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further clarification on administration expenses

24 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 administrators 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 courts discretion to include both the persons costs of appearing at the hearing of the administration application and also the persons 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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