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High Court of Ireland Decisions
You are here: BAILII >> Databases >> High Court of Ireland Decisions >> C.H.A. Ltd., Re [1999] IEHC 90; [1999] 1 IR 437; [1999] 2 ILRM 76 (25th January, 1999)
URL: http://www.bailii.org/ie/cases/IEHC/1999/90.html
Cite as: [1999] 2 ILRM 76, [1999] IEHC 90, [1999] 1 IR 437

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C.H.A. Ltd., Re [1999] IEHC 90; [1999] 1 IR 437; [1999] 2 ILRM 76 (25th January, 1999)

THE HIGH COURT
1988 No. 7635P
IN THE MATTER OF THE COMPANIES ACTS, 1963 to 1990
AND IN THE MATTER OF C.H.A. LIMITED (IN LIQUIDATION)
ON THE APPLICATION OF TRIPLE D WAREHOUSES LIMITED

Judgment of Ms. Justice Laffoy delivered on the 25th day of January, 1999

1. By Order of this Court made on 21st September, 1988 it was ordered that C.H.A. Limited (the Company) be wound up by the Court and that F. J. Grey be appointed Official Liquidator for the purposes of the said winding up. At the time of the winding up order the Company was in occupation of certain premises as tenant to Triple D Warehouses Limited (the Applicant) and the Liquidator continued to occupy the premises after the commencement of the winding up. On the failure of the Liquidator to pay post liquidation rent claimed by the landlord, the Applicant, in respect of post liquidation occupation of the premises in question, by Order of this Court made on 21st October, 1991 the Applicant was given leave to institute proceedings against the Company for recovery of the rent.

2. The proceedings were brought in the Circuit Court in Cork and on 7th February, 1996 an Order was made in the Circuit Court by His Honour Judge Moran that the Plaintiff should recover the sum of £5,000 together with the costs of the proceedings when taxed and ascertained. A sum of £2,000 had been lodged in Court by the Liquidator with the leave of this Court and it was ordered that that sum be paid out to the Plaintiff in part discharge of the decree.

3. The costs of the Circuit Court proceedings and witnesses' expenses were subsequently taxed in the sum of £2,644.34.

4. On this application the Applicant claims the sum of £3,000, being the balance due on foot of the order of the Circuit Court, as "costs, charges and expenses incurred in the winding up" within the meaning of Section 244 of the Companies Act, 1963 (the Act of 1963) and claims that it is entitled to be paid the taxed costs of the proceedings in priority to all other claims in the liquidation.

5. I will deal with the question of the taxed costs first. In support of his contention that the Applicant is entitled to be paid the taxed costs in priority to all other claims in the winding up, Mr. Hunt relied on the decision of the Supreme Court in Comhlucht Paipear Riomhaireachta Teo -v- Udaras na Gaeltachta (1991) I.R. 320. In that case, the Court was concerned with an application by the defendants against the plaintiff, a company in voluntary liquidation, for security for costs under Section 390 of the Act of 1963. It was held by the Supreme Court that where an action is brought by a company after liquidation the costs of a successful defendant rank in priority to all other claims and, as there were sufficient funds available to liquidator in that case to pay the costs of the successful defendant, the application for security for costs failed in limine. In his judgment, McCarthy J. reviewed the authorities and he also quoted the following passage from Halsbury's Laws of England (4th Edition), Volume 7 (2) at paragraph 1803:-


"Where, after the commencement of the winding up, an action or other proceeding is brought in the company's name or by its liquidator, and an order for costs is made simply directing payment of costs or directing that costs be paid out of the assets, the costs are payable in full out of the company's assets in priority to the costs of the winding up."

