This case concerns the statutory interpretation whether the priority of wages in s. 31 of the Employment Act 1955 (“EA”) takes precedence over the general priority provisions for insolvency or receivership in the Companies Act 2016.

 

Following Perwaja Steel’s winding up in November 2017, the appointed Receiver and Manager (“R&M”) took steps to dispose lands that were charged by the company in order to satisfy outstanding debt. However, nearly 800 of the company’s former employees, all of whom had been retrenched prior to the liquidation, contended that the company had failed to pay their wages, and that their dues ought to be paid out from the total proceeds of the sale of the charged lands. To this end, by reason of s.31 of the EA, they claimed that their wages are to take priority over debts owed to the debenture holders. The R&M and debenture holders however took an opposing view. 

 

In a landmark case, the High Court found that wages owed to former employees must take priority over any secured debts owed to the debenture holders of a company. The EA, being a special law regarding the rights of employees must be read independently from general company provisions dealing with the treatment of unsecured liquidation debts.

 

The High Court also found that the legislative intention behind the EA was to specifically extend the priority of wages to include statutory payments. In this regard, the R&M was ordered to pay all outstanding back wages and owed statutory payments to all its affected former employees in priority, in priority to any of the company’s debenture holders or secured creditors. 

 

The High Court’s decision was subsequently affirmed by the Court of Appeal.

 

Alvin Tang acted for the former employees.