that the Respondent’s Liquidator failed to perform his duties with promptitude and had ample opportunity throughout these proceedings (from April 2024 to to-date), to inform this Court on whether the Respondent’s Liquidator would bring, continue with or defend the Proposed Legal Proceedings, but the Respondent’s Liquidator refused/failed to do so.

Had the Applicant not file this application, the Respondent’s Liquidator may have not taken any steps to file the leave application, instead simply lamenting that he does not have enough documents to proceed further with the legal affairs of the Respondent.

Further, I find the Respondent Liquidator since his appointment, has not contacted any director and/or hold any meetings with the directors and the shareholders of the Respondent under section 487 of Act 777 or carrying out any auditing on the Respondent. The directors and the shareholders of the Respondent have been left in the dark as to the liquidation process and the disposal of the assets of the Respondent.

The failure of the Respondent’s Liquidator to hold a meeting with neither the company secretary, directors nor the creditors pursuant to subsection 487(2) of Act 777 is unprofessional. Should the meeting be called, the Respondent’s Liquidator would be able to get the information requested and make the decision as to bring, continue with or defend the Proposed Legal Proceedings, rather than keep writing to the Applicant for documents not within the power and possession of the Applicant.

I am aware that this Court should be slow in interfering with the affairs of the liquidator. However, I am of the view that the Court has the discretion to grant leave for the Applicant to proceed with the Arbitration Proceedings involving the Respondent in sight of the Respondent’s potential recovery and does not amount to an abuse of the winding-up process.

From all these circumstances added by a lack of transparency in the conduct of the Respondent’s Liquidator, I conclude that the Respondent’s Liquidator had failed to discharge his duties efficiently by taking into consideration the paramount interest of the creditors and contributories, largely due to lack of funds and documentation.

Nowhere in the affidavits or submissions does the Liquidator express a positive intention to proceed with the Arbitration Proceedings.

The Liquidator’s “waiting for information” stance cannot reasonably defeat the statutory right of a contributory (the Applicant) when substantial claims (over RM30 million) are at stake and hearing dates had been fixed.

A successful counterclaim could potentially satisfy all creditors, and there is no evidence of detriment to the estate. The Applicant has undertaken to bear all necessary Arbitration expenses.

The Court must ensure that potentially valuable causes of action are not abandoned simply due to lack of funds in the liquidation.

Based on the foregoing reasons, I allowed the Applicant’s application in Enclosure 1 as follows:

leave is given to the Applicant to proceed and continue with the Arbitration proceedings, i.e. Arbitration Reference No. AIAC/D/FTR/1053-2022 between MCC and the Respondent; and

no order as to costs.

Prayer 2 of Enclosure 1 was not allowed since the Respondent’s Liquidator has acted to file the application to set aside JID on 10.2.2025. Dated 31 January 2026. Signed by: …………………….. Wong Mee Ling Judge High Court of Malaya Johor Bahru Johor Darul Ta’zim. Counsel/Solicitor for the Applicant: Ms. K. Sheela a/p T. Vinayaka Das Messrs Sheela Vinayaka & Co Counsel/Solicitor for the Respondents: Mr. Wilson Lim Mao Shen and