Mohamed Dzaiddin FCJ

This is an appeal from the decision of the Court of Appeal concerning the powers of the receivers and managers appointed under the debenture to sell the property charged under the National Land Code by private treaty.

On 24 July 2002, we granted leave to appeal on the following question of law:

Notwithstanding a valid Power of Attorney contained in a Debenture, can the Receivers and Managers appointed under the said Debenture proceed to sell the property charged under the National Land Code by private treaty?

Brief Facts

The first respondent is the registered proprietor of the lease of a piece of land held under qualified title H.S.(D) 143155 PTD 80563, Mukim of Plentong, District of Johor Bahru, Johor (the said lease).

On 30 June 1992 the first respondent executed a debenture in favour of the second respondent as security for banking facilities granted by the latter. Later, the first respondent executed a first legal charge over the said lease under the National Land Code which was duly registered on 18 July 1992.

On 9 February 1994 the second respondent exercised their right under the said debenture and appointed one Lim Tian Huat of Messrs. Arthur Anderson & Co. as the receiver and manager (hereinafter shall be referred to as 'R & M') of all the assets and undertakings of the first respondent. Clause 12.2 of the debenture empowered the R & M to act as agent of the first respondent and cl. 12.2(c) further empowered him to effect the sale of the asset secured by the debenture after taking possession of them. By cl. 12.5(a), R & M is also irrevocably appointed the lawful attorney of the first respondent.

On 2 July 1996, R & M entered into a sale and purchase agreement with the appellant to sell the said lease subject to the terms and conditions contained therein. The appellant however did not wish to proceed with the said purchase on the ground that R & M did not have the power to sell the said lease by private agreement in view of Kimlin Housing Development Sdn Bhd (Appointed Receiver and Manager) (In liquidation) v. Bank Bumiputra (M) Bhd[1997] 3 CLJ 274;[1997] 2 MLJ 805.

On 10 September 1997, the first respondent filed an originating summons in the Kuala Lumpur High Court for a declaration that R & M was duly empowered by the said debenture to sell the said lease.

On 20 September 1997, the learned judge granted the declaration and ruled as follows (p. 63 Rekod Rayuan):

I find as a fact that the Administrative Receivers/Managers are the authorised agents of the company under the debenture and as such are authorised to enter into any sale and purchase agreement on the assets of the company; subject however to the obtaining of the prior consent of the debenture holders and which consent was freely given by the second defendants to the Court. Therefore, the need on the part of the Receivers/Managers in any way invoking the Orders of the High Court, 1980 (sic)only become applicable where such sale is proceeded by the chargee under its foreclosure proceedings and not where the chargor so proceeds with the sale by consenting parties.

I hold, that under these circumstances the administrative Receivers/Managers as agents of the company are absolutely free and empowered to dispose off the assets of the company; and their act binds the company.

The appellant appealed against the above decision. The Court of Appeal dismissed the appeal and ordered that each party to bear its own costs. In the main, the Court of Appeal was in total agreement with the submission of the learned counsel for the first respondent that the ratio in Kimlindid not apply to the case under appeal because of several distinguishing features. In its judgment (at pp. 324-5 Rekod Rayuan) the court stated:

(a) In the Kimlincase, the chargor company was wound up and consequently, the receivers and managers ceased to be agents of the chargor company;

(b) in the present case, the chargor was not wound up;

(c) the debenture under consideration