[2007]JRC190
royal court
(Samedi Division)
3rd October 2007
Before : |
M. C. St. J. Birt, Esq., Deputy Bailiff (sitting alone). |
Between |
The directors of UGDJ Limited |
Representors |
|
|
|
And |
(1) Christine Mary Laverty (2) Miles Anthony Halley (3) Finbarr O'Connell (4) Alan Roberts (5) Adrian Rabet (6) Mechanical Copyright Protection Society Limited (7) Jersey Post (8) HSBC |
Respondents |
In the Matter of the Representation of the Directors of UGDJ Limited.
And in the Matter of Article 161 (4) of the Companies (Jersey) Law 1991 (as amended).
Advocate P. D. James for the Representor.
Advocate A. J. N. Dessain for the First, Second and Third Respondents.
Advocate M. H. Temple for the Fourth and Fifth Respondents.
Advocate A. J. Clarke for the Sixth Respondent (not present).
The Seventh and Eighth Respondents did not appear and were not represented.
judgment
the deputy bailiff:
1. The matter before me is a short point in connection with the winding-up of a company called UGDJ Limited. Very briefly, UDGJ is insolvent and has been placed in a creditors' winding-up. There was a meeting of members on 31st August. Two persons, Messrs Rabet and Roberts, had been nominated as joint liquidators, but at the members' meeting the representative of the sole shareholder tabled a resolution to add a third liquidator. So the resolution as passed by the members was that there should be three liquidators, the third liquidator being Mr O'Connell, a member of KPMG.
2. Immediately after that there was the necessary creditors' meeting. During that meeting concerns were expressed as to whether it was right that Mr O'Connell of KPMG should be appointed because, it was said, of a potential conflict of interest and certain other matters. The meeting was adjourned in order that the representative of the major creditor could take instructions but following her return it was still clear that there was disagreement.
3. The chairman of the meeting Mr Gee, one of the directors of the company, suggested that a representation be made to this Court in order to resolve the question of who should be appointed liquidator. Although there was not a formal vote, the evidence is that all those present agreed to such a course of action, including the representative of the major creditor.
4. The matter came before this Court a little while ago and the two original liquidators were appointed on a temporary basis pending today's hearing at which the Court was due to decide whether the third liquidator should be appointed. However the parties have very sensibly agreed the matter, no doubt largely so as not to run up further costs in what is clearly an insolvent company, and it has been agreed that simply the two liquidators will act; Mr O'Connell will not be appointed.
5. It has been agreed that the directors who brought the representation should have their legal fees in the bringing of the representation. However the directors also ask for their internal costs, by which is meant their fees for their time. I should explain that they are professional directors who are not under a contract of employment or a fixed salary; they are apparently directors who are remunerated according to the time they spend. They wish therefore for their remuneration in bringing the representation to be treated as costs of the creditors' winding-up under Article 165.
6. Mr Dessain appears for the major creditor. He submits that in a creditor's winding-up the directors fees are not normally to be considered as costs of the creditors' winding-up. In other words the work done by directors in convening the creditors' meeting and thereafter in offering time and assistance to the liquidators and fulfilling any other duties upon them are not recoverable as costs of the creditors' winding-up.
7. In the short time available it has not been possible for counsel to refer to any authority, but I am content to accept that that is the case. However, what is said by Mr James on behalf of the directors in relation to this case, is that it is a very unusual case. The directors had convened the necessary creditors' meeting and are not claiming for their time in convening and chairing the creditors' meeting. What he says is that the creditors themselves agreed that the way out of the impasse which had been reached because of the difference of opinion amongst the creditors was for the directors to bring this representation. In other words, the creditors agreed and encouraged the directors to spend time in bringing this representation. Mr James says that it would really be most unjust that creditors should be allowed to have encouraged the directors to do this and then turn round and say that such voluntary action on the part of the directors should not be treated as a cost of the winding-up.
8. I have to say that I am impressed by that argument. However, Mr Dessain has a second string to his bow. He says that the difference of opinion between the smaller creditors, or some of them, and the major creditor arose largely out of a misunderstanding and that the directors did not do enough at the creditors' meeting to resolve that misunderstanding. As against that, Mr James says that the representative of the major creditor was there and it was really for her to resolve any misunderstanding. Furthermore he says that the major creditor did not take any steps prior to the bringing of the representation to resolve such misunderstanding.
9. It is not possible for me on the basis of the evidence before me to resolve definitively whether the directors could have done a little better or not. I return to the fact that, for better or worse, the creditors, including the major creditor, agreed that the directors should bring this representation. This was something that the directors did not have to do; they could have left it to the creditors to bring the competing matters before the Court and argue it out. The directors, in order to help the orderly process of this creditors' winding-up, volunteered to spend time in bringing this matter before the Court and, as I indicated at the last hearing, I consider that it was proper to bring the matter before the Court in order to resolve it. Indeed the matter has now been resolved by agreement.
10. I consider, therefore, that this is an exceptional case and that it would be wrong not to treat this action, voluntarily undertaken by the directors with the encouragement of the creditors, as costs of the winding-up and therefore a priority expense. Accordingly I rule that the directors' internal expenses are to be treated as costs of the winding-up under Article 165. Mr Dessain made the point that there would be no control over the level of such fees. Clearly the fees will have to be at whatever hourly rate had been agreed with the company prior to the liquidation. As to the degree of time spent, that is really a matter it seems to me for the liquidators. They will need to be satisfied that what is being put forward is reasonable just like any other bill that is submitted to them. If they dispute it then, at the end of the day, if it cannot be resolved by agreement it will have to be resolved by the Court. The directors are entitled to be remunerated at the agreed rate for all time reasonably spent in connection with this representation.
No Authorities