Introduction
On 12 November 2025, the Federal Court delivered an important judgment that brings much-needed clarity to the powers, responsibilities, and protections available to liquidators acting under the Companies Act 2016 (“CA 2016”).
The decision provides authoritative guidance on what constitutes “costs and expenses of winding up” under section 527(1)(a), and on the high threshold applicable to efforts to remove or sue a liquidator.
Brief background
London Biscuits Berhad (“LBB”) was ordered to be wound up in January 2020. Its liquidator, Lim San Peen (“LSP”), obtained Court sanction to carry on LBB’s business for the purpose of achieving a beneficial winding up.
To preserve value and facilitate a going-concern sale, LSP retained key employees to complete customer orders, maintain operations, and safeguard LBB’s goodwill.
Upon completion of the sale process, the employees’ termination benefits and indemnity in lieu of notice were paid ahead of unsecured creditors.
An unsecured creditor challenged the payments and sought LSP’s removal. The High Court upheld LSP’s decisions and granted his discharge, but the Court of Appeal reversed parts of that decision, holding that the payments were not entitled to priority and removing LSP from office.
The matter proceeded to the Federal Court, which addressed three leave questions concerning section 527 and a liquidator’s liability for alleged irregular payments.
