Company – Administration order – Costs – Claimant substituted for original petitioner in winding-up proceedings against defendant – Winding-up dismissed and administration order made at same time – Claimant applying for costs of winding-up petition — Whether claimant’s costs of petition payable as expense in administration in priority to administrators’ expenses – Application granted in part
The court made an administration order in respect of the defendant company and dismissed a winding-up petition against it. The claimant petitioner had been substituted for the party that had started the winding-up proceedings.
The claimant applied for an order that its costs of the petition be paid as an expense in the administration of the defendant, pursuant to r 2.12(1) of the Insolvency Rules 1986. The court was also asked to direct, pursuant to r 2.67(3) that the claimant’s costs should be paid out of the defendant’s assets in priority to the administrators’ expenses and the cost of any security be provided by the administrators.
The defendant argued that the court had no jurisdiction to make either order since, in respect of a party that had presented a winding-up petition, and appeared at the hearing of an administration application, the rules in question related only to that party’s costs of appearing at the hearing of the administration petition, rather than to any other costs, and, in particular, not to that its costs in the winding-up proceedings.
Held: The application was granted in part.
The facts of the instant case demonstrated that an administration on the application of the company might be the last stage in a long process whereby the company became subject to an insolvency process in the interests of its creditors, the earlier stages of which might include the bringing of a winding-up petition and the prosecution of that petition in the face of the company’s resistance. One of the purposes for which r 2.12(1)(e) permitted a party that had presented a winding-up petition to appear at the hearing of an administration application was to enable it to seek an order for the costs of that petition, which would ordinarily be dismissed at the hearing of the administration application, were an administration order to be made.
It followed that the phrase “the costs… of any person whose costs are allowed by the court” in r 2.12(3) comprehended not merely the costs of appearing at the hearing of an administration application, but those incurred in any petition which was dismissed at the same time, where the court thought fit to make such an order. The remaining words of r 2.12(3) automatically provided for such costs to be payable as an expense of the administration and fell within the words in r 2.67(1)(c) “the costs of… any person appearing on the hearing of the application …”.
In the instant case, as a matter of the court’s discretion, the claimant’s costs of prosecuting the petition after being substituted as petitioner ought to be payable as an expense of the administration. The court was not required to set out its reasons for that conclusion since the objection taken by the defendant was related only to jurisdiction, and the court had concluded that it did have the jurisdiction to make such an order.
However, there was no good or sufficient reason to vary the priority in which those costs were to be paid, pursuant to r 2.67(3), in the unlikely event that the assets would otherwise be insufficient to satisfy that liability applying the priority afforded by r 2.67(1)(c).
Alec McCluskey (instructed by Halliwells LLP) appeared for the claimant; Timothy Calland (instructed by Harbottle & Lewis LLP) appeared for the defendant.
Eileen O’Grady, barrister
