Introduction

This week, the Court of Appeal delivered its decision in PNL Capital Sdn Bhd & Others v Loh Teck Wah & Others and Other Appeals. The case involved a company called Fintree Capital Sdn Bhd (“Fintree”) which was placed under judicial management (the “JMO”) (and interim judicial management (the “IJM Order”)) by the High Court in June 2021 on the application of Loh Teck Wah (“Loh”). Several interveners, including the PNL Group of Companies applied to set aside the JMO and IJM Order. When the interveners’ applications were dismissed by the High Court, they appealed to the Court of Appeal.

At the Court of Appeal, the interveners argued that the JMO and IJM Order ought to be set aside as the High Court had failed to consider the history, role, nature and function of Fintree in the scheme of Loh to deceive the PNL Group of Companies and is tainted with mala fide. The interveners also argued that the JMO should not be allowed as the requirements under Section 405 of the Companies Act 2016 (“CA 2016”) had not been met by Loh. It was also argued that the IJM Order which was obtained on an ex-parte basis should not have been allowed.

Decision of the Court of Appeal

The Court of Appeal allowed the interveners’ appeals and set aside the JMO and IJM Order. In delivering the judgment of the Court, Lee Swee Seng JCA made several significant findings concerning the law on judicial management.

(1) Abuse of the Judicial Management Mechanism

The Court of Appeal dedicated a significant portion of its judgment to this issue and held at paragraphs 54 and 55 of its judgment that:

a. the “prophylactic properties” of the judicial management……..