Kub Sepadu Sdn Bhd v 1. ) Chong Kwong Chin (WA-24NCC-166-04/2024)

CHONG KWONG CHIN (NRIC No.: 520509-10-5841) (In his capacity as former Joint Liquidator of KUB Sepadu Sdn Bhd)

CHANTHIRAN A/L NAGAPPAN (NRIC No.: 641006-04-5235) (In his capacity as former Joint Liquidator of KUB Sepadu Sdn Bhd)

CONTINENTAL MANAGEMENT RESOURCES SDN BHD (Company Registration No.: 200601025131 (744885-V)) ... DEFENDANTS JUDGMENT A. Introduction [1] The defendants filed an application to strike out the claim, premised on the argument that this court does not have jurisdiction to hear the claim. [2] I allowed the striking out application, for the reasons explained below. B. Background Facts The winding up of the plaintiff [3] The plaintiff was incorporated in 1996, and its shareholders are: a. with 60% shareholding; b. , with 30% shareholding; and c. Lembaga Amanah Kebajikan Kaum Melanau Sarawak , with 10% shareholding. [4] The plaintiff was involved in the business of the plantation of palm oil in Mukah, Sarawak, and was operating two estates, i.e. the Sungai Buloh Estate and the Sungai Nape Estate prior to its winding up. [5] On 23 November 2019, Medan Sepadu and Lembaga Amanah filed Winding Up Petition No. BA-28NCC-773-11/2019 against the plaintiff On 15 June 2022, the Winding Up Court allowed the petition and wound up the p [6] The 1st and 2nd defendants were appointed as joint and several liquidators of the plaintiff. The 3rd defendant provided support services for the liquidation exercise. [7] The Winding Up Order granted the 1st and 2nd defendants the power to continue carrying out the business of the plaintiff as far as necessary for its beneficial winding up, and to appoint persons necessary for that purpose. The Consent Order [8] On 17 June 2022, KUBAH filed an appeal to the Court of Appeal against the Winding Up Order. [9] At the Court of Appeal, KUBAH, Medan Sepadu and Lembaga Amanah entered into a consent order dated Up Order was set aside, with effect from the date of the Consent Order. [10] RM6,052,481.05 that was ust account to the 3rd defendant. The plaintiff alleged that in causing the transfers, the 1st and 2nd defendants had breached their duties as liquidators, since no court order was obtained under section 479 of the . [11] The defendants position is that the amount was properly paid, based on a reading of section 479(2) of the CA 2016 with rule 142(3) of the Companies (Winding-Up) Rules 1972. The defendants claimed they had in any event filed a notice of motion at the Winding Up Court for, amongst others, a declaration that the payment of their remuneration which forms part of the total amount was lawful and represents a fair and reasonable sum for their remuneration. C. The Striking Out Application [12] The defendants filed a striking out application under order 18 rule 19(1) of the Rules of Court 2012 The main ground relied on by the defendants to strike out th is that this court has no jurisdiction to hear the claim. [13] Winding Up Court no longer exists with the setting aside of the Winding Up Order, by way of the Consent Order. As such, no leave is required for the plaintiff to commence this action against the defendants. [14] However, the defendants contend that a winding up court does not cease to exist juridically when a winding up order is set aside or terminated. Thus, leave must still be sought from the winding up court before a liquidator is sued for matters concerning the liquidation exercise. D. Considerations [15] The sole issue for the determination of this court is whether leave of the Winding Up Court is required, to commence proceedings against the 1st and 2nd defendants, in view of the fact that the Winding Up Order has been set aside by the Consent Order. [16] The court considered three main points in the determination of this issue. The requirement for leave [17] The first point is that leave of court must be obtained before proceedings can be filed against a liquidator in respect of a liquidation exercise. This is set out in section 486(2) of the CA 2016, which states that: 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 [18] The requirement to obtain leave is expressed clearly by the Federal Court in the recent case of N Chanthiran a/l Nagappan v Kao Che Jen [2023] 5 MLJ 284. Nallini Pathmanathan FCJ, after considering relevant authorities, summarised the position adopted by the Malaysian courts at paragraph [37] of the judgment: a court-appointed liquidator is an officer of the court and therefore leave of the winding up court should be obtained before proceedings can be commenced against him. In this regard:

