Requirement for leave of court during an appeal against decision involving a wound-up company

The dilemma

You are sued by a company. Halfway through the proceedings, a winding-up order is made against the company. After a long and arduous legal battle, the now wound-up company prevailed, and judgment is entered in the company’s favour against you.

Naturally, you decide to file an appeal. However, section 471 (1) of the Companies Act 2016 (pari materia with section 226 (3) of the Companies Act 1965) provides that no action or proceeding shall be proceeded with or commenced against a company when a winding-up order has been made or an interim liquidator has been appointed except by leave of the Court and in accordance with such terms as the Court may impose.

Reading section 471 (1) of the Companies Act 2016 leaves you pondering a crucial question: whether an appeal against the said judgment against you entered in favour of the now wound-up company requires leave of the Court given that an appeal, is technically a proceeding per se.

The law

This question was answered in the Federal Court’s judgment in CGU INSURANCE BHD v ASEAN SECURITY PAPER MILLS SDN BHD AND OTHER APPEALS [2002] 2 MLJ 1 (“Asean Security”).

The respondent in Asean Security has insured its assets with the appellants ie Provincial Insurance (“Provincial”) and Commercial Union Assurance (“CGU”). The assets were then destroyed in a fire and as a result, the respondent commenced actions against CGU and Provincial respectively¹.

Prior to the conclusion of the actions against CGU and Provincial, the respondent was wound up and the Official Receiver was appointed as provisional liquidator.

Following the winding up of the respondent, the issues which ultimately came before the Federal Court concerned the following proceedings:-

a)Provincial’s application for security for costs against the respondent following the winding-up of the respondent which was allowed in the High Court; and

b)CGU’s appeal against the High Court’s decision in favour of the respondent which was struck out on the ground that CGU did not obtain leave of the winding up court pursuant to section 226 (3) of the Companies Act 1965².

The issue went on appeals before the Federal Court which had granted leave to appeal on the following questions of law: –

1. whether an appeal against the decision in favour of a company under liquidation falls within the meaning of the phrase ‘action or proceeding’ in s 226 (3) of the Companies Act 1965 (‘the Act’), so that no appeal could be prosecuted without leave under the said provision³;
2. whether an application for security for costs by a defendant in an action commenced by a company under liquidation falls within the meaning of the phrase ‘action or proceeding’ in s 226 (3) of the Act, so that no application for security for costs could be commenced and/or proceeded with, without leave under the said provision⁴.

In answering the above questions, the Federal Court referred to the House of Lords’ decision in Humber & Co v John Griffiths Cycle Co (1901) 85 LT 141⁵ and the Indian High Court’s decision in Rahmat Ali Fatehullah v Calcutta National Bank Ltd AIR 1955 All 169⁶.

Humber

In Humber, the company which commenced proceedings against the defendant was wound up pending the company’s appeal to the Court of Appeal which ultimately decided in favour of the company.

The defendant appealed to the House of Lords.

It was held that no leave of the winding up court was required for the defendant to pursue its appeal to the House of Lords which came pursuant to the appeal prosecuted by the company at the Court of Appeal.

Rahmat Ali

In Rahmat Ali, the Full Bench of the Allahabad High Court enunciated the ‘defensive action’ approach with reference to Humber where it was held as follows:-

• no leave is required from the court for steps taken by the defendant to defend against or escape the liability sought to be imposed by the proceedings commenced by the company, whether before or after the winding up order;
• leave is required from the court when a proceeding has been commenced by a party other than the company either to impose liability on the company or to escape liability arising from a claim which the company has not itself brought before the Court;
• no leave is required from the court for defensive steps taken by the defendant, including an appeal, revision, review or application to set aside an ex parte decree or order obtained by the company in a suit or other proceeding initiated by the company to enforce a claim.

Adopting the ‘defensive action’ approach taken in Humber and Rahmat Ali, the Federal Court in Asean Security held that the whole phrase ‘action or proceeding … proceeded with or commenced against the company” in section 226 (3) of the Companies Act ought to be considered in tandem.

What it essentially means is that one ought to not only consider if the application taken is a proceeding or otherwise but whether such proceeding is instituted or commenced against the wound-up company within the meaning of section 226 (3) of the Companies Act 1965 which is dependant of whether such proceeding is defensive in nature.

The Federal Court further held that the factual circumstances of each case ought to be considered in determining such question.

Having laid down the legal principle, the Federal Court decided that although the appeal by CGU and application for security of cost by Provincial can be construed as proceedings per se, having considered the factual circumstances surrounding each matter and the defensive nature of such proceeding, such proceedings are not within the statutory phrase of section 226 (3) of the Companies Act 1965 and no leave was required for such proceedings.

With that said, and referring to the hypothetical scenario laid down in the beginning of this article, should the circumstances be reversed and the company is being sued by you where your claim has been dismissed and you are now filing an appeal, then leave of the Court would be required prior to continuing your proceedings against the company.

Asean Security remains good law as at the publication of this article, with decision by the Court of Appeal as recent as 2025 citing and following the legal principles⁷.

Lim Jun Yik (Sean), Partner, Ang & Lim Partnership

Notes

1. CGU INSURANCE BHD v ASEAN SECURITY PAPER MILLS SDN BHD AND OTHER APPEALS [2002] 2 MLJ 1 (Federal Court) at p5E, F, G, H and I, p6A ↩
2. CGU INSURANCE BHD v ASEAN SECURITY PAPER MILLS SDN BHD [2001] 1 MLJ 511 (Court of Appeal) ↩
3. CGU INSURANCE BHD v ASEAN SECURITY PAPER MILLS SDN BHD AND OTHER APPEALS [2002] 2 MLJ 1 (Federal Court) at p 5C ↩
4. Ibid p 5C ↩
5. Humber & Co v John Griffiths Cycle Co (1901) 85 LT 141 ↩
6. Rahmat Ali Fatehullah v Calcutta National Bank Ltd AIR 1955 All 169 ↩
7. Andrew Heng & Anor v Chong Kok Wooi (acting in his own capacity and representing the group of condominium unit owners of Marinox Sky Villas) [2025] 6 MLJ 951 ↩

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