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2011 MarsdenLR 2411
HASNAH MOHAMMED HASHIM
WOODSVILLE SDN BHD – Appellant
Versus
TIEN IK ENTERPRISE SDN BHD & ORS – Respondent
Legal expenses incurred by Liquidators personally are not payable from assets of the company in liquidation; only proper liquidation costs and tax liabilities are prioritize for payment from company assets.
Headnote:(A) Companies Act 1965 - Sections 274, 275, and 292 - Companies (Winding Up) Rules 1972 - Liquidation costs and expenses - The court held that costs arising from the liquidation and legal fees incurred by Liquidators must be paid from the assets of the Companies prior to dissolution. Previous judgments indicate that legal costs incurred by Liquidators in personal capacity are not payable from company funds. The duty of Liquidators to protect assets is emphasized while allowing tax liabilities to be paid from company assets. (Paras 1, 2)
Facts of the case:
This application arises from the Liquidators seeking orders for payment of costs and expenses associated with the companies in liquidation. It involves disputes over payment of legal fees and tax liabilities out of corporate assets.
Findings of Court:
The court granted the application allowing tax liabilities and certain costs to be paid from the companies' assets prior to their dissolution.
Issues: The core issues were the legitimacy of claims for legal costs from liquidation assets and the distinction between personal liability of Liquidators versus company liability.
Ratio Decidendi: The court reasoned that legal costs incurred in the personal capacity of Liquidators cannot be severely drawn from company assets, emphasizing the necessity of prioritizing liquidation expenses and tax payments prior to dissolution.
Result: Application allowed with costs.
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| 1. liquidators' application for tax liabilities. (Para 1 , 2) |
Enclosure 444
This is an application by the Liquidators of Tien Ik Sdn. Bhd. Tien Ik Credit Sdn. Bhd., Tien Ik Enterprises Sdn. Bhd. and Giltspur Holdings Sdn. Bhd. (the Companies) pursuant to section 274, 275 and 292 of the Companies Act 1965 and the Companies (Winding Up) Rules 1972 and the inherent jurisdiction of this Court for the following orders and directions:-
(a) an order or direction that all tax liabilities of the Companies to the Inland Revenue Department / Government of Malaysia and all liabilities of the Companies to their tax agent are proper costs charges and expenses of and incidental to the liquidation of the Companies and shall be payable out of the assets of the Companies;
(b) an order or direction that all legal and other costs incurred by the Liquidators of the Companies to their advocates and solicitors namely Lee Hishamuddin Allen & Gledhill, Tan Hock Chuan and Skrine and duly approved and/or taxed by the Registrar of the High Court pursuant to the Companies (Winding Up) Rules 1972 are proper costs charges and expenses of and incidental to the liquidation of the Companies and shall be payable out of the assets of the Companies;
(c) an order that where any such legal and other costs set out in prayer (b) above had already been advanced and/or paid by the Liquidators of the Companies to the said advocates and solicitors or any of them, the Liquidators be reimbursed all payments made by them out of the assets of the Companies;
(d) an order that the Liquidators of the Companies be permitted to recoup any liability or payment for costs ordered to be payable by the Liquidators to the Petitioner and/or the 2nd, 3rd, 4th and/or 5th Respondents from the assets of the Companies;
(e) such further or other orders or directions as may be necessary to ensure that all proper costs, charges and expenses of and incidental to the liquidation of the Companies be paid out of the assets of the Companies in priority to all other claims pursuant to sections 295 and 292 of the Companies Act 1965 and under the inherent jurisdiction of the Court prior to the release of the Liquidators and the dissolution of the Companies;
(f) an order that the costs of and occasioned by this application, including the Liquidators legal costs to their solicitors be taxed on a solicitor and own client basis, unless otherwise agreed upon, and be paid out of the assets of the Companies.
The grounds of this application are as follows:-
(1) there are certain outstanding costs charges and expenses of the incidental to the liquidation of the Companies which the Liquidators have been advised by their solicitors are payable out of the assets of the Companies in priority to all other claims and this application is filed to obtain the directions of this Court so that all such costs charges and expenses can be duly paid prior to the dissolution of the Companies; and
(2) such other grounds as are set out in the Affidavit affirmed by Mr. Gong Wee Ning one of the Liquidators of the Companies.
1. All legal and other costs incurred by the Liquidators of the Companies to their advocates and solicitors namely Lee Hishamuddin Allen & Gledhill, Tan Hock Chuan and Skrine and duly approved and/or taxed by the Registrar of the High Court pursuant to the Companies (Winding Up) Rules 1972 are proper costs charges and expenses of and incidental to the liquidation of the Companies and shall be payable out of the assets of the Companies
2. Any such legal and other costs set out in prayer (b) above had already been advanced and/or paid by the Liquidators of the Companies to the said advocates and solicitors or any of them, the Liquidators be reimbursed all payments made by them out of the assets of the Companies
On 7.1,2011 I had dismissed the Liquidators application for the sum of RM900,000 to be retained.
It is the duty of the Liquidator to protect and administer the fund prope
