Farrell v Plastronix Investments Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 09 October 2012
• Neutral Citation: [2012] IEHC 418
• Court: High Court
• Date: 09 October 2012

[2012] IEHC 418

THE HIGH COURT

[No. 279 COS/2005]

Farrell (Official Liquidator) v Plastronix Investments Ltd

No Redaction Needed

IN THE MATTER OF MOULDPRO INTERNATIONAL LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2005

BETWEEN

PEARSE FARRELL (OFFICIAL LIQUIDATOR)

APPLICANT

AND

PLASTRONIX INVESTMENTS LIMITED

NOTICE PARTY

COMPANIES ACT 1963 S228

RSC O.74 r46

CAR REPLACEMENTS LTD (IN LIQUIDATION), IN RE UNREP MURPHY 15.12.1999 2000/3/1105

MERCHANT BANKING LTD (IN LIQUIDATION), IN RE 1987 ILRM 260 1986/4/1224

COMPANIES (AMDT) ACT 1990 S29(1)

SHARMANE LTD & ORS, IN RE 2009 4 IR 285 2009/53/13279 2009 IEHC 377

COMPANIES (AMDT) ACT 1990 S29

MISSFORD LTD T/A RESIDENCE MEMBERS CLUB, IN RE 2010 3 IR 756 2010 1 ILRM 187 2010/36/9069 2010 IEHC 240

ESG REINSURANCE IRL LTD (UNDER ADMINISTRATION) & ANOR, IN RE 2011 1 ILRM 197 2010/18/4511 2010 IEHC 365

INSURANCE (NO 2) ACT 1983

MARINO LTD & ORS, IN RE UNREP CLARKE 29.7.2010 2010/33/8259 2010 IEHC 394

COMPANIES ACT 1990 S150

COMPANY LAW ENFORCEMENT ACT 2001 S56

RED SAIL FROZEN FOODS LTD (IN RECEIVERSHIP), IN RE UNREP LAFFOY 20.10.2006 2006/51/10956 2006 IEHC 328

MIRROR GROUP NEWSPAPERS PLC v MAXWELL 1998 BCC 324 1998 1 BCLC 638

RSC O.74 r128(2)

COMPANY LAW

Liquidation

Remuneration of liquidator - Principles to be applied - Amount of remuneration contested - Whether reasonable amount - Appropriate quantum of remuneration - Re Car Replacements Limited (In liquidation) (Unrep, Murphy J, 15/12/1999); Re Sharmane Ltd [2009] IEHC 377, [2009] 4 IR 285; Re Missford Ltd t/a Residence Members Club [2010] IEHC 240, [2010] 3 IR 756; Re ESG Reinsurance Ireland Ltd [2010] IEHC 365, [2011] 1 ILRM 197; Re Marino Ltd [2010] IEHC 394, (Unrep, Clarke J, 29/7/2010); Re Red Sail Frozen Foods Ltd (In receivership) [2006] IEHC 328, [2007] 2 IR 361 and Mirror Group Newspapers plc v Maxwell [1998] BCLC 638 approved - In re Merchant Banking Ltd [1987] ILRM 260 considered - Rules of the Superior Courts 1986 (SI 15/1986), O 74 - Companies Act 1963 (No 33), s 228 - Insurance (No 2) Act 1983 (No 29) - Companies (Amendment) Act 1990 (No 27), s 29(1) - Companies Act 1990 (No 33), s 150 - Company Law Enforcement Act 2001 (No 28), s 56 - Remuneration measured (2005/279COS - Finlay Geoghegan J - 09/10/2012) [2012] IEHC 418

Farrell v Plastronix Investments Limited

Facts: The applicant was the liquidator of Mouldpro International Limited ("the company") who applied to the court seeking direction as to the amount of remuneration to be granted for the work completed in the course of it's winding up for four different periods. The company had specialised in manufacturing advanced plastic injection mouldings in a variety of the industries but the applicant had been appointed on foot of a petition by Plastronix Investments Limited, a creditor of the company and notice party in this action, when they had failed to repay their outstanding debts.

It was standard practice for a liquidator to apply to the court to determine remuneration by presenting a report outlining the completed work, time spent and the relevant rate for the number (and level) of staff used. It was then for the court to decide whether the amount claimed was fair or not. In the present case, the liquidator had claimed €1.5 million.

Held by Finlay Geoghegan J that since Sharmane Limited and Others [2009] 4 IR 285, that a court in determining a liquidator's remuneration should consider not only the report provided but also the nature, complexity and value of the work to those who will benefit from the distribution of any remaining assets. In the present case, the applicant had presented a report outlining the completed work, time spent and charge-out rate. The notice party had raised concerns about the lack of detail in the report regarding the work completed, time spent and level of staff employed with the suggestion that a forensic accountant be used to clarify. It was the court's view that whilst the work was certainly complex in some areas, the time taken was significant and the amount claimed seemed high. Sharmane Limited and Others [2009] 4 IR 285 considered.

