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2022 MarsdenLR 3014
HIGH COURT MALAYA PULAU PINANG
MAMMOTH EMPIRE LAND SDN BHD – Appellant
Versus
LOTUS PROFIT SDN BHD; HENG HUA PIANG & ORS (PETITIONERS) – Respondent
[Civil Suit No: PA-28PW-13-02/2022 (Companies Winding Up Petition No: PA-28NCC-72-11/2020)]
Claims against a company in liquidation must show they cannot be adequately dealt with by the winding-up Court; monetary claims are provable and typically do not warrant separate action.
Headnote:(A) Companies Act 2016 – Section 471 – Winding up – Application for leave to continue suit against company in liquidation – The Applicant sought leave as the Respondent was wound up before the determination of Suit 333—a claim for specific performance and damages – The Court examined whether claims could be adequately dealt with by winding up Court – Leave was refused as all claims were monetary and provable in liquidation. (Paras 12-79)
(B) Leave Criteria – The Applicant must show that his claims cannot be adequately remedied by the winding up Court and that he has a prima facie case – The criteria were confirmed through previous court decisions referenced. (Paras 14-15)
Facts of the case: The Applicant, after purchasing properties, sued the Respondent for specific performance and damages due to delayed delivery before the Respondent was wound up. (Paras 2-10)
Findings of Court: Claims for specific performance were not adequate for winding up proceedings, and the relief sought was mainly monetary – The Court found that closer examination favors preserving the pari passu principle for all creditors. (Paras 60-69)
Issues: Whether the Applicant could proceed with the suit against a company in liquidation and whether claims were appropriate for winding up Court. (Paras 70-74)
Ratio Decidendi: The Court ruled that since the claims were monetary and a proof of debt process was available, specific performance was deemed futile and leave to proceed would disrupt the equal treatment of creditors. (Paras 51-69)
Result: Application for leave dismissed.
JUDGMENT
(Application For Leave To Continue A Suit Against A Company In Liquidation)
Prelusion
[1] The Applicant sued the Respondent. The suit is pending. Before the suit is determined, the Respondent was wound up. As a result, the Applicant needs the leave of Court to continue to pursue the reliefs and remedies prayed for in the suit. Should the Applicant be granted leave?
The Suit That The Applicant Wishes To Continue
[2] The Respondent is the developer of the Empire Residence project in Selangor. The Applicant purchased two units of property from the Respondent. The Sale And Purchase Agreements (SPAs) were signed in October 2011.
[3] The properties and common facilities were contracted to be delivered by October 2014 (36 months from the date of the SPAs). But by 2020, the properties and the common facilities were still not completed.
[4] In September 2020, the Applicant sues the Respondent for specific performance, for damages, for liquidated ascertained damages (LAD) for the late delivery of vacant possession, and for a declaration that relates to the Deed Of Mutual Covenants (DMCs) that the Applicant signed when the Applicant bought the properties. The Applicant's suit is Shah Alam High Court Suit No BA-22NCVC-333-09/2020 (Suit 333).
[5] Under the remedy of specific performance, the Applicant seeks an Order that the Respondent completes and delivers vacant possession of the properties and common facilities to the Applicant within 3 months of the Judgment in Suit 333.
[6] It is pertinent to note that in the alternative to specific performance, the Applicant prayed for damages. In other words, if the presiding Court for Suit 333 could not grant specific performance (for the properties and common facilities to be completed and delivered), then the Applicant seeks monetary compensation in the form of the market value of the properties and the common facilities.
[7] Under the remedy of damages, the Applicant seeks all the monies paid in the transaction, including the deposit, the part-payment of the purchase price, the legal fees, as well as general damages.
[8] Under LAD, the Applicant seeks the LAD amount calculated from the date that vacant possession was contracted to be delivered, to the date that vacant possession is actually delivered.
[9] These are all monetary claims, or claims that are compensable by money.
[10] As for the declaratory relief that the Applicant seeks, it is for a declaration to terminate the two DMCs.
This Application
[11] In this proceeding, the Applicant applies for two Orders:
(1) leave to intervene in this Winding Up Petition; and
(2) leave to continue with its claim against the Respondent in Suit 333.
The Law And The Principles On Whether To Grant Leave
[12] The Applicant applies for leave under s 471 of the Companies Act 2016 . Section 471 provides that when a winding up order is made, no suit can be commenced or continued without the leave of this winding up Court.
[13] Section 471 is set out here for reference:
Section 471 . Action or proceeding stayed after winding up order
(1) When a winding up order has been made or an interim liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and in accordance with such terms as the Court imposes.
(2) The application for leave under subsection (1) shall be made in the Court granting the winding up order and shall be served on the liquidator.
[Emphasis Added]
[14] The Applicant must satisfy two requirements before the Court will grant leave for them to continue with Suit 333. The Applicant must demonstrate that:
(1) the Applicant's claim in Suit 333 cannot be adequately dealt with by this Winding Up Court; and
(2) the Applicant has a prima facie case against the Respondent in Suit 333.
[15] This general principle is propounded in Mesuntung Property Sdn Bhd v. Kimlin Housing Development Sdn Bhd , [2014] 4 MLJ 886 ( CA ). The Court Of Appeal, through Justice David Wong Dak Wah
