Leave to continue a suit against a liquidated company is denied if the claim can be resolved through winding up proceedings, safeguarding the pari passu principle for creditors.

(Leave To Continue A Suit Against A Company In Liquidation)

Kenneth St James JC:

Prelusion

[1] The Applicant filed Kuala Lumpur High Court Civil Suit No: WA-22NCC-427-09/2021 (Suit 427) against the Respondent company (Biaxis) in September 2021.

[2] In Suit 427, the Applicant claims against Biaxis the outstanding rent for construction machinery and other repair and services costs.

[3] Suit 427's sole remedy is for a sum of money ie it is a purely monetary claim.

[4] In March 2022, the Applicant obtained summary judgment against Biaxis for RM264,595.44. The balance outstanding of RM527,824.34 was ordered to be determined at trial.

[5] Biaxis was wound up in April 2022.

[6] By virtue of s 471(1) of the Companies Act 2016 , the Applicant needs the leave of Court to continue with Suit 427 for the balance sum.

The Law And Principles On Whether To Grant Leave

[7] The primary purpose of the liquidation process is to call-in the assets of the wound up company and to distribute the assets among the unsecured creditors (after settling preferential debts).

[8] Section 471 says that where a company is wound up, no suit or proceeding can proceed against it without the leave of Court.

[9] There are two criteria that the Applicant must satisfy before the Court will grant leave for the Applicant to continue with Suit 427. The Applicant must demonstrate that:

(1) the Applicant's claim in Suit 427 cannot be adequately dealt with by this winding up Court; and

(2) the Applicant has a prima facie case against Biaxis in Suit 427:

see the Court Of Appeal ( CA ) case of Mesuntung Property Sdn Bhd v. Kimlin Housing Development Sdn Bhd , 2014 MarsdenLR 2107 ( ).

[10] But what are the factors that I have to consider when I consider whether the Applicant has met these two criteria? The answer can be found in the authorities that the CA referred to with approval in Mesuntung (supra). One of them is Bruno Phillipe Fehrenbach v. Pegawai Penerima Malaysia , 1999 MarsdenLR 1602 (HC).

[11] In Bruno Phillipe (supra), I am guided that some of the factors that I should consider should include:

(i) the nature of the Applicant's claim in Suit 427;

(ii) the complexity of the issues involved in Suit 427;

(iii) the balance of convenience in granting or not granting the Applicant the leave to continue prosecuting Suit 427;

(iv) the justice of the case ie the justice of granting leave as against the justice of not granting leave;?

(v) the likelihood that the Applicant will get an advantage over the creditors of Biaxis (in liquidation);

(vi) whether any prejudice will be caused to the creditors; and

(vii) the effects that granting leave will have on the liquidation process.

[12] Another case referred to with approval in Mesuntung (supra) is Vagrand Pty Ltd (in liq) v. Fielding & Ors (1993) 11 ACLC 411. From Vagrand (supra), I learnt that the CA also considered these factors:

(i) the rationale to require an applicant to first obtain leave before they can commence or continue with a suit against a company in liquidation is to protect the company, to safeguard the company from having to deal with, and to finance, the intended or existing litigation;

(ii) whether it is more convenient or appropriate to grant leave and let Suit 427 progress to its conclusion;

(iii) the effects that Suit 427 will have on Biaxis, particularly the financial effects; and

(iv) whether Biaxis' assets will be unnecessarily utilised to resist Suit 427.

[13] Another authority referred to with approval in Mesuntung (supra) is Capital Financial Grou