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2021 MarsdenLR 1416
HIGH COURT MALAYA KUALA LUMPUR
IRC JURUTERA PERUNDING & ORS – Appellant
Versus
SRI ALAM SDN BHD & ORS (ENCL 1) – Respondent
[Post Winding Up No: WA-28PW-62-02/2021]
Leave to initiate legal proceedings in company liquidation must demonstrate a prima facie case and cannot be adequately addressed in winding-up processes.
Headnote:(A) Companies Act 2016 – Section 471 – Leave for legal proceedings – The Applicants moved for leave to initiate legal proceedings against the Respondents, citing the inability to enforce the Consent Order in winding up proceedings and demonstrating a prima facie case – The Court upheld the necessity to allow the Applicants to seek enforcement outside of the winding up process. (Paras 17, 25, 29)
(B) Jurisdiction – The court's discretion under s 471 of the Companies Act allows granting of leave under specific terms to facilitate claims not adequately resolved within winding-up protocols. (Paras 18, 26)
Facts of the case: The Applicants sought enforcement of a Consent Order regarding costs from a voluntary liquidation case, after the liquidators allegedly failed to adhere to resolutions made in a Committee of Inspection meeting.
Findings of Court: The Court found that the Applicants had a prima facie case and that the relief sought could not be adequately granted within winding-up proceedings, dictating that more effective methods should be utilized.
Issues: The primary questions were whether the Applicants could enforce the Consent Order and if the Respondents' actions constituted a breach.
Ratio Decidendi: The Court emphasized the necessity for a prima facie case to grant leave for actions outside winding-up and reaffirmed that costs claims should ideally follow taxation procedures rather than separate litigation.
Result: Leave granted with conditions to file costs under taxation procedures, not separate litigation.
JUDGMENT
Enclosure 1
Motion
[1] By way of a Notice of Motion (Motion), the applicants being IRC Jurutera Perunding & 9 others (Applicants) have moved this Court pursuant to s 471 of the Companies Act 2016 and/or the inherent jurisdiction of this Court for inter alia for liberty and/or leave to be granted to the Applicants to initiate legal proceedings by way of originating summons against Sri Alam Sdn Bhd (in Liquidation)(Sri Alam) and 2 others (collectively the "Respondents').
[2]Inter alia the grounds in support of the Motion were as follows:
a) the Applicants and Sri Alam are parties to the Originating Summons No WA-28NCC-487-09/2019 (Suit 487) where the parties had entered into a consent order dated 5 June 2020 (Consent Order)
b) the Applicants are seeking enforcement of the Consent Order where the related fees, expenses and costs itemized in the Consent Order will be paid out of the assets of Sri Alam
c) the enforcement of the Consent Order cannot be dealt with in the proof of debt exercise of the company, hence the necessity for leave to be granted to allow the Applicants to enforce the Consent Order against the Respondents; and
d) the Applicants have a strong prima facie case against the Respondents
Factual Background
[3] Sri Alam was placed under members voluntary liquidation in 2013 where originally Lim Tian Huat and Wan Mohd Shukri (Shukri) were appointed as liquidators of Sri Alam. The former thereafter resigned and the latter had then as the sole liquidator carried out various steps including identifying the creditors of Sri Alam, and holding a creditors meeting on 16 May 2019 wherein Sri Alam's status was converted into a creditors voluntary liquidation (CVL) and Wan Idris bin Wan Ibrahim, the 3rd Respondent herein (Idris) was appointed as joint liquidator.
[4] On 20 September 2019, the contributories of Sri Alam had filed Suit 487 to seek inter alia that Shukri and Idris be removed a liquidators of Sri Salam and be replaced by Baltasar bin Maskor, the 2nd Respondent herein, which culiminated thereafter into the parties entering into the Consent Order on 5 June 2020 before Wong Chee Lin J in Suit 487.
[5] On 10 December 2020, following thereto, the Joint Liquidators of Sri Alam and the COI held a meeting to table and pass various resolutions (COI 10 December 2020 Meeting) including the interveners costs provided in cls 5 and 7 of the Consent Order.
Applicant's Submissions
[6] It was submitted by the Applicants that:
a) at the COI Meeting the COI had resolved amongst others to fix the interveners costs at RM30,000 for Suit 487 to be paid out of the assets of Sri Alam to each of the intervener's therein (Interveners Costs)
b) pursuant thereto the Applicants had requested the Joint Liquidators of Sri Alam to make payment of the Interveners Costs as resolved in the COI 10 December 2020 Meeting
c) the Joint Liquidators have deliberately refused to comply with the resolution of the COI
d) the Joint Liquidators have imposed additional requirements in the Applicants to retrieve their costs pursuant to the Consent Order
e) the failure to comply with the Consent Order constitutes a breach of contract which is a reasonable cause of action for the Applicants
[7] The Applicants being aggrieved with the Respondent's decision have to obtain leave to initiate legal proceedings against their said decision and that the same cannot be enforced through the lodgement of a proof of debt.
Joint Liqudiators / Respondents Submissions
[8] The Respondents had raised a preliminary issue that the Applicants had failed to observe Practice Direction 1 of 2018 in filing the Motion.
[9] It is contended by the Respondents that the:
(i) COI 10 December 2020 Meeting had not resolved to pay the Applicants herein the costs in Suit 487 as the same was postponed to be decided at the next adjourned meeting due to the fact that one of the COI members had left in the mid of the said meeting
(ii) at the next meeting held on 8 January 2021 (COI 8 January 2021
