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    1618   CNE100000FF3

METALLURGICAL CORPORATION OF CHINA LTD.

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Metallurgical of China : Who Should Win The Appointment – The Tale Of Competing Private Liquidators

07/06/2021 | 04:11am EDT

Faced with competing applications to appoint private liquidators, the court in the case of MCC Overseas (M) Sdn Bhd v TY Land & Development Sdn Bhd (Sabah Development Bank Bhd, applicant) and another case [2020] MLJU 2522made its decision based on the following factors:

  1. The experience of the Private Liquidator ("PL");
  2. The fees of the PL (in accordance with Table C Second Schedule of the Companies (winding Up) Rules 1972 i.e., liquidators fees to be based on the Company's assets realised which the Court finds will be less burdensome on the winding up process and more equitable to the creditors and contributories)

The Court also held that the argument that the appointment of a PL will help to ease the burden of the Official Receiver ("OR") is not a factor to be considered.

Background Facts

Following the winding up of a company, there was a creditors' meeting to appoint a liquidator. Three creditors were present: SDB, FBSB and MCC Overseas. SDN and MCC Overseas voted in favour of Datuk Afrizan whilst FBSB had abstained.

FBSB disagreed with SDB's proposed private liquidator. FBSB applied to appoint two liquidators: Datuk Ooi Woon Chee and Mr Tam Kok Meng.

The issues before the court were:

  1. whether the court was bound to accept wishes of creditors or contributories;
  2. whether appointment of private liquidator to "assist and ease the burden" of OR was an acceptable ground; and
  3. whether Mr Tham Kok Meng is in a position of conflict as he was employed by Arthur Andersen who was the auditor for the holding company of the Company known as Fajarbaru.

Decision

The Court referred to s521 of the Companies Act 2016, Rule 19 of the Companies (Winding Up) Rules 1972 (WUR), and took note of s477 (1)(c) of the Companies Act 2016:

"From the above sections in the Companies Act, it is my view that under section 521 the Court is not bound to accept the wishes of the creditors or contributories but only to have 'regard' to the same when deciding any outcome of a meeting held pursuant thereto, which in the matter before me is the outcome of the Creditors Meeting, and that Rule 19 of the WUR is of course to be subject to such section. I also hold that section 477(1)(c) allows this Court to make such determination on the appointment of a liquidator, taking into account, of course, the entire circumstances of the matter before me, thus giving this Court the discretion to decide on the appointment of the liquidator."

JC Nadzarin Wok Nordin held that FBSB had no notice of Datuk Afrizan before the creditors' meeting, as the notice of meeting from the OR did not state or name any proposed liquidator by SDB. Further, two letters from FBSB's solicitors stated that their client FBSB inter alia was not agreeable to the appointment of Datuk Afrizan and had wished to propose an alternative Liquidator to Datuk Afrizan.

Whether FBSB is in fact the largest creditor:

"is to be determined by the new liquidator of the Company in the event there is in fact a challenge to the same. Unless and until the POD of FBSB is rejected, based on FBSB's POD filed with the OR, FBSB would appear to be the largest creditor of the Company. I am, for the record, of the further view that the reason proffered by SDB that the appointment of a private liquidator being 'to assist and ease the burden' of the OR is not a ground which this court can accept."

On whether Mr Tham Kok Meng was in a position of conflict, the court found no conflict on part of Mr Tham Kok Meng to be appointed as a liquidator. This was because Mr Tham Kok Meng had left Arthur Andersen on 15.7.1991 at the time the said Arthur Andersen was not even the auditor of Fajar Baru. In any event, Arthur Andersen was only the auditor for Fajar Baru more than 18 years ago i.e., from 1996 to 2002. In making this decision, the Court referred to two cases (See Teow Guan & Ors V Kian Joo Holdings Sdn Bhd & Ors [2010] 1 MLJ 547 and Ooi Woon Chee & Anor v Dato See Teow Chuan & Ors [2012] 2 MLJ 713).

In deciding who should be appointed as the liquidators, the court looked at the CVs of the three named candidates and accepted FBSB's application on two grounds:

"I find that the Liquidators proposed by FBSB have experience in abandoned projects as compared to Datuk Afrizan's CV which makes no specific reference to the any experience in abandoned projects.

I have in coming to my decision also noted that Dato Ooi Woon Chee and Mr Tam Kok Meng has agreed to be remunerated in accordance with Table C Second Schedule of the Companies (winding Up) Rules 1972 i.e liquidators fees to be based on the Company's assets being realised which this Court finds will be less burdensome on the winding up process and more equitable to the creditors and contributories alike as well as FBSB's proposal to have a COI appointed which will provide a form of check and balance as to the affairs of a Company in liquidation are factors which have swayed this Court to consider FBSB's proposal to have Dato Ooi Woon Chee and Mr Tam Kok Meng be appointed as the liquidators of the Company."

The court lastly imposed a condition that the liquidators once appointed, were to call for a meeting to decide on whether the COI (committee of inspection) is to be appointed pursuant to these court's powers under s521 of the Companies Act 2016 with the result of such meeting to be reported to the court.

Originally published 14 June 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Wong Chee Lin
SKRINE
Level 8, Wisma UOA Damansara
50, Jalan Dungun, Damansara Heights
Kuala Lumpur
MALAYSIA
Tel: 32081 3999
Fax: 32094 3211
E-mail: bdcsupportteam@skrine.com
URL: www.skrine.com

© Mondaq Ltd, 2021 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing

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