Red Sail Frozen Foods Ltd ( In Receivership) -v- Companies Act [2006] IEHC 328 (20 October 2006)

Red Sail Frozen Foods Ltd ( In Receivership) -v- Companies Act [2006] IEHC 328 (20 October 2006)

It is lawful for the receiver to pay the preferential claims for arrears of wages, holiday pay, minimum notice, and unfair dismissal, including those subrogated to the Minister, notwithstanding the pre-receivership illegality, due to statutory intervention and the pragmatic approach of the Department. The receiver is entitled to remuneration and reimbursement of costs and expenses as claimed, subject to the court's discretion under s. 24(6) of the Conveyancing Act, 1881, as applied by the debentures. The bank is not entitled to reimbursement for all legal costs out of the assets of the companies, only those properly incurred in enforcing or preserving its security.

Citation
[2006] IEHC 328
Parties
Applicant: Tom Grace, Receiver; Company: Red Sail Frozen Foods Limited (In Receivership); Company: Red Sail Kilmore Limited (In Receivership); Company: Red Sail Exports Limited (In Receivership); Secured Creditor: Ulster Bank Ireland Limited; Notice Party/claimant: Minister of Enterprise, Trade and Employment; Notice Party: Revenue Commissioners; Notice Parties/claimants: Employees of Frozen Foods and Kilmore
Jurisdiction
Ireland
Judgment Date
20 October 2006
Procedural Posture
Application for Directions Under Companies Act / High Court Judgment on Application for Directions
Outcome
Application for directions granted in part.
Legal Topics
Receivership, Preferential Claims, Illegality of Contracts, Remuneration of Receivers, Subrogation, Priority of Payments
Insolvency Company Law Employment Law Receivership Preferential Claims Illegality of Contracts Remuneration of Receivers Subrogation +1 more

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Parties

Tom Grace, Receiver

Applicant

Red Sail Frozen Foods Limited (In Receivership)

Company

Red Sail Kilmore Limited (In Receivership)

Company

Red Sail Exports Limited (In Receivership)

Company

Ulster Bank Ireland Limited

Secured Creditor

Minister of Enterprise, Trade and Employment

Notice Party/claimant

Revenue Commissioners

Notice Party

Employees of Frozen Foods and Kilmore

Notice Parties/claimants

Procedural Posture

Application for Directions Under Companies Act / High Court Judgment on Application for Directions

Legal Issues

  1. 1 Whether the receiver can lawfully pay preferential claims for arrears of wages, holiday pay, minimum notice, and unfair dismissal where there was a pre-receivership practice of untaxed 'under the counter' payments to employees; Whether the receiver is entitled to remuneration and reimbursement of costs and expenses, and how these should be quantified; Whether the bank is entitled to be paid out of the assets of the companies for legal costs and expenses incurred in connection with the receivership and related litigation.

Ratio Decidendi

It is lawful for the receiver to pay the preferential claims for arrears of wages, holiday pay, minimum notice, and unfair dismissal, including those subrogated to the Minister, notwithstanding the pre-receivership illegality, due to statutory intervention and the pragmatic approach of the Department. The receiver is entitled to remuneration and reimbursement of costs and expenses as claimed, subject to the court's discretion under s. 24(6) of the Conveyancing Act, 1881, as applied by the debentures. The bank is not entitled to reimbursement for all legal costs out of the assets of the companies, only those properly incurred in enforcing or preserving its security.

Court Disposition

Application for directions granted in part.

Orders

  • It is lawful for the receiver to pay the preferential claims of the Minister and employees for arrears of wages, holiday pay, minimum notice, and unfair dismissal.
  • The receiver is entitled to remuneration and reimbursement of costs and expenses as claimed, subject to the court's discretion under s. 24(6) of the Conveyancing Act, 1881.