Post-liquidation tax and liquidator remuneration: income tax on trading in winding-up ranked as an expense, while earlier fees were protected.

Income tax arising from a liquidator's post-liquidation trading while realising company assets was treated as a consequence of the winding-up and held to fall within "expenses of the winding-up", payable out of the company's assets in priority to other claims. The fact that the tax was also recoverable as a Crown debt did not prevent that result. As to the liquidator's remuneration, the court declined to disturb sums already retained before the later assessment date, recognising the exceptional history of the liquidation and services rendered in preserving and realising assets. Remuneration for the later period was left for inquiry to determine what was properly allowable.

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Issues: (i) Whether income tax arising from a liquidator's post-liquidation trading formed part of the expenses of the winding-up and could be ordered to be paid out of the company's assets in priority to other claims; (ii) Whether the liquidator's remuneration already retained by him should be disturbed, and to what extent remuneration for the later period should be subject to inquiry.

Issue (i): Whether income tax arising from a liquidator's post-liquidation trading formed part of the expenses of the winding-up and could be ordered to be paid out of the company's assets in priority to other claims.

Analysis: The Court treated income tax incurred on profits earned by the company after liquidation, while the liquidator was carrying on the business for realisation, as a consequence of the liquidation itself. Reading the winding-up provisions together, the Court held that the phrase "expenses of the winding-up" was wide enough to include liabilities of that character. The fact that income tax is recoverable as a Crown debt under the Income Tax Act, 1918 did not prevent it from being treated as an expense properly falling on the winding-up estate. Rule 187 of the Companies Winding-up Rules, 1909 was regarded as assisting by analogy, but not as controlling a voluntary winding-up.

Conclusion: The income tax claims were held to be expenses of the winding-up and were payable out of the assets, in favour of Revenue.

Issue (ii): Whether the liquidator's remuneration already retained by him should be disturbed, and to what extent remuneration for the later period should be subject to inquiry.

Analysis: The Court accepted that, as a general rule, winding-up expenses should come before the liquidator's remuneration, but also recognised that a liquidator may fairly retain remuneration earned before the true deficiency became apparent. Exercising the discretion contemplated by section 171 of the Companies (Consolidation) Act, 1908, the Court considered the exceptional history of the liquidation, the earlier assumption of solvency, and the services rendered in preserving and realising the assets. It therefore declined to disturb remuneration received before the date of the later assessment, while directing an inquiry for the later period to determine what remuneration, if any, was properly allowable for preservation services.

Conclusion: Remuneration retained before 8 December 1930 was left undisturbed, and an inquiry was directed for the later period, in favour of the respondent on that limited aspect.

Final Conclusion: The Court upheld the Crown's right to payment of the post-liquidation income tax as a winding-up expense, but protected pre-assessment remuneration already taken by the liquidator and left the later remuneration to be examined.

Ratio Decidendi: Post-liquidation tax liabilities incurred in the course of realising a company's assets may be treated as expenses of the winding-up, and the court may exercise a just discretion to adjust the order of payment in a voluntary liquidation.

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