1. ) MESSRS. KASSIM TADIN, WAI & CO 2. ) MESSRS. A J ARIFFIN YEO & HARPAL v SHENCOURT PROPERTIES SDN BHD (IN LIQUIDATION) PIHAK TERKILAN CHAI FOOK CHONG

Case Significance

Illustrates the treatment of a liquidator's solicitors' fees as costs and expenses of the winding up entitled to priority over unsecured creditors under section 292(1)(a) of the Companies Act 1965 and the salvage principle, and records the court's management of the time for payment of those undisputed fees.

This High Court decision concerns the priority to be given to the legal fees of a liquidator's solicitors in the winding up of a company, and a related question about the time for payment of those fees. The applicants, two firms of solicitors who had acted for the liquidator, applied to reverse the Official Receiver's decision that their legal fees, incurred in the course of the winding up, were not entitled to priority over other creditors. In its earlier grounds the court had granted that application and set aside the Official Receiver's decision, holding that post-liquidation legal fees authorised on the instructions of the liquidator, and which contribute to and benefit the estate, are preferential and payable in priority to the other unsecured creditors of the company, whether under section 292(1)(a) of the Companies Act 1965 or under the salvage principle recognised in insolvency at common law or in equity. The invoices of the two firms, which were not disputed by the liquidators, had been ordered to be paid within a fixed period. This further set of grounds concerns the subsequent management of payment: when the Official Receiver was unable to pay the bills within the time ordered, the court, with the consent of counsel for the applicants and the Official Receiver, extended the time for payment until a specified period after the disposal of a related pending appeal, and it was from that order extending time that a further appeal was brought. The court's approach reflects the rationale that a solicitor whose work preserves or augments the assets available for distribution stands, like a salvor, to be paid ahead of those who benefit from that work, and that requiring taxation is not a precondition where the invoices are undisputed. The judgment records the court's handling of the timing of payment consistent with its earlier ruling on priority. It illustrates the treatment of a liquidator's solicitors' fees as costs and expenses of the winding up entitled to priority, and the practical management of payment where the estate cannot immediately meet the undisputed bills.