The High Court has ruled that Home Payments Ltd’s joint liquidators may seek a contribution from customer funds towards costs of administering those funds, but only after company assets are applied to liquidation costs. The court did not set the final amount to be deducted or make the further distribution order in this judgment.
In a judgment delivered on 25 October 2013, Ms Justice Finlay Geoghegan directed that company assets be used to meet the liquidators’ total allowable remuneration, costs and expenses for company-related and customer-related work in equal priority. If those assets are insufficient, the unpaid share of allowable costs attributed to customer-related work may be deducted from the customer funds before distribution.
The company was wound up in August 2011. Its 2,239 customers were owed a combined €6.67 million, while €2.09 million stood in a company bank account. The court had previously approved treating that account balance as trust money for customers and accepted that individual contributions could not practically be traced. In July 2012, it authorised an initial €1.2 million distribution, pending a decision on whether costs could be met from the remaining funds.
The liquidators said reconciling customer accounts and arranging a fair distribution were necessary parts of an orderly winding up. A customer committee accepted that some costs could be charged to customer funds, but disputed the proposed priority, the overall fees and aspects of how work had been allocated.
The judge held that the court had equitable jurisdiction to allow a contribution from trust funds, exercised sparingly, and that the reconciliation and administration work was part of the liquidators’ duties. She also found jurisdiction under section 244 of the Companies Act 1963 to set the priority of winding-up costs where company assets were insufficient. She saw no just basis to give company-related work priority over customer-related work. The judgment noted that, regardless of the order, no dividend to company creditors was expected on the figures then available.
On fees, the judge ordered a 5% reduction in the liquidators’ remuneration, including projected remuneration, to account for probable extra expense from using two accountancy firms. She otherwise made no further reduction to remuneration and expenses. One substantial item of KPMG work, reviewing alleged misuse of customer money for investments, was to be reclassified as company-related work. The judge considered the proposed legal fees reasonable and approved them as a basis for calculating the overall costs.
The final calculation remained outstanding. The liquidators were directed to update the figures for VAT treatment, the reclassification, the 5% reduction and any future company-asset realisations, then estimate the customer-fund deduction and submit the figures to the customer committee’s solicitors. The court said it would make final determinations and orders at a future date.