A company's directors lose standing to sue upon liquidation, and only a liquidator can initiate proceedings on behalf of the company.

This an application vide a Summons in Chambers in Enclosure 25 by the 1st Defendants/Applicant under Order 18 Rule 19(1)(a) the Rules of the High Court 1980 for the that the Writ of Summons and Statement of Claim dated 26.11.2008 be struck out on the grounds.

Background

At the request of the 1st Plaintiff, the 2nd Defendant had granted a loan of RM150 million subject to the terms and conditions contained therein, which the Defendant had accepted.

The 2nd Plaintiff is a director of the 1st Plaintiff and is not a shareholder of the 1st Plaintiff. The 2nd Plaintiff together with one Azhar bin Hashim by a Letter of Guarantee dated 13.6.1997 and 26.6.2000 jointly and severally guaranteed the repayment of the amounts owing under the facilities. The 2nd Defendant is a secured creditor by virtue of the Debentures dated 13.6.1997 and 27.6.2000. The 1st Plaintiff, having utilised all the aforesaid banking facilities amounting to RM150 million, defaulted in the repayment. A Receiver and Manager (R&M) was appointed over the 1st Plaintiff company on 31.12005. The 1st Defendant was appointed as R& M on 27.7.2007.

The Law

It is only in plain and obvious cases that the Court will dismiss an action summarily. In the case of Lee Nyan Choi v. Voon Noon Lee Hun Hoe CJ (Borneo) at page 29 observed that:

"The power to dismiss an action summarily without permitting a party to trial is a drastic power and should be exercised with utmost caution. The power of summary procedure should only be resorted to on plain and obvious cases.".

The Federal Court in Roslan bin Abdullah v. New Zealand Co. Ltd. (1981) 2 MLJ 324 and in Golden Century Development Sdn. Bhd. v. Ganhoe & Anor (1982) CLJ 106 (Rep); (1982) CLJ 536; (1983) 1 MLJ 86 referred to the English case, AG of Duchy of Lancaster v. L & NW Railway Co. (1892) 3 Ch 274 and observed that summary procedure:

"...can only be adopted when it can clearly be seen that a claim or answer is on the face of it obviously unsustainable..."

The principle relating to O. 18 r. 19(1) RHC was considered in Bandar Builder Sdn. Bhd. v. United Malayan Banking Corporation Bhd. (1993) 4 CLJ 7 ; (1993) 3 MLJ 36 . Mohamad Dzaiddin SCJ (as he then was) said at pg 43 that:

"It is only in plain and obvious cases that recourse should be had to summary process under this rule (per Lindley MR in Hubbuck & Sons Ltd v. Wilkinson, Heywood & Clark Ltd.) and this summary procedure can only be adopted when it can be clearly seen that a claim or answer can only be adopted when it can be clearly seen that a claim or answer is on the face of it obviously unsustainable.".

His Lordship goes on to say that such process:

"... cannot be exercised by a minute examination of the documents and facts of the case, in order to see whether the party has a cause of action or a defence... The court must be satisfied that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable.".

The 1st Plaintiff was wound up on 2.12.2010 and a provisional liquidator was appointed. The 2nd Plaintiffs contended that the sale of the Azrahi Hotels Sdn. Bhd. by the 2nd Defendant for a sum of RM90 million was without due consideration to the Order of Sale dated 7.3.2005 which ordered the sale and had set the sale price at RM135 million.

According to the Plaintiff the said hotel is valued at RM150 million by the valuer in its report and therefore the 2nd Defendant is in breach of their obligations and duties towards the 1st Plaintiff.

In its claim the 2nd Plaintiff prays for the following:-

a) In respect of the sale of the Property at a gross undervalue:

(i) The sum of RM60 million being the differential sum between the sale price and the actual market; and

(ii) General damages with interest.

b) General Damages:

(i) Interest; and

(ii) Cost.

Having considered the submissions as well as the authorities by both the L