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2022 MarsdenLR 1738
HIGH COURT MALAYA KUALA LUMPUR
SMALL MEDIUM ENTERPRISE DEVELOPMENT BANK MALAYSIA BERHAD – Appellant
Versus
OREN VENTURE SDN BHD & ORS AND ANOTHER C.... – Respondent
[Suit Nos: WA-22M-286-07-2020 & WA-22M-102-05-2021]
A liquidator of a wound-up company cannot delegate powers to initiate or defend legal proceedings, as only the liquidator possesses the statutory authority to do so under the Companies Act.
Headnote:(A) Companies Act, 2016 – Item (a) of the Twelfth Schedule – Power of liquidator – Issue of whether a liquidator can delegate his power to bring or defend legal proceedings – The Court finds that under the Act, a liquidator of a wound-up company lacks the authority to issue a sanction or delegate such power to another person. This conclusion is supported by references to the provisions of the Act and relevant case law, emphasizing the principle that the liquidator must personally exercise his powers. (Paras 10, 21, 47, 48)
Facts of the case:
The judgment addresses preliminary issues in ongoing suits concerning the powers of a liquidator after a company's winding-up, specifically focusing on the legitimacy of sanctions issued by the liquidator to third parties.
Findings of Court:
The liquidator's power to delegate or issue sanctions is invalid as per the Act, which requires the liquidator to be the one initiating legal actions.
Issues
: The primary legal question is whether a liquidator can delegate his statutory powers for legal proceedings to another entity.
Ratio Decidendi:
The Court identifies that liquidators under the Act must act within the bounds of their personal authority and cannot delegate their statutory assignments.
Result:
The liquidator cannot issue sanctions or delegate powers to third parties.
JUDGMENT
(Preliminary Issue)
Overview
[1] This Judgment will examine whether a liquidator of a wound-up company can issue a sanction or delegate to another person his power under Item (a) of the Twelfth Schedule of the Companies Act , 2016 ("the Act") to bring or defend any action or other legal proceedings in the name and on behalf of that company.
Background
[2] Two suits before this Court, Suits WA-22M-286-07/2020 ("Suit 286") filed in July 2020, and WA-22M-102-05/2021 ("Suit 102") filed in May 2021 are to be heard together. Small Medium Enterprise Development Bank Malaysia Berhad ("the Bank") is the Plaintiff in Suit 286 and the Defendant in Suit 102.Oren Venture Sdn Bhd ("the Company") is the 1st Defendant in Suit 286, and the Plaintiff in Suit 102. The other three Defendants in Suit 286 were directors of the Company. They are not parties to Suit 102. Further, while the Bank is represented by the same firm of solicitors in both Suits, the Company is represented by two separate firms of Solicitors in Suit 286 and Suit 102.
[3] On 23 March 2021, in Kuala Lumpur High Court Winding-Up No: WA- 28NCC-111-01/2020, the Company was given two months until 25 May 2021 to pay all its outstanding debts to the petitioner, TNo Project Management Sdn Bhd, failing which it would be wound-up on 25 May 2021 under the provisions of the Act, and the Pegawai Penerima be appointed its Provisional Liquidator ("the Liquidator"). The Company did not pay that debt, and was wound-up on 25 May 2021. This means that the Company was wound-up after Suits 286 and 102 were filed but before they were disposed of.
[4] Because of that, the Bank decided to do two things. Firstly, to withdraw Suit 286 against the Company, and secondly, to apply for security for costs against it in Suit 102. The Bank has not filed any application under O 21 r 3 of the Rules of Court, 2012 to discontinue Suit 286, hoping to do so without applying, but has filed an application against the Company under O 23 for security for costs ("Security For Costs Application").
[5] On 9 February 2022, these two Suits came up before me, for Case Management on the withdrawal of Suit 286 against the Company and on the Security For Costs Application. Counsel for the Company in Suit 286 informed the Court that her instructions were to seek costs from the Bank for the withdrawal of Suit 286 against Oren Venture.
[6] As for the Security For Costs Application in Suit 102, Counsel for the Bank informed me that his instructions are to proceed with it. Counsel for the Company in Suit 102 informed me that he is being instructed by a contributory of the Company who had obtained a "sanction" in a letter dated 13 December 2021 from the Liquidator to proceed with Suit 102 against the Bank, which would include opposing the Security For Costs Application. Indeed, the affidavit filed by the Company opposing the Security For Costs Application was affirmed by one Nor Lizah Binti Basir on 25 January 2022 as a "Pengarah" of Oren Venture.
[7] For the purpose of ensuring that any withdrawal of Suit 286 against the Company and the disposal of the Security For Costs Application is done in accordance with the law, I invited Counsel to address me on one preliminary issue, namely:
"Whether a liquidator of a wound-up company can issue a sanction or delegate his power under Item (a) of the Twelfth Schedule of the Companies Act , 2016 to any other person to bring or defend any action or other legal proceedings in the name and on behalf of that company."
[8] All three Counsel then submitted their respective Counsel's Note outlining their positions. Counsel for the Company in both suits also adduced the letter each had received from the Jabatan Insolvensi Malaysia ("JIM"), which they regarded as the sanction issued by the Liquidator to the contributory they were taking instructions from ("the Contributory") to continue with Suit 102 and defend Suit 286. Save for being addressed to their separate Firms, these two letters
