Tee Siew Kai v Machang Indah Development Sdn Bhd (P-02(IM)-843-04/2017)

1 IN THE COURT OF APPEAL OF MALAYSIA (APPELLATE JURISDICTION) CIVIL APPEAL NO: P-02(IM)-843-04/2017 BETWEEN TEE SIEW KAI … APPELLANT (No. K/P: 500325-01-5579) [Sebagai Pelikuidas bagi Merger Acceptance Sdn Bhd] [Dalam Likuidasi] [No. Syarikat: 260318-H] AND MACHANG INDAH DEVELOPMENT SDN BHD … RESPONDENT [Dalam Likuidasi] [No. Syarikat: 04144881] [Dahulu dikenali sebagai Rakyat Corporation Sdn Bhd] (Dalam Perkara Penggulungan Syarikat No. 28-99-2001 Dalam Mahkamah Tinggi Malaya di Pulau Pinang) ANTARA

1. LEONG CHEONG CHYE @ LEONG SEONG MOH …PEMPETISYEN-PEMPETISYEN

2. GOH LUCK MOOI DAN MERGER ACCEPTANCE SDN BHD … RESPONDEN [NO. SYARIKAT: 260318-H] 2 DAN MACHANG INDAH DEVELOPMENT SDN BHD … PEMOHON [Dalam Likuidasi] [No. Syarikat: 014481] [Dahulu dikenali sebagai Rakyat Corporation Sdn Bhd] CORAM: Hamid Sultan bin Abu Backer, JCA Abang Iskandar bin Abang Hashim, JCA Hasnah binti Dato’ Mohammed Hashim, JCA Hamid Sultan Bin Abu Backer, JCA (Delivering Judgment of the Court) GROUNDS OF JUDGMENT [1] The appellant/liquidator of Merger Acceptance Sdn Bhd appeals against the decision of the High Court which exercised its discretion and granted leave to commence proceedings against the liquidator personally. The Notice of Motion for leave in the High Court inter alia read as follows: “TAKE NOTICE that the Court shall be moved on 20 AUG 2016, 2016 at 9 a.m. /p.m. or soon thereafter as Counsel can be heard, by Counsel for Wong Weng Foo, the Liquidator of the above named Applicant being Machang Indah Development Sdn Bhd (In Liquidation) (Company No. 0144891-M) (formerly known as Rakyat Corporation Sdn Bhd), under the inherent powers of this Court, for an Order which states as follows: 3

(1) That the Applicant be given leave to commence legal proceedings against Tee Siew Kai (NRIC No. 500325-01-5579), the Liquidator of the above named Respondent, in his personal capacity per the Proposed Writ and Proposed Statement of Claim annexed herewith as ANNEXURE [1].” [2] We heard the appeal on 17-01-2018 and took the view that the appeal has no merit as the appellant was not able to convince us inter alia on the law to intervene on matters relating to the discretionary exercise of the High Court. In consequence, the appeal was dismissed in limine. We now give our grounds. [3] The supplemental Memorandum of Appeal read as follows: “3. The Learned High Court Judicial Commissioner ("the learned JC") erred in law and in fact when he entertained and allowed the Respondent's application vide Notice of Motion dated 22- 7-2016 in Enclosure G ("the Motion") to seek leave of the High Court to commence legal proceedings against Tee Siew Kai ("Tee") personally whilst acting as the liquidator for Merger Acceptance Sdn Bhd ("Merger") by invoking the inherent jurisdiction of the High Court of Malaya instead of the readily available relevant statutory provisions in the Companies Act 1965.

4. The Learned JC erred in law and in fact when he found that the Respondent had the necessary locus standi to commence in the High Court a legal suit against Tee in his personal capacity for his conduct of liquidating the assets of Merger 4 although the Respondent was neither a shareholder nor a contributory of Merger at the time when the Respondent filed and moved the Motion.

5. The learned JC erred in law and in fact when he proceeded to consider and evaluate the proposed Statement of Claim (annexed to the Motion) and reproduced merely as an "Exhibit 2" to the Respondent's 1st Affidavit) and concluded that "there is a necessity for the contentious issues and disputes to be ventilated and litigated between the Appellant and the Liquidator in the proper forum of the proposed action in a civil Court.

