RE PERAK PIONEER LTD

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JUDGMENT

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1. A creditor's petition was presented by Bumiputra Malaysia Finance Limited (the petitioner) to wind up Perak Pioneer Limited (the company) on the 24th July 1984 on the grounds that the company is insolvent and unable to pay its debts and that it is just and equitable to do so. On the same day the Official Receiver was appointed to be the provisional liquidator.

2. Upon the application of the Official Receiver John William Crawford, Thomas Brian Stevenson and Wilfred Keith Timso accountants in the firm of Ernst & Whinney were appointed to be special managers. The three accountants are also the liquidators of Carrian Holdings Limited.

3. Carrian Holdings Limited (in liquidation) presented a petition to wind up the company on the 4th May 1984. The Official Receiver was appointed to be the provisional liquidator and the same accountants from Ernst & Whinney were appointed on the Official Receiver's application to be special managers. The company was ordered to be wound up on the 10th July 1984, but the order was later set aside on appeal by the company. It was also ascertained at the hearing of the appeal that the appointments of the provisional liquidator and the special managers were a nullity for they had been made prior to the presentation of the petition.

4. Mr. Poon has made an application on behalf of the company that the appointment of the three accountants as special managers should be discharged on the grounds that as they are also the liquidators of Carrian Holdings Limited which is engaged in litigation against the company, there is a conflict of interest.

5. Mr. Davison for the Official Receiver has challenged the locus of the company to appear on the application. Although in principle the directors' powers cease on the appointment of a provisional liquidator, they retain the power to appoint solicitors and may take part in the winding-up proceedings on behalf of the company. They are entitled to apply to the court to discharge the provisional liquidator. In my view they can also apply for the discharge of special managers upon cause being shown. Accordingly I hold that the company has locus.

6. Mr. Poon cited an Australian authority, Re Nickel Mines Ltd. and the Companies Act (1978) 3 A.C.L.R. 686 where it was held that:-

        It was undesirable that the same person should act as provisional liquidator of two companies who were engaged in litigation against one another.".

 

In his judgment at p. 688, Weedham J. said:-

"It is not unusual, in the first instance, for the one liquidator to be appointed to two or more related companies: it usually saves expenses and ensures a speedier and more satisfactory liquidation. However, the question of conflict of interest is always a matter of concern and, when a liquidator feels that such a conflict has arisen, he applies to the court for discharge from one of his conflicting positions.".

And later on p. 689, he went on to say:

However, in the instant case the accountants are not provisional liquidators, but special managers appointed by the court with restricted powers that have been conferred by the court. A special manager is a very different creature to a provisional liquidator. He exercises his power under the control of the Official Receiver to whom he must account when required to do so. The liquidation is controlled by the provisional liquidator who performs judicial functions. A special manager has no judicial capacity and has no power to distribute the assets of the company. In fact, as submitted by Mr. Davison, his function is administrative.

7. In my judgment, I do not consider that any conflict of interest arises in the circumstances of this case. The application will therefore be dismissed with costs to the Official Receiver.