Court of Appeal Reduces Liquidator's Fees in Respect of Six-year Liquidation which were Deemed "Neither Reasonable nor Necessary"
Earlier this year the Court of Appeal reduced a bill of €1.8 million in respect of the fees of a Liquidator on the basis that certain fees were "neither reasonable nor necessary."

 

In the matter of Mouldpro International Limited (In Liquidation) and in the matter of The Companies Acts 1963 – 2005 the Court of Appeal reduced the fees of the liquidator in respect of three of the four periods of the six-year liquidation of Mouldpro International Limited ("Mouldpro"), finding that a portion of the hours claimed for were "neither reasonable nor necessary". 

The appeal was brought by Plastronix Investments Limited (“Plastronix”), the largest unsecured creditor of Mouldpro.  The case was an appeal from a 2012 decision of the High Court whereby the liquidator's fees in respect of the liquidation of Mouldpro were reduced to €1,298,350.51 plus VAT, with the trial judge reducing the liquidator's fees in respect of the fourth period of the liquidation by 20%. In the case before the Court of Appeal Plastronix sought a further reduction of the liquidator's fees in respect of each discrete period. 

The Court, in examining the liquidator's fees and work carried out in respect of each discrete period of the liquidation, held that the number of hours’ work claimed by the liquidator in the later stages of the liquidation should be reduced. However, the liquidator's fees in respect of the earlier stages of the liquidation were approved. In arriving at its decision the Court stressed that where a liquidator seeks to be remunerated in a manner which exceeds substantially the estimates originally submitted and approved by the Court it is for the liquidator to justify his claims. The Court held that the liquidator should have provided greater visibility and particulars of the actual basis and precise nature of his claim for remuneration, especially in respect of the later periods of the liquidation.  

The first period of the liquidation was 22 July 2005 - 28 February 2006. Ms Justice Máire Whelan was satisfied that the vast bulk of the liquidator's work was carried out during this period, noting that Mouldpro's creditors received positive benefits and the value of the realisations was increased.

The Court held that the number of hours claimed in respect of the second period of the liquidation, being 1 March 2006 – 30 September 2007, was substantial given that the vast bulk of the liquidator's work had been completed by this stage.  Ms Justice Whelan was not satisfied that the number of hours claimed for were either reasonable or necessary and held that the fees for this period ought to be reduced by 25%.  

The third period of the liquidation was 1 October 2007 - 31 March 2009.  After due consideration the Court held that the hours claimed and approved in respect of this period were, on balance, unreasonable and should be reduced.  Ms Justice Whelan stated that a vigilant and thorough scrutiny suggested that the work claimed could have been carried out more efficiently and in a substantially shorter period of time.  The Court held that the fees for this period ought to be reduced by 25%.  

The fourth period of the liquidation was 1 April 2009 – 30 September 2011.  The trial judge had held that the hours claimed for were neither reasonable nor necessary and reduced the liquidator's fees in respect of this period by 20%.  However, the Court of Appeal held that the reasonable remuneration warranted a reduction of 25% of the amount claimed in respect of the final period.

Key considerations for liquidators

A liquidator is an agent of the company and owes fiduciary duties to it in addition to his statutory obligations. The Companies Act 2014, Part XI, brought about significant changes to the process whereby the liquidator's remuneration is fixed. However, that statute was inapplicable with regard to any part of the periods in question in this case as it pre-dated the 2014 Act.  An important consideration on the part of the Court in considering the remuneration of a liquidator is fairness and the Court of Appeal held that the Court is not bound by the existence of scales of fees, though it is entitled to take such scales into account if it thinks it proper to do so in the exercise of arriving at what constitutes a fair remuneration in all the circumstances of the case.  
The court will act with "vigilant scrutiny" in considering what constitutes fair remuneration, therefore anyone acting 

Contributed by Rebecca O'Connor 

 

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