CLASSIC MARITIME INC v 1. ) LION DIVERSIFIED HOLDINGS BERHAD (DALAM LIKUIDASI) 2. ) Benapro Sdn. Bhd.

Case Significance

Confirms that a sale of company assets sanctioned by the court under section 487(3) of the Companies Act 2016 must be challenged by appealing the sanctioning order; section 517 cannot be used as a collateral means to set aside a subsisting court order, and here the liquidator was in any event found to have committed no breach of duty.

This Court of Appeal decision, delivered in a judgment of the court by Azizul Azmi Adnan JCA (sitting with Azizah Nawawi and Mohd Firuz Jaffril JJCA), concerns the interaction between a liquidator's power to sell company assets with the court's sanction and a later attempt to unwind that sale. The appellant, Classic Maritime Inc, a company incorporated in the Marshall Islands, was a judgment creditor of the first respondent, Lion Diversified Holdings Berhad (in liquidation); the second respondent is Benapro Sdn Bhd. The liquidator of Lion Diversified had obtained the sanction of the High Court, by an order of Nadzarin J dated 26 August 2021, to sell the company's equity interest under section 487(3) of the Companies Act 2016. The appellant, alleging that the assets had been sold at an undervalue, sought to set that sale aside, invoking section 517 of the Act.

The court dismissed the appeal. Its central reasoning was that what the appellant in substance sought to set aside was not merely an act or decision of the liquidator but the High Court order of 26 August 2021 that had sanctioned the sale under section 487(3). The proper course, the court held, was for the appellant to have appealed against the decision of Nadzarin J, and section 517 could not be used as a collateral route to undo a subsisting order of court granted under section 487(3). The court added that, even had an appeal been properly pursued, it would have dismissed it, because on the facts there was no breach of duty on the part of the liquidator. It accordingly dismissed the appeal with costs of RM50,000 to the first respondent and RM30,000 to the second respondent, subject to allocatur. The decision underscores that a court-sanctioned liquidation sale must be challenged by appeal against the sanctioning order, not by a fresh application to set it aside.