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The payment of costs of a winding up petitioner as an expense of the administration

The High Court on 10 February 2010 issued guidance as to how to treat the situation where a company has been the subject of a winding up petition and subsequently the has been an administration order against the company made following an application to the Court.

The Court had to consider in Irish Reel Productions Limited v Capitol Films Limited [2010] EWHC 180 (Ch) whether the petitioning creditor was entitled to their costs of the winding up petition as a costs of the administration in accordance with r2.12. The Court was asked to direct that the petitioners costs were paid out of assets of the company and in priority to the administrators expenses under r2.67(3). It was disputed that that the petitioner's costs were entitled to be treated as an expense of the administration as the wording of r2.67 merely allowed for the recovery of the expenses of those appearing at the hearing of the administration application.

Mr Justice Briggs decided that r2.12(e) permitted a person who had presented a winding up petition to appear an the hearing of an administration application to enable that person to seek the costs of bring that petition, which would ordinarily be dismissed if the administration order was made. Mr Justice Briggs decided that as the phrase "costs ... of any person whose costs are allowed by the

court" in r2.12(3) meant not merely that persons costs of appearing at the hearing of the administration application but the costs of any petition which is dismissed at the same time. The remainder of the words of r.2.12(3) the automatically provided for such costs to be payable as an expense of the administration and fall within the wording in r2.67(1)(c) as a cost of those appearing at the hearing of the application.

Mr Justice Briggs emphasised that the administration order could be the last stage of a long process whereby the company ends up in an insolvency process, the earlier stages of which, including the presentation of a winding up petition against the company could have faced dogged resistance by the Company itself.

Comment

This case provides useful guidance to practitioners who looked to be appointed as administrators of companies on an administration order application following the presentation of a winding up petition. Practitioners will have to take into account the costs of the petitioners as an administration expense when considering taking on such a case.