MCC OVERSEAS (M) SDN BHD
V
TY LAND & DEVELOPMENT SDN BHD (SABAH DEVELOPMENT BANK BERHAD – APPLICANT) (AND ANOTHER APPLICATION) [2020] MLJU 2522
The suit concerned two opposing applications for the appointment of private liquidator for TY Land Development Sdn Bhd (“company”). This article will discuss the factors considered by the Court in deciding which private liquidator was to be appointment.
Background Facts
The company was wound up on 3 January 2019 and the Official Receiver (“OR”) was appointed as the liquidator of the company.
On 6 January 2020, Sabah Development Bank Berhad (“SDB”) applied to the Court to appoint Datuk Mohd Afrizan bin Dato Husain (“Datuk Afrizan”) as the liquidator in place of the OR (“SDB’s application”).
Following the filing of SDB’s application, a meeting was called by the OR to obtain the wishes of the creditors. Three creditors of the company were present at the meeting, namely SDB, Fajarbaru Builder Sdn Bhd (“FBSB”) and MCC Overseas (M) Sdn Bhd (“MCC”). At the creditors’ meeting, SDB and MCC voted in favour of SDB’s application whilst FBSB requested for time to consider SDB’s application due to the lack of information provided. FBSB’s request was allowed by the OR. By letter dated 27 February 2020, FBSB notified the OR that it disagrees with SDB’s application.
Shortly thereafter, FBSB filed an application for, among others, Datuk Ooi Woon Chee and Mr Tam Kok Meng to be appointed as liquidators in place of the OR (“FBSB’s application”).
In opposing SDB’s application, FBSB contended, among others, that:
- FBSB is the largest creditor of the company and hence, its wish ought to be considered;
- FBSB’s proposed liquidators have better qualification to deal with the company, whose only asset is the abandoned mixed-development project;
- FBSB’s proposed liquidators’ fee structure is more favourable to the company, as opposed to SDB’s proposed liquidator’s fee; and
- SDB had already appointed Receivers over the company’s asset.
On the other hand, the SDB challenged FBSB’s contention that it is the largest creditor of the company. SDB also argued that Mr Tham Kok Meng was in a position of conflict as he was employed by Arthur Anderson who was the previous auditor for the holding company of FBSB. Additionally, SDB also emphasised that since 2 out of 3 creditors voted in favour of SDB’s application, the Court ought to follow the majority creditors’ wishes in appointing Datuk Afrizan as the liquidator of the company.
As MCC had voted in favour of SDB’s application during the creditor’s meeting, MCC likewise supported SDB’s application and opposed FBSB’s application.
Court’s Decision
Having considered the parties’ submissions, the Court granted FBSB’s application and dismissed SDB’s application.
First, with regard to SDB’s contention relating to the wishes of majority creditors, the Court referred to Section 521 Companies Act 2016, Rule 19 of Companies (Winding-Up) Rules 1972 and Section 477 (1)(c) of the Companies Act 2016 and held as follow:
[22] From the above sections in the Companies Act, it is my view that under s 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 s 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.
On this issue, the Court also found that based on the evidence adduced, FBSB had no notice about SDB’s application and/or the intention for SDB to apply for Datuk Afrizan to be appointed as liquidator prior to the creditors’ meeting. The notice of creditor’s meeting dated 23 January 2020 issued by the OR did not state the name of the proposed liquidator. Hence, FBSB did not vote on this matter during the creditor’s meeting. In addition, FBSB had thereafter clearly indicated that it was not agreeable to the appointment of Datuk Afrizan and will propose an alternative liquidator.
Second, with regard to SDB’s contention relating to whether FBSB is in fact the largest creditor, the Court was of the view that this issue should be determined by the new liquidator of the company if there is any challenge to it. Based on the proof of debt filed in this suit, FBSB remains the largest creditor of the company.
Third, the Court also found that the FBSB’s proposed liquidator, Mr Tham Kok Meng was not in a position of conflict. Mr Tham had left Arthur Andersen since 15 July 1991, and at the time when Mr Tham was employed by Arthur Andersen, the accounting firm was not even the auditor of FBSB’s holding company. In any event, Mr Tham was / is not the auditor of FBSB. The Court held that the functions undertaken by an accountancy practice and the function or duties of the personal appointment of the individuals in the accountancy practice as liquidators of a company are not necessarily competing or in conflict unless evidence shows otherwise.
Fourth, after comparing the respective curriculum vitae of Datuk Afrizan dan Datuk Ooi Woon Chee and Mr Tam Kok Meng, the Court opined that the proposed liquidators by FBSB have experiences in abandoned projects which are relevant to the company’s financial situation.
Fifth, FBSB’s proposed liquidators have agreed to be remunerated according with Companies (Winding-Up) Rules 1972 which the Court finds to be less burdensome on the company and more equitable to the creditors and contributories. Additionally, FBSB’s proposal to appoint a COI will provide a check and balance to the affairs of the company.
Summary
The High Court in MCC Overseas (M) Sdn Bhd v TYL Land & Development Sdn Bhd (Sabah Development Bank Bhd, applicant) and another case [2020] MLJU 2522 provided further guidance on factors considered when there are competing applications / nominees to be appointment as liquidator(s) of a company. The experience of the proposed liquidator and the remuneration of the proposed liquidator appear to be crucial factors.
It is interesting that the High Court in this case did not give more weight to the numerical vote of the 2 creditors, i.e. SDB and MCC. The Court emphasised that the court is not bound to accept the wishes of the creditors or contributories but only to have ‘regard’ to the same. This position defers slightly from the High Court case of Re Rentak Arena Development Sdn Bhd (In Liquidation); Ex Parte Spanland Sdn Bhd and Another Case [2020] MLJU 2133, whereby the Court gave due weight to the fact that the majority in terms of the numbers of the creditors have voted in favour of Ms. Chan Siew Mei although the value of the majority votes was less than the vote of the other single creditor.
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