6. The learned JC erred in law and in fact when he held that the Respondent had to demonstrate "that it had suffered loss as a result of the breach of duty by the Liquidator" and then proceed to find as follows: - "I agree with the contention advanced by the counsel for the Applicant that the Liquidator's failure to give satisfactory rebuttal to the Petitioner's averment, an irresistible conclusion can be made that the unsold and unbuilt lots to Kelana Estate and Oasis Highland Sdn Bhd at the selling price of RM9,000,000.00 (Nine Million) has impacted the creditors and contributors of the Respondent”.

6.1 In arriving at this conclusion, the learned JC failed to take in consideration that the Respondent in this Appeal 5 (the Applicant in the High Court in the Motion) was neither a creditor nor a contributory of Merger.

7. In allowing the Motion, the learned JC failed to take into consideration the following further facts: -

(ii) That the JVA and PMA were effectively terminated and/or frustrated with the winding-up of Merger as the Respondent could not and did not expend any monies to continue to develop the remaining unsold 124 vacant lots by virtue of the application of the undue preference principle since the Respondent itself was ordered to be wound-up on 17-06-2002;

(ii) That the JVA and PMA were contemporaneously executed documents evidencing on transaction for the development of the project involving the unsold 124 lots and as such both the JVA and PMA stood terminated by the Order of winding-up; 6

(iv) There was no clear rebuttal evidence from the Respondent in respect of the following facts: - a. The project was halted and abandoned since Merger was ordered to be wound up and also the fact the Respondent was itself ordered to be wound-up on 17-06-2002 by the Penang High Court vide Companies (Winding-Up) Petition No: 28-09-2001); b.

Pursuant to and order of the Court below, the Appellant was appointed as the liquidator of Merger on 28-8-2013 to replace the Ketua Pengarah Insolvensi ("KPI") and empowered to take into possession of the 124 un-developed units which were unsold and to redeem them from Bank Kerjasama Rakyat Malaysia Berhad ("Bank Rakyat"); c. The consideration for the sale of the unsold and unbuilt 124 units at RM9,000,000.00 had correspondent to the value opined by the Appellant's valuer and the Appellant's chargee's valuer. d. The Appellant as the liquidator of Merger had since its appointment acted in the best interest of the liquidation process of Merger. 7

(vi) That the Respondent's primary complaint was that the alleged unlawful act of the Appellant had caused the Respondent to:- a. Suffer loss and damage in the sum of RM300.801.58 being the Respondent's entitlement under the JVA based on the alleged market value of RM16.5million less the redemption sum; and b. The Appellant's refusal to acknowledge the subsistence of the JVA.

8. The learned JC ought not to have summarily granted the leave sought by the Respondent to commerce a civil suit personally against the Appellant for the alleged breaches of the JVA and PMA between the Respondent and Merger despite there being credible denial of the factual averments between the Appellant and the Respondent in the exchange of affidavits between them and ought to have in the circumstances of the entire case dismissed the Motion.” 8 Brief Facts and Findings of the High Court [4] The facts of the case has been well articulated by the learned judicial commissioner in His Lordship’s comprehensive judgment. To appreciate our judgment, the judgment of the learned judicial commissioner must be read together. To save judicial time, we will repeat the facts and findings as placed in a rudimentary manner before us which read as follows: “BRIEF FACTS OF THE CASE:

1. The applicant and the Respondent in High Court are parties to Joint Venture Agreement dated 29 September 1995 ("the JV"). The purpose of the JV is to develop and complete a light industrial estate project ("the project") on the Respondent's 17 pieces of land in Penang. The JV provides the parties for the sharing profit and loss.

2. The Respondent appointed the Applicant as its Attorney in relation to the Merger Lands by an irrevocable Power of Attorney dated 29 September 1995. The Respondent also appointed the Applicant as Project Manager of the project by a Project Management Agreement dated 29 September 1995 ("the PMA"). Clause 11 of the PMA states among others that the agreement shall be terminated forthwith in the event that either party shall be wound up voluntarily or compulsory. There is no similar clause in either the JVA or the irrevocable PA.

