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Further clarification on administration expenses
25 February 2010
It has always been the practice of the Companies Court to order
that the costs of bringing a winding up petition against a company
which subsequently enters into administration should be paid as an
administration expense. However until this month there has been no
authority on the point.
Earlier this month, in Irish Reel Productions Limited v
Capitol Films Limited, Mr Justice Briggs made an
administration order in relation to Capitol Films Limited. At this
hearing, he was asked by counsel for Irish Reel Productions Limited
to order that the costs of a winding up petition, which had
been presented in August 2008, be paid as an expense of the
administration. Counsel also requested that the order of priority
be altered pursuant to rule 2.67(3) of the Insolvency Rules 1986
and that these be paid in priority to the administrator’s expenses.
Counsel for Capitol Films Limited submitted that Mr Justice Briggs
had no jurisdiction to make either of those orders and judgement
was reserved.
Mr Justice Briggs held that the Court does have jurisdiction to
make such orders and at his discretion he ordered that, in this
case, the costs of the winding up petition be payable as an expense
of the administration. However, he was not persuaded that there was
any good or sufficient reason to vary the priority in which those
costs would be paid.
Mr Justice Briggs made his judgement based on the reading of
rule 2.12(1) of the Insolvency Rules 1986 which provides a list of
who may appear or be represented at a hearing of an administration
application. This list includes any person who has presented a
petition for the winding up of the company. He held that one of the
purposes of this is to enable that person to seek an order for the
costs of that petition, which would ordinarily be dismissed at the
hearing of the administration application if the administration
order is made.
He referred to rule 2.12(3) of the Insolvency Rules 1986 which
states that, “the costs of any person whose costs are allowed by
the court are payable as an expense of the administration” and held
that it is at the court’s discretion to include both the person’s
costs of appearing at the hearing of the administration application
and also the person’s costs of any petition which is dismissed at
the same time.
This case is authority that when an order is made at the hearing
of an administration application for the costs of a winding up
petition to be paid by the company in administration, these costs
will automatically become an expense.
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