The High Court struck out a winding-up petition against MCR Personnel Limited after the company paid the outstanding €18,000 debt following its presentation. The court ordered the company to pay the petitioner’s costs to date, with those costs to be taxed if not agreed.
The only issue before Miss Justice Laffoy was whether petitioner Karl Farrelly was entitled to costs. The company argued he was not, because the petition had not been advertised. The judge delivered her judgment on 25 July 2011.
Farrelly, the company’s former landlord, had settled earlier High Court proceedings against the company in August 2010. Under the settlement, he was to pay €43,750 in three instalments. The judgment says the company would have discharged its debt by 29 October 2010 if it had complied with the settlement, but €18,000 remained unpaid.
In May 2011, Farrelly served a statutory demand under section 214 of the Companies Act 1963. The company did not respond or pay, secure or settle the amount within three weeks. It was therefore deemed unable to pay its debts under that provision. Farrelly presented the winding-up petition on 20 June, and it was served on the company the following day.
On 27 June, the company transferred €18,000 to Farrelly’s solicitors. It then asked for the petition to be struck out without a costs order. Farrelly’s solicitors said they would seek costs from the court. The petition was not advertised after the debt was paid.
The company relied on an English decision concerning petitions where the debt had been paid but the petition had not been advertised. Justice Laffoy said the court should decide costs applications on their individual facts, considering events both before and after a petition is presented. She declined to impose a strict rule denying costs whenever a debt is paid before advertisement.
The judge said Farrelly was justified in serving the demand and presenting the petition after the demand went unmet. The debt was paid only after the petition was presented. Applying the usual principle that costs follow the event, she treated the successful recovery of the debt, rather than the winding-up of the company, as the relevant outcome. She also said it would be unjust to require the company to bear unnecessary advertising costs solely to comply with the rules.
The court ordered the petition struck out and awarded Farrelly his costs to date against the company, to be taxed in default of agreement. It made no winding-up order.