Compustore Ltd (in Voluntary Liquidation) v Companies Act

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 22 February 2006
• Neutral Citation: [2006] IEHC 52
• Docket Number: [2005 No. 327 COS]
• Court: High Court
• Date: 22 February 2006

[2006] IEHC 52

THE HIGH COURT

No. 327 COS/2005

COMPUSTORE LTD, IN RE

IN THE MATTER OF COMPUSTORE LIMITED (IN VOLUNTARY LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS, 1963– 2003

AND

IN THE MATTER OF S. 280 OF THE COMPANIES ACT, 1963

COMPANIES ACT 1963 S280

COMPANIES ACT 1963 S281

COMPANIES ACT 1963 S254

RSC O.74 r128

SORGE (AV) & COMPANY LTD, IN RE 1986 BCLC 490

COMPANIES ACT 1963 S293

COMPANIES ACT 1963 S266

WATERLOO MANUFACTURING COMPANY (BURNLEY) LTD, IN RE 1936 3 CCR 281

WILLIAM ADLER & COMPANY LTD, IN RE 1935 CH 134

SANDWELL COPIERS LTD, IN RE 1988 BCLC 2092

BURNS v HEARNE (ORSE A NOYEK & SONS LTD), IN RE 1988 IR 772 1989 ILRM 155

INTERPRETATION ACT 2005 S5

COMPANY LAW

Winding up

STATUTORY INTERPRETATION

Construction

Costs - Pre-resolution expenses - Whether pre-resolution fees and expenses were expenses properly incurred within meaning of Act of 1963 - Re Sorge & Co Ltd [1986]BCLC 490 not followed; Re Sandwell Copiers Ltd [1988] BCLC 209 considered -Rules of the Superior Courts 1986 (SI15/1986), O 74, r 128 - Companies Act 1963(No 33) s 281 - Interpretation Act 2005 (No23) s 5 - Application for fees dismissed(2005/327COS - Laffoy J - 22/2/2006)[2006] IEHC 52 In re Compustore Ltd

The applicants as creditors of Compustore Ltd (the company) brought an application under section 280 of the Companies Act, 1963 in order to determine whether fees and expenses due to the applicants in respect of legal advice furnished in relation to the procedures to be followed to place the company into creditors' voluntary liquidation were "expenses properly incurred in the winding up of the company within the meaning of s. 281 of the Act of 1963.

Held by Laffoy J. in refusing the application: That the words "costs, charges and expenses properly incurred in the winding up" as contained in section 281 were clear and unambiguous and referred to costs etc properly incurred while the winding up was in being, that is to say, after the resolution to wind up the company was passed. Consequently, the fees and expenses due to the applicants for pre-resolution advice and services were not payable out of the assets of the company in priority of all other claims.

Reporter: L.O'S.

1 Judgment of Miss Justice Laffoy delivered on 22nd February, 2006.

2 The applicants, the members of the firm of Eugene F. Collins, Solicitors, bring this application as creditors of Compustore Limited (the Company) under s. 280 of the Companies Act, 1963 (the Act of 1963), asking the court to determine the question whether fees and expenses due to the applicants in respect of advices given in relation to the procedures to be followed to place the Company into creditors" voluntary liquidation are "expenses properly incurred in the winding up of the company" within the meaning of s. 281 of the Act of 1963. Section 281 provides as follows:

"All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, shall be payable out of the assets of the company in priority to all other claims."

3 The resolution to wind up the Company was passed by its members on 9th November, 2004. By virtue of s. 254 of the Act of 1963 the winding up was deemed to have commenced on that day. The liquidator of the Company, David Hughes, on behalf of the Company contends that the fees and expenses in issue are not expenses properly incurred in the winding up within the meaning of s. 281.

4 The factual background is that the applicants were first consulted by the Company on 18th October, 2004 for the sole purpose of advising it on the procedures to be followed in initiating a creditors" voluntary liquidation. On being engaged, the applicants sought a payment on account for services to be rendered. The directors of the Company confirmed that they had sufficient cash at the bank to make such a payment and that remained the position up to the commencement of the winding up. However, the Company's bankers refused to allow a withdrawal of any funds. In outlining the services rendered by the applicants to the Company in the grounding affidavit, which is not controverted, Barry O'Neill, a partner in the applicants" firm, stressed the scale and notoriety of the Company, a household name for the sale of computers with outlets in numerous locations throughout Ireland. Mr. O'Neill averred that the Company's financial collapse was very sudden and necessitated numerous meetings with the directors to ensure the Company complied with the procedures leading up to the liquidation. The Company had over 200 creditors and some of the trade creditors were owed significant amounts. The applicants advised on the imminent liquidation and on issues involving internal Company matters, and prepared all documents relating to the creditors" meeting. They also made preparations with the Burlington Hotel for the creditors" meeting itself. The scale of the Company and the speed with which events unfolded resulted in a period of intense legal advice.

5 The applicants have indicated that they are willing to have the quantum of the costs and expenses claimed determined by taxation. Accordingly, the court is concerned with the issue of principle, not the quantum of the bill presented.

6 It is convenient before considering the arguments advanced on behalf of the applicants to refer to the position in a winding up by the court. Rule 128 of Order 74 of the Rules of the Superior Courts, 1986, insofar as it is relevant for present purposes, provides as follows:

"The assets of a company in a winding up by the Court remaining after payment of the fees and expenses properly incurred in preserving, realising or getting in the assets, including where the company has previously commenced to be wound up voluntarily such remuneration, costs and expenses as the Court may allow to a Liquidator appointed in such a voluntary winding up, shall, subject to any order of the Court, be liable to the following payments which shall be made in the following order of priority, namely:"

7 First The costs of the petition, including the costs of any person appearing on the petition whose costs are allowed by the Court...."

8 As there is no authority directly in point in this jurisdiction on the question raised on this application, counsel for the applicants urged that the court should adopt the approach adopted by the English High Court (Hoffman J.) in...