Leave Requirement to Commence Proceedings Against a Liquidator: Does It Apply to Any Person?

The requirement to obtain leave before commencing proceedings against a court-appointed liquidator is now firmly established in Malaysian insolvency law. More importantly, recent authorities confirm that the requirement extends beyond creditors and contributories to any person seeking to challenge acts or decisions of a liquidator undertaken in the course of liquidation.

The Court of Appeal’s decision in Andrew Heng & Anor v Chong Kok Wooi [2025] 6 MLJ 951 is particularly significant because it clarifies that proceedings brought under section 517 of the Companies Act 2016 (“CA 2016”) are likewise subject to the leave requirement notwithstanding the absence of any express reference to leave in the provision itself.

Statutory Framework

Section 486(2) of the CA 2016 provides that a liquidator exercises his powers “subject to the control of the Court”. Although the provision does not expressly state that leave is required before proceedings may be commenced against a liquidator, the courts have interpreted the phrase as implying such a requirement.

Section 517 of the CA 2016 further provides that “any person aggrieved” by an act or decision of the liquidator may apply to the court.

The issue that subsequently arose was whether proceedings brought under section 517 were exempted from the leave requirement because the provision does not contain the phrase “subject to the control of the Court”.

The Federal Court’s Position in N Chanthiran

The position was substantially clarified by the Federal Court in N Chanthiran a/l Nagappan v Kao Che Jen [2023] 5 MLJ 284 (“N Chanthiran”).

The Federal Court held that leave of the winding-up court is required before commencing proceedings against a court-appointed liquidator, notwithstanding the absence of express wording requiring leave under section 486(2) of CA 2016.

Importantly, the Federal Court held that the phrase “subject to the control of the Court” reflects the supervisory jurisdiction of the winding-up court over liquidators, who are officers of the court. Once a liquidator is appointed pursuant to a winding-up order, the liquidator remains answerable to the winding-up court in the performance of his statutory duties.

The Federal Court also recognised several policy reasons underlying the leave requirement, including:

• protecting liquidators from vexatious or unnecessary litigation;

• preventing wrongful interference with the winding-up process; and

• preserving the assets of the company in liquidation for the benefit of stakeholders.

The Federal Court further opined that it would amount to an abuse of process if proceedings could be commenced against the liquidator before a court other than the winding-up court exercising supervision over the liquidator and winding-up proceedings as a whole.

Andrew Heng: Clarification that the Leave Requirement Applies Generally

The Court of Appeal decision in Andrew Heng & Anor v Chong Kok Wooi [2025] 6 MLJ 951 (“Andrew Heng”) significantly clarified and expanded the position above.

The plaintiffs were purchasers of condominium units developed by a company in liquidation. The liquidator imposed a fixed administrative fee of RM8,000 for the execution of memorandum of transfer documents, which the purchasers alleged was excessive and unreasonable.

The purchasers commenced proceedings against the liquidator under section 517 of the CA 2016 without first obtaining leave of the winding-up court.

At first instance, the High Court held that leave was unnecessary because the purchasers were neither creditors nor contributories and the proceedings were brought under Section 517 of CA 2016 by “persons aggrieved”.

The Court of Appeal reversed that decision.

Importantly, the Court of Appeal held that the same leave requirement applicable under section 236(3) of the Companies Act 1965 and section 486(2) of the CA 2016 equally applies to proceedings brought under section 517 of the CA 2016.

The Court of Appeal reasoned that although Section 517 does not contain the phrase “subject to the control of the Court”, this omission was immaterial because Section 517 of CA 2016 still concerns acts and decisions of the liquidator undertaken in the course of liquidation. As such, proceedings under Section 517 of CA 2016 remain subject to the supervisory jurisdiction of the winding-up court.

In particular, the Court of Appeal opined that: “It made no sense if any complaint by the creditor or contributory against the exercise of the powers of the liquidator under s 486(2) … was subject to the leave requirement … [but] the same could not be said for any proceeding under s 517.” (Emphasis added)

Significantly, the Court of Appeal expressly rejected the argument that leave is only required where proceedings are brought by creditors or contributories, and held that:

“The need for leave before any proceedings may be commenced against a liquidator is to ensure that he could carry out his statutory duty without having to defend any unnecessary litigation that may hinder the winding up process of a company… there should not be any preference to any class of persons who wishes to commence a proceeding against a liquidator”. (Emphasis added)

The Court of Appeal therefore made clear that the leave requirement is one of general application. Leave is required even where proceedings are commenced by purchasers, contractual counterparties or other “persons aggrieved” who are neither creditors nor contributories.

This represents an important clarification of Malaysian insolvency law because it confirms that the supervisory jurisdiction of the winding-up court over liquidators cannot be circumvented merely by framing proceedings under section 517 of CA 2016.

Consistency with Other Common Law Jurisdictions

The approach adopted by the Malaysian courts is consistent with the wider common law position recognising that liquidators, as officers of the court, should not be exposed to unrestricted litigation that may disrupt or impede the winding-up process.

