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2021 MarsdenLR 4047
HIGH COURT MALAYA KUALA LUMPUR
LING SIE KIONG THE LIQUIDATOR – Appellant
Versus
SG & SONS SDN BHD – Respondent
[Post Winding Up Application No: WA-28PW-251-07/2020]
Assessment rates under the Local Government Act 1976 do not qualify as federal tax and do not take priority over other debts in company liquidation under the Companies Act 1965.
Headnote:(A) Companies Act 1965 – Sections 291, 292, 619(6) – Local Government Act 1976 – Section 146 – Liquidation of company – Application by Liquidator for waiver of unpaid assessment rates – DBKL's claim for assessment rates deemed an unsecured debt – Court held that rates are not a federal tax and thus not entitled to priority over other debts in winding up. (Paras 2, 30, 37)
(B) Statutory Obligation – Liquidator's duty to ascertain debts and prioritize claims under Companies Act – Court emphasized that debtors’ obligations remain unless explicitly discharged. (Paras 41, 44)
(C) Priority of Claims – First charge principles in local government context discussed – Local authorities’ claim ranks as unsecured debt post-winding up. (Paras 18, 36)
(D)
Findings of Court: Court ruled that DBKL can only claim assessments owed up until Winding Up Order and thus the claim beyond that date is inadmissible. (Paras 55) (E)
Issues: Scope of Local Government Act concerning priorities and liabilities under Companies Act addressed. (Paras 21, 43) (F)
Ratio Decidendi: The court stated that local authority rates are not federal taxes, thus they do not enjoy prioritization under Companies Act provisions concerning tax debts. (Paras 37, 44) (G)
Result: DBKL’s claim for RM55,030 rejected; Respondent ordered to pay costs of RM5000.
JUDGMENT
Introduction
[1] Before this Court is a Notice of Motion dated 6 July 2020 in enclosure 1, filed by the Liquidator (Liquidator) of the Respondent Company (Respondent) for an order pursuant to ss 291, 292 and 619(6) of the Companies Act 2016 and/or inherent juris of the Court seeking directions from this Court (Application) that inter alia:
a) Dewan Bandaraya Kuala Lumpur (DBKL) shall waive the full payments of assessment lodged in their Proof Of Debt for RM55,030 (POD) for the period 1999 until 1 September 2017 for unit 1 no 1 level 20th floor, Block A aka Bangsar Tower/Menara Bangsar bearing postal address 299-20-1, Jalan Maarof, Menara Bangsar, Bukit Bandaraya (Property) from date of Winding Up Order till the date the Property is disposed of;
b) If the POD is allowed in full or in part, the said amount shall be an unsecured debt and DBKL shall rank equally with other unsecured creditors of the Respondent pursuant to s 292 of the Companies Act 1965 and subject to availability of funds and not at any earlier date and/or prior to the date of the notice of declaration of dividends.
[2] The grounds on which the Application is relied on are inter alia as follows:
(i) the Respondent was Wound up on 10 December 1997 (Winding Up Order) and the Official Receiver (OR) appointed as the Provisional Liquidator;
(ii) Ling Sie Kiong (LSK) was appointed as Liquidator by way of a Court Order dated 25 March 2019;
(iii) there is only 1 asset of the Respondent being the said Property;
(iv) only after the appointment of LSK and after carrying out several tender process for the sale of the Property, that the Property was sold on 29 January 2020;
(v) the Property had been vacant and left abandoned and did not generate any income and/or was not disposed of at an earlier stage after the Winding Up Order, there should be a waiver or reduction on the assessment imposed by DBKL.
[3] DBKL asserts that the Liquidator by filing this Application had hijacked and sabotaged DBKL's rights as a creditor of the Respondent.
Background Facts
[4] The Respondent is a company incorporated in Malaysia and is in the business of interior decorating and renovation works and is the owner of the Property.
[5] After more than 20 years the only asset of Respondent is the Property.
[6] After appointment of LSK as the Liquidator of the Respondent on 25 March 2019, and after carrying out several tender process for the sale of the Property, the Property was sold on 29 January 2020 for RM1,000,000.
[7] On 24 April 2019 the Liquidator had written to DBKL requesting them to lodge any claims with the Liquidator and DBKL had thereafter lodged their POD with the Liquidator on 8 February 2020 for the sum of RM55,030 being arrears of assessment for the period 1999 to 1 September 2017.
[8] It was argued by the Liquidator that the sums claimed by DBKL are post winding up and not debts that had accrued before the Winding Up Order.
DBKL's Reply
[9] DBKL had inter alia submitted that:
i. the Company was statutorily obliged/liable to pay the assessment for the Property pursuant to s 146 of the Local Government Act 1976 ( LGA 1976);
ii. DBKL as the local authority was at all material times entitled to claim the said assessment which needs to be paid twice yearly (post and pre winding up);
iii. the OR had never rejected DBKL"s POD and the Liquidator is therefore estopped from claiming that a "waiver" had occurred after the said Property was sold;
iv. the Liquidator had never sought the confirmation from DBKL or its lawyers as to the amount of assessment owed.
Courts Findings
DBKL As A Creditor
[10] This Court has examined the POD of DBKL which can be found at exhibit LSK-5 of encl 2 being the Affidavit In Support of the Liquidator, and of which attached to the POD is a Statement of Account from DBKL with regards the Property which states (in Bahasa Malaysia) as follows:
Debit Baki RM53,538.00 Cukai Taksiran Am 1 Januari 2017 - 30 Jun 2017 RM732.00 RM54,270.00 Caj denda Lewat Penggal Pertama pada
