Re Lucca Foods and the Companies Acts 1963-2013

• Jurisdiction: Ireland
• Judge: Mr. Justice Allen
• Judgment Date: 18 January 2019
• Neutral Citation: [2019] IEHC 11
• Court: High Court
• Docket Number: [2015 No. 225 COS]
• Date: 18 January 2019

[2019] IEHC 11

THE HIGH COURT

Allen J.

[2015 No. 225 COS]

IN THE MATTER OF THE COMPANIES ACTS 1963-2013 AND IN THE MATTER OF LUCCA FOOD TRADING COMPANY LIMITED (IN VOLUNTARY LIQUIDATION) AND IN THE MATTER OF SECTION 280 OF THE COMPANIES ACT 1963

BETWEEN

ANTHONY J. FITZPATRICK IN HIS CAPACITY AS LIQUIDATOR OF LUCCA FOOD TRADING COMPANY LIMITED (IN VOLUNTARY LIQUIDATION)

APPLICANT

AND

REVENUE COMMISSIONERS

RESPONDENTS

Liquidation – Remuneration – Expenses – Parties seeking adjudication on the outstanding issues of the amount of the applicant’s remuneration and his entitlement to retain sums equivalent to the payments he had made – Whether the High Court should make an order for Courts Act interest

Facts: Lucca Food Trading Company Ltd ceased trading on 1st March, 2012 and on 15th March, 2012 resolved that by reason of its liabilities it could no longer continue trading and should be wound up. The applicant, Mr Fitzpatrick, was appointed liquidator. The liquidator convened the final meeting of the company for 26th August, 2014 when he presented his final report. A representative of the Revenue attended the final meeting and protested that the claim for remuneration was “far in excess of the normal level of remuneration in a liquidation of this size and complexity” and the Revenue’s position was confirmed in correspondence on the following day. By letter dated 16th October, 2014, the Revenue wrote suggesting that the appropriate remuneration, based on the information provided to the creditors meeting, was €36,000, and protesting that the Revenue was not satisfied that the legal costs and consultancy costs were costs properly incurred in the liquidation. The liquidator was invited to apply to the High Court to fix his remuneration at an appropriate level and to include in his application a direction in relation to the legal and consultancy fees claimed. The Revenue observed that there might be an adequate explanation for the high level of legal and consultancy fees but suggested that no such explanation had been provided. The High Court was asked by the parties to adjudicate on the outstanding issues of the amount of the liquidator’s remuneration and his entitlement to retain sums equivalent to the payments he had made. The High Court was asked by the respondent, the Revenue Commissioners, to deduct from the €80,000 proceeds of realisation of the company’s assets the amounts which the liquidator was entitled to retain and to make an order for payment by him of the balance.

Held by Allen J that there would be an order: (1) fixing the liquidator’s remuneration and expenses, inclusive of VAT, at €37,883.69; (2) determining that of the sum €10,080.83 claimed for “legal and professional fees”, the liquidator had justified the sum of €2,700.33 for “legal fee” (which was included in the €37,883.69); (3) determining that of the €9,790.80 claimed for “payments to consultants” the liquidator had justified the sum of €4,495.40 (which was included in the €37,883.69); (4) directing the payment by the liquidator to the Revenue Commissioners, forthwith, of the sum of €42,116.31.

Allen J held that the Revenue’s open offer of €36,000.00 plus VAT would have come to €44,280.00; the liquidator was short of that and must pay the costs of the proceedings. Allen J would hear counsel as to whether he should make an order for Courts Act interest, and if so from what date.

Judgment approved.

JUDGMENT of Mr. Justice Allen delivered on the 18th day of January, 2019

1 Lucca Food Trading Company Ltd (‘ the company’) was incorporated on 24th June, 2010 and commenced trading on 2nd January, 2011. The company carried on a pizza and pasta restaurant business from two locations in Salthill, County Galway. The business was purchased by the company from the promoters, who became the directors of the company.

2 The company ceased trading on 1st March, 2012 and on 15th March, 2012 resolved that by reason of its liabilities it could no longer continue trading and should be wound up. The applicant (to whom I will refer as the liquidator) was appointed liquidator.

3 On a date which is not apparent save that it was shortly before the liquidation, the company agreed to sell all of its assets and undertaking for €100,000, payable by instalments. The first instalment of €25,000 was said to have been placed in a safe in one of the premises from which the company had carried on business. There was, apparently, a written contract but the liquidator did not get this until shortly before 12th October, 2012 when he wrote to the Insolvency Unit of the Revenue Commissioners that he had ‘ finally obtained a copy of the sale contract’.

