The High Court found that the Revenue Commissioners were unfairly prejudiced by the way receivership costs were allocated between the floating and fixed charge assets of A-Wear Limited. It proposed directions limiting the costs charged to the floating asset proceeds, but invited further submissions before making an order.
The application concerned the allocation of the remuneration and costs of the company’s receivership, including legal expenses. The Revenue Commissioners argued that most work after the sale of the company’s stock related to the more complex fixed charge assets, and that those costs should not be loaded onto the proceeds of floating charge assets.
The court heard that a schedule prepared by the receiver’s solicitors allocated €771,791.01 in costs and expenses to fixed charge proceeds and €121,317.19 to floating charge proceeds. The schedule listed €250,023.97 in floating charge assets and €1,302,541.01 in fixed charge assets. The parties appeared to agree that it omitted €850,000 received from Latzur Limited for company business equipment. A further €59,381.66 cash balance had previously been agreed to fall within the floating charge category.
The Revenue said its share of costs should reflect the work actually done on each category of asset. Its counsel argued that the stock was sold soon after the first receiver’s appointment in February 2012, while later work involved preserving, managing and selling fixed assets. The receiver’s counsel submitted that the Revenue had to establish unfair prejudice and pointed to the absence of evidence supporting the alleged allocation of work. The receiver also averred that normal practice did not involve recording staff time separately by charge category.
The judge said concerns about prejudice were reasonable and should be addressed by the receiver. The court considered that beneficiaries of the floating asset proceeds should pay only the cost of the stock sale and any limited work by the first receiver to categorise the stock. It found that a general allocation practice that did not assess the work involved did prejudice the Revenue in this receivership.
The court did not make final directions in this judgment. It proposed to give directions along the lines sought in the application and invited counsel to make further submissions on the two requested directions: allocating receivership remuneration and costs according to work done for each asset category, and excluding certain costs connected with the dispute over fixed asset costs.