JUDGMENT

Steve Shim CJ (Sabah & Sarawak):

There are three appeals before us, all involving the same issue of law. As such, we propose to deal with them together. Leave to appeal was granted by the Federal Court on 22 February 2001 on the following questions:

(1) Whether an appeal against the decision in favour of a company under liquidation falls within the meaning of the phrase 'action or proceeding' in section 226(3) of the Companies Act, 1965, so that no appeal could be prosecuted without leave under the said provision.

(2) Whether an application for security for costs by a defendant in an action commenced by a company under liquidation falls within the meaning of the phrase 'action or proceeding' in section 226(3) of the Companies Act, 1965, so that no application for security for costs could be commenced and/or proceeded with, without leave under the said provision.

Although the questions turn essentially on s. 226 of the Companies Act 1965 (hereinafter "the Act"), a brief narrative of the background facts is in order. Asean Security Paper Mills Sdn. Bhd. (the respondent) was a company set up as an ASEAN Industrial Joint Venture to manufacture high quality security paper. On 6 September 1989, the respondent insured its warehouse, forklift and stock-in-trade with two insurance companies ie, Provincial Insurance (hereinafter "Provincial") and Commercial Union Assurance (now known as CGU), the appellants herein. On 11 September 1989, a fire destroyed the respondent's warehouse, forklift and stock-in-trade. In the result, the respondent commenced actions against the appellants ie, against CGU in the Ipoh High Court and against Provincial in the Kuala Lumpur High Court. On 5 October 1992, the respondent was wound up pursuant to a winding-up order of the Kuala Lumpur High Court following which the official receiver was appointed the Provisional Liquidator. Subsequently, one Mr. Lim Tian Huat of Messrs Arthur Andersen & Co. was appointed Liquidator on 7 September 1993. As a result of the winding-up, both CGU and Provincial applied for security of costs to be borne by the respondent in each case. The Ipoh High Court dismissed CGU's application holding that s. 226(3) of the Act made it mandatory for leave of the winding-up court to be obtained before making such an application. However, the Kuala Lumpur High Court took a different view on Provincial's application, by allowing the application and ordering the respondent to provide RM100,000 as security for costs. The respondent appealed to the Court of Appeal. The appeal was allowed. In the meantime, the trial of the Ipoh suit commenced on 18 May 1999 at the end of which the trial judge gave judgment in favour of the respondent in the sum of RM16,124,500 with interests and costs. Against that decision, CGU filed an appeal to the Court of Appeal on 19 May 2000. Then, on 13 September 2000, the respondent applied to strike out the said appeal on the ground that the appellant had not obtained leave of the winding-up court pursuant to s. 226(3) of the Act. The Court of Appeal allowed the application and consequently struck out the appeal with costs.

It seems clear that the main focus in these appeals is this: whether an appeal against the decision in favour of a company under liquidation or an application for security of costs against such a company, falls within the meaning of the phrase "action or proceeding ... proceeded with or commenced against the company" so that neither form or approach could be undertaken without leave of the winding-up court. Quite obviously, the two questions upon which leave was granted turn very much on the construction to be placed on s. 226(3) of the Act. In this connection, the Court of Appeal has clearly taken the stand in the affirmative. This is reflected in the following passages in the judgment of the Court of Appeal which read:

... In the present application, it is clear to us that certain restrictions have been imposed by the law on any party comm