Ho Wing On Christopher v ECRC Land: Liquidators' Liability for Unpaid Costs

In Ho Wing On Christopher and Others v ECRC Land Pte Ltd (in liquidation), the Court of Appeal of Singapore on 2006-08-16 allowed the appeal, holding the liquidators of ECRC Land personally liable for the outstanding costs owed to Ho Wing On Christopher, Shum Sze Keong, Lee Yen Kee Ruby, and Law Kwok Fai Paul. The liquidators breached the estate costs rule by prioritizing payments to the company's lawyers over the appellants' costs, after the appellants successfully defended an action brought against them by ECRC Land. The court found that the liquidators' actions led to a shortfall in assets available to satisfy the costs order in favor of the appellants.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal allowed with costs. The liquidators are liable to compensate the appellants for the outstanding shortfall.

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Liquidators of ECRC Land were held personally liable for unpaid costs due to breach of estate costs rule, prioritizing legal fees over opposing party's costs.

1.7 Decision Date

15 August 2006

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Ho Wing On Christopher	Appellant	Individual	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
Shum Sze Keong	Appellant	Individual	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
Lee Yen Kee Ruby	Appellant	Individual	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
Law Kwok Fai Paul	Appellant	Individual	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
E-Zone (Plaza) Pte Ltd	Appellant	Corporation	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
The Grande Group Ltd	Appellant	Corporation	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
East Coast Works Pte Ltd	Appellant	Corporation	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
Hong Kong Aberdeen Seafood Restaurant Pte Ltd	Appellant	Corporation	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
Nakamichi Pte Ltd	Appellant	Corporation	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
Cafe Al Fresco Pte Ltd	Appellant	Corporation	Appeal Allowed	Won	Lai Yew Fei of Rajah & Tann Francis Xavier of Rajah & Tann
ECRC Land Pte Ltd (in liquidation)	Respondent	Corporation	Appeal Dismissed	Lost	Oommen Mathew of Haq & Selvam

3. Judges

Judge Name	Title	Delivered Judgment
Chan Sek Keong	Chief Justice	Yes
Andrew Phang Boon Leong	Justice of the Court of Appeal	No
Judith Prakash	Judge	No

4. Counsels

Counsel Name	Organization
Lai Yew Fei	Rajah & Tann
Francis Xavier	Rajah & Tann
Oommen Mathew	Haq & Selvam

4. Facts

ECRC Land was placed in compulsory liquidation in 1999.
Liquidators commenced an action against the appellants alleging fraud, breach of fiduciary duty, constructive trust, and conspiracy.
Appellants successfully defended the action and were awarded costs.
ECRC Land had insufficient assets to satisfy the costs order due to payments made to liquidators and lawyers.
Liquidators paid themselves remuneration and paid ECRC's lawyers before paying the appellants' costs.
Payments to ECRC's lawyers were made without taxation, breaching the Companies (Winding up) Rules.
Appellants sought to hold the liquidators personally liable for the unpaid costs.

5. Formal Citations

Ho Wing On Christopher and Others v ECRC Land Pte Ltd (in liquidation), CA 139/2005, [2006] SGCA 25

6. Timeline

Date	Event
1999-01-01	ECRC Land Pte Ltd placed in compulsory liquidation
2001-01-01	Suit No 1210 of 2001 filed by ECRC Land Pte Ltd against the appellants
2003-01-01	Civil Appeal No 117 of 2003 filed
2003-12-01	Appellants wrote to the liquidators asking that they pay the appellants’ costs in the main suit in priority to all other claims
2004-01-01	Appellants wrote to the liquidators asking that they pay the appellants’ costs in the main suit in priority to all other claims
2004-02-01	Payment made to Arthur Loke & Partners
2004-03-01	Payment made to Arthur Loke & Partners
2004-01-01	Summons in Chamber No 600479 of 2004 filed by the appellants
2004-01-01	Summons in Chambers No 600611 of 2004 filed
2006-08-16	Judgment reserved

7. Legal Issues

Breach of Estate Costs Rule
- Outcome: The court held that the liquidators breached the estate costs rule by prioritizing payments to the company's lawyers over the appellants' costs.
- Category: Substantive
- Sub-Issues:
  - Priority of costs
  - Liquidator's liability
Personal Liability of Liquidators
- Outcome: The court held the liquidators personally liable for the outstanding shortfall due to their breach of the estate costs rule.
- Category: Substantive
- Sub-Issues:
  - Scope of liability
  - Exceptions to liability
Court's Power to Exempt Liquidators from Liability
- Outcome: The court found no exceptional circumstances to justify exempting the liquidators from liability.
- Category: Procedural
- Sub-Issues:
  - Discretionary power
  - Exceptional circumstances

8. Remedies Sought

Order that liquidators pay the outstanding shortfall
Order that liquidators be held personally liable for the costs of the application

