1. ) Chung Yoo Hock 2. ) OCEANERGY GASES SDN. BHD. v Zumatex Engineering Sdn. Bhd.

Case Significance

Illustrates the principles governing an application by a contributory under section 486(2) of the Companies Act 2016 to litigate in the name of a company in liquidation, the interests-of-the-company test, and the protective conditions, such as an undertaking as to costs and to account for proceeds, that a court may attach when granting leave.

This High Court decision at Kuala Lumpur concerns an application by a contributory for leave, under section 486(2) of the Companies Act 2016, to bring, continue and defend proceedings in the name of a company in liquidation. The applicant, a shareholder of the company, sought leave to pursue and defend a cluster of proceedings to which the company in liquidation was a party, including appeals against a High Court judgment exceeding RM8 million, proceedings to impeach a judgment on the ground of fraud, and taxation proceedings and the defence of a claim by solicitors. The court set out the test governing such an application. The touchstone is whether the grant of leave is in the interests of the company, and the court is not required to assess the merits of the underlying proceedings in detail. It considered the applicant's locus standi as a shareholder and whether the liquidator had refused or declined to act. It held that the continuation of the proceedings might preserve or enhance the company's assets or reduce its liabilities, and that the company's financial difficulties were not by themselves determinative against a grant. Balancing these factors, the court granted leave, but subject to conditions protective of the company's estate: the applicant was to provide a personal undertaking to the liquidator to bear all legal costs arising from the proceedings, and to ensure that any proceeds recovered were fully accounted for and paid to the estate of the company. It made no order as to costs. The court stressed that a contributory seeking such leave need not establish a strong case on the merits, the focus being on whether allowing the litigation to proceed serves the collective interest of those interested in the winding up. The judgment is a useful illustration of the principles governing an application by a contributory under section 486(2) to litigate in the name of a company in liquidation, and of the safeguards a court may attach to protect the estate when granting leave.