6. Having commented that a number of the cases to which he had already referred are cited in the footnote to the foregoing paragraph, McCarthy J. went on to state as follows:-


"The overwhelming line of authority establishes that in the cases such as the present, where an action is brought after liquidation, the costs of a successful litigant against the company appear to rank in priority to all other claims. As a simple proposition it would seem to be supported in principle. It would be a great injustice if a company were free, after liquidation, to maintain an action for the benefit of the general body of creditors and, if unsuccessful, successfully contend that the costs of the successful litigant against the company should only rank pari passu with the claims of the creditors."

7. It was submitted by Mr. Collins, on behalf of the Liquidator, that the instant case is distinguishable from Comhlucht Paipear Riomhaireachta Teo -v- Udaras na Gaeltachta in that the Applicant is a successful plaintiff who, with the leave of the Court, commenced an action against the Company after the commencement of the winding up, and is not a successful defendant to an action brought by a company in liquidation after the commencement of the winding up. That this distinction exists cannot be gainsaid but, in my view, it is an immaterial distinction.

8. The quotation from Halsbury in the judgment of McCarthy J. does not give the full text of paragraph 1803, the remainder of the paragraph being in the following terms:-

"Similarly, where leave is given to bring an action against the company and to the liquidator to defend it, the successful plaintiff is entitled to have his costs in full out of the assets, including his costs of obtaining leave."

9. As authority for the foregoing proposition, the editors of Halsbury cite Bailey and Leetham's Case (1869) L.R. 8 Eq. 94 and Re: Wenborn & Company (1905) 1 Ch 413. In his judgment in the latter case, Buckley J. stated as follows at page 417:-


"When the voluntary liquidator, or the liquidator in a compulsory winding up, comes to court for leave to bring or defend an action by or against the company, and obtains this leave, the judge in effect pledges the assets of the company for the costs of the action which he authorises the liquidator to bring or adopt or defend. In Bailey and Leetham's case leave was given to the liquidator to defend an action brought against the company, and when the company lost the action, James V.C., as he then was, ordered the costs in full to be paid out of the company's assets. The principle of that case applies here."

10. Accordingly, on the authority of the decision of the Supreme Court in Comhlucht Paipear Riomhaireachta Teo -v- Udaras na Gaeltachta , I am satisfied that the Applicant is entitled to be paid in full the taxed costs of the Circuit Court proceedings amounting to £2,644.34 in priority to all other claims in the liquidation and I will make an Order for payment of the said sum by the Liquidator to the Applicant.

11. In relation to the balance of £3,000 due to the Applicant on foot of the Circuit Court Order in respect of post liquidation rent, it was properly conceded by Mr. Collins that, on the authority of the decision of Murphy J. in Re: GWI Limited , in which judgment was delivered on 16th November, 1987, that the sum of £3,000 owing in respect of post liquidation rent falls to be regarded as a debt contracted for the purpose of the winding up of the Company and to be paid in full like any other debt or expense properly incurred by the liquidator for the same purpose. Accordingly, I will make a declaration that the sum of £3,000 represents "costs, charges and expenses incurred in the winding up" within the meaning of Section 244 of the Act of 1963.

Section 244 provides as follows:-

"The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the costs, charges and expenses incurred in the winding up in such order of priority as the court thinks just."

12. The Court has been apprised that the liquidator has in hand a sum in the region of £8,000 to meet, in addition to the Applicant's claim, the Liquidator's own legal expenses and his remuneration and the other claims against the Company. The Court was also apprised that the Liquidator will shortly be bringing an application for final directions in the winding up. I propose adjourning the question of the Applicant's entitlement to be paid the balance of the sum due to it on foot of the Circuit Court Order and the priority of that claim vis a vis the other costs, charges and expenses incurred in the winding up until the hearing of the Liquidator's application, which should be on notice to the Applicant. I accept Mr. Collins submission that the Court's discretion under Section 244 overrides the order of priority stipulated in Order 74, Rule 128 of the Rules of the Superior Courts, 1986, which provision, by its terms, is "subject to any order of the Court".

© 1999 Irish High Court

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URL: http://www.bailii.org/ie/cases/IEHC/1999/90.html