Re Missford Ltd t/a Residence Members Club

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 17 June 2010
• Neutral Citation: [2010] IEHC 240
• Court: High Court
• Docket Number: [2010 No. 2 COS]
• Date: 17 June 2010

Missford Ltd t/a Residence Members Club, In re

IN THE MATTER OF MISSFORD LIMITED T/A RESIDENCE MEMBERS CLUB

AND

IN THE MATTER OF THE COMPANIES (AMENDMENT) ACT 1990 , AS AMENDED

[2010] IEHC 240

[No. 2 COS/2010]

THE HIGH COURT

COMPANY LAW

Examiner

Interim examiner - Remuneration, costs and expenses - Role of interim examiner - Obligation to vouch costs and expenses - Limited functions of interim examiner - Hourly rate charge - Whether part of work for which interim examiner sought remuneration fell within his powers - Whether court ought to sanction hourly rate charge sought - Re Coombe Importers Ltd (Unrep, Hamilton CJ, 22/6/1995), In re Edenpark Construction Ltd [1994] 3 IR 126 and Re Sharmane Ltd [2009] IEHC 377, [2009] 4 IR 285 followed - Rules of the Superior Courts 1986 (No 3) 1991 (SI 147/1991), O 75A - Companies (Amendment) Act 1990 (No 27), ss 7, 9 and 29 - Rate re4duced and costs referred to taxing master (2010/2Cos - Kelly J - 17/6/2010) [2010] IEHC 240

Re Missford Ltd t/a Residence Members Club

Facts: The interim examiner of the company the subject of examinership proceedings sought an order of the Court pursuant to s. 29 Companies (Amendment) Act 1990, to fix the remuneration of the interim examiner for a period from 5 January 2010 to 20 January 2010 for the sum of €62, 857.20 together with €741.15 in respect of expenses. The examiner also sought an order measuring the legal costs incurred in the same period in the sum of €50,600.65. The interim examiner had charged an hourly rate of €425 and was assisted by a supervisor, senior, semi-senior and junior, relating to rates struck in 2007.

Held by Kelly J. that there was no justification for maintaining a January 2007 hourly charge our rate. A comparator had to be sought to set an appropriately hourly rate charge. Fees paid by the State for prosecution and defence work had been reduced by 16%, being two reductions of 8%. The Court proposed to reduce the charge out rate in respect of all personnel involved in the examination by 16%, which equated more to the realities of life in 2010 than fees struck three years ago. The assignment of staff as utilised was appropriate to the task. The charge out rate would be reduced by 16% and the overall sum by 15%. The examiner would be remunerated for 51 hours and not 60 hours as indicated. A grand total € 38, 467.23 would thus be the final total.

Reporter: E.F.

MISFORD LTD T/A RESIDENCE MEMBERS CLUB, IN RE UNREP KELLY 20.1.2010 2010 IEHC 11

COMPANIES (AMDT) ACT 1990 S29(2)

COMPANIES (AMDT) ACT 1990 S29(3)

COMPANIES (AMDT) ACT 1990 S29(4)

COMPANIES (AMDT) ACT 1990 S29(5)

COOMBE IMPORTERS LTD, IN RE 1999 1 IR 492 1998 14 4919

O.75A r22

EDEN PARK CONSTRUCTION LTD, IN RE 1994 3 IR 126

COMPANIES (AMDT) ACT 1990 S9

COMPANIES (AMDT) ACT 1990 S7

COMPANIES (AMDT) ACT 1990 S7(5)

COMPANIES (AMDT) ACT 1990 S29

SHARMANE LTD, IN RE UNREP FINLAY-GEOGHEGAN 30.7.2009 2009 IEHC 377

1 JUDGMENT of Mr. Justice Kelly delivered on the 17th day of June, 2010

Introduction

2 This is the application of Jim Stafford, the former Interim Examiner of Missford Limited (the Company). He asks the court to fix the remuneration due to him for the period from 5 ^th January, 2010 to 20 ^th January, 2010. The sum sought is €61,857.20 together with €741.15 in respect of expenses. Both figures are inclusive of VAT.

3 Mr. Stafford also seeks an order measuring the legal costs which he incurred for the same period in the sum of €50,600.65 inclusive of VAT.

Background

4 At a vacation sitting of the court on 5 ^th January, 2010, Edwards J. appointed Mr. Stafford as Interim Examiner of the Company.

5 I heard the Company's petition on 13 ^th January, 2010. At that hearing, Mr. Stafford presented a report setting out a summary of the work carried out by him from the time of his appointment.

