Unfair Dismissal and Company Winding Up

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An employee has brought a complaint of unfair dismissal under S.20 IRA 1967 against his/her former company. The case is awaiting trial and the former company is suddenly facing winding-up and liquidators have taken control.

The questions that may crop up in the minds of both parties – Can the complainant still continue? Can the company halt the action? Does the complainant need permission?
Firstly, the complaint can still proceed. Why? Because it is a fundamental right of the employee to bring an action before the Industrial court for unfair dismissal as long as it is within 60 days of termination.

The dispute now begins when the company being wound-up, argues that S.471(1) Companies Act 2016 (previously S.236(2) Companies Act 1965) applies. This particular section requires the leave of High Court in order for parties to commence or proceed with any action against a company that is going through winding up/liquidation. The argument in the beginning went 2 ways: One; that the section in the Companies Act did not apply to an Industrial Court action and the other which did.

The matter was thought to have been settled with the High Court case of Isuta International Sdn Bhd & Ors v Industrial Court Malaysia and Ors [2013] 4 ILR 24. This Penang case stated that leave of the High Court is required when taking a case of unfair dismissal against a company being wound-up because the court could not ignore the provision in the Companies Act.

However, in Johor, a 2015 decision in the case of Wong Chen Feng v. Wonderful Compound Sdn. Bhd. [2015] 1 ILR 274 chose not to follow Isuta. It argued that the decision of Isuta was that of the High Court and that there existed a conflicting case in the Federal Court (then Supreme Court). Therefore, the decision in the higher court takes precedence.

The Federal Court case that Wong Chen Feng referred to was the case of Marianna Ghazali & Ors v. Co-Operative Central Bank Ltd (In Receivership) & 2 Others Cases [1989] 2 ILR 497. This case decided that there was no need for leave to be obtained from the High Court for a case of unfair dismissal when a company winds up. The court’s reasoning was that S.20 IRA 1957 claim in the Industrial Court is not an “action” or “proceeding” as envisaged by the then S. 263(2) CA 1965.

Isuta’s reasoning for not following Marianna was that the case was specific to its own facts.

Industrial Court decision on this issue seems to be specific to the state. In Johor, the unreported case Goh Chiu Khek v Yichai Biotech Sdn.Bhd [2017] 2 LNS 0662 followed in the footsteps of Wong Chen Feng and applied the decision in Marianna. In Kuala Lumpur, the unreported case Sunitha Sharmila Rajendra Parshad dan 5 perayu lain v. Alcim Sdn.Bhd [2018] 2 LNS 0182, applied Isuta. The case of Marianna was not discussed.

So what does this mean? The Industrial Court in Kuala Lumpur and Penang seem to have a differing opinion from that of the Industrial Court in Johor. The matter can only be solved if it were to go up to the Federal Court again for their decision. For now, lawyers are left to argue their case and the decision rests with the Chairman of the Industrial Court in each state.

Employers and employees should be aware of where their case is being decided and how the court in that particular state might decide, as there is no definite conclusion. In a situation of winding up, the Liquidator would likely have already taken control of the case from the company. Bringing up both Isuta’s and Marianna’s decisions by either party will allow the Chairman of the Industrial Court to weigh its options.