In the matter of Springline Ltd (in liquidation).
And in the matter of the Companies Acts 1963-1990.
Company - Statutory interpretation - Examinership - Liquidation - Examiner's expenses - Whether examiner's expenses take priority over other claims on a winding up - Whether liquidator's remuneration, costs and expenses constitute a claim - Companies Act 1963 (No 33), section 281 - Companies (Amendment) Act 1990 (No 27), section 29.
The Supreme Court (Mr Justice Keane, Mr Justice Murphy and Mr Justice Barron); judgment delivered 22 July 1998.
The word "claim" in section 29(3) of the Companies (Amendment) Act 1990 must be given its ordinary and natural meaning and where an official liquidator per- forms work or incurs liabilities in respect of which he is entitled to be reimbursued he can properly be described as having a claim to such sums. The Supreme Court so held in allowing the appeal of the examiner and making an order that priority be given to the costs of the examiner over the costs of the liquidator in this winding up.
John McBratney SC and Michael Cush BL for the examiner; Bill Shipsey SC and John Gleeson BL for the official liquidator.
Mr Justice Keane, delivering the unanimous judgment of the court, said that the issue to be decided in this case was whether the remuneration, costs and expenses of an examiner of a company must be paid in full out of the assets of the company before any of the costs of a liquidator appointed by the High Court after the examiner has ceased to act. Section 29(3) of the Companies (Amendment) Act 1990 provides that "the remuneration, costs and expenses of an examiner which have been sanctioned by order of the court shall be paid in full and shall be paid before any other claim, secured or nsecured, under any compromise or scheme of arrangement or in any receivership or winding up of the company to which he has been appointed." Mr Rory O'Ferrall was appointed as examiner to Springline Ltd on 26 February 1996 and having decided, and informed the court, that it was not possible to formulate a scheme of arrangement to facilitate the survival of the company the court ordered the compulsory winding up of the company on 10 June 1996.
On 29 July and 9 October 1996 the examiner applied to the court for orders sanctioning the payment to him of his costs, remuneration and expenses. The liquidator then applied to the court for a determination of the priority to be given to that claim. Mr Justice Shanley decided that the costs, remuneration and expenses of a liqudator could not properly be described as a "claim" and accordingly the Companies (Amendment) Act 1990 did not confer the priority claimed on behalf of the examiner.
The examiner submitted that the word "claim" as used in the section should be given its ordinary and natural meaning. On this construction the word meant a demand for something which was due and clearly included the remuneration, costs and expenses of a liquidator. It was further submitted that section 281 of the Companies Act 1963 treats a liquidator's costs as a claim in the context of a voluntary winding up and there was no reason to distinguish between such costs in a voluntary winding up and one ordered by the court. The examiner also sought to rely on the Supreme Court decision of Re Holidair Ltd [1994] 1 IR 416. There it was held that if the unsecured assets of a company were insufficient to meet the examiner's costs then he could have recourse to the secured assets thereby gaining priority over a liquidator who was not entitled to avail of those assets. Therefore, it was argued that it would be anomalous to make an examiner's priority dependent on whether the company happened to have secured assets.
The liquidator argued that the word "claim" should be interpreted in the context of the section and it was clear that in using this term the legislature was concerned with the claims of creditors rather than the operating costs of a liquidation. It was further argued that a liquidator had a statutory responsibility to ensure the orderly disposition of a company's affairs on a winding up. If section 29(3) of the 1990 Act was to be given the meaning contended for by the examiner this might present an insuperable obstacle to getting anyone to agree to act as liqudator and therefore would militate against successfully securing the orderly winding up of an insolvent company's affairs.
Mr Justice Keane said that the word "claim" in the 1990 Act had to be given its ordinary meaning and said that there could be little doubt that a liquidator could be said to have a "claim" to sums in respect of which he is entitled to be reimbursed or remunerated for work done or liabilities incurred.
He followed the English High Court decision of West Wake Price & Company v Ching [1956] 3 All ER 821 where Devlin J stated that a claim is a demand for something as due or an assertion of a right to something and is to be distinguished from the cause of action by which the claim may be supported or the ground on which it may be based. Further, section 281 of the 1963 Act makes it clear that in a voluntary winding up the entitlement of a liquidator to remuneration was to be regarded as a "claim". Therefore, "claim" must be given the same meaning in section 29(3) of the 1990 Act because by virtue of section 37(3) of the 1990 Act the 1963 Act and all amending legislation, including the 1990 Act, are to be construed together as one Act.
Mr Justice Keane said that the legislature did not intend to distinguish between a voluntary and a compulsory winding up in relation to the costs, expenses and remuneration of a liquidator but if the interpretation argued for by the liquidator were adopted it would mean that an examiner would achieve a priority over the liquidator where the company had secured assets but not where, as here, the company had no such assets.
There was some force in the argument that difficulties will be created for liquidations as a result of the interpretation preferred by the court but the court was bound to take into account the underlying policy of the 1990 Act, which was to facilitate where possible the survival of companies as going concerns while the feasibility of a scheme of arrangement was looked into by an examiner. The Supreme Court had already determined, in the case of Re Holidair, that in the event of any ambiguity in the construction of any section in the Act this underlying policy had to be borne in mind. The alternative construction, if adopted by the court would result in a serious disincentive to appropriately qualified people to act as examiners which would be contrary to the policy of the 1990 Act.
Mr Justice Keane said the appeal would be allowed and an order would be substituted for the order of the High Court giving the examiner priority over the costs, expenses and remuneration of the liquidator in the winding up.
Solicitors: Matheson Ormsby Prentice (Dublin) for the examiner; Eugene F Collins (Dublin) for the official liquidator.