9. Cause of Actions

Breach of Estate Costs Rule

10. Practice Areas

Commercial Litigation
Insolvency
Liquidation

11. Industries

No industries specified

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Peng Ann Realty Pte Ltd v Liu Cho Chit	High Court	Yes	[1993] 1 SLR 630	Singapore	Cited for the principle that security for costs may be refused if it would stultify the claim where the defendant's alleged misconduct caused the plaintiff's impecuniosity.
In re Home Investment Society	N/A	Yes	(1880) 14 Ch D 167	N/A	Established the estate costs rule, a common law rule of priority in company liquidations.
In re Pacific Coast Syndicate, Limited	N/A	Yes	[1913] 2 Ch 26	N/A	Cited as direct authority for the proposition that a liquidator who makes payments in breach of the estate costs rule must remedy his breach.
In re London Metallurgical Company	N/A	Yes	[1895] 1 Ch 758	N/A	States that a successful litigant against a company in liquidation is entitled to be paid his costs in priority to the other general expenses of the liquidation.
In re Trent and Humber Ship-Building Company	N/A	Yes	(1869) LR 8 Eq 94	N/A	Outlines the rationale for the estate costs rule, stating that a company in winding up should be treated like any other litigant.
Metalloy Supplies Ltd v MA (UK) Ltd	English Court of Appeal	Yes	[1997] 1 WLR 1613	England and Wales	States that a liquidator who was a non-party to an action would only be held personally liable for costs in exceptional circumstances where impropriety on his part was proved.
Hypec Electronics Pty Ltd v Mead	New South Wales Supreme Court	Yes	(2004) 185 FLR 76	Australia	States that the court would only exercise its supervisory jurisdiction over liquidators and hold a liquidator personally liable for a defendant’s costs if the liquidator had acted improperly in causing the defendant to incur the costs in question.
In re Dominion of Canada Plumbago Company	N/A	Yes	(1884) 27 Ch D 33	N/A	Supports a finding of personal liability against a liquidator who applies the company’s moneys in breach of common law priority rules.
Deputy Commissioner of Taxation v Tideturn Pty Ltd	N/A	Yes	(2001) 37 ACSR 152	Australia	Supports the proposition that a liquidator who breaches a priority rule should be held personally liable.
In re Wenborn & Co	N/A	Yes	[1905] 1 Ch 413	N/A	Affirms the content of the estate costs rule.
In re R Bolton and Company	N/A	Yes	[1895] 1 Ch 333	N/A	States that an order ought not to be made against the liquidator personally unless the liquidator has done something to make himself personally liable for the costs.
In re Wilson Lovatt & Sons Ltd	N/A	Yes	[1977] 1 All ER 274	N/A	Where a liquidator brings an action in his own name, he is himself a party to the proceedings and therefore “litigates at his own risk”.
In re Staffordshire Gas and Coke Company	N/A	Yes	[1893] 3 Ch 523	N/A	He will be held liable for the opposing party’s costs even if the company’s assets are inadequate to provide a complete indemnity.
Project Construction & Development Pty Ltd v Ellison	New South Wales Supreme Court	Yes	[2002] NSWSC 372	Australia	Where litigation is commenced in the company’s name, the liquidator is a non-party, and an order of costs against him would not follow as a matter of course.
In re Dronfield Silkstone Coal Company (No 2)	N/A	Yes	In re Dronfield Silkstone Coal Company (No 2) (1883) 23 Ch D 511	N/A	Established a common law priority rule, which required that the general costs of winding up be paid pari passu with the costs of internal litigation.
Chin Yoke Choong Bobby v Hong Lam Marine Pte Ltd	N/A	Yes	[2000] 1 SLR 137	Singapore	An order of costs made in exercise of this power would be inextricably linked with the main proceedings as a result of which the costs were incurred.
Eastglen Ltd (in liquidation) v Grafton	N/A	Yes	[1996] 2 BCLC 279	N/A	The bona fides of the proceedings and of the non-party’s support for them are an important feature of the … discretion [to order costs against a non-party].
Chee Kheong Mah Chaly v Liquidators of Baring Futures (Singapore) Pte Ltd	N/A	Yes	[2003] 2 SLR 571	Singapore	The rationale for the Estate Costs Rule is that where an action is taken by a liquidator for the benefit of the insolvent estate, it is only fair that the defendant’s costs should rank in priority over the liquidator’s expenses and remuneration and the claims of the unsecured creditors in general.
In re Beni-Felkai Mining Company, Limited	N/A	Yes	[1934] Ch 406	N/A	The liquidator is the “person who can see what the position is” and has the means to ascertain the company’s financial position at any time.
Cowell v Taylor	N/A	Yes	Cowell v Taylor (1885) 31 Ch D 34	N/A	Poverty is no bar to a litigant who is a natural person.
Pearson v Naydler	N/A	Yes	[1977] 1 WLR 899	N/A	A man may bring into being as many limited companies as he wishes, with the privilege of limited liability; and section 447 [the equivalent of our s 388] provides some protection for the community against litigious abuses by artificial persons manipulated by natural persons.
Knight v FP Special Assets Limited	High Court of Australia	Yes	(1992) 174 CLR 178	Australia	As a matter of policy, provision for security for costs is a better remedy for protecting persons involved in litigation with insolvent companies than ordering a receiver to pay the costs of litigation after verdict.
Hamilton v Al Fayed (No 2)	N/A	Yes	[2003] QB 1175	N/A	An impecunious claimant must not be denied access to the courts, even if this would result in injustice to a successful defendant who may be unable to recover his legal costs.

13. Applicable Rules

Rule Name
Companies (Winding up) Rules (Cap 50, R 1, 1990 Rev Ed) r 173
Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 59 r 2(2)

14. Applicable Statutes

Statute Name	Jurisdiction
Companies Act (Cap 50, 1994 Rev Ed) s 283(3)	Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 323(1)	Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 328(1)	Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 313(2)	Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 315	Singapore
Companies Act (Cap 50, 1994 Rev Ed) s 388(1)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Liquidation
Liquidator
Estate costs rule
Personal liability
Priority of costs
Winding up
Security for costs
Indemnity
Realisation costs
Outstanding shortfall

15.2 Keywords

Liquidation
Liquidator
Estate costs rule
Personal liability
Priority of costs
Winding up
Security for costs
Insolvency

17. Areas of Law

Area Name	Relevance Score
Insolvency Law	95
Winding Up	95
Costs	60
Company Law	50

16. Subjects

Insolvency
Liquidation
Company Law
Civil Procedure
Costs