3. On 17 June 2002 whilst the project was ongoing, the Respondent was wound up. Despite that, the Applicant still carried on the Project since it viewed that it is still valid under both the JVA and the 9 Irrevocable PA. The Applicant claimed that the PA survived the winding up of the Respondent and remain valid and subsisting thereafter. The Official Receiver of the Respondent had no issue with the Applicant carrying on the project.

4. The Applicant also has been wound up on 19 November 2009. One Wong Weng Foo was appointed as the Applicant's liquidator.

5. Yet, the Applicant still carried on the JVA on the same view that the irrevocable PA survived.

6. Only after four years the Appellant has been wound up, the Liquidator of the Respondent was appointed to replace the Official Receiver.

7. At the time of the appointment of the Respondent's liquidator, there were 124 sub-divided unbuilt individual parcels from the Merger Land which had yet to be sold and redeemed from the Bank Kerjasama Rakyat Malaysia ("Bank Rakyat"), of the charge of the Merger Lands ("Unsold & Unbuilt Lots").

8. About a year after his appointment, the Liquidator caused the Respondent to sell the Unsold & unbuilt Lots purportedly to one Kelana Estate Sdn Bhd ("Kelana Estate") for RM 9 million.

9. The Applicant contended that the Sale of the properties to Kelana Estate was purported one because the Liquidator had caused the Respondent to sell 7 lots out of 124 unsold & unbuilt lots to Kelana Estate for a total consideration sum of RM500,000.00. While the remaining 117 lots were sold to Oasis Highlight for a total sum of 10 RM8,500,000. 00. It caused the Applicant to suffer loss and damage in the sum of RM3,300,801.58 i.e. equal to the amount of the Applicant's 40% share in the net proceeds of the sale of the Unsold & Unbuilt Lots based on a selling price of RM16,500,000.00 and a redemption sum of RM8,247,996.05 ("Redemption Sum").

10. The Applicant then filed an application to commence legal proceedings against the Liquidator of the Respondent personally as per the proposed Writ and Statement of Claim (Enclosure G).

11. The application was granted by the High Court thus this appeal to the Court of Appeal. FINDING OF LEARNED HIGH COURT JUDGE

1. The Applicant has locus standi to file this application based on the inherent power of the court. Since the Liquidator is appointed by the court, thus as an officer of the court, a leave is required before an action is commenced against him. The court will protect its officer from spurious or vexatious litigation and the court will protect its integrity of the winding up process to ensure no wrongful interference with the process.

2. In the case of Ooi Woon Chee & Anor v. Dato' See Teow Chuan & Ors and Other Appeals [2012] 2 CLJ 501, the court applied the test of a prima facie case in determining whether leave ought to be granted to sue a liquidator. The court held that the court is compelled to evaluate the evidence led to determine whether the test is met.

3. Based on the affidavit by the Liquidator on the issue of the JVA and the irrevocable PA, the court held that there is necessity for the 11 contentious issues and disputes to be ventilated and litigated between the Applicant and the Liquidator in the proper forum of the proposed action in a civil court.

4. In an application for leave to commence proceeding inter alia, breach of duty against a liquidator, it is necessary to prove pecuniary loss to the company. From the Petitioner's Affidavit, the court opined that the Petitioner's averment in it are relevant to be considered in deliberating on the issue of the pecuniary loss to the Respondent. The Liquidator on the other hand offered no response to the issues raised by the Petitioners. It is an irresistible conclusion that the unsold lots to Kelana Estate and Oasis Highland Sdn Bhd at the selling price of RM 9 million has impacted the creditors and contributors of the Respondent.

5. Thus, the Applicant's application is allowed with costs of RM4,000.00 be paid by the Liquidator to the Respondent.” Jurisprudence relating to ‘Receiver and Manager’, Liqidator, Appointment, Action against liquidator, Removal, etc. [5] To appreciate the role, appointment, action against liquidator and removal of liquidator, one need to appreciate the jurisprudence related to the role of ‘Receiver and Manager’ (‘R&M’), at common law. [See Janab’s Key To Law, Practice and Legal Remedies, 2nd ed. 2019 pages 423 to 428; Order 30 of Rules of Court 2012]. The liquidator mentioned in the Companies Act 1965 has its reminiscent relating to ‘R&M’ at common law. A liquidator is appointed once the company 12 is wound up as opposed to ‘R&M’. [See Re Marine Mansions Co (1867) LR 4 Eq.601]. [6] The Companies Act also recognises the appointment of ‘R&M’. Some of the sections for understanding the role, obligation and liability of the ‘R&M’ is summarised as follows: “(i) Section 182 of the Companies Act 1965 specifically sets out the persons who are not qualified to be appointed as receiver and manager and includes:-

