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2025 MarsdenLR 1081
HIGH COURT MALAYA KUALA LUMPUR
GENISYS INTEGRATED ENGINEERS PTE LTD – Appellant
Versus
ONN KIEN HOE & ANOR – Respondent
[Companies (Winding-Up) No: WA-28PW-406-09/2023]
Liquidators can be removed for gross negligence and failure to perform statutory duties, justifying the need for competent oversight in liquidation processes.
Headnote:(A) Companies Act 1965 - Section 181 - Companies Act 2016 - Section 482 - Application for removal of Liquidators - Grounds for removal include failure to exercise statutory duties, gross negligence, and unprofessional conduct - Respondents failed to supervise employees leading to misappropriation of funds - Lack of urgency in completing liquidation process raises concerns of conflict of interest and bias - Court finds sufficient cause for removal of Respondents as Liquidators. (Paras 19, 23)
(B) Liquidators - Duty of care - The Court emphasizes that liquidators must exercise reasonable skill and diligence in their duties, and failure to do so can justify their removal. (Paras 19, 23)
Facts of the case:
The Applicant sought to remove the Respondents as Liquidators of the solvent Company due to their failure to complete the liquidation process for over seven years, despite all creditors being paid. Allegations of misappropriation of funds by an employee under their supervision emerged, raising concerns about their competence and conduct. (Paras 1-6, 9-12)
Findings of Court:
The Court found that the Respondents had shown gross negligence in their duties, failed to act impartially, and had not completed the liquidation process in a timely manner, justifying their removal. (Paras 23)
Issues: Whether the Respondents failed in their statutory duties as Liquidators, whether their conduct justified removal, and whether there was a conflict of interest in their actions. (Paras 7-8, 23)
Ratio Decidendi: The Court ruled that the Respondents' failure to supervise their employees and complete the liquidation process constituted gross negligence and unprofessional conduct, satisfying the threshold for removal under Section 482 of the Companies Act 2016. (Paras 19, 23)
Result: Application allowed with costs.
Introduction
[1] Genisys Integrated Engineers Pte Ltd ("the Applicant") filed Enclosure 1 for leave to commence an application for the removal of Onn Kien Hoe and Mok Yuen Lok ("the Respondents") as the Liquidators of UEM Genisys Sdn Bhd ("the Company") and that Tan Peng Sam @ Cheng Peng Sam be appointed as the new Liquidator of the Company, and for other consequential orders including for assessment of remuneration of the current Liquidators.
[2] During the hearing on 29 January 2024, the Applicant was given leave to commence an action to remove the Liquidators of the Company. This Court then directed that:
(a) encl 1 be converted to a proper application for the removal of the Respondents as Liquidators of the Company;
(b) This Court will decide on the main issue, which is the removal of the Respondents as Liquidators in these proceedings while the parties are to file a separate application for ratification/assessment of remuneration;
(c) Pursuant to the application by the Applicant for interim orders in Enclosure 20, Tan Peng Sam @ Cheng Peng Sam was appointed as an Additional Liquidator of the Company pending the disposal of encl 1; and
(d) The Respondents be allowed to file a comprehensive affidavit to address all the issues raised by the Applicant earlier.
Background Facts
[3] The Company is a joint venture company formed between the Applicant with 49% shareholding and UEM Group Berhad (formerly known as United Engineers (Malaysia) Bhd ("UEM") with 51% shareholding.
[4] Pursuant to a Court order dated 20 October 2005, the Company was wound up and by a subsequent Court order dated 17 January 2006, the First and the Second Respondents, were appointed as Joint Liquidators of The Company (collectively "the Liquidators" or "the Respondents").
[5] The winding-up of the Company was pursuant to a shareholders' dispute under s 181 of the then Companies Act 1965 (" CA 1965") and is not the usual Court-ordered winding-up due to insolvency. The Company was solvent at the time of the winding-up order, but its operations were disrupted by a shareholders' dispute. The Liquidators were nominated by UEM, the other shareholder of the Company.
[6] Following its liquidation, all the Company's creditors had been fully paid as of 31 December 2016. This is as set out in the Liquidators' Status Report dated 18 April 2018. The only parties remaining, thereafter, that had legitimate interest in the winding-up of the Company were the contributories ie the two shareholders of the Company.
Grounds For Removal
[7] (i) The Applicant alleges that the Respondents have failed to faithfully and vigorously exercise their statutory duties as Liquidators of the Company and/or failed to apply reasonable professional skill and exercise due diligence in conducting the affairs of the Company. It would be against the interest of the shareholders of the Company to allow the Respondents to remain as Liquidators of the Company any longer.
(ii) The Applicant Avers That Since Their Appointment, Over 17 Years Since The Winding-Up Of The Company, The Respondents Had Not Been Able To Complete The Liquidation Process. Although All Creditors Had Been Fully Paid In The Year 2016, The Respondents Were, Thereafter, Still Not Able To Complete The Liquidation Process For Over Seven (7) Years.
[8] The above were the initial grounds to justify the removal of the Liquidators. However, another ground, which is more significant, came to light in the course of these proceedings.
[9] On 29 November 2023, the First Respondent deposed in his Affidavit in Reply (2) ("the Respondents' "AIR (2)") that there was a misappropriation of a large sum of money amounting to RM15,681,746.06 (the "Misappropriated Sum") by the Company's "senior staff", an employee named Lim Andy, from the Company's bank accounts and fixed deposits which were maintained and controlled by the Respondents.
[10] The Respondents admitted in their AIR (2) that the alleged misappropriation occurred between 3
