Liquidators' actions are subject to scrutiny, but removal requires evidence of personal unfitness or conflict of interest; applications for removal should not serve collateral purposes contrary to creditor interests.

[1] This is an appeal by the appellants against the decision of the Court of Appeal on the 5 May 2011 in dismissing the appellants' appeal against the decision of the High Court dismissing the appellants' application vide Notice of Motion ("encl 368") pursuant to s 232 of the Companies Act 1965 ("the Act") to remove and replace Ng Peak Yam, the 1st respondent and Dato' Khoo Peng Lai, the second respondent as liquidators of a company known as Folin and Brothers Sdn Bhd ("Folin").

Leave To Appeal

[2] The appellants sought for leave to appeal against the decision of the Court of Appeal to the Federal Court and leave was granted on the following question of law:

"Does r 173 of the Companies (Winding-Up) Rules 1972 ("the Rules") prohibit payment of all the solicitors bills paid by the respondents from the assets of Folin and Brothers Sdn Bhd (in liquidation) to their solicitors, unless the said solicitors bills have been considered and allowed by the taxing officer?"

Background Facts

[3] The registered proprietors of the shares of Folin are the 1st, 2nd and 3rd appellants together with one Wong Bung Sun (an undischarged bankrupt) and the Estate of Wong Foo Ling. The appellants constituted 75% in value of the shareholders of Folin and are the only members of its Committee of Inspection. The 1st appellant is the largest creditor of Folin. Folin which is a family company was ordered to be wound up by the High Court on 8 April 1987. The winding up petition was filed by the 3rd appellant. The 1st and 2nd respondents were appointed as the liquidators of Folin on 13 March 1997 replacing the previous liquidators. Folin's only substantial assets are the 99.99% shares it owns in its subsidiary, known as Folin Food Processing Sdn Bhd ("Folin Food"). Folin Food has been dormant for more than twenty years and its sole asset is a commercial property referred to as "Lot 16" generating a monthly rental income of RM48,000.00.

[4] Upon taking office, the respondents faced various litigations which they had to pursue and defend with the active collaboration and participation of the appellants, particularly the first appellant. The filing of encl 368 by the appellants for the removal of the 1st and 2nd respondents as liquidators must be examined in the light of the history of litigation endured by the appellants and the respondents as liquidators. This can be briefly set out as follows.

[5] The first so-called oppression suit was launched by the appellants against the respondents in 2008 when they sought to injunct the respondents from exercising their right to vote in favour of a voluntary liquidation of Folin Food. It is pertinent to note that Folin was not a party to the oppression suit. The first oppression suit was resolved by a Consent Order dated 4 June 2009 ("the Consent Order") which essentially provided for the valuation of Folin Food's shares by Ernst & Young ("EY"), and upon the ascertainment of its 'fair price' a sale and purchase agreement was to be entered within thirty days. The shares were valued by EY and the respondents were unhappy with the said valuation by EY.

[6] The respondents were of the view that EY's valuation was flawed in law and did not represent a 'fair value' and hence was not in accordance with the Consent Order. As a result, the respondents commenced a suit vide Kuala Lumpur High Court Suit No. D-22NCC-674-2009 ("the Consent Order Suit") on 14 December 2009 to essentially have the shares of Folin Food revalued. The appellants counterclaimed for specific performance of the sale and purchase agreement. On 21 January 2011 the High Court dismissed the respondents' claim in the Consent Order Suit and allowed the appellants' counterclaim. However, on 5 May 2011, the Court of Appeal all