(ii) Section 183 of the Companies Act sets out the liability of the receiver, and says that notwithstanding any agreement to the contrary, but without prejudice to his rights against the company or any other person, be liable for debts incurred by him in the course of the receivership or possession for services rendered goods purchased or property hired leased used or occupied. This section also permits the receiver to seek directions from the court. Debenture holder can also seek directions from the court in relation to any matter arising in connection with the performance of the functions of the receiver and manager. 13

(iii) Section 184 of the Companies Act 1965 gives power to the court to fix remuneration of receivers and managers.

(iv) Section 185 of the Companies Act 1965 makes provision for a liquidator to be appointed as a receiver upon the application of debenture holders or creditors of a company which is being wound up by court.

(vi) Section 187 of the Companies Act 1965 makes it mandatory for all letter heads and documents of the company where receiver and manager or liquidator has been appointed to state that receiver and manager as the case may be has been appointed.

(vii) Section 188 requires the receiver and manager to send notice to the company of his appointment, prepare statement of officers of the company etc. Failure to comply attracts penal consequences.

(viii) Section 189 of the Companies Act 1965 sets out the manner the statement of affairs must be prepared. Failure to comply attracts penal consequences. 14

(ix) Section 190 of the Companies Act 1965 sets out the manner in which the accounts of receiver and manager need to be lodged. Failure to do so attracts Penal consequences.

(xi) Section 192 of the Companies Act 1965 makes provision to enforce the duty of the receiver and manager and make him liable for misconduct in applying the funds of the company.” [Emphasis added]. [7] In essence, the common law obligation of ‘R&M’ and the obligation of liquidator in a compulsory winding is inextricably interwoven. There may be slight difference in the removal of liquidator in a voluntary winding up as the liquidator is appointed by agreement of parties and not through the courts; and the process of removal need not be through a court procedure though any misconduct of a liquidator in a voluntary winding up may be subject to the same jurisprudence as advocated by courts in a compulsory winding up. [8] It must also be noted that at the time the ‘R&M’ jurisprudence originated at common law, that too a few centuries back the appointments were related to lay persons probably with no remuneration and the court appointed them to assist the court to resolve issues. To encourage the acceptance of such appointment, 15 the court gave them some protection by developing the concept as what we now call as ‘officers of court’. Such protection was necessary to protect the lay persons or its like who are qualified in the view of the court (as opposed to tertiary qualification) appointed by the court to be sued without obtaining the leave of the court. The learned authors of Halsbury Laws of England, 4th Edition at page 430 observes: “In the ordinary case of a receivership of the rents and profits of land, it is not a fatal objection that the person nominated has no experience of estate management, or even that he is illiterate, provided that he is in other respects well qualified.” [9] Over the years, the ‘R&M’ and including liquidator are now appointed based on people who have suitable qualifications and that too for remuneration. Thus, the obligation of ‘R&M’ inclusive of liquidators are professional in nature and they are obliged to adhere to principles of accountability, transparency and good governance, as set out in case laws, which is seen as one related to evolutionary jurisprudence. [See Asean Bintulu Fertilizer Sdn Bhd v Wekajaya Sdn Bhd [2018] 2 CLJ 257]. When a complainant can demonstrate to the court, these categories of people have breached their professional obligations and there are sufficient prima facie material before the court to take cognisance of the breach and there is an element of loss and/or damage, the court ought to grant leave to commence proceedings against the ‘R&M’ or liquidator personally, unless there are other specific sections in the statute to deal with the complaint justly as well as expeditiously. 16 [10] The significance of ‘R&M’ at common law is also reflected in the CA 1965. For example, the CA 1965 defines ‘liquidator’ by stating that it includes the Official Receiver when acting as liquidator of the corporation. Thus, the Official Assignee plays the role of Official Receiver and Liquidator where applicable under the Companies Act. The jurisprudence relating to ‘R&M’ at law is significant in appreciating the process of appointment, court action, role as well as removal of the liquidator.

