LOH SIEW CHOONG v Khoo Chooi Thuan (Liquidator, Lohman Holdings Sdn. Bhd. (In Members' Voluntary Liguidation)) Tujuan Management Consultants Sdn. Bhd.

Case Significance

Confirms that leave of the court is a precondition to suing a company in members' voluntary liquidation under section 451(2) of the Companies Act 2016, and that an action begun without leave, bearing the marks of an abuse of process, will be struck out to protect the integrity of the liquidation.

This High Court decision at Ipoh concerns the requirement to obtain the court's leave before suing a company in members' voluntary liquidation, and the consequences of failing to do so. The plaintiff had commenced an originating summons against the defendant in his capacity as the liquidator of a company in members' voluntary liquidation, invoking provisions of the company's memorandum and articles and of the Companies Act 2016. The liquidator applied to strike the originating summons out under Order 18 rule 19 of the Rules of Court 2012, contending that the action was frivolous, vexatious and an abuse of the process of the court, both because of procedural non-compliance and for want of merit.

The central question was whether leave of the court was required to commence proceedings against a company under members' voluntary liquidation, and the effect of proceeding without it. The court examined section 451(2) of the Companies Act 2016, and its predecessor section 263(2) of the Companies Act 1965, and reasoned that the requirement for leave exists to prevent a multiplicity of overlapping claims and to protect the company's assets for orderly distribution among all those interested in the liquidation. Proceedings commenced without the requisite leave are procedurally defective. The court also considered whether the action bore the hallmarks of malice, and touched on the validity of an online meeting and the liquidator's statutory powers relative to the company's articles, concluding that the action was vexatious and an abuse of process.

The court allowed the liquidator's striking-out application and struck out the plaintiff's originating summons, with costs of RM10,000 subject to allocator. The judgment illustrates that leave is a precondition to suing a company in liquidation, and that an action begun without leave, and carrying the marks of an abuse of process, will be struck out to protect the integrity of the liquidation.