Case Update: Unsecured Creditors Can Intervene in a Judicial Management Application

The High Court in its grounds of judgment dated 10 June 2020 in Goldpage Assets Sdn Bhd v Unique Mix Sdn Bhd held that unsecured creditors can intervene in a judicial management application. The unsecured creditors’ views can then be heard in opposing the making of the judicial management order. This is an important decision clarifying this often argued point.

Brief Facts

Goldpage Assets Sdn Bhd (Goldpage) had filed an application to obtain a judicial management Order. While the application was pending, four different sets of unsecured creditors applied to intervene in the judicial management application. Some of these unsecured creditors had obtained judgment or had pending legal proceedings against Goldpage.

The intervention was applied under Order 15 rule 6(2)(b)(ii) of the Rules of Court 2012. This civil procedure provision essentially allows the Court to add any person as a party to the proceedings where there is some question or issue to be determined between the parties.

Goldpage opposed the intervention applications. It argued that the Companies (Corporate Rescue Mechanism) Rules 2018 (CRM Rules) would not simply allow any unsecured creditors to appear and to oppose the judicial management application. The procedure allowed only secured creditors to appear and to be the opposing parties.

Summary of the Decision

The Rules of Court 2012 applies generally to all court proceedings. On the other hand, the CRM Rules apply specifically to judicial management proceedings.

Rule 13 of the CRM Rules appears to restrict the persons who can oppose the judicial management application to essentially a debenture holder or a secured creditor. Rule 2 of the CRM Rules also state that where there is no specific procedure under the CRM Rules, the procedure under the Rules of Court 2012 shall apply.

The Judicial Commissioner allowed the intervention based on several reasons.

First, the Judicial Commissioner held that there was nothing in the wording of the Companies Act 2016 (CA 2016) that prevented any unsecured creditor from attempting to oppose the judicial management application.

Second, the Judicial Commissioner also turned to the parliamentary debate from Hansard and the Explanatory Statement to the Companies Bill 2015. There was also nothing in those wordings that restricted the right of opposition to only secured creditors.

Third, from a plain reading of section 409(a) and (b) of the CA 2016, those provisions were merely the veto provisions. Those provisions did not go on to say that only those forms of secured creditors could oppose the application.

Fourth, that the reading of the CRM Rules must be read subject to the parent Act being the CA 2016.

Fifth, the CRM Rules do not provide for any intervention proceedings in a judicial management application. The Judicial Commissioner held that the specific Order 15 rule 6(2)(b)(ii) of the Rules of Court 2012 could therefore apply. This allows an interested party to intervene if that party’s legal rights and interest in relation to the subject matter would be directly affected by any order.

Application of this Decision

This is an important procedural clarification. There are now conflicting High Court decisions on this issue as to whether unsecured creditors can appear and be heard in opposition. In the High Court decision of Million Westlink Sdn Bhd v Maybank Investment Bank Berhad & Ors [2019] MLJU 1721, the Court specifically did not allow the intervention by the unsecured creditor. The Court in that case held that the CRM Rules set out specific procedures and that it trumped the general intervention procedure under the Rules of Court 2012. Million Westlink held that unsecured creditors merely had a right to oppose the nomination of the judicial manager candidate.

In a judicial management application, unsecured creditors would normally have opted to file the Notice of Intention to Appear under the CRM Rules (Form 10)  and state that they are an opposing creditor. The applicant in the judicial management application would then raise the Rule 13 of the CRM Rules in opposition. The applicant would also argue that Form 10 does not allow any mere unsecured creditor to appear and to oppose.

Based on this Goldpage decision, unsecured creditors can now apply to intervene under the Rules of Court 2012 instead. Due to the moratorium effect of the judicial management application and any possible restructuring by the judicial manager, it would be relatively easy for an unsecured creditor to satisfy the intervention threshold. Nonetheless, there is a conflict on this ability to intervene when compared with the Million Westlink decision.

 

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