Australia

Australian courts have long recognised that proceedings against court-appointed liquidators generally require leave of the winding-up court.

In Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd (1996) 14 ACLC 846, the Federal Court of Australia reaffirmed the principle that there is “no right to sue” an officer of the court without the sanction of the appointing court. The Federal Court explained that the requirement exists to protect the integrity of the winding-up process and to prevent unnecessary interference with the discharge of the liquidator’s duties.

Similarly, in  Re Magic Aust Pty Ltd (in liq) (1992) 10 ACLC 929; (1992) 7 ACSR 742, the Supreme Court of New South Wales observed that Section 538 of Companies (NSW) Code stipulates that a “person aggrieved by any… decision of… a liquidator… of a company, may appeal to the court in respect of the decision, and the Court may confirm, reverse or modify the… decision”. The Supreme Court went on to conclude that no proceedings can be brought against a court-appointed liquidator unless there is an application for leave of court made in the winding-up proceedings.

Singapore

The Singapore High Court in Excalibur Group Pte Ltd v Goh Boon Kok [2012] SGHC 71 adopted a similar position that leave should generally be required before proceedings may be commenced against a liquidator. Although neither the Singapore Companies Act or Companies (Winding Up) Rules expressly require leave, the Singapore High Court held that the Australian and Malaysian common law approach should be followed. The Court observed that the requirement for leave promotes the efficient and expeditious conduct of the winding-up process and allows frivolous or unmeritorious claims to be filtered out at an early stage.

The Singapore High Court in Excalibur Group (supra) further recognised that the leave requirement serves the broader objective of protecting the liquidation process for the benefit of all stakeholders.

Implications for Creditors and Contributories Disputing a Rejection of Proof of Debt

The broad application of the leave requirement raises an important practical question in the context of proof of debt adjudication.

Under the winding-up regime in Malaysia, a liquidator is empowered to admit or reject proofs of debt lodged by creditors. Where a proof of debt is rejected, the creditor or contributory may challenge the liquidator’s decision by way of an appeal to the court pursuant to Rule 93 of the Companies (Winding-Up) Rules 1972.

However, following N Chanthiran (supra) and Andrew Heng (supra), the position now appears to be that even proceedings challenging a liquidator’s rejection of a proof of debt may require prior leave of the winding-up court because such proceedings nevertheless constitute proceedings against the liquidator arising from acts undertaken in the course of liquidation.

This potentially creates procedural and practical implications for creditors and contributories, particularly because Rule 93 of the Companies (Winding-Up) Rules 1972 imposes strict timelines for appealing against a rejection of proof of debt by the liquidator.

This issue was considered by the High Court in Cheah Foong Ming & Ors v Wong Weng Foo [2021] 1 LNS 2704, which concerned an application by multiple applicants to reverse the liquidator’s rejection of their proofs of debt. No leave of the winding-up court was sought by the applicants prior to the commencement of proceedings. In this regard, the High Court held that leave was required before any action can be brought against the court-appointed liquidator personally and thus dismissed the said application to challenge the liquidator’s rejection of the proof of debts.

The case of Cheah Foong Ming (supra) illustrates the procedural framework through which creditors and contributories commonly challenge a liquidator’s adjudication of proofs of debt. Failure to obtain leave prior to commencing an application to appeal against the liquidator’s rejection of a proof of debt may expose the proceedings to preliminary objections or dismissal on procedural grounds.

The practical difficulty, however, lies in the relatively strict timelines imposed under the Companies (Winding-Up) Rules 1972 for challenging the rejection of a proof of debt. As such, creditors and contributories may now need to consider:

1. first obtaining leave of the winding-up court to commence proceedings against the liquidator prior to commencing the application to appeal against the liquidator’s rejection of a proof of debt; or

2. in the same application to appeal, include a separate prayer for an extension of the time limit of 21-days, in order to apply for leave from the winding-up court.

Conclusion

The Court of Appeal’s decision in Andrew Heng (supra) provides important clarity on the scope of the leave requirement in proceedings against liquidators.

The position now appears settled that::

• the leave requirement under section 486(2) equally applies to proceedings under section 517 of the CA 2016;

• the absence of the words “subject to the control of the Court” in section 517 does not exempt any aggrieved persons from first obtaining leave of the winding-up court; and

• the requirement for leave is generally applicable to any person seeking to commence proceedings against a court-appointed liquidator in respect of acts undertaken during the liquidation process

Furthermore, the requirement for leave to commence proceedings against the liquidator introduces an additional procedural layer for creditors and contributories disputing the liquidator’s adjudication of proofs of debt. Creditors and contributories ought to proceed cautiously and consider obtaining leave of the winding-up court at the outset to avoid procedural complications arising from the broader supervisory approach adopted in N Chanthiran (supra) and Andrew Heng (supra).