KUALA LUMPUR (Nov 14): The Federal Court has allowed the discharge and release of liquidator Lim San Peen in the long-running liquidation of London Biscuits Bhd (LBB), overturning the Court of Appeal’s 2023 decision which removed him as a liquidator. The court ruled that Lim’s actions in running the company after winding-up were lawful, reasonable, and in good faith.
The Federal Court also maintained Lim’s successor, Victor Saw Seng Kee, as LBB’s liquidator and overturned the Court of Appeal’s decision to appoint Gabriel Teo Chun as a joint liquidator of LBB, removing him from the role.
On Nov 13, a three-judge Federal Court bench led by Chief Judge of Malaya Tan Sri Hasnah Mohammed Hashim ruled that the Court of Appeal wrongly removed Lim, ignoring well-established legal principles governing the removal of a liquidator and acting only on an alleged breach of Section 527(1) of the Companies Act.
“In doing so, the Court of Appeal failed to give due consideration to the serious and far reaching consequences of an order for removal, which inevitably impugns Lim’s professional standing and reputation,” the judgement read.
In 2023, the Court of Appeal found that Lim, who was an insolvency practitioner with PricewaterhouseCoopers Advisory Services Sdn Bhd (PwC), had been wrong in giving termination benefits and indemnity in lieu of notice to the employees of the company to the tune of RM1.74 million.
In overturning the decision, the Federal Court agreed with Lim’s counsel’s arguments that the RM1.74 million payments were “reasonable and practical”.
“We agree with the arguments of the learned counsel…that Lim's decision to make the payments of termination benefits and indemnity in lieu of notice was reasonable and practical, facilitating the sale of LBB's assets and business as a going concern, which benefited creditors,” the judgement stated.
She said that these payments can fall under the “costs and expenses of winding-up” under Section 527(1)(a) Companies Act 2016.
Hasnah added that the court must consider the majority of creditors’ wishes when deciding whether to appoint an additional joint liquidator.
“The courts below fell into error in disregarding the majority of the creditors that had voted for the appellant (Saw)…” she said.
Hasnah also held that where one joint liquidator is conflicted, the non-conflicted liquidator may act alone under Section 478(2) of the Companies Act. In this case, she said “Gabriel Teo Chun is personally conflicted in deciding matters related to LBB’s leave application and LBB’s validation and stay application” as this “directly concerns the appointment of Gabriel Teo Chun as a joint liquidator of LBB”.
The Federal Court allowed all four appeals and granted costs against the respondent, Wong Weng Foo & Co, totalling RM585,000.
Together with Hasnah on the bench were Court of Appeal President Datuk Abu Bakar Jais and Federal Court judge and former attorney general Tan Sri Ahmad Terrirudin Mohd Salleh.
Datuk Lim Chee Wee, Kwan Will Sen, Pang Huey Lynn and Manveer Singh acted for LBB in the Federal Court. Lim was represented by Rabindra S Nathan, whereas Saw was represented by Christopher Leong and Jacky Loi. Benjamin Dawson and Ng Hooi Huang represented the interveners consisting of financial institutions.
Steven Tan Chee Qian & Max Chuah Chern Tee represented the respondent, Wong Weng Foo & Co, whereas S Ravenesan acted for the joint liquidator, Teo.