1. Whether legal fees of solicitors appointed by liquidators for post-winding-up work constitute costs and expenses of winding up under s 292(1)(a) of CA 1965, entitled to priority over unsecured creditors. (Para 1 , 2 , 4 , 5 , 6 , 7 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 24 , 25 )
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2025 MarsdenLR 5094
HIGH COURT MALAYA KUALA LUMPUR
MESSRS LASSIM TADIN WAI & CO & ANOR – Appellant
Versus
SHENCOURT PROPERTIES SDN BHD; HEW KIANG HOE & ANOR (PETITIONE.... – Respondent
[Post Winding Up Suit No: WA-28PW-750-12/2024]
Petitioner Advocates:Ivanpal Singh Grewal,Harwinder Kaur,Collin Goonting,Terrance Kanagaratnam,Darren Tay,Keshvinder Kaur ,Respondent Advocate: Wardah Nasuha,Franky Irwan
Legal Category Hierarchy
- insolvency and liquidation
- company law
- legal profession
Table of Contents
2. Applicants contend fees are costs and expenses of winding up under s 292(1)(a) entitled to priority; the OR contends they are ordinary unsecured debts payable pari passu without priority. (Para 8 , 9 , 10 , 11 , 23 , 26 , 27 )
3. Applicants' invoices are costs and expenses of the winding up under s 292(1)(a) of CA 1965 and are entitled to priority over unsecured creditors. (Para 62 , 63 )
4. Whether post-liquidation legal fees of solicitors appointed by liquidators fall within 'costs and expenses of the winding up' under s 292(1)(a) of CA 1965?
Yes, such fees fall within s 292(1)(a) and are entitled to priority over unsecured creditors, as confirmed by Putra Gill and Lee Min Choon, which held that expenses incurred by a liquidator in performing duties including litigation to recover or protect assets must be accorded priority. (Para 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 61 )
5. Does the salvage principle in insolvency law apply in Malaysia to confer priority on legal fees incurred by liquidators for asset preservation and realization?
Yes, the salvage principle applies in Malaysia and supports priority for debts incurred by a liquidator for the purpose of the liquidation, including expenses in preserving or realizing company assets, as creditors benefit from the work producing the distributable fund. (Para 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 )
6. Is taxation of solicitors' bills under r 173 of the Companies (Winding Up) Rules 1972 a precondition for priority under s 292(1)(a)?
No, litigation services under s 236(2)(a) are exempt from mandatory taxation under r 173; the bills were approved under s 128(2) of the LPA and do not require taxation before payment. (Para 58 , 59 , 60 )
JUDGMENT
[1] These Grounds concern an application filed by way of Enel 1 to reverse the decision of the current liquidator of the respondent ("Shencourt") in finding that the legal fees of the solicitors of the liquidator incurred in the course of winding up, were not conferred priority over other creditors.
[2] To be precise, the issue is whether the fees of solicitors appointed by the liquidators of Shencourt, for work done after the winding up order, constitute 'costs and expenses' of the winding up within s 292(1)(a) of the Companies Act 1965 ("CA 1965") and thus, payable in priority to the debts of the other unsecured creditors. The basis of the argument for priority is that as services rendered by these solicitors, preserved and realised the assets of a company in liquidation for the benefit of the unsecured creditors, it is only fair that such fees should be paid in priority to such creditors.
[3] Save where the context otherwise provides, all references to sections are with reference to sections in CA 1965.
Introduction
[4] By an application of Hew Kiang Hoe & May De Silva, a winding up order was entered against Shencourt Properties Sdn Bhd in KL High Court on 19 February 2002 and the Official Receiver ("the OR") was appointed as the interim liquidator.
[5] On 4 February 2004, Ricky Thong and later, on 26 April 2011, Datuk Narendra Kumar Jasani ("Datuk Jasani") of Grant Thornton were appointed as joint liquidators.
[6] On 18 January 2019 the joint liquidators were removed by the Court of Appeal and the OR was appointed as the liquidator in their place.
[7] The Invoices were dealt with by the respective liquidators in the following way:
a. before being removed, Datuk Jasani confirmed the approval of the Applicants' invoices ("the Invoices") without the need for taxation, see paras 20 and 21 of Enel 2. This is not effectively disputed. The aggrieved merely states that these paras are 'immaterial', see para 17 of Enel 4. The OR states that he has no knowledge of para 20 but admits para 21, in which the Invoices were described as the 'Approved Bills', see paras 10 and 11 of Enel 5;
b. the OR appears to have accepted the POD filed by Kassim Tadin on 3 July 2024 for the sum of RM1.768 and the POD filed by AJ Ariffin on 28 June 2024 for the sum of RM6.36 million, see para 14(4) of Enel 5;
c. so, the quantum of the Invoices raised by the Applicants is not in issue.
[8] The only issue is priority.
[9] The Applicants informed the OR by letters dated 17 May 2024 and 6 June 2024, that they were acting as the solicitors for the joint liquidators and their fees were entitled to be paid in priority as preferential claim
[10] By a letter dated 21 June 2024, the OR informed the Applicants that they will be paid pari passu and that the Applicants have to file their Proofs of Debt ("PODs"). That is said to be unfair as the services performed by the Applicants were for the benefit of the unsecured creditors and on the express instructions of the liquidators.
The Applicants' Claims
[11] It was submitted that the Applicants' fees are 'costs and expenses of the winding up' entitled to priority under s 292(1)(a) of the CA 1965, which also fall within the salvage principle ("the Salvage Principle") in insolvency law.
[12] At the outset, I accept that the priority claimed by the Applicants by way of statute is to be determined under CA 1965 and not the Companies Act 2016 ("CA 2016"). s 619(6) of CA 2016 provides that:
"a company which is in the course of winding up immediately before the commencement of this Act shall continue to be wound up under the relevant provisions in the Companies Act 1965."
[13] This saving or transitional provision preserves the application of CA 1965 to all liquidations commenced prior to 15 October 2017, the date when CA 2016 came into force. Shencourt was wound up on 19 April 2002 by a prior Petition filed, thus falling squarely within s 619(6).
Background Facts
[14] Following the winding up, Shencourt was embro
