Irish Reel Productions Ltd v Capitol Films Ltd

Where a winding-up petition is dismissed because an administration order is made, the petitioning creditor may seek an order that its petition costs be paid as an expense of the administration. A purposive reading of rule 2.12 permits the petitioner to appear at the administration hearing for that purpose. The costs covered are not confined to attendance costs at the administration hearing. They may include the costs of prosecuting the winding-up petition. Such costs fall within the priority category for the costs of a person appearing at the administration application. A separate order varying that priority requires good or sufficient reason.

Irish Reel Productions Ltd had presented a winding-up petition against Capitol Films Ltd and later became petitioner by substitution. The court made an administration order and dismissed the petition. Irish Reel sought an order that its petition costs be paid as an expense of the administration, and a direction under rule 2.67(3) that those costs rank ahead of the administrators’ expenses and the cost of security.

Capitol contended that the court lacked jurisdiction, arguing that rules 2.12(3) and 2.67(1)(c) covered only costs incurred in appearing at the administration hearing. The issues were whether the rules extended to the costs of the dismissed winding-up petition and whether their priority should be varied.

1. Jurisdiction to order payment as an administration expense. Rule 2.12(1)(e) permits a person who has presented a winding-up petition to appear at an administration hearing. One purpose of that provision is to allow the petitioner to seek an order for the costs of the petition where the petition is dismissed because an administration order is made.
2. Scope of the costs. On a purposive reading, the phrase “the costs ... of any person whose costs are allowed by the court” in rule 2.12(3) includes the petitioner’s costs of the winding-up petition, not merely the costs of appearing at the administration hearing. Once allowed, those costs are payable as an expense of the administration and fall within rule 2.67(1)(c).
3. Application. Irish Reel’s costs of prosecuting the petition after its substitution as petitioner should be paid as an expense of the administration. The court therefore ordered payment on that basis.
4. Priority. There was no good or sufficient reason to vary the priority under rule 2.67(3). That application was refused, particularly since it appeared extremely unlikely that the assets would be insufficient to meet the liability under rule 2.67(1)(c).

not stated in the judgment.