The High Court has ruled that a former examiner’s court-approved remuneration, costs and expenses must be paid from a company’s trading revenue before weekly operating expenses when a receiver continues to trade the business.
The judgment, delivered by Ms Justice Finlay Geoghegan on 17 December 2009, concerns 12 companies named in the proceedings. Their examinerships had ended and they were in receivership. The former examiner and the receiver disputed how the examiner’s approved fees ranked against payments to employees, suppliers and a company managing public houses operated by some of the businesses.
The court rejected the receiver’s argument that the company or receiver could choose whether to pay the examiner from trading revenue or asset sale proceeds. It interpreted section 29 of the Companies (Amendment) Act 1990 as giving the examiner a right to seek payment from either source, or potentially both.
The judge held that employees and suppliers have claims in a receivership for their pay and the agreed price of goods or services. The manager of the pubs could also have a claim under its contract. But section 29(3) gives the examiner priority over other claims in a receivership. Where a receiver chooses to continue trading and generates revenue, that revenue must first be applied to the examiner’s approved fees and expenses, ahead of weekly operating outgoings.
The ruling distinguishes receiverships from court-approved schemes of arrangement. Under a scheme, the examiner’s priority is over payments made under the scheme; it does not outrank the company’s ordinary operating expenses in the period before those scheme payments fall due.
A separate dispute concerned €100,000 attributed to Sharmane Limited. The former examiner said the money returned to the receiver was revenue earned by Sharmane for administrative and management work for subsidiaries. The receiver disputed that, saying Sharmane had no source of income. The judge said the affidavit evidence was insufficient to resolve whether the money was Sharmane revenue.
The court also made no finding on the receiver’s obligations concerning funds returned before the court determined the examiner’s approved fees. That question would require further submissions if it became necessary.
The judge declined at this stage to order disclosure of all money received by each company, saying it would impose a significant administrative burden. She said the receiver should identify which companies had received revenue since 31 July 2009 and arrange immediate payment of the examiner’s approved amounts, or pay over the revenue received if it was less. The court would hear the parties on the timing and precise form of the order. The judgment therefore set the priority rule but did not finally determine the Sharmane revenue dispute or settle the final order.