Sale of Land by Private Treaty
Application for Appointment of Liquidator
Service of Statutory Demand
Power of Court to Grant Costs in Winding-Up Proceedings
Application for Stay of Winding-Up Order
Action against a Provisional Liquidator
Section 181 Applications after Winding-Up
Erinford Injunctions
Locus Standi of a Shareholder
Discharge of a Receiver/Manager
Interlocutory Injunction to Prevent Presentation of a Winding-Up Petition
Judgment as a Ground to Winding-Up Petition
Interpretation of Rule 24 of the Companies (Winding-Up) Rules
Striking Out of Winding-Up Petitions
Injunction in Winding-Up Proceedings
Sale of Land by Private Treaty
In Melantrans Sdn Bhd v Carah Enterprise Sdn Bhd [2003] 2 CLJ 83 the Federal Court held that a receiver of a company (not in liquidation) who is an agent of the company and holds a valid power of attorney conferred under a debenture created by the company can sell land by private treaty.
Earlier, in Kimlin Housing Development Sdn Bhd (appointed receiver and manager) (in liquidation) v Bank Bumiputera (M) Bhd [1997] 2 MLJ 805, the Supreme Court held that where land belonging to a company was subject to both a fixed charge under a debenture in favour of a lender and a statutory charge registered under National Land Code 1965 in favour of the same lender, a receiver appointed by the lender under the debenture did not have the power to sell land by private treaty.
Since the decision in Kimlin, receivers and managers have had to avoid selling land by private treaty, slowing the security realization process and prolonging receivership, thus adding to the expense of the process. While the Federal Court in Melantrans did not disagree with the reasoning in Kimlin, it effectively confined Kimlin to its own facts and re-opened the door for receivers to sell land as agents of the company.
Application for Appointment of Liquidator
In Volvo Malaysia Sdn Bhd v EFK Composite Technology Sdn Bhd [2003] 5 CLJ 476 the High Court of Malaysia at Shah Alam held that a supporting creditor may file an application for the appointment of a liquidator before the creditors meeting by virtue of Section 227(1) of the Companies Act 1965 and Rule 31(3) of the Companies (Winding-Up) Rules 1972.
The court pointed out that in the application for appointment of liquidator, evidence must exist that the proposed liquidator is approved by the minister of finance.
In Dayakuasa Holdings Sdn Bhd v Kayaal Holdings Sdn Bhd [2003] 2 MLJ 263 the High Court at Melaka held that the requirement of service of a statutory demand under Section 218(2)(a) of the Companies Act 1965 must be complied with strictly. The court pointed out that sending a statutory demand by way of registered post to the respondent's registered office does not satisfy the statutory requirement under Section 218(2)(a) that it be "served on the company by leaving it at the registered office".
Power of Court to Grant Costs in Winding-Up Proceedings
In Re Tan Eng Seng Holdings Sdn Bhd [2003] 6 CLJ 65 the Kuala Lumpur High Court held that even though the general rule under Section 220 of the Companies Act 1965 is that the petitioners' costs in winding-up proceedings be paid out of the company's assets, it has a discretion under Section 351(2) to order that the costs to be borne by such party to the proceedings as the court sees fit.
The court added that "such party to the proceedings" in winding-up proceedings includes a person who has given notice of his or her intention to appear and oppose the petition.
Application for Stay of Winding-Up Order
In Sri Binaraya Sdn Bhd v Golden Approach Sdn Bhd (No 2) [2003] 5 CLJ 268 the High Court at Shah Alam held that under Section 43 of the Courts of Judicature Act 1964, an application for stay of a winding-up order must first be made to the High Court before moving the Court of Appeal.
In this regard, a company that has been ordered to be wound up has a right to appeal and, after lodging its notice of appeal, may apply to the Court of Appeal for the stay of the winding-up order after moving the High Court.
Action against a Provisional Liquidator
In Chin Cheen Foh v Ong Tee Chew [2003] 2 CLJ 575 the Kuala Lumpur High Court held that a plaintiff must obtain leave of the winding-up court before bringing an action against a court-appointed provisional liquidator who is an officer of court. Failure to do so may result in the action being struck out.
The court noted that it was clear from Section 236(3) of the Companies Act 1965 that a provisional liquidator is an officer of court. The exercise of powers conferred on a liquidator (including provisional liquidators) is subject to the control of the court.
Section 181 Applications after Winding-Up
In Henrick International Hotels & Resorts Pte Ltd v YTL Hotels & Properties Sdn Bhd [2003] 2 CLJ 445 the Court of Appeal held that once an order has been granted to wind up a company and a liquidator appointed, the complaints of a petitioner under Section 181 of the Companies Act 1965 for oppressive acts cannot be sustained.
Section 181 of the act empowers a member or debenture holder of a company to bring an action against it on the basis that the company's affairs were being conducted in an oppressive manner.
