Leave to sue a liquidator requires a prima facie case and proof of pecuniary loss, with courts protecting the liquidation process from frivolous claims.

Moses Susayan JC:

Introduction

[1] The applicant ("Dato' Suki Mee") seeks leave to initiate proceedings against the liquidator of Far Origin Sdn Bhd ("FOSB"), for allegations of impropriety and mismanagement. In this respect, the applicant demands court intervention. However, the liquidator opposes the applicant's request for leave to commence proceedings against the liquidator, arguing that the applicant has failed to meet the legal threshold for such an application. The question for determination for this court is whether leave can be granted for the applicant to pursue legal action against the liquidator.

Background Facts

[2] The applicant alleges impropriety and mismanagement. The applicant complains that one of the contributories in FOSB, known as Toi Sin Fatt improperly increased his shareholding in FOSB to 315,000 shares and later transferred 11,000 shares to his wife, Ng Yok Fong, without making any payment. The applicant argues that this act was illegal and void, resulting in pecuniary losses to him. He contends that the shares were unlawfully issued and transferred without consideration, and the liquidator's confirmation on 28 February 2024 stating that no records of payment for these shares exist supports his claim. Based on this, the applicant asserts that the share transfers should be rectified and declared invalid.

[3] The applicant also argues that FOSB holds 26 shoplots as a bare trustee under an irrevocable power of attorney ("PA") on behalf of Arena Ria Sdn Bhd ("ARSB"), a company where the applicant holds a 40% share. The applicant claims that the assets belong to ARSB, and their distribution to FOSB's shareholders would constitute criminal misappropriation.

[4] Further, the applicant demands the formation of a Committee of Inspection ("COI") to investigate the alleged share improprieties and asset misappropriation, citing the liquidator's refusal as a failure of fiduciary duty. The applicant also seeks directorship in Puspa Sepakat Sdn Bhd., where FOSB is a substantial shareholder, alleging inaction from the liquidator on the matter. Based on these claims, the applicant asserts a prima facie case is established, invoking the court's power to intervene under s 206(3) of the Companies Act 2016 . The applicant prays for leave to commence proceedings to protect his contributory rights and prevent further losses to the company (FOSB).

Respondent's Submission

[5] The respondent opposes the applicant's request for leave to commence proceedings against the liquidator of FOSB on several grounds. Firstly, the respondent asserts that the applicant has failed to establish a prima facie case or demonstrate pecuniary loss to FOSB, as required under Ooi Woon Chee & Anor v. See Teow Chuan & Ors & Other Appeals 2012 MarsdenLR 1339 ; ; [2012] 2 CLJ 501. The allegations of impropriety in shareholding, specifically the issuance and transfer of 315,000 shares, were adjudicated during the winding-up proceedings, and the court of Appeal found no basis for the applicant's claims. Therefore, the respondent submits that the doctrine of res judicata bars this matter and cannot be revisited.

[6] Secondly, the respondent contends that the formation of COI is unwarranted. Most creditors and contributories opposed the COI's formation, deeming it unnecessary given FOSB's solvency and the limited number of stakeholders. The respondent also submits that a COI would add unnecessary delays and costs to the liquidation process. Furthermore, the liquidator has already addressed the alleged share improprieties and provided relevant records, rendering a COI redundant.

[7] Regarding the applicant's claim that 26 shoplots belong to ARSB under a PA, the respondent argues that the PA does not confer ownership of these assets to ARSB. The liquidator of ARSB confirmed that the assets belong to FOSB, and the respondent asserts that transferring them would result in losses to FOSB. The applicant's claims are, therefore, unfounded and procedurally imprope