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2022 MarsdenLR 1257
HIGH COURT MALAYA KUALA LUMPUR
RE: MALAYSIAN AIRLINE SYSTEM BERHAD (IN CREDITORS VOLUNTARY LIQUIDATION)
[Post Winding Up Application No: WA-28PW-204-07/2021]
Claimants must provide credible evidence to support debt claims against a liquidated estate; failure to do so results in dismissal of claims.
Headnote:(A) Companies Act 2016 – Section 517 – Companies (Winding-Up) Rules 1972 – Rule 93 – Proof of Debt – Application filed by Malaysia Airports Sdn Bhd and Malaysia Airports (Sepang) Sdn Bhd for the reversal of Liquidator's rejection of debts claimed – The Liquidator's decisions were based on novation to Malaysia Airlines Berhad – The court finds no evidence supporting the existence of the debts claimed and maintains the Liquidator’s decision. (Paras 1, 11, 12, 29)
(B) Appeal against Liquidator's decision – The court emphasized that the applicant holds the burden of proof for claims made against the liquidated estate, and no evidence was provided to support the claims – Therefore, the appeal is dismissed. (Paras 25, 29)
Facts of the case: The applicants sought to challenge the Liquidator's rejection of their Proof of Debt Forms, asserting that the amounts had not been novated. However, the Liquidators argued that the debts had been transferred to Malaysia Airlines Berhad due to prior vesting orders.
Findings of Court: The court determined that the Applicants failed to present sufficient evidence to prove the debts existed, upholding the Liquidator's decisions.
Issues: The core issues revolved around the validity of the claimed debts and the procedural correctness of filing the summons for reconsideration of the Liquidator's decision.
Ratio Decidendi: The court underscored that the burden of establishing a claim rests on the claimant, emphasizing that, without credible evidence, claims cannot succeed. The decision of the Liquidator is to be respected unless clear evidence to the contrary is provided.
Result: Applicants' claims are dismissed with costs.
Key Points: - A creditor must provide credible evidence to support debt claims against a liquidated estate; failure to do so results in dismissal of the claims (!) (!) . - The burden of proof rests on the applicant creditor to establish the existence and validity of the claimed debt (!) (!) (!) . - The liquidator’s decision on proof of debt is to be respected unless clear and credible evidence to the contrary is provided (!) (!) . - Debts properly novated to another entity under a vesting order are no longer liabilities of the original company, and the original creditor must prove otherwise (!) (!) . - A creditor’s mere averment without documentary evidence is insufficient to establish a claim (!) .
What is the burden of proof for a creditor seeking to challenge a liquidator’s rejection of a proof of debt?
What must a creditor provide to succeed in an application to reverse a liquidator’s decision on proof of debt?
How are debts novated to a new entity treated when a creditor contests a liquidator’s rejection of a proof of debt?
JUDGMENT
(Enclosure 1)
[1] Enclosure 1 is a Form of Summons (Summons) filed by Malaysia Airports Sdn Bhd and Malaysia Airports (Sepang) Sdn Bhd (Applicants) pursuant to s 517 of the Companies Act 2016 and r 93 of the Companies (Winding-Up) Rules 1972 for the following orders-
(i) That the decision of the Liquidator of Malaysian Airline System Berhad in rejecting the Proof of Debt Form dated 4 December 2020 filed by Malaysia Airports Sdn Bhd ("MASB") for the sum of RM3,994,334.16 be reversed and/or varied accordingly;
(ii) That the decision of the Liquidator of Malaysian Airline System Berhad in rejecting the Proof of Debt Form dated 4 December 2020 filed by Malaysia Airports (Sepang) Sdn Bhd ("MASSB") for the sum of RM1,729,493.99 be reversed and/or varied accordingly;
(iii) That the costs of this application be paid by Malaysian Airline System Berhad.
[2] The grounds in support of the Summons state that:-
(a) That the Liquidator erred in rejecting he whole amount stated in MASB's Proof of Debt Form and MASSB's Proof of Debt Form on the basis that the said amounts have been novated to Malaysia Airlines Berhad and are no longer a debt of Malaysian Airline System Berhad; and
(b) That the Liquidator should have considered the aeronautical charges in MASB's Proof of Debt Form and MASSB's Proof of Debt Form which are not subject to the Malaysian Airline System Berhad (Administration) (Vesting Date) Order 2015.
Background Facts
[3] The Respondent was the former operator of Malaysia's national carrier until it ceased operations on 31 August 2015.
[4] On 25 May 2015, the Respondent was placed under administration pursuant to the Malaysian Airline System Berhad (Administration) Act 2015 ("Act") and Dato' Mohammad Faiz bin Mohammad Azmi was appointed as the Administrator of the Respondent.
[5] Pursuant to the administration under the Act, Malaysia Airlines Berhad ("MAB") replaced the Respondent as the operator of Malaysia's national carrier with effect from 1 September 2015.
[6] As part of the restructuring exercise to transfer the business operations of the Respondent to MAB, the Respondent had novated all present and future rights, title and interest in, and obligations with respect to any property, and liabilities of the Respondent, specified in First Schedule of the Malaysian Airline System Berhad (Administration) (Vesting Date) Order 2015 ("Vesting Order") 7 to MAB with effect from the vesting date on 1 September 2015.
[7] Notably, the vesting date on 1 September 2015 coincided with the day MAB replaced the Respondent as the national carrier following the Respondent's cessation of operations on 31 August 2015.
[8] On 14 February 2020, the Respondent was wound up via creditors' voluntary liquidation as the Respondent cannot by reason of its liabilities continue its business. On 13 March 2020, Ms Chan Siew Mei, Mr Lok Peng Chuan and Adrian Hong was appointed as the joint and/or several liquidators of the Respondent ("Liquidators").
[9] On 24 June 2021, the Liquidators rejected the 2 Proofs of Debt both dated 4 December 2020 lodged by MASB for RM3,994,334.16 ("MASB POD") and lodged by MASSB for RM1,729,493.99 ("MASSB POD") respectively.
[10] On 15 July 2021, the Applicants filed encl 1.
Findings
[11] I have firstly considered the Liquidator's contention that encl 1 is defective as there are 2 separate POD's and the Liquidator has rejected them both by separate Rejection Notices wherein the Applicants ought to have filed separate appeals. In this respect, I have been referred to s 517 of the Companies Act 2016 and r 93 of the Companies (Winding-Up) Rules 1972 and the Federal Court case of Deepak Jaikishan v. A Santamil Selvi Alau Malay @ Anna Malay & Ors, which concerned a case where save for the eighth defendant, all of the defendants filed separate notices of motion wherein they applied for the notice of appeal of the plaintiffs to be struck out on ground that the notice of appeal was bad in law for not filing a separate notice
