High Court: Liquidator must provide Revenue with detailed time sheets before payment is granted

About this case:

• Judgment:
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The Revenue had contended that the fees sought were too high, and Mr Justice David Keane found that he could not make a determination on the matter without the appropriate timesheets from the liquidator’s firm.

The applicant, Mr David Hughes was appointed as the official liquidator of Denis Finn Limited in June 2008, and the Court heard that liquidation of the company was almost complete.

In the Chancery Division of the High Court, Mr Hughes made an application for final orders, one of which was to determine the applicant’s remuneration in the sum of €558,750.76 and permitting the applicant to retain €93,004.00 out of the assets of the company, since the sum of €465,746.76 has already been received by the applicant from those assets in the form of interim fee payments.

The Office of the Revenue Commissioners as a significant creditor of the company, was the respondent to the application in the guise of legitimus contradictor.

In the present proceedings, the Revenue opposed the making of the order concerned on two grounds:

Background

In February 2011, the applicant first made an interim fee application to cover his remuneration, costs and expenses for the period between May 2008 and October 2010, representing 1,856.38 hours of work. The sum claimed was €330,181.20 including VAT at 23%

In December 2013, the applicant made a second interim fee application to cover the same matters for the period between November 2010 and September 2013, representing 781.50 hours of work. The sum claimed then was €135,565.56 including VAT at 23%

The court granted the applicant liberty to retain each of those sums.

The further payment of €93,004 (including VAT at 23%), sought in the High Court was to cover his remuneration, costs and expenses for the period between October 2013 and the conclusion of the liquidation, representing 328.80 hours of work.

In affidavits produced in the course of the proceedings, the applicant averred to his belief that all of the work involved was properly and necessarily carried out, and properly and necessarily delegated as appropriate; and that the remuneration sought represented true and fair value for the work done.

The Revenue pointed to time sheets that the applicant’s firm provided to it in another matter as evidence both that the applicant was familiar with the type of information required and that there was no reason to believe that the applicant could not produce such information to it (in the form of time sheets) in this case.

Furthermore, the Revenue stated that “…generic paragraphs indicating that “significant time” has been spent, is (sic) simply not sufficient for a fee application of this magnitude. Revenue are not in a position to assess the value of the liquidation to the creditors in their role as legitimus contradictor.”

The High Court

Mr Justice David Keane placed reliance on the judgment of Ferris J. in the Chancery Division of the High Court in England in Mirror Group Newspapers plc v Maxwell & Ors. 1 BCLC 638 which explained the principles applicable to the remuneration of receivers:

In the Mirror case, it was held that office-holders must expect to give full particulars in order to justify the amount of any claim for remuneration; and that office-holders must keep proper records of what they have done and why they have done it.

Justice Keane accepted that it was not ‘the norm’ to require liquidators to provide schedules containing a breakdown of time per topic or, in particular, to require liquidators to provide time sheets in support of an application for fees.

That being said, Justice Keane emphasised that in each case the court must strike a balance between, on the one hand, requiring the provision of a level of information or documentation sufficient to permit a representative creditor (such as the Revenue) and, ultimately, the court to form a view on what is reasonable remuneration and; on the other, not imposing unnecessary requirements that will result in extra work and expense in the liquidation without any, or any proportionate, benefit for creditors or contributories.

Considering the present case, Justice Keane found that there was no evidence to suggest that the effort or expense involved on the part of the applicant in producing the time sheets sought would entail a disproportionate - or, indeed, any further - expense in the liquidation to the detriment of the general body of creditors

Furthermore, considering Re Mouldpro International Ltd (In liquidation): Farrell v Plastronix Investments Ltd IEHC 418 Jusitce Keane accepted that it was for the applicant to satisfy the court, on the evidence put before it, that the amount he was seeking was reasonable remuneration for the work done by him in the liquidation.

Given the absence of necessary information before the Court, Justice Keane stated that at this stage it would be premature, and thus wrong for him to address whether the level of remuneration sought by the applicant was reasonable in the circumstances.

Accordingly, Justice Keane made an order directing the applicant, Mr David Hughes, to furnish the Revenue with the required breakdown of fees.