MEGAFEST SDN BHD (DALAM LIKUIDASI) v 1. ) Ketua Pengarah Insolvensi Selaku Wakil Sah Dan Pengurus Dan Penerima Estet Lim Thian Hock @ Lim Thiam Hock, Simati (Dalam Kebankrapan) 2. ) SIVANANTHAM A/L MUTHU KARPAN 3. ) LIM KWEE GEE

j-02ncvcw-765-05-2023 Court of Appeal (Mahkamah Rayuan) 26 February 2026 • J-02(NCvC)(W)-765-05/2023 • 34 min read

12 cases cited (4 SG, 8 foreign)

Outcome

Accordingly, and for the reasons set out above, we are of the view that the learned High Court judge was wrong in allowing the Validation Application and we hereby allow the appeal in respect thereof and set aside the decision of the learned High Court Judge.

Quoted verbatim from the judgment of Court of Appeal (Mahkamah Rayuan) (j-02ncvcw-765-05-2023). Read the full judgment on the official Malaysia Courts portal for the complete decision.

Catchwords

allegations of undue preference, premised on voluntary settlements said to have been made without valuable consideration and not in good faith - fraudulent preference - application for a validation order in respect of a payment rendered void as the payment was made after the presentation of the winding-up petition. - (i) the distinct statutory requirements governing undue preference as opposed to fraudulent preference; (ii) whether proof of a dominant intention to prefer remains a necessary element for fraudulent preference; (iii) the scope of the recognised exceptions where payments are made under genuine commercial pressure to avert the imminent collapse of the company; (iv) the scope of the directors’ duties and (iv) the circumstances in which the court may properly grant validation of payments otherwise void against the liquidator. - Companies Act 1965 (“CA 1965”) - Insolvency Act 1967 (“IA 1967”).

Practice Areas

Bankruptcy & Insolvency Company Law

Judges (3)

Ahmad Kamal bin Md. Shahid Coram Azhahari Kamal bin Ramli Coram Ong Chee Kwan Delivered

Counsel (4)

Raj Shankar Firm Mohamed Shah Reza Counsel Respondent Raj Shankar a/l Rajahram Counsel Appellant Tina Francis Counsel Appellant

Parties (4)

Ketua Pengarah Insolvensi Selaku Wakil Sah Dan Pengurus Dan Penerima Estet Lim Thian Hock @ Lim Thiam Hock, Simati (Dalam Kebankrapan) Respondent MEGAFEST Sdn Bhd (DALAM LIKUIDASI) Appellant Lim Kwee Gee Respondent Sivanantham a/l Muthu Karpan Respondent

Case Significance

An undue-preference appeal in the Megafest cluster involving a settlement touching an estate represented by the Director General of Insolvency; the Court of Appeal allowed it as one of the trio resolved for the liquidator, reinforcing recovery of assets transferred without valuable consideration.

This Court of Appeal decision is part of the group of appeals arising from the liquidation of Megafest Sdn Bhd (in liquidation) and concerns Civil Appeal No. J-02(NCvC)(W)-765-05/2023. In this appeal the respondents included the Ketua Pengarah Insolvensi (the Director General of Insolvency) in his representative capacity for a bankrupt estate. The liquidator of Megafest Sdn Bhd, as appellant, challenged “voluntary settlements said to have been made without valuable consideration and not in good faith” as voidable preferences. Individual respondents are referred to here by their procedural role.

The judgment gave a unified treatment of the principles at stake for the whole cluster: the “distinct statutory requirements governing undue preference as opposed to fraudulent preference”; “whether proof of a dominant intention to prefer remains a necessary element for fraudulent preference”; the recognised exception for “payments … made under genuine commercial pressure to avert the imminent collapse of the company”; and “the scope of the directors' duties”. The governing statutes were the Companies Act 1965 (“CA 1965”) and the Insolvency Act 1967 (“IA 1967”). Appeal 765 is distinguished within the cluster by the involvement of the Director General of Insolvency as a representative respondent.

The Court of Appeal allowed this appeal. It recorded that it was “unanimous in [its] decision to allow Appeals 765, 761, and 764 with costs fixed at RM 20,000.00 each here and below subject to payment of allocator and with interest at 5% p.a from 19.4.2023 to full realisation”.

The decision matters because it shows the preference-avoidance principles being applied even where a settlement engaged an estate represented by the Director General of Insolvency, and it forms part of the trio of undue-preference appeals resolved in the liquidator's favour, reinforcing the recovery of assets that had passed out of the insolvent company without valuable consideration. The court's insistence on separating the elements of undue preference from those of fraudulent preference, and on locating the “dominant intention to prefer” question only within the latter, gives the judgment continuing value as a statement of Malaysian insolvency principle applicable well beyond the particular settlements challenged here.

Summary

Megafest Sdn Bhd (in liquidation) brought five related appeals involving allegations of undue preference, fraudulent preference, and a validation order for payments made after the winding-up petition. The key issues included the distinction between undue and fraudulent preference, whether a dominant intention to prefer was proven, and the scope of directors' duties. The Court of Appeal allowed Appeals 765, 761, and 764, dismissed Appeal 763 except for RM50,000 in post-petition payments, and allowed Appeal 775.

What distinguished Appeal 765 within the cluster?

Its respondents included the Director General of Insolvency (Ketua Pengarah Insolvensi) in a representative capacity for a bankrupt estate, in a challenge to voluntary settlements alleged to be undue preferences made without valuable consideration and not in good faith.

How was Appeal 765 decided?

The Court of Appeal allowed it, together with Appeals 761 and 764, with costs of RM20,000 each and interest at 5% per annum from 19 April 2023 to full realisation.