in Chi Liung Holdings (at p 207), the Court of Appeal cited s 236(3) of the 1965 Act (which, as stated earlier, is in pari materia with s 486(2) of the 2016 Act) in support of its reasoning that a liquidator appointed by the court is an officer of the court; and

(ii) in Abric (at para [24]), the High Court referred to r 63 of the Winding-Up Rules, which expressly recognises a liquidator as an officer of the court;

the rationale underlying the requirement that a prospective litigant should obtain leave to sue a court-appointed liquidator is twofold:

the court will protect its officer from spurious or vexatious litigation; and

(ii) the court will protect the integrity of the winding up process to ensure no wrongful interference with that process; (see: Tee Siew Kai at para [76] Chi Liung Holdings at p 210; See Teow Guan at paras [6] [7]; Abric at paras [28] [29], and Sarawak Timber Industry at paras [33] [34]);

leave of the winding up court is required regardless of whether the proposed action against a liquidator is filed before the winding up court or another court (see: Woodsville at para (emphasis added) [19] Thus, as explained by the Federal Court, leave of court is required to commence an action against a liquidator, and the purpose of leave is to protect the liquidator from spurious or vexatious litigation, and to protect the integrity of the winding up process. Control over the liquidator [20] The second point is that the liquidator is under the control of the winding up court. [21] In a case involving an action filed against a liquidator personally, Tee Siew Kai (liquidators for Merger Acceptance Sdn Bhd (in liquidation)) v Machang Indah Development Sdn Bhd (in liquidation) (previously known as Rakyat Corp Sdn Bhd) [2020] 6 MLJ 168, the Federal Court considered the role of the winding up court, and cited the following passage of the judgment of the Privy Council in Vernon Lloyd-Owen v Alfred E Bull & Ors [1936] 1 DLR 433: A Judge in winding up is the custodian of the interests of every class affected by the liquidation. It is his duty even if it be in a voluntary liquidation that opportunity offers to see to it that all assets of the company are brought into the winding up. In authorising proceedings, especially if they may or will involve some drain upon the assets, he must satisfy himself as to their probable success: where, as in the present case, they involve no possible charge on assets, he will nevertheless be careful to see (emphasis added) [22] The control of the court over the winding up process is clearly stipulated in section 510(1) of the CA 2016, which states that: The Court shall take cognizance of the conduct of liquidators, and if a liquidator does not faithfully perform his duties and observe the prescribed requirements or the requirements of the Court or if any complaint is made to the Court by any creditor or contributory or by the Official Receiver in regard to the conduct, the Court shall inquire into the matter and take such action as the Court thinks fit. (emphasis added) [23] Section 510(3) then goes on to provide that: The Court may at any time require any liquidator to answer any inquiry in relation to the winding up and may examine the liquidator or any other person on oath concerning the winding up and may direct an investigation to be made of the books and (emphasis added) [24] In N Chanthiran (supra), the Federal Court considered the control of the winding up court of over liquidators by referring to section 277(2) of the Companies Act 1965 (which is in pari materia with section 510(1) of the CA 2016). The court observed that: [45] This subsection therefore statutorily recognises that it is the winding up court that retains control over liquidators and that any complaint by any creditor or contributory warrants an inquiry into the matter. It is clear from all these provisions that any application to remove a liquidator can only be undertaken by a court, that too the winding up court that appointed him as the liquidator in the first place (emphasis added) [25] Thus, based on the wordings of section 510(1) and (3), the court retains control over a liquidator, and has the power to enquire into the winding up process and the conduct of the liquidator. [26] In the present case, the question is whether that power is retained in view of the setting aside of the Winding Up Order. I am of the firm view that this question must be answered in the affirmative, as section 510(3) of the CA 2016 provides that an inquiry in relation to a winding [27] The argument that the Winding Up Court is functus officio defeats the purpose of the requirement for leave as expressed in N Chanthiran (supra), which is to protect the liquidator from spurious and vexatious litigation, and to protect the integrity of the winding up process. Proceedings against a liquidator or in respect of a winding up process can be initiated after a winding up process is terminated or a winding up order is set aside, and questions on the integrity of a winding up process may arise after the completion of a winding up process. [28] Th argument may also lead to absurd results, as it means that a party can wait until the conclusion of the winding up process, and then freely sue liquidators without obtaining leave of court, thus defeating the rationale of the winding up court acting as a filter in actions against liquidators. The effect of the Consent Order [29] My third and final point is on the effect of the Consent Order. The Consent Order, entered into at the Court of Appeal on 29 February 2024, provides that: The Winding-Up Order dated 15.6.2022 obtained vide Companies Winding Up No.BA-28NCC-773-11/2019 be hereby set aside with effect from the date of this