The court pointed out that the aggrieved party could bring his or her complaint to the liquidator without having resort to Section 181, even if the Section 181 application were filed before the company's winding-up.
In Celcom (Malaysia) Berhad v Inmiss Communication Sdn Bhd [2003] LNS 177 the Kuala Lumpur High Court held that it has jurisdiction to grant an Erinford injunction to restrain a defendant from taking further steps in a winding-up petition, pending the plaintiff's appeal to the Court of Appeal against the High Court's decision to dismiss an injunction application to restrain the defendant from filing a winding-up petition against the plaintiff.
In Anfartalar Caddesi Sdn Bhd v Southern Investment Bank Bhd (formerly known as Perdana Merchant Bankers Bhd) [2003] 1 MLJ 561 the Court of Appeal, applying the rule in Foss v Harbottle, held that the appellant as a company shareholder had no locus standi (status in the proceedings) to sue the respondent on behalf of the company (which was wound up) in a dispute involving a sale by auction of the company's land to the respondent. The court pointed out that only the company or its liquidator could bring action against the respondent on behalf of the company.
Discharge of a Receiver and Manager
In Chow Sooi Cheng v Trans-Global Agencies Berhad (No 2) [2003] MLJU LEXIS 44 the Kuala Lumpur High Court held that it has the power to discharge a court-appointed receiver/manager in appropriate circumstances upon an application made by him or her.
The managing director of the company in receivership physically threatened the receiver/manager. The court held that where the safety of the receiver/manager was under threat, it could discharge the receiver/manager from his or her duties. The court noted that it was conceivable in the circumstances of the case that the receiver/manager would not be able to discharge his duties properly.
Interlocutory Injunction to Prevent Presentation of a Winding-Up Petition
In Modular Resources Sdn Bhd v Terra Edge Project Management (M) Sdn Bhd [2003] 128 MLJU LEXIS 42 the Kuala Lumpur High Court held that in order to obtain an interlocutory injunction to prevent the presentation of a winding-up petition against it, a company must show that the intended petition would fail and was an abuse of process of court.
Judgment as a Ground to Winding-Up Petition
In RHB Bank Berhad v Pembinaan MCP Sdn Bhd [2003] 5 CLJ 335 the Melaka High held that a judgment - be it a judgment in default, summary judgment or judgment obtained after full hearing - is a sufficient basis for a winding-up petition unless and until it is set aside, or its execution is stayed. The court added that a mere notice of appeal against a judgment could not affect the ability of a petitioning creditor to base winding-up proceedings upon it.
Interpretation of Rule 24 of the Companies (Winding-Up) Rules
Rule 24 of the Companies (Winding-Up) Rules 1972 states that "every petition shall be advertised in Form 4 seven clear days or such longer time as the court may direct before the hearing, once in the Gazette and twice at least in two local newspapers circulating in Malaysia".
In Petro-Pipe Industries (M) Sdn Bhd v Fieldwork Engineering Sdn Bhd [2003] 1 MLJ 417 the Kuala Lumpur High Court clarified that the phrase 'twice at least in two local newspapers' equals four separate advertisements.
The High Court also pointed out that the phrase 'seven clear days or such longer time as the court may direct before the hearing' does not mean that the advertisements must be made exactly seven days beforehand. Such interpretation would, the court said, result in absurdity. The correct interpretation is that the petition must be advertised in accordance to Rule 24 at least seven clear days before the hearing date of the petition.
Striking Out of Winding-Up Petitions
The Court of Appeal in Tan Kim Hor v Tan Heng Chew [2003] 1 MLJ 492 held that courts have the power to strike out a winding-up petition when the petition is "obviously unsustainable for want of cause of action, plainly vexatious or frivolous, or an abuse of process". However, the court pointed out that it is undesirable to have a striking-out application in winding-up proceedings, as such an application would invariably delay the adjudication of the matter. The court added that the background facts of each case were relevant to determine whether a striking-out application was appropriate.
Injunction in Winding-Up Proceedings
In Tan Kim Hor & Ors v Tan Heng Chew [2003] 1 CLJ 472 the High Court held that a winding-up court has no powers to grant an injunction under a winding-up petition.
The court pointed out that neither the Companies Act 1965 nor the Companies (Winding-Up) Rules 1972 provide for interlocutory injunctions to be issued in the course of winding-up proceedings. The powers of the winding-up court are limited to making ancillary orders in furtherance of or otherwise in connection with the winding-up proceedings or order.
For further information on this topic, please contact Rabindra S Nathan, Mohd Izral Khairy or Jack Yow Pit Pin at Shearn Delamore & Co by telephone (+603 2076 2871) or by fax (+603 2034 2763) or by email ([email protected] or [email protected] or[email protected]).