Insolvency Can of Worms

Petitioning Creditor News: thought limit of liability to the Official Receiver was the “deposit”, well sorry chaps and chapesses think again …

An interesting decision was handed down by Deputy Insolvency and Companies Court Judge Frith in the case of Revenue And Customs v Direct Affinity Events Ltd & Ors [2019] EWHC 3063 (Ch).

The case involved winding up orders that were either rescinded or the subject of rescission applications, often due to communication anomalies; sums due to a petitioner had been paid or the company had already been placed into Creditors Voluntary Liquidation or there was a dispute subject to alternative legal proceedings.

Key point: the petitioning creditor in general terms would probably be unlikely to find themselves liable to the Official Receiver for more than the amount already paid by way of the “deposit” but if there was some material dispute then the Court might step in and look at the matter under the assessment of costs regime.

The question that sprouted was who (if anyone) was going to pick up the costs of the Official Receiver (“OR”) and what was the status of those costs given rescission of the original orders, which arguably perhaps might not have been made. The cases involved company insolvent liquidations where there were no asset recoveries (“chargeable receipts”) into the liquidation estate. The dispute in these cases was between the OR and HMRC.

A submission by the Official Receiver was that rescission is termination of an earlier order; distinct from annulment which means the order in effect had never been made. The question which therefore arose was whether or not there were legal consequences arising from rescinded orders or whether the original orders were a nullity. The Court was not persuaded that there were no legal consequences.

What it appears that the Court found was that the Official Receiver’s entitlement to the administration fee and general fee arose in the three cases it considered “on the making of an order” but in consideration of the “2016 Order” these fees (taking into account the petition deposit) could only be recovered from “chargeable receipts” ie. asset recoveries made by the OR.

However, what the Court also then went on to broadcast was not only that the making of an order does enable the Official Receiver to retain the deposit received from the petitioning creditor but that the Court has unfettered jurisdiction to order the balance of the OR’s “actual costs” should be subject to assessment in cases of disagreement.

Notable extracts from the judgment:

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