Rohl v Bickland Ltd

The court has jurisdiction under paragraph 13(1)(f) of Schedule B1 to make an order concerning the costs of an administration application, even where an out-of-court appointment prevents an administration order being made. Rule 2.67 is complete as to expenses strictly so called, but other liabilities may be treated as if they were administration expenses. The discretion should be exercised where the application was substantially for creditors’ benefit and would probably have succeeded but for the intervening appointment.

The applicant, a creditor and director of the insolvent respondent company, applied for an administration order proposing a pre-pack sale of its restaurant business. Before the hearing, a floating charge was assigned to the other director, who appointed administrators out of court. The applicant accepted that his application could not proceed.

The remaining issues were whether his costs could be treated as an expense of the administration, what priority they should receive, and whether the discretion should be exercised in his favour.

1. Paragraph 13(1)(f) of Schedule B1 to the Insolvency Act 1986 was sufficiently wide to permit an order concerning the costs of an administration application, even though no administration order was made.
2. Rule 2.67 of the Insolvency Rules 1986 was a complete code of expenses strictly so called. However, the court could direct that other liabilities be treated as if they were administration expenses, applying the analogous liquidation-expenses principle.
3. The authorities concerning pre-appointment costs supported the width of the discretion under paragraph 13(1)(f), although none directly decided the present situation. The approach in Toshouku Finance supported treating the costs as if they were expenses and assigning them the priority they would have had under Rule 2.67(1)(c).
4. The burden was on the applicant seeking to impose the costs on another person. The relevant consideration was whether the proposed administration and pre-pack were substantially for creditors’ benefit rather than primarily for the applicant’s own interests. On the evidence, the proposal was in creditors’ interests and would probably have succeeded but for the out-of-court appointment.
5. The costs were therefore to be treated as if they were costs of the administration, with the priority they would have had under Rule 2.67(1)(c).

First-instance decision. The judgment records an earlier hearing before David Richards J and restoration to Mann J after the out-of-court appointment. No separate appeal is stated.