Case Update: Federal Court to Decide If Unsecured Creditors Can Oppose Judicial Management

Lee Shih and Lynn comment on the Federal Court proceedings involving points of law on judicial management

The Federal Court in the case of Million Westlink Sdn Bhd will now decide on an important area on judicial management law. Whether unsecured creditors can appear in an application for a judicial management order and oppose the making of the judicial management order. Leave to the Federal Court was granted on 4 January 2021.

Brief Background

The High Court decision can be seen at Million Westlink Sdn Bhd v Maybank Investment Bank Bhd & Ors [2019] MLJU 1721.

In March 2019, Million Westlink applied for a judicial management order. Several bank creditors applied to intervene in the judicial management application. The banks were  unsecured creditors. In the intervention application, the banks also applied to strike out the judicial management application or alternatively, to have the application dismissed.

The High Court decided that unsecured creditors did not come with the category of specific creditors referred to in Rule 13 of the Companies (Corporate Rescue Mechanism) Rules 2018. Rule 13 refers to only certain creditors who may appear at the hearing in order to oppose the application. The persons are a debenture holder or any secured creditor.

13  Notice of intention to appear

(1) Only the following person may appear at the hearing of an application for a judicial management order to oppose the application:

(a) any person who has appointed or is or may be entitled to appoint a receiver or receiver and manager under subparagraph 408(1)(b)(ii) of the Act; or

(b) any secured creditor referred to in paragraph 409(b) of the Act.

Therefore, the High Court ruled that the banks could not intervene in the judicial management application proceedings. The banks appealed.

In July 2020, the Court of Appeal reversed the High Court decision. There are no grounds of judgment that I am aware of.  The Court of Appeal ruled that unsecured creditors have the right to be heard and to oppose the making of a judicial management order. That principle would appear to be similar to the High Court decision in the Goldpage decision.

On 4 January 2021, the Federal Court in the Federal Court Civil Application No. 08(i)-224-08/2020 granted leave to appeal to the Federal Court.

Federal Court Granted Leave

The Federal Court granted leave to appeal on two questions of law:

    1. Whether an unsecured creditor may oppose the making of a judicial management order pursuant to section 405 of the Companies Act 2016, read together with Rule 13 of the Companies (Corporate Rescue Mechanism) Rules 2018.

    2. Whether an unsecured creditor may intervene and be heard in proceedings in connection with the application for a judicial management order and whether such right is only limited to the issue of the nomination of the judicial manager.

       

We look forward to the Federal Court deciding for the first time on the area of judicial management. We anticipate that the arguments will cover the underlying rationale for the introduction of judicial management as a corporate rescue tool. When comparing with similar regimes as Singapore judicial management and UK administration, should Malaysia law allow unsecured creditors to appear and to oppose the making of the judicial management order itself?

 

Pang Huey Lynn is an associate with Lim Chee Wee Partnership. She is active in the field of restructuring and insolvency, and commercial disputes. She graduated from the University of Cambridge.

 

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