The High Court approved €32,656.50 in legal costs arising in the bankruptcy estate of M.O’L., a discharged bankrupt, and set out procedures for future applications by the Official Assignee to pay legal costs from bankruptcy estates.
In a judgment delivered on 28 April 2021, Humphreys J. said the €12,000 threshold in section 61(3)(h) of the Bankruptcy Act 1988 applies to cumulative costs in a case. The Official Assignee may agree costs without court direction only where the amount that would be allowed on taxation would not exceed €12,000. The judge said that threshold could not be avoided by splitting costs into multiple invoices below €12,000 when the total exceeded it.
Going forward, the Official Assignee must submit costs for court approval if an additional payment would take a case’s cumulative costs above €12,000, or if that threshold has already been exceeded. Where a further payment is sought in an existing case, the application should also seek approval for historic costs already paid without the necessary approval. The judge said there was no immediate need for a comprehensive review of all historical files. Third parties whose interests were adversely affected could still object to historic payments.
The judgment also said applications to pay solicitors from a bankrupt’s estate should not properly be made ex parte because the payment may reduce what creditors recover. The Official Assignee should generally identify the petitioning creditor or largest unsecured creditor as the appropriate creditor to represent affected interests, and seek that creditor’s consent. If consent is provided, the application may proceed on an ex parte docket; otherwise, a notice of motion should be served on that creditor. The judge said unusual cases may require another approach, subject to seeking the court’s directions.
The application in M.O’L.’s estate was made on an ex parte docket and supported by affidavits setting out the background, invoices, work performed, fee review and the petitioning creditor’s position. A supplemental affidavit exhibited that creditor’s letter of consent. The judge said this more formal process provides transparency and accountability and should be used going forward.
The ruling followed an application heard on 12 April 2021. The judgment states that the court would grant the requested approval under section 61(3)(h). It also says the judge proposed to approve costs requested in four other cases, identified only by initials: G.L., J. McC., J.T. and B.W.