After having obtained the leave of court to institute legal action against the wound-up respondent company (`the company'), the plaintiff settled his action with the company and then had his costs taxed. When the company failed to pay the taxed costs as requested, the plaintiff applied to court for a compliance order against the company's liquidator. However, the Registrar refused the application. Hence, the plaintiff appealed to the judge. The plaintiff argued that since the costs were ordered in proceedings in which the liquidator was involved after the winding-up had commenced, there was no necessity for him to prove his debt to the liquidator under s. 291 of the Companies Act 1965 (`the Act'). The plaintiff further alleged that since the taxed costs were determined after contest by the liquidator, the taxed costs were a first charge in the liquidation and, by that fact, had priority of payment.

Held (dismissing appeal with costs):

(1) The plaintiff was not entitled to any priority of payment of his costs and/or an order to compel the liquidator to pay the said costs. The Act did not provide priority for the plaintiff's taxed costs as it did not come under the priority ranking under s. 292 of the Act. (paras 13, 15 & 23)

(2) As the plaintiff's taxed costs had to be paid out of the property of the company, s. 264 of the Act applied in that subject to the provisions of the Act as to preferential payments, the company's property shall on its winding-up be applied pari passu in satisfaction of its liabilities. There was no lacuna or ambiguities in the law relating to priorities nor was there any change in the law on the status of wound-up companies. (paras 12 & 22)

Case(s) referred to:

Abdul Samad Alias (Receiver and Manager of Rajiv Enterprises Sdn Bhd) v. Government of Malaysia & 2 Ors [1996] 4 CLJ 123 FC (refd)

Director of Customs Federal Territory v. Ler Cheng Chye (Liquidator of Castwell Sdn Bhd (In Liquidation) [1995] 3 CLJ 316 SC (refd)

Kenneth Teh Ah Kiam & Chin Kwai Yoong v. Ketua Pengarah Jabatan Kastam & Eksais & Ors [1998] 1 CLJ 183 FC (refd)

Markcon Sdn Bhd (In Liquidation) v. Resilient Construction Sdn Bhd and Labtec Sdn Bhd & Anor (Opposing Creditors) [1994] 1 CLJ 271 HC (refd)

Wong Pot Heng v. Zainal Abidin Putih & Anor [1990] 2 CLJ 174; [1990] 1 CLJ (Rep) 312 SC (refd)

Zainal Abidin Putih & Anor v. Che Wan Dvpt Sdn Bhd [1992] 3 CLJ 1539; [1992] 1 CLJ (Rep) 381 SC (refd)

Legislation referred to:

Companies Act 1965, ss. 211, 220, 264, 281, 291, 292(1)(a), 351(2)

Companies (Winding-up) Rules 1972, rr. 78, 79, 82

Rules of the High Court 1980, O. 59 r. 2(2)

Supreme Court Practice 1979 [UK], O. 62 r. 2

Counsel:

For the plaintiff - Krishnan; M/s Krishnan & Co

For the defendant - Andre Wee Heng Leong; M/s Yap Koon Roy & Assocs

Reported by Ashok Kumar

The defendant was the successful bidder of a government contract, ie, roads upgrading project at Sri Aman and the plaintiff was the subcontractor of the project. It was agreed between the parties that the contract sum would be at the ratio of 96%:4%, to be paid progressively by the defendant upon the receipt of the progressive claims from the plaintiff. However, the defendant had failed to make the payment for the final progressive claim although the work had been satisfactorily completed. The plaintiff thus, in this summary application, sought payment for the works done. The defendant raised issues, inter alia, that (i) there was another oral agreement between the parties that superseded the earlier agreement, ie, if the plaintiff was successful in obtaining a second project in Bintulu road construction, then the contract sum would be shared at the ratio of 95%:5%; and (ii) that the defendant was justified to withhold the payment as there was an issue of taxes with the Inland Revenue Board (`IRB').

Held (allowing application for summary judgment with costs):

(1) The defendant had not brought forth any document from the IRB to show that there was a taxation auditing or that there was a tax audit in the process. The issue of who should pay the tax (if any) should have been sorted out between the plaintiff and the defendant at the early stages. The defendant had failed to prove that there were correspondences or effective communication between them and the plaintiff on this issue. (paras 11 & 21)

(2) The defendant's allegation of another oral agreement that was said to have superseded the first oral agreement was without grounds and could not be justified. The plaintiff had failed to bid and obtain the Bintulu road project. Hence, the second alleged agreement had never turned into an effective or enforceable contract and therefore had never superseded the first agreement. The parties were therefore still bound by the first agreement. (paras 12 & 17)

(3) There was no nexus or linkage between the first road projects in Sri Aman and the second bidding for the road project in Bintulu. Therefore, the plaintiff could not be held hostage to be denied payments just because the plaintiff had failed to secure the Bintulu road project. (paras 15 & 16)

Case(s) referred to:

Bank Negara Malaysia v. Mohd Ismail Ali Johor & Ors [1992] 1 CLJ 627; [1992] 1 CLJ (Rep) 14 SC (refd)

Dato' Sri Celestine Ujang v. Perdana Industri Holdings Berhad [2003] 4 AMR 285 (refd)

HTC Global Services MSC Sdn Bhd v. Kompakar Ebiz Sdn Bhd [2008] 1 LNS 419 (refd)

Ng Hee Thoong v. Public Bank Bhd [1995] 1 CLJ 609 CA (refd)

Counsel:

For the plaintiff - Adrian Chiew; M/s Battenberg & Talma

For the defendant - Sam Laya; M/s Sam & Co

Reported by S Barathi