RE SHARMANE Ltd

• Jurisdiction: Ireland
• Judgment Date: 17 December 2009
• Date: 17 December 2009
• Docket Number: [2008 No. 514 COS]
• Court: High Court

[2009] IEHC 556,

High Court

[2008 No. 514 COS]

Re Sharmane Ltd.

In the matter of Sharmane Limited and Others and in the matter of the Companies Acts 1963 to 2006

Cases mentioned in this report:-

Re Sharmane Ltd. [2009] IEHC 377, [2009] 4 I.R. 285.

In re Springline Ltd. (in liquidation) [1999] 1 I.R. 467; [1999] 1 I.L.R.M. 15.

Re Holidair Ltd. [1994] 1 I.R. 416; [1994] 1 I.L.R.M. 481.

West Wake Price & Co. v. Ching [1957] 1 W.L.R. 45; [1956] 3 All E.R. 821; [1956] 2 Lloyd's Rep. 618.

Company law - Examinership - Receivership - Remuneration costs and expenses of former examiner - Claim in receivership - Priority of payments in receivership - Companies (Amendment) Act 1990 (No.27), s. 29.

Motion on notice

The facts have been summarised in the headnote and are more fully set out in the judgment of Finlay Geoghegan J., infra.

On the 23rd February, 2009, the High Court (Finlay Geoghegan J.) ordered that the protection period cease for some of the companies. On the 20th March, 2009, following a similar order in respect of the remaining companies, a receiver was appointed over all of the companies.

On the 30th July, 2009, the High Court (Finlay Geoghegan J.) ordered that the former examiner be allowed certain remuneration, costs and expenses, in accordance with s. 29(1) of the Companies (Amendment) Act 1990 (see [2009] IEHC 377, [2009] 4 I.R. 285).

By notice of motion dated the 6th October, 2009, the former examiner sought, inter alia, an order pursuant to s. 29 of the Act of 1990 directing the receiver to immediately pay his remuneration, costs and expenses out of the revenue of the businesses. The application was heard by the High Court (Finlay Geoghegan J.) on the 1st December, 2009.

Section 29 of the Companies (Amendment) Act 1990, insofar as relevant, provides:-

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

(2) 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).

(3) The remuneration, costs and expenses of an examiner which have been sanctioned by order of the court (other than the expenses referred to in subsection (3A)) shall be paid in full and shall be paid before any other claim, secured or unsecured, under any compromise or scheme of arrangement or in any receivership or winding-up of the company to which he has been appointed …"

By orders of the High Court the companies were discharged from examinership and were then put into receivership by creditors. In accordance with s. 29(1) of the Act of 1990, the High Court ordered that the former examiner be allowed certain remuneration, costs and expenses, following which a dispute arose between the former examiner and the receiver in relation to the timing and priority of those payments.

The former examiner argued that he was entitled, under s. 29(3) of the Act of 1990, to have his fees discharged out of the revenue received by the relevant company in receivership. The receiver argued that he was entitled to withhold payment to the former examiner until he had first disposed of the company's assets.

Held by the High Court (Finlay Geoghegan J.), in directing payment to the former examiner out of the revenue of the business, 1, that s. 29(3) of the Act of 1990 entitled an examiner to payment of court approved remuneration, costs and expenses out of the revenue of a business of a trading company in receivership, in advance of that company's weekly outgoings.

2. That, rather than giving a receiver an option as to the source from which he might pay a former examiner, s. 29(2) of the Act of 1990 gave a former examiner a right to be indemnified either out of the revenue of the business of the company or the proceeds of the realisation of the assets, or both.

3. That an employee of a trading company in receivership or a supplier of goods to such a company had a claim, within the meaning of s. 29(3) of the Act of 1990, to be paid a salary or to be paid for goods supplied, and such claims were claims in the receivership within the meaning of that section.

In re Springline Ltd. (in liquidation) [1999] 1 I.R. 467 applied. West Wake Price & Co. v. Ching[1957] W.L.R. 45 considered.

4. That where ambiguities arose concerning the construction of any section of the Act of 1990, a court ought to seek to uphold the underlying policy of that Act.

Re Holidair Ltd. [1994] 1 I.R. 416 applied.

5. That, while there was no ambiguity in s. 29, it was consistent with the policy of the Act of 1990 that an examiner who was unable to propose a scheme of arrangement be given absolute priority regarding his fees, so as to ensure the availability of persons willing to act as examiners and to devote the significant time required, having regard to the limited time periods under the Act.

Re Holidair Ltd. [1994] 1 I.R. 416 and In re Springline Ltd. (in liquidation) [1999] 1 I.R. 467 applied.

Cur. adv. vult.

Finlay Geoghegan J. 17th December, 2009

[1] The applicant is the former examiner of each of the above companies and certain related companies. On the 31st July, 2009, an order was made pursuant to s. 29(1) of the Companies (Amendment) Act 1990, that the former examiner be allowed remuneration and outlay and legal expenses in the amounts set out in the schedules to that order. On the 23rd February, 2009, on the application of the former examiner, certain of the companies ceased to have the protection of the court. On the 20th March, 2009, the former examiner, in the course of a confirmation hearing, informed the court that he was no longer recommending that the court confirm the schemes of arrangement. On that day, pursuant to s. 26 of the Act of 1990, an order was made that the protection period cease for all remaining nine companies and ACC Bank plc. ("ACC") appointed Mr. Martin Ferris as receiver ("the receiver") of each of the companies named in the title to this application, and Ulster Bank Ltd. appointed a receiver over certain...