(ii) The learned authors of Halsbury Laws of England, 4th edition, page 406, on the issue of liability of ‘R&M’ makes the following observations:- "Prima facie a receiver appointed out of court, being an agent only, is not personally liable in respect of transactions properly entered into by him as receiver. However, if a receiver gives his personal promise to pay a debt for which his principals may become liable, he is bound by the promise, but 17 the question whether the promise is the personal promise of the agent or the promise only of his principals depends in each case upon the intention of the parties, to be gathered from the terms of the document, if any, containing the promise. A receiver of the property of a company appointed under the power contained in any instrument is, except so far as the contract otherwise provides, personally liable to the same extent as if he had been appointed by an order of the court. He is entitled, as receiver, to ratify contracts made by others ostensibly as agents for the company. Where under the express terms of a debenture the receiver is agent for the company, his authority as agent is determined by the commencement of liquidation, whether voluntary or compulsory, and he is personally liable under contracts made after that date. As an agent, a receiver may always render himself personally liable in damages for breach of warranty of authority. A receiver may be liable in tort as a trespasser where the appointment is defective or where the title of a third person such as a trustee in bankruptcy prevails over that of the debenture holders and the company. A receiver who is sued with the company, fraudulent conspiracy between the Defendant being alleged, may not refuse to produce material company documents on the ground that he holds them as agent for the debenture holders.” [11] It is now well settled that any action against a court appointed ‘R&M’ or liquidator, need the leave of court. [See William H Parsons & Ors v The Sovereign Bank of Canada (1913) AC 160; Tai Kwong Goldsmiths & Jewellers (under receivership) v Yap Kooi Hee & Ors 18 [1995] 1 MLJ 1]. In considering leave to sue the company or liquidator, the courts generally consider the following:

(ii) if the dispute can be settled in the winding-up proceedings itself, the court may refuse to grant leave for the institution of a separate suit or proceeding which may add to costs and delay in the winding-up proceedings.

(iii) leave is usually granted when third parties are involved with dispute related to the company which has nexus to liquidation. [12] A liquidator is now specifically recognised as an officer of court by virtue of rule 63 of the Companies (Winding-Up) Rules 1972 which read as follows: “63. Officers of Court All liquidators appointed by the Court shall be officers of the Court.” [13] Section 305 of CA 1965, to some extent makes provisions to deal with the misconduct of liquidator, etc. but the complainant must be the liquidator, creditor or contributory and the loss or damage must be directly to the company. If the misconduct of the liquidator is of 19 benefit to the company, section 305 may not apply and the common law jurisprudence to leave procedure to sue the liquidator may apply. [14] The Court of Appeal in Chi Liung Holdings Sdn Bhd v Ng Pyak Yeow [1995] 4 CLJ 11, had relied on the jurisprudence related to ‘R&M’ under the common law to anchor the argument that the liquidators are officers of the court and in consequence leave is necessary. In saying so, the criteria for granting leave to sue ‘R&M’ had also been adopted for that purpose. [See Woodsville Sdn Bhd v Tien Ik Enterprises Sdn Bhd & Ors & Another Appeal [2010] 2 CLJ 858]. [15] The learned judicial commissioner in the instant case, had meticulously summarised the threshold criteria to grant leave and that part of the judgment reads as follows: “[26] On the issue of the threshold and the standards of proof to be met before leave to sue a liquidator is granted, I agree with submission advanced by the counsel for the Applicant that had made reference to the principle of the law laid down by the Singapore High Court in the case of Excalibur Group Pte Ltd v. Goh Boon Kok [2012] 2 SLR 999 (at page 1010 and 1011) set out the various approaches taken by courts in different jurisdictions on the matter:

(1) There is no specific threshold for the grant of leave to sue a liquidator according to the Australian case of Sydlow Pty Ltd (in liquidation) v. TG Kotselas Pty Ltd [1996] 144 159. 20

(2) Sydlow Pty Ltd (in liquidation) v. TG Kotselas Ptv Ltd also held that a prima facie case need not necessarily be shown; all the circumstances have to be taken into account in determining whether leave should be granted.

