Ramly Ali J:

This is an application by the plaintiff for an order that the plaintiff be given leave pursuant to s. 263(1) of the Companies Act 1965 to proceed with their counter claim against the defendant in Kuala Lumpur High Court Civil Suit No: S5-22-77-2004 and the costs of the application to be borne and paid by the defendant to the plaintiff upon taxation thereof.

Brief Facts

The plaintiff is a development company engaged in the development project of a complex known as Galaxy Ampang, of which the defendant as main contractor was responsible for the building construction thereof, having taken over the contract from the previous contractor.

The matters relating to the works in question are contained in those documents known as the letter of intent dated 18 May 1996, the supplementary letter of award dated 29 August 1997 and a new letter of award dated 29 August 1997 and another letter of award dated 1 September 1999. The defendant's action in Kuala Lumpur High Court Civil Suit No: S5-22-77-2004 is pursuant to the settlement agreement dated 13 March 2001 inter alia, in regard to the amount of RM900,000 to be paid in cash and specific performance of the units of properties in the complex to be transferred to the defendant or his nominees or alternatively the sum of RM1,585,668 representing the value of the said units and RM156,443.30 representing the short-fall of the contra-value and rental for the tower crane amounting to RM365,000.

Videsettlement agreement dated 22 December 1999, the parties resolved to settle the payment of the works completed up till 22 December 1999 which was to be effected by monetary as well as contra-payment in the form of sale and purchase agreements in respect of contra-units in the complex.

Subsequently a second settlement agreement was entered into on 13 March 2001 (the final settlement agreement) which inter alia supercedes the aforesaid settlement agreement particularly in the mode of payment.

Consequent to the cessation of works by the defendant, as envisaged by the said final settlement agreement, the plaintiff appointed another new contractor to complete the remaining works left.

Upon examining the works to be continued and completed the new contractor discovered serious latent defects which so fundamental as to render it impossible to continue the works from where the defendant left them for the new contractor as these had to be rectified first and in certain instances to be redone, as they were wrongly carried out and completed contrary to specifications and basic requirements.

The estimated costs of rectifying these latent defects is about RM17,898,000 and is now made the subject of the plaintiff's counter claim against the defendant's claims under the final settlement agreement.

After the defence and counter claim was filed by the plaintiff, the defendant was voluntarily wound up by their creditors on 28 April 2004.

The defendant's defence to the plaintiff's counter claim is, inter alia, that the plaintiff's counter claim is baseless, frivolous and vexatious as it was made merely to delay and avoid the plaintiff's liability to the defendant.

Parties have filed their respective pleadings in the court and the plaintiff's appeal against the summary judgment obtained by the defendant in the said civil suit pursuant to O. 14 of the Rules of High Court 1980 was allowed by the court whilst the defendant's application for specific performance pursuant to O. 812 of the Rules of High Court 1980 was withdrawn by the defendant with no order as to costs. The matter is now fixed for case management.

Law Regarding Leave to Proceed

The plaintiff's application for leave to proceed with its counter claim against the defendant in the said civil suit is pursuant to s. 263(2) of the Companies Act 1965 which reads:

After the commencement of the winding up no action or proceeding shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the co