Court of Appeal Sets Aside Order to Stay Dismissal of Judicial Management Application
25 February 2019
On 13 February 2019, the Court of Appeal in CIMB Islamic Bank Berhad v Wellcom Communications (NS) Sdn Bhd and Rangkaian Minang (NS) Sdn Bhd (Civil Appeal No. W-02(IM)-1888-09/2018) set aside an order issued by the High Court to stay its order dismissing an application for judicial management.
The brief facts leading up the appeal before the Court of Appeal are as follows.
The respondents applied for a judicial management order (‘JMO’) pursuant to section 404 of the Companies Act 2016 (‘CA2016’). The application was dismissed by the High Court (‘the no order’). Subsequently, the respondents obtained an order to stay the order dismissing the application for a JMO.
Under section 410 of CA2016, the filing of an application for a JMO would, among others, result in the imposition of a moratorium on proceedings by creditors to enforce the security held over the applicant’s assets and on new and ongoing legal proceedings against the applicant until the JMO is issued or the application is dismissed. Section 411 of CA2016 provides that if a JMO is issued, the aforesaid moratorium continues for the duration of the JMO and further, that any receiver or receiver and manager is required to vacate office and any proceedings to wind up the company shall be dismissed.
The appellant’s appeal against the stay of the no order was allowed by the Court of Appeal. According to the Court of Appeal, the stay of the no order was, in jurisprudential terms, an abuse of process as it brought back into effect the moratorium that arose under section 410 when the application for the JMO was filed.
The Court was of the view that an order to stay the dismissal of an originating process was unprecedented. The respondents could not produce any authority to support the proposition that the Court could grant such an order. The Court of Appeal was of the view that the case of Ong Koh Hou @ Won Kok Fong v Da Land Sdn Bhd  MLJU 778 which had been relied upon by the respondents, did not support the proposition as DA Land concerned a situation where orders had been given by the court and the appellant sought to stay such orders pending the outcome of its appeal against the orders.
The decision by the Court of Appeal in Wellcom Communications is welcomed for two reasons. First, it contributes to the development of case law on the judicial management provisions in CA2016 that came into operation on 1 March 2018. Second, the decision prevents an unsuccessful applicant for a JMO from reviving a moratorium by obtaining a stay of the order dismissing its JMO application.