(3) The Supreme Court of New South Wales in the case of Re Biposo Pty Ltd; Condon v. Rodgers (2 August 1995) held that the standard was simply one of whether there is a prima facie case.

(4) The Victorian Supreme Court in the case of Armitage v. Gainsborough Properties Pty Ltd [2011] VSC 419 applied a combined test of whether there was a prima facie case and whether there was sufficient evidence to show that the proposed claims had a prospect of success.

(5) The Malaysian case of Abric Project Management Sdn Bhd v. Palmshine Plaza Sdn Bhd [2007] 3 MLJ 571 applied the test of whether there was sufficient prima facie evidence to support the allegations against the liquidator.

(6) In See Teow Guan v. Kian Joo Holdings Sdn Bhd [2010] 1 MLJ 547, the Court took the view that the threshold for leave would depend on the circumstances and that a variety of factors such as the sufficiency of the evidence adduced and the likelihood of success of the proposed action should be considered. 21

(7) In Chi Liung Holdings Sdn Bhd v. Ng Pyak Yeow [supra] the Court considered that the court hearing the application for leave will act liberally; however the applicant is required to satisfy the court of the probable success of the action and that the action is not vexatious or merely oppressive. [27] In Excalibur Group Pte Ltd's case [supra] (at page 1011), the Singapore High Court took the views inter alia that (a) all facts and circumstances of the case have to be taken into consideration when deciding whether to grant leave, (b) hard and fast rules should not be laid down, (c) the applicant must at least be able to show a prima facie arguable case, (d) the Applicant need not go so far as to snow he will or is likely to succeed, (e) applications without any foundation or that are frivolous or vexatious or calculated to delay proceedings or with an ulterior motive will not be allowed, and (f) the stage at which the proceedings are when such applications are made will also be a very relevant consideration. [28] The Federal Court in the case of Ooi Woon Chee & Anor v. Dato' See Teow Chuan & Ors and Other Appeals [2012] 2 CLJ 501 (at page 520) applied the test of a prima facie case in determining whether leave ought to be granted to sue a liquidator. In applying the test, the Federal Court held that the court is compelled to evaluate the evidence led to determine whether the test is met.” [16] We have read the appeal records and the able submissions of the parties. After giving much consideration to the submissions of 22 the learned counsel for the appellant, we took the view that the appeal has no merit. Our reasons inter alia are as follows:

305. “Power of Court to assess damages against delinquent officers, etc.

(1) If in the course of winding up it appears that any person who has taken part in the formation or promotion of the company or any past or present liquidator or officer has misapplied or retained or become liable or accountable for any money or property of the company or been guilty of any misfeasance or breach of trust or duty in relation to the company, the Court may on the application of the liquidator or of any creditor or contributory examine into the conduct of that person, liquidator or officer and compel him to repay or restore the money or property or any part thereof with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust or duty as the Court thinks just.

(2) This section shall extend and apply to and in respect of the receipt of any money or property by any officer of the company during the two years preceding the commencement of the winding up whether by way of salary or otherwise appearing to the Court to be unfair or unjust to other members of the company. 26

