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2025 MarsdenLR 347
COURT OF APPEAL PUTRAJAYA
MAJIDEE PARK AUTO SPARES & SERVICES SDN BHD & ANOR – Appellant
Versus
N THANAVATHY RAJAH & ANOR – Respondent
[Civil Appeal No: J-01(A)-408-07/2023]
The removal of a liquidator requires cause shown, and not all creditors need to support the application for removal; the liquidator must act in the interest of all stakeholders.
Headnote:(A) Companies Act 2016 - Section 232(1) - Liquidator's removal - The High Court allowed the application to remove the liquidator due to non-renewal of license and failure to act promptly. The Court found the removal unjustified as the license was renewed retroactively. The requirement for all creditors to support the removal application was clarified. (Paras 8, 9, 14, 19, 35, 49)
(B) Liquidator's duties - The liquidator must act with promptitude and diligence in the liquidation process. The Court found that the liquidator had taken reasonable steps despite delays from the directors. (Paras 36, 40, 41, 47)
(C) Appeal - The appeal was allowed, and the High Court's order was set aside. (Para 49)
Facts of the case:
The 2nd appellant was removed as liquidator of the 1st appellant, a company in liquidation, based on claims of unfitness and failure to renew his license. The 2nd appellant's license was later renewed retroactively.
Findings of Court:
The Court found that the removal was unjustified and that the liquidator had acted reasonably given the circumstances.
Issues: The main issues included the justification for removal based on license status and the necessity of creditor support for such applications.
Ratio Decidendi: The Court ruled that the liquidator's license renewal negated grounds for removal and clarified that not all creditors need to support a removal application.
Result: Appeal allowed, order set aside.
JUDGMENT
Introduction
[1] This appeal concerns the decision of Johor Bahru High Court given on 26 June 2023 in allowing the 1st respondent's application to remove the 2nd appellant as a liquidator of the 1st appellant.
[2] We heard the appeal on 17 October 2024 and thereafter adjourned our decision to deliberate on the arguments advanced by the parties.
[3] Having done so, we hereby give our decision below including the grounds thereof.
Background facts
[4] The 2nd appellant, Jayapalasingam a/l Kandiah was appointed as the liquidator of the 1st appellant, Majidee Park Auto Spares & Services Sdn Bhd ("the Company") pursuant to the Winding-Up Order granted on 1 February 2021.
[5] The 1st and 2nd appellants shall be collectively referred to herein as "the appellants" unless specified otherwise.
[6] The 1st respondent, N Thanavathy a/p Rajah was one of the directors of the Company. The other directors are Punithavathy a/p N Rajah and Somas Kanda Rajah.
[7] As a result of the removal of the 2nd appellant as the liquidator of the Company, the High Court appointed the Director General of Insolvency (the 2nd respondent) as the Official Receiver.
The High Court 's Decision
[8] In allowing the 1st respondent's application, the learned Judicial Commissioner ("JC") held as follows:
"[28] It is clear from the provision above, the 2nd Respondent has been disqualified to be appointed as liquidator once his licence has not been renewed. The 2nd Respondent did not offer any explanation for the failure to renew his license and did not apply for leave of the Court for him to continue to act as the liquidator for the 1st Respondent as provided in subsection 433(1) of Act 777.
[29] This ground alone will warrant the removal of the 2nd Respondent without having a need to consider the merits of this application. Therefore, I am of the view that the 2nd Respondent is no longer able to act as the liquidator of the 1st Respondent pursuant to para 433(1)(a) of Act 777. Thus, the 2nd Respondent must be removed as the liquidator of the 1st Respondent and be replaced by DGI pursuant to para 477(1)(e) of Act 777. The contention of the 2nd Respondent that there is no liquidator to be removed is devoid of merits as 2nd Respondent is appointed pursuant to the Court order dated 1 February 2021 and thus, it needs to be removed by the order of the Court .
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[35] The 2nd Respondent then filed the Pre-Action Discovery application on 16 December 2022 in suit JA-24NCC-37-12/2022 against Punithavathy. I find that this application was filed after the Applicant's application (encl 33) for an order for the 2nd Respondent to prepare and make payment of the outstanding sum to the LHDN, being dismissed by the Court on 13 September 2022. The 2nd Respondent has taken approximately 1 year from the date of received SOA, to file the application. I find that the 2nd Respondent did not act within a reasonable period of time despite the 2nd Respondent's claim that the directors have delayed in providing the information requested.
[36] It is pertinent to note that the reason for the appointment of a liquidator is to speed up the liquidation process, to realize the assets of the company and to pay off the creditors and other dues before finally putting the company in dissolution within the reasonable time. The liquidator will be paid remuneration or salary pursuant to s 479 of Act 777. Therefore, the liquidator is expected to discharge their statutory duties by exercising a high standard of care, skill, diligence and competence commensurate with their professional standards.
[37] The general duties of a liquidator appointed in a compulsory winding-up was explained by Marks J in the Australian case of Corporate Affairs v. Harvey [1980] VR 669 in the following terms:
The duties of a liquidator need to be clearly understood. Fundamentally, he must administer the estate strictly in accordance with the duties and obligations specifically imposed on him by the Compani
