A liquidator's removal requires sufficient legal grounds, supported by a consensus of involved creditors; the court will not second-guess a liquidator's reasonable judgment in enforcing duties under the Companies Act.

Headnote:(A) Companies Act 2016 – Section 482(b) – Removal of Liquidator – The applicant sought the removal of the Liquidator based on allegations of failure to perform duties regarding pre-winding up issues and interference with justice – The court reviewed principles governing liquidator removal, establishing the liquidator's actions remained within acceptable bounds – No sufficient cause shown for removal. (Paras 31-70)

Facts of the case: The applicant filed to remove the appointed Liquidator, claiming a failure to investigate dividend distributions and other alleged misconduct. The Liquidator, appointed on 19 July 2018, responded with a forensic report justifying actions taken post the filing of the Dividend Suit.

Findings of Court: The Liquidator's conduct was found reasonable and within statutory powers; the application for his removal was not supported by all creditors and was viewed as lacking bona fides.

Issues: Main issues included whether the Liquidator failed in his duties and acted reasonably in relation to the Dividend Suit and whether the application to remove him had valid grounds.

Ratio Decidendi: The court held that the Liquidator acted within the law, and it is imperative that any removal has unanimous support from all stakeholders involved in the liquidation process, finding no evidence of misconduct or bias.

Result: Application to remove the Liquidator dismissed, costs awarded against the applicant and intervener.

JUDGMENT

Nadzarin Wok Nordin JC:

Enclosure 1

[1] The applicant, Es Eng Soon Holdings Sdn Bhd (Applicant) had filed under s 482(b) of the Companies Act 2016 and/or the inherent jurisdiction of the Court for inter alia the following orders:

a) that Tan Wae Leng (Liquidator) of c/o Cheng & Co, Corporate Recovery Sdn Bhd be removed as the Liquidator Of Golden Affinity Development Sdn Bhd (In Liquidation) (Respondent)

b) that pursuant to (a) above, Chan Chuan Long be appointed as Liquidator of the Respondent

c) an injunction to restrain the Liquidator and/or the Respondent frpm proceeding with the action known as Kuala Lumpur High Court Suit No WA-22NCC-472-08/2019 (Suit 472) against both the former and current directors and shareholders of the Respondent.

[2] The Application is supported by the grounds as follows:

(i) the Liquidator has failed to carry out his duty to investigate into the pre winding up dealings of the directors and contributories of the Respondent on the issue of distribution of dividends for which he was expressly and specifically appointed on 19 July 2018

(ii) the Liquidator knew or ought to have known of the Shah Alam High Court Suit No BA-22NCC-43-04/2019 (Dividend Suit) and that it was filed without any finding from him that the directors and shareholders are in breach of ss 131 to 133 of the Companies Act 2016

(iii) the Liquidator had failed to call a meeting of the creditors and contributories to inform them that he was not filing any action against the directors and contributories and that they could file an application under s 517 of the Companies Act 2016 to reverse his decision not to file the action

(iv) alternatively that he failed to inform them that they could seek sanction from him to file an action in the name of the Respondent after due investigation and written finding that the directors and shareholders are in breach of ss 131 to 133 of the Companies Act 2016

(v) the Liquidator commenced purported investigation after the filing of the Dividend Suit and hence interfered with the administration of justice

(vi) the Liquidator belatedly and on the pretext of investigating the issue of dividend distribution attempted to help the plaintiffs (in the Dividend Suit) to improve the Dividend Suit

(vii) the Liquidator belatedly filed Suit 472 without proper investigation and finding that the directors and shareholders are in breach of ss 131 to 133 of the Companies Act 2016

Background

[3] The Respondent was the registered proprietor of a land in Puchong Perdana, Selangor (land) and was developing the Land as an industrial development known as "i-32 Corporate Industrial Park" (Project) comprising of 32 units of 3 storey semi detached industrial factories

[4] The Respondent was wound up vide a High Court Order on 30 October 2017 and the Official Receiver was appointed as the liquidator of the Respondent.

[5] Thereafter on 19 July 2018 the Liquidator herein was appointed to replace the Official Receiver on the application of one San Rene Sdn Bhd (San Rene), a creditor of the Respondent, and which was supported by 4 other creditors to investigate the pre winding up dealings of the Respondent, in particular the Directors Declaration and Dividend Distribution of RM27 million to the shareholders of the Respondent.

[6] On 16 April 2019 the Dividend Suit was filed by 9 creditors of the Respondent against the Applicant, the Intervener and one Hoe Foong amongst others which suit has since been struck off on the grounds of duplicity of action.

[7] On 23 August 2019 the Liquidator had filed Suit 472 against the same common defendants in the Dividend Suit.

[8] The Applicant had thereafter on 10 September 2019 filed this Application to remove the Liquidator.

[9] One See Kok Seng (Intervener) had then applied to and was allowed to intervene in the Application herein.

[10] On 1 October 2020, the parties had appeared before this Court for the hearing of the Application but the same was adjourned as the Intervener h

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