6 I reserved my judgment on the application for a week. I delivered it on 20 ^th January, 2010. ( [2010] IEHC 11). For the reasons set out in that judgment, I dismissed the petition and withdrew the protection of the court from the Company.

7 Subsequently, Mr. Stafford brought this application. I was not satisfied to make the orders sought on the basis of the information then put before me. I afforded him a further opportunity to put additional material of his choosing before the court and this he did.

The Company

8 The Company was engaged in the business of running a form of private members club at St. Stephen's Green in Dublin. Although incorporated in November 2006, it only commenced trading in May 2008. It never traded profitably. At the time of the presentation of the petition, it was indebted to the Revenue Commissioners in the sum of €1.2m. It also owed Zurich Bank €2.3m. Trade creditors were owed in excess of €740,000 and lease financing creditors in excess of €200,000.

9 The decision of the Company to petition the court for the appointment of an examiner was precipitated by the Revenue Commissioners attaching the Company's bank account. Edwards J. did not confer any powers on Mr. Stafford over and above those that are given by statute. As the petition was dismissed, Mr. Stafford never acted as examiner of the Company.

The Legal Position

10 Section 29 of the Companies (Amendment) Act 1990, (the Act) deals with the costs and remuneration of examiners. Subsection 1 provides:-

"The court may from time to time make such orders as it thinks proper for payment of the remuneration and costs of, and reasonable expenses properly incurred by, an examiner."

11 Subsection 2 provides:-

"Unless the court otherwise orders, the remuneration, costs and expenses of an examiner shall be paid and the examiner shall be entitled to be indemnified in respect thereof out of the revenue of the business of the company to which he has been appointed, or the proceeds of realisation of the assets (including investments)."

12 Subsection 3 in its amended form provides for the remuneration, costs and expenses which have been sanctioned by order of the court to be paid in full before any other claim, secured or unsecured.

13 Subsection 4 provides:-

"The functions of an examiner may be performed by him with the assistance of persons appointed or employed by him for that purpose provided that an examiner shall, insofar as is reasonably possible, make use of the services of the staff and facilities of the company to which he has been appointed to assist him in the performance of his functions."

14 Finally, subs. 5 provides that:-

"In considering any matter relating to the costs, expenses and remuneration of an examiner the court shall have particular regard to the provision of subsection (4)."

Case Law

15 Section 29 makes it clear that the court should only make such orders as it thinks proper for payment of remuneration, costs and expenses of an examiner. The court is not a cipher to rubber stamp claims made by an examiner. That is clear from the observations of Hamilton C.J. in Re Coombe Importers Limited (22 ^nd June, 1995) where he said:-

"There is no doubt that the court has jurisdiction to review and disallow the remuneration, costs and expenses of the examiner and in view of the priority given to such remuneration, costs and expenses there is an obligation on the court to be vigilant in scrutinising an examiner's application for sanction of payment."

16 That vigilant scrutiny can only be carried out effectively if all the necessary information is placed before the court. Thus, it is not surprising to find that under O.75A, r.22, it is prescribed that an examiner seeking an order such as this is obliged to place affidavit evidence before the court setting forth "a full account of the work carried out by him to the date of the application and a full account of the costs and expenses incurred by him". That rule obliges him to vouch the costs and expenses and to set out the basis for the proposed remuneration which he seeks. He is also obliged to set out in the affidavit what use, if any, he made of the services of the staff or facilities of the Company to which he was appointed and the extent of such use.

17 In carrying out its vigilant scrutiny, the court must always be mindful of the limited functions of an examiner and a fortiori an interim examiner. As was pointed out by Murphy J. in Re Eden Park Construction Limited [1994] I.R. 126:-

"...an examiner appointed under the Companies (Amendment) Act 1990, does not as such have an executive role. He does not have functions akin to those of a receiver or liquidator. In the absence of some particular order of the High Court, he may not usurp the functions of the board of directors of the company over which he is appointed and it is the board or its officials who will continue to manage the business of the company during the period of protection and the continuance of the examinership. The important function which the examiner must perform during the strictly limited period of the statutory moratorium provided by the Act of 1990, is to examine the affairs of the company and to prepare and deliver a report containing the information specified in s. 16 of that Act... an executive role, if it may be so described, which is likely to fall to most examiners would be the duty to review at the request of the directors (or perhaps a potential creditor) liabilities intended to be incurred by the company during the protection period with a view to forming an opinion as to whether the survival of the company as a going concern during the protection period would be seriously prejudiced if such liabilities were not in fact incurred."

18 Thus, it is clear that the court must be astute to ensure that the examiner is remunerated only for work which falls properly within his remit. If he does work in...