(3) This section shall have effect notwithstanding that the offence is one for which the offender is criminally liable.” [20] As we have said earlier, section 305 of CA 1965 is limited to certain parameters. The annexure related to proposed writ is much wider. Section 305 does not displace the common law cases to sue the liquidator for misconduct per se. The authorities which the appellant relied on at this point namely: (i) Chi Liung Holdings Sdn Bhd v Ng Pyak Yeow [1995] 4 CLJ 11; (ii) MBF Finance Bhd v Sri-Hartamas Sdn Bhd [1992] 2 CLJ 55; (iii) Pakata Sdn Bhd v Chean Seong Fatt & Ors [2001] 6 CLJ 318, does not say so in relation to leave. [21] Section 305 is related to loss or damage to the company and is not related to loss to the interested parties who have nexus to the liquidation process. The Indian Companies Act 1956 (ICA 1956) has a similar provision. Their section 543 also deals with ‘Power of Court to assess damages against delinquent directors, etc. Learned authors of A. Ramaiya, 11th ed. on the scope of the section at page 1355, observes: “The proceeding under this section does not extend to any and every kind of claim which a company may have against delinquent directors or officers. It is limited to claims relating to misfeasance or breach of trust in respect of their duties in relation to the company.” 27 [22] Section 305 of CA 1965 is not meant to cover all types of cause of action as well as parties. Causing loss to the company and causing loss to interested parties to the winding-up process by liquidators are separate issues. For example, a liquidator can be made liable for professional negligence to interested parties to the winding-up process. Section 305 may not cover professional negligence, though common law cases require leave to sue the liquidator and such leave is ordinarily given under the inherent jurisdiction as was developed through the jurisprudence related to ‘R&M’ which we had mentioned earlier. Learned authors of Datta on Company Law, 5th ed. on section 543 of ICA 1956 observes: “The object of this section is to enable the Court to enquire into the allegations made against the persons in management, to determine their liability and compel them to discharge such liabilities towards the company.” [23] The appellant relies on section 305 which specifically relates to an application by liquidator or of any creditor or contributory. Thus, admitting that the application can only be made by three persons. However, a perusal of the supplementary Memorandum of Appeal itself will show that the appellant contradicts by saying the applicant has no locus standi. Further, in arguing that leave should not be granted, the appellant places a misconceived argument stating inter alia that: 28 “8.3 The primary issue between the Respondent and the Appellant were on the issue of the JVA and the irrevocable PA. These issues were credible contested in the exchanges of affidavits between the parties to this appeal.

8.4 The effect of the Merger's winding-up on 17/6/2002 had caused Merger to be incapacitated and unable in law and in fact to continue performing its part under the JVA. The Appellant's contention is that the JVA and PMA was terminated forthwith by the fact that of the winding-up of the Respondent on 17/6/2002.

8.5 Since the winding-up of the Merger, the Respondent did not file any proof of debt with the Appellant as required under the law for any claims against Merger. In other words, the Respondent can only be classified as a creditor if it had proved its debt before the liquidator of Merger or had obtained judgment against Merger in a civil suit. Otherwise, it would remain a person claiming to be a creditor and a third party outside the winding up proceedings. As such, he is a stranger in the winding-up proceedings.

8.6 Further, to put the Respondent's case at its highest, as the Respondent is not a secured creditor but claiming to be a contractual party who had yet to obtain a judgment against Merger in a civil suit, Merger could no longer in law have any further sharing of profit with the Respondent under the JVA after the winding-up of Merger as it would amount to undue preference to the Respondent against the general body of creditors of Merger.” 29 [24] Thus, para 8.6 of the appellant’s submission contradicts the arguments related to section 305 of CA 1965. [25] In the instant case, the liquidator of the respondent Wong Weng Foo had specifically asserted in the affidavit inter alia as follows: “7.9 Subsequent to his appointment as the Liquidator of the Respondent, the said Tee Siew Kai had committed unlawful acts in relation to the Merger Lands, the Project and the Unsold & Unbuilt Lots by causing Merger to disregard and breach both the JVA and the Irrevocable PA by inter alia, causing Merger to sell the Unsold & Unbuilt Lots to one Kelana Estet Sdn Bhd at a selling price of RM9,000,000-00 without the knowledge and or consent of the Applicant as the lawfully appointed Attorney of Merger. Annexed herewith and marked collectively as Exhibit "6" are copies of exchange of correspondences between the said Tee Siew Kai and the liquidator of the Applicant in support of the above stated.” [26] We have perused the exchange of correspondent in Exhibit ‘6’. The issue of not recognising irrevocable power of attorney may lead to sustainable cause of action. In addition, the registered power of attorney or irrevocable power of attorney cannot be revoked unilaterally. [See Sidambaram a/l Torosamy v Lok Bee Yong [2017] 4 MLJ 570; Power of Attorney Act 1949]. At least, a prudent liquidator will seek the direction of the court to absolve himself from acting in breach of rule of law and in consequence be made personally liable 30 for misconduct. Whether there was indeed a breach of rule of law which resulted in loss and damage to applicant for leave is a matter which need to be tried. In our view inter alia three letters which were exchanged will demonstrate the bona fide of the complaint and the nature of purported unlawful act. They are as follows: