V.C. George J:

We had allowed this appeal on the 6 September 1994. We now give our reasons for doing so.

In originating summons D2-31-198-88 the High Court had on 6 March 1990 declared that the partnership firm known as Tai Kwong Goldsmiths & Jewellers "do stand dissolved". The Court went on to order that:

Dato Rohailan Bin Mohamad be and is hereby appointed the receiver of the said firm to get in and realise the assets, accounts and monies receivable by the firm and determine its liabilities for the purpose of a dissolution of the said business and to do all that is necessary and/or needful to undertake his task under s. 46 of the Partnership Act, and make appropriate settlement and distributions there under.

Section 46(b) of the Partnership Act, 1961 provides that on the dissolution of a partnership its assets should be distributed in the following manner and order:

(i) in paying the debts and liabilities of the firm to persons who are not partners therein;

(ii) in paying to each partner rateably what is due from the firm to him for advances as distinguished from capital;

(iii) in paying to each partner rateably what is due from the firm to him in respect of capital; and

(iv) the ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible.

Section 47 provides that:

The rules of equity and of common law applicable in partnership shall continue in force, except so far as they are inconsistent with the express provisions of this Act.

The receiver in the instant case, who as has been seen had been appointed by the Court, in discharging his duties as receiver got in a total of just over RM1 million against liabilities owed by the firm of some RM10 million which was the aggregate of amounts owed to various persons who had deposited monies with the firm and amounts owed to other unsecured creditors which included termination benefits payable to the erstwhile employees of the firm pursuant to an order of the Industrial Court.

Now, sometime after the aforesaid appointment of the receiver, three of the depositors who had judgments against the firm had obtained garnishee orders, in effect, against the monies in the hands of the receiver. None of them had obtained the leave of the Court to take out the garnishee proceedings.

By summons in chambers dated 12 September 1992 the receiver had applied to the Court for directions in respect of priority to be given in respect of the payment out of the monies got in. Pending the disposal of the application for directions the receiver had obtained a stay of execution against each of the depositors who had obtained judgments including the three who had obtained the garnishee orders.

The trio had thereafter successfully applied to be heard in the summons for directions as intervenors and had contended that because they had the garnishee orders in hand they were entitled to be paid forthwith on the basis of priority over all the other unsecured creditors.

A preliminary point taken on behalf of the receiver at the summons for directions was that the receiver having been appointed by the Court and as such was in effect an officer of the Court, a condition precedent to taking out any proceedings against him (which includes garnishee proceedings) was the obtaining of the leave of the Court that had appointed the receiver and as such leave had not been obtained by the garnishors or any of them the garnishee orders were bad. It was also contended on behalf of the receiver, that in any event all the unsecured creditors including the three depositors who had obtained the garnishee orders and the said esrtwhile employees entitled to termination benefits were all entitled to a distribution of the monies with the receiver (after deduction of the receiver's fees expenses and the costs) on a pari passu basis.

The record shows that the learned Judge's attention was inter alia drawn to the judgment of the Supreme Court in Zainal Abidin Puti