Leave from the winding-up court is required before commencing proceedings against a court-appointed liquidator, and claims for reimbursement of legal fees must be made against the company, not the liquidator.

The Application

[1] The applicants, the former directors of Lau Tiong Ik Construction Sdn Bhd (the Company), are seeking leave of the court to commence legal proceedings against Wong Ching Yong, the liquidator of the company for the sum of RM336,000.00.

The Brief Backgrounds

[2] The Company was wound up on 23 August 2013 following a petition by Lau Choon Liang (deceased) and his son Lau Chai Kung who were also the shareholders and contributories of the company.

[3] The respondent was court-appointed liquidator for the winding-up of the company.

[4] Following a police report lodged by Lau Choon Liang (deceased) then in 2012 alleging financial misconduct by the applicants during their tenure as directors, the applicants were charged in 2015 with criminal breach of trust. They were acquitted of all charges in 2018.

[5] The applicants claimed that they incurred RM336,000.00 in legal fees to defend themselves. They claim they are entitled and should be reimbursed under art 116 of the company's Memorandum and Articles of Association.

[6] The applicants alleged that despite multiple letters were sent to the respondent requesting reimbursement of legal fees, but no response was received.

[7] The applicants are compelled to commence proceedings against the respondent to recover the legal fees allegedly incurred.

[8] Consequently, the applicants took out this Notice of Motion dated 11 May 2024 stated in the intitulement to be made under s 486(2) of the Companies Act 2016 , for leave to commence legal proceedings or action against the respondent in his capacity as liquidator of the company for the sum of RM336,000.00.

The Propriety Of The Applicants' Application

[9] In N Chanthiran Nagappan v. KAo Che Jen 2023 MarsdenLR 434 ; [2023] 5 MLJ 284 ; [2023] 7 CLJ 677 ; [2023] 6 AMR 73 (FC) , the Federal court held that leave of the winding-up court is required before commencing proceedings against a court-appointed liquidator. The requirement is implied in the phrase "subject to the control of the court' under s 486(2) of the Companies Act 2016 . The rationale is to protect the liquidator, as an officer of the court, from vexatious or frivolous litigation and to ensure the integrity of the winding-up process. The winding-up court exercises strict supervision over the liquidator's actions, and any interference must be sanctioned by the court to prevent abuse of process.

[10] Similarly, in Chi Liung Holdings Sdn Bhd v. Ng Pyak Yeow 1995 MarsdenLR 418 ; ; [1995] 4 CLJ 11 (FC) , the court of Appeal ruled that a liquidator appointed by the court is an officer of the court under s 236(3) of the Companies Act 1965 (equivalent of s 486(2) of the Companies Act 2016 ), and leave of the winding-up court must be obtained before commencing any action against the liquidator. This ensures judicial supervision to prevent unnecessary, vexatious, or wasteful litigation against liquidators.

See: r 63 of the Companies (Winding-Up) Rules 1972.

See also: Ooi Woon Chee & Anor v. See Teow Chuan & Ors & Other Appeals 2012 MarsdenLR 1339; ; [2012] 2 CLJ 501 (FC) .

[11] Since any action against the respondent, as the liquidator of the company, requires the permission, authority, or leave of the winding-up court that appointed him, such an application must be made within the winding-up proceedings in which the appointment was made.

[12] That being the case, it is legally incorrect for the applicants to file this Notice of Motion for leave by a separate action.

The Cause Of Action Against The Company Not The Liquidator

[13] Additionally, the applicants intended action for the claim for reimbursement of th