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Case Update: Court of Appeal rules that the Courts will be slow to interfere with the act or decision of the liquidator

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COMPANIES AND CORPORATIONS
Appeal – Proof of Debt – Decision of Liquidator – Whether High Court’s decision in interfering with the decision of the Liquidator in discharging his role was justified – Companies Act 2016, Section 517

Sunrise Megaway Sdn Bhd (dalam penggulungan) v Kathryn Ma Wai Fong
[2021] MLJU 368, Court of Appeal
- see the grounds of judgment here

Facts A company, Sunrise Megaway Sdn Bhd (“the Appellant”) was wound up by the Court with a winding up petition by one Kathryn Ma Wai Fong (“the Respondent”). A private liquidator was appointed. One of the creditors, Lismore Trading Co Ltd (“Lismore”), lodged a proof of debt of RM4 million with the Liquidator which was admitted. The Respondent, dissatisfied with the admission of Lismore’s proof of debt, made an application to the High Court pursuant to Section 517 of Companies Act 2016[1] to oppose the Liquidator’s decision. The High Court held in favour of the Respondent on the ground that the evidence for proof of debt was questionable and not reliable and that the Liquidator failed to carry out more investigations to support Lismore’s claim which led to errors of law by the Liquidator. The High Court reversed the Liquidator’s decision and therefore, Lismore’s proof of debt was rejected. Hence, this appeal.

Issue Whether the High Court’s decision in interfering with the decision of the Liquidator in discharging his role was justified.

Held In allowing the appeal unanimously, the Court of Appeal had reversed the High Court’s decision and reinstated the Liquidator’s decision to admit the proof of debt by Lismore as it had been correctly exercised following a detailed investigation. It was held that it is not for the Court to determine how the Liquidator’s investigation is to be done or carried out. It is also not for the Court to determine the relevancy and adequacy of the documents to be considered by the Liquidator in his investigation. It was further stated that the function of the Liquidator cannot be usurped by the Court in company liquidation. The threshold test applied here is that the Courts should be slow to interfere with any act or decision of the liquidators in discharging their roles in company liquidation except under very exceptional circumstance when the liquidator has acted in utter unreasonableness.

ZUL RAFIQUE & partners
{15 April 2021}
 
[1] Any person aggrieved by an act or decision of the liquidator may apply to the Court which may confirm, reverse or modify the act or decision complained of and make such order as it thinks just.

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