4 By email of 1st June, 2012 the liquidator confirmed to the Revenue that he had received the €25,000 and the first monthly payment.

5 By letter of 12th October, 2012 the liquidator confirmed to the Revenue that he had collected a total of €50,000. He observed that it was commercially unwise to have a sale price payable by instalments over a protracted period of time, but intended to keep the pressure on to collect the full amount.

6 By email of 31st March, 2014 the liquidator confirmed to the Revenue that he had collected €55,000 between May and November 2012 and another €10,000 in January 2014 and was still trying to collect the balance, but would be surprised if any further amounts came in.

7 The liquidator convened the final meeting of the company for 26th August, 2014 when he presented his final report.

8 At chapter 5 of the report the liquidator summarised the work undertaken by him since the date of his appointment.

1. The liquidator reported that he had filed the forms in relation to the resolution to wind up and notice of his appointment as liquidator. He said that he had ‘ now recently prepared for submission the required interim annual and biannual returns to the Companies Registration Office’.

2. The liquidator reported that he had given notice of his appointment to the directors, the auditors, the Revenue, a leasing company, the company's bank, and the rates office of Galway City Council.

3. The liquidator reported that the company had total tax liabilities of €197,950. He reported that he had liaised with the creditors in relation to the validity of their claims. He did not give any figures for the other creditors. There were some leased assets and the liquidator had arranged for the collection of these.

4. The liquidator did not register for VAT for the company in liquidation.

5. The liquidator reported that subsequent to his appointment he took control of the company's books and records which appeared to have been ‘ reasonably well written up to the date of the liquidation’.

6. The liquidator reported that the main asset in the directors” estimated statement of affairs was the debtor of €100,000 which arose from the sale of the assets and goodwill of the company. The contract for sale was said to have provided for a ‘ deposit’ of €25,000 and the balance on a scheduled basis over the following 15 months. The liquidator reported that he had received €55,000 between May and November, 2012; nothing in 2013; and ‘ with significant time and effort involved’ another €25,000 in full and final settlement of the balance. The business was said to have ceased trading and the operators to have returned to Italy so that he had ‘ few options’ other than to accept the remaining €25,000 in full and final settlement.

7. The liquidator reported that he had submitted a s. 56 report to the office of the Director of Corporate Enforcement on the conduct and actions of the directors, both of whom were subsequently restricted by the High Court.

8. As to fees, the liquidator reported that ‘ as is normal in insolvency assignments, a fee will be calculated on a time/charge-out rate basis’. He set out the charge out rates for himself and his staff. He reported that the value of the work completed during the course of the liquidation came to €64,847.57, inclusive of VAT but that his fee was limited to €59,324.64, inclusive of VAT, which was said to be the full amount of the funds available.

9 In appendix 2 of his final report the liquidator set out a final receipts and payments account. This showed that he had collected €80,000 from debtors and €19,565.65 in respect of employee claims; which latter sum he had duly paid out to the employees. Besides some small payments for advertising and the like, the final account showed payments of €9,790.80 for ‘ consultancy’; €10,080.83 for ‘ legal and professional fees’; and €59,324.64 for ‘ liquidator fee’.

10 In appendix 3 the liquidator set out what was said to be a breakdown of the work in progress figure. This was a spreadsheet on a single page suggesting that the liquidator and his staff had worked for a total of 312.25 hours which resulted in a claim for €59,632.50 exclusive of VAT. With odds and ends of outlay, the total work in progress was €74,638.37, inclusive of VAT, from which was deducted a figure of €9,790.80 for ‘ payments to consultants’, to get to €64,847.57, which was cut back to €59,324.64, because that was all there was.

11 A representative of the Revenue attended the final meeting and protested that the claim for remuneration was ‘ far in excess of the normal level of remuneration in a liquidation of this size and complexity’ and the Revenue's position was confirmed in correspondence on the following day.

12 By letter dated 16th October, 2014 (there having been no response in the meantime) the Revenue wrote suggesting that the appropriate remuneration, based on the information provided to the creditors meeting, was €36,000; and protesting that the Revenue was not satisfied that the legal costs and consultancy costs were costs properly incurred in the liquidation. The liquidator was invited to apply to the High Court to fix his remuneration at an appropriate level and to include in his application a direction in...