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2025 MarsdenLR 93
COURT OF APPEAL PUTRAJAYA
CLASSIC MARITIME INC – Appellant
Versus
LION DIVERSIFIED HOLDINGS BERHAD & ANOR – Respondent
[Civil Appeal No: W-02(A)-1956-10/2022]
A liquidator must exercise discretion to obtain the best possible price for company assets, but failure to demonstrate impropriety prevents judicial intervention against liquidator's decisions.
Headnote:(A) Companies Act 2016 - Sections 487 and 517 - Application to set aside liquidator's sale of shares in subsidiary - High Court dismissed the application based on liquidator's adequate disclosure and exercise of discretion in public tender - Liquidator must act in the best interest of creditors, balancing various considerations in decision-making. (Paras 4, 5, 10, 28)
(B) Judicial Review - Limits on court intervention - Courts should hesitate to interfere with liquidators' decisions unless there is evidence of fraud, bad faith, or unreasonable actions. (Paras 29, 32, 43)
Facts of the case:
The appellant sought to challenge the sale of shares in Banting Resources by the liquidator of Lion Diversified, claiming it was at an undervalue and indicative of failing to act in creditors' interests, owed over RM440 million. The court found all relevant disclosures had been made.
Findings of Court:
High Court's finding supported that the liquidator acted within discretion and no formal abuse of power occurred, confirming the public tender established fair valuation.
Issues: Main questions were whether liquidation process followed statutory requirements and if liquidator's discretion was properly exercised.
Ratio Decidendi: Court held that despite claims of undervalue, appellant failed to prove the liquidator acted improperly or without due care and diligence in managing the sale, affirming that judicial intervention was limited.
Result: Appeal dismissed with costs.
| Table of Content |
|---|
| 1. appellant's company status and creditor relationship. (Para 1 , 2 , 3) |
| 2. setting aside the liquidator's decision. (Para 4 , 5 , 6) |
| 3. appellant's contentions in appeal. (Para 8 , 9) |
| 4. summary of court findings. (Para 10) |
| 5. material facts surrounding equity interest. (Para 12 , 13 , 14) |
| 6. tender exercise process. (Para 15 , 16 , 17) |
| 7. valuation considerations during tender. (Para 18 , 19 , 20) |
| 8. benapro's bid and related party considerations. (Para 21 , 22 , 23) |
| 9. applicable principles for liquidator's actions. (Para 28 , 29 , 30) |
| 10. court's reasoning regarding breach of duty. (Para 32 , 38 , 41) |
| 11. jurisdiction considerations under companies act. (Para 44 , 45) |
| 12. conclusion on appeal dismissal. (Para 52 , 54) |
Introduction
[1] The appellant, Classic Maritime Inc, is a company incorporated in the Marshall Islands. It is a judgment creditor of the first respondent, Lion Diversified Holdings Berhad ("Lion Diversified"). The appellant obtained judgment against Lion Diversified through suits commenced in England arising from breaches of contracts of affreightment. Lion Diversified was formerly a publicly listed company. It was delisted and is now in liquidation. The appellant is owed more than RM440 million by Lion Diversified, and is its majority creditor.
[2] The appellant made an application to the winding up court to set aside the decision of the liquidator of the Lion Diversified to sell its equity interests in a subsidiary, Banting Resources Sdn Bhd ("Banting Resources"), for the price of RM42,220,800.00. The sale was effected by public tender after leave of court had been obtained. The successful bidder was the second respondent, Benapro Sdn Bhd ("Benapro"). Benapro's bid was the sole bid received in the public tender exercise.
[3] It was common ground that the first and second respondents are related to one another by reason of the fact that Tan Sri William Cheng Heng Jam, a substantial shareholder of Lion Diversified, has substantial interests in Benapro.
Before The High court
[4] The basis upon which the appellant had sought to set aside the decision of the liquidator to sell the shares in Banting Resources is set out in the Notice of Motion filed before the winding up court: it was contended that the bid by Benapro was at an undervalue and that accordingly the sale was prejudicial to the interests of the creditors. It was also alleged that the liquidator had failed to disclose all pertinent information to the winding up court when the approval of the court was sought for the sale to Benapro, pursuant to s 487(3) of the Companies Act 2016 . For these reasons, it was contended that the liquidator had not acted in the best interests of the creditors in entering into the sale of the subject shares.
[5] The High court dismissed the setting aside application. It did so for the
(a) first, the learned High court judge, Nadzarin J, ruled that he was functus officio, and was not clothed with the jurisdiction to revisit the order that he had granted on 26 August 2021 approving the sale to Benapro, in the absence of any evidence that the order had been irregularly obtained due to illegality, breach of the rules of natural justice or lack of jurisdiction;
(b) second and in any event, the contention that the statement of affairs of Lion Diversified showing its realisable equity value as RM257,987,027.36 had not been brought to the attention of the court when the 26 August 2021 order was sought, was not made out. The statement of affairs was in fact annexed to the affidavit affirmed in support of the application to court;
(c) furthermore, there had been adequate disclosure to the court of the interests of Tan Sri William Cheng in the bidder, Benapro;
(d) fourth, the High court ruled that the fact that the sale was effected by public tender established that there had been no undervalue, on the basis that the true commercial value of the shares was the actual price that they would fetch on the open market, an