(emphasis added) [30] It is this clearly stipulated in the Consent Order, and cannot be disputed, that the setting aside of the Winding Up Order takes effect from the date of the Consent Order. [31] The plaintiff argument on the effect of the Consent Order is unclear, to say the least. First, the plaintiff argued, citing Malayan Banking Bhd v Gan Bee San & Ors and another appeal (SKS Foam

(M) Sdn Bhd, intervener) [2019] 2 MLJ 137, that the effect of setting aside a winding up order is that the winding up order and the appointment of the liquidator is void ab initio. [32] The plaintiff then argued, citing Panaron Sdn Bhd v Univac Switchgear Sdn Bhd [2015] 9 MLJ 498, that a winding up order can be set aside prospectively. In this regard, the plaintiff acknowledged that based on paragraph 1 of the Consent Order, the Winding Up Order was set aside prospectively in the style of Panaron (supra). The plaintiff highlighted that the effect of the setting aside of the Winding Up Order is that the winding up process and the appointment of the 1st and 2nd defendants ended with effect from 29 February 2024, but that anything done during the liquidation period from 15 June 2022 to 29 February 2024 would not be adversely affected or voided. [33] argument, that the Winding Up Court that granted the Winding Up Order no longer has any role, and there is therefore no legal basis for the defendants to contend that the current proceedings ought to have been filed at the Winding Up Court and that leave ought to have been obtained from the Winding Up Court to commenced these proceedings. [34] For the reasons I have elaborated in my assessment of the first two points above, I find that notwithstanding the Consent Order which set aside the Winding Up Order with effect from 29 February 2024: a. Leave must be obtained from the Winding Up Court for the plaintiff to institute these proceedings; and b. This matter can only be dealt with at the Winding Up Court. [35] As such, I find that this court does not have jurisdiction to hear this matter. [36] Relying on Bandar Builder Sdn Bhd v United Banking Corporation Bhd [1993] 3 MLJ 36, I find this to be a plain and obvious case for which recourse should be had to summary process of striking out under order 18 rule 19(1) of the ROC. E. Decision [37] Based on the considerations and findings as set out, the court allowed the striking out application, with costs. Dated 2 August 2024 ADLIN ABDUL MAJID Judge High Court of Malaya Commercial Division (NCC6) Kuala Lumpur Counsel: Plaintiff : Nathalie Ker (together with Wong Chee Chien) of Messrs. Lim Chee Wee Partnership Defendants : Malik Imtiaz Sarwar (together with Harleen Kaur, Surendra Ananth, Lim Yvonne and Foo Joan Liang (pupil-in-chambers)) of Messrs. Vin Partnership