The Court examined each of the four periods individually. In terms of the fee charged for the first two periods, it was held that the fee claimed was reasonable in consideration of the completed work and the time taken. It was noted that whilst the rates for certain elements of may appear high, it was in line with what was being charged at that time. In relation to the third period, it was found that most of the work was done in relation to a potential claim against the Sony Group. It was held that this involved complex work and would have been of great value to the unsecured creditors if successful and could therefore be justified. The fee claimed was once again seen as reasonable.

In terms of the final period, the work completed during this time included the potential claim from the third period. It had been decided during this period not to commence proceedings without the financial backing of the managing director of the notice party. Whilst said director had some part to play in the protracted work in relation to the claim, it was ultimately for the liquidator to consider the interests of the other creditors and a decision whether to commence proceedings or not should have been made much sooner. This inevitably delayed the adjudication of unsecured creditors and led to increased costs. As such, the amount of remuneration for this period would be reduced by 20%.

Order for remuneration made.

1 1. This judgment is given on one issue only arising in the application for final orders made by Mr. Farrell, the official liquidator ("the Liquidator") in the above liquidation. The application was brought by direction of the Court on notice to Plastronix Investments Ltd. ("Plastronix"). The dispute relates to the amount of the remuneration sought by the Liquidator to be determined in respect of the work done by him in the liquidation.

Background

2 2. Mouldpro International Ltd. ("the Company") was established in Dublin in1984. It specialised in the manufacture of advanced technology plastic injection mouldings for the consumer electronic, automotive and construction industries. It was initially a subsidiary of Toyota Ireland Ltd., then acquired by the Munekata Group and, in 2002, acquired by the then directors of the Company through a management buyout and changed its name to its current one. In 2003, the Company established a branch in the Czech Republic. The main customers of the Company are recorded as having been Sony, Toshiba, Panasonic and Orion. The Liquidator, in his second report to the Court of 28 ^th February, 2006, summarised the events leading to the petition for winding up which are relevant to the conduct of the liquidation and issues arising in this application in the following terms:

"In October 2004 the Company commenced a downsizing and restructuring plan. They placed their premises at Jamestown Road on the market for sale. Subsequently new significantly increased levels of production were agreed with Sony in order to meet Sony's increased production requirements. The Company sought to 'Leaseback' its premises for a two year period.

However, late that month Toshiba major customer announced the cessation of its UK television operations. This was quickly followed, within a fortnight, by a similar announcement from Sony, the Company's other major customer that it too was closing its UK operations. Both announcements resulted in an immediate loss of turnover in the order of €10,000.000. The business would no longer be sustainable in the long term and the directors sought independent advice regarding the Company's financial position which advice resulted in my appointment on foot of a petition brought by a related company [Plastronix] in its capacity as a creditor of the Company."

3 3. On 22 ^nd July, 2005, the Liquidator was appointed as provisional liquidator, and on 14 ^th August, 2005, an order made for the winding up of the Company and his appointment as official liquidator.

4 4. The Liquidator is a well-known insolvency practitioner and a partner in the firm RSM Farrell Grant Sparks ("FGS"). In the final application, he has sought an order of the Court determining his remuneration as provisional and official liquidator as follows:

Fee Period	Net (€)	VAT (€)	Total (€)
22 Jul 05 to 28 Feb 06	738,449.31	155,074.36	893,523.67
1 Mar 06 to 30 Sep 07	348,379.17	73,159.63	421,538.80
1 Oct 07 to 31 Mar 09	211,522.03	45,477.24	256,999.27
1 Apr 09 to 30 Sep 11	196,081.00	41,177.00	237,258.00
Post-Costs	8,264.00	1,736.00	10,000.00
Total:	1,502,695.41	316,624.23	1,819,319.74

The Law

5 5. There is limited statutory guidance for the determination of liquidators' remuneration. Section 228 of the Companies Act 1963 provides:

"The following provisions relating to liquidators shall have effect on a winding-up order being made-

…

(d) a person appointed liquidator shall receive such salary or remuneration by way of percentage or otherwise as the court may direct, and if more such persons than one are appointed liquidators, their remuneration shall be distributed among them in such proportions as the court directs."

6 6. Order 74, r. 46 of the Rules of the Superior Courts provides:

"An Official Liquidator shall be allowed in his accounts or otherwise paid, such salary or remuneration as the Court may from time to time direct and in fixing such salary or remuneration the Court shall have regard to any necessary employment of accountants, assistants or clerks by him. Such salary or remuneration may be fixed either at the time of his appointment or at any time...