Re Professional Computer Group

JurisdictionEngland & Wales
CourtChancery Division
JudgeMR JUSTICE MORGAN
Judgment Date04 Jul 2008
Neutral Citation[2008] EWHC 1541 (Ch)
Docket NumberCase No: 2714 of 2008

[2008] EWHC 1541 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Morgan

Case No: 2714 of 2008

In The Matter Of Professional Computer Group Limited

In The Matter Of The Insolvency Act 1986

Ms Marianne Perkins (instructed by Follett Stock) for Professional Computer Group Ltd

Mr Niall McCulloch (instructed by Pitmans) for Mountain Software Holdings Ltd

Hearing dates: 11 th, 18 th and 21 st April 2008

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

MR JUSTICE MORGAN MR JUSTICE MORGAN

Introduction

1

On 21 st April 2008, following a contested hearing, I made an administration order in relation to Professional Computer Group Limited (“the Company”) and I gave a judgment dealing with the many points that had been argued before me first at a short hearing on 11 th April 2008 and later at an all day hearing on 18 th April 2008.

2

This second judgment deals with certain applications which have been made as to costs following my earlier judgment.

3

The applications as to costs were argued in the first instance immediately following judgment on 21 st April 2008. At that time, it was suggested that the rival submissions made in support of those applications involved important questions of principle and of practice. Accordingly, I invited counsel to make submissions in writing on the matters arising. I have now received detailed written submissions on the applications.

4

I will not restate all the matters which I dealt with in my earlier judgment. However, to make this second judgment intelligible I will briefly summarise the main points that were then dealt with. In my earlier judgment, I summarised the history of dealings between the Company and Mountain and the claims and cross-claims that had been made. I then referred to the three questions arising: (1) did the court have jurisdiction to make an administration order? (2) should the court in the exercise of its discretion make an administration order or was liquidation more appropriate than administration? and (3) who should be the administrator? I then summarised the relevant legal principles. I next recited the facts as to previous applications to the court in connection with Mountain's winding up petition in relation to the Company.

5

I then dealt with the question of jurisdiction which turned on whether there was a real prospect of the purpose of the administration being achieved. That involved a large number of detailed points arising from a comparison of the outcome of an administration with the outcome of a liquidation. In the course of examining the detailed facts, I stated that the sums involved were not substantial but that there was a real prospect of the creditors being better off with an administration rather than a liquidation.

6

I then considered whether the court should in the exercise of its discretion make an administration order and, in particular, whether the court should decline to do so and instead make an order winding up the Company. That question also required some examination of the detailed facts and, in particular, the facts relating to claims made by Mountain that the conduct of the directors of the Company required to be investigated by a liquidator. I concluded that the right thing to do was to make an administration order.

7

Finally, I dealt with the question of the identity of the administrator and I appointed the Company's nominee notwithstanding the objections put forward by Mountain.

The procedural history

8

My earlier judgment did not set out very much by way of procedural history of the application for an administration order. For the purposes of the various applications as to costs, I need to recite some of the relevant history.

9

On 28 th January 2008, Mountain presented a winding up petition in relation to the Company. On 1 st April 2008, the Company made the application for an administration order. The application was made in accordance with rules 2.2, 2.3, 2.4 and 2.5 of the Insolvency Rules 1986 (“the 1986 Rules”). There was a lack of clarity as to whether the application was made by the directors of the Company or by the Company but that is not a point of any substance in relation to the outstanding matters as to costs. The application was served on Mountain in accordance with rule 2.6 (3)(a) of the 1986 Rules. The application was listed to be heard in the interim applications court on 11 th April 2008. There was a degree of urgency in relation to the application because of the trading circumstances of the Company.

10

On the 11 th April 2008, the state of the evidence was that there was a witness statement from a director of the Company, a witness statement in response from Group Legal Counsel of Mountain (Ms Challinger), followed by a second witness statement from the director, a witness statement from the proposed administrator and two other witness statements on behalf of the Company. Although the 1986 Rules as amended do not require a report for the court from the proposed administrator, the director's witness statement in support of the application did exhibit such a report. The witness statement on behalf of Mountain ran to some 15 pages and contained 2 lengthy exhibits. Mountain's contentions raised many matters of detail as to the consequences of an administration order, the consequences of a liquidation and the suggested need for an investigation into previous actions of the directors of the Company. The witness statement of the proposed administrator, in response to Mountain's evidence, ran to some 25 pages and in addition there were 7 exhibits.

11

The application for an administration order came before me on 11 th April 2008 in the interim applications court. The Company was represented by Counsel. Mountain was also represented by Counsel. Mountain was entitled to be heard pursuant to rule 2.12(1)(e) of the 1986 Rules. I had been able to pre-read some but not all of the evidence which was to be relied upon. I did not think that the application could be dealt with within the usual time allowed for ordinary interim applications. Both Counsel had prepared skeleton arguments. The skeleton argument of Counsel for Mountain ran to 8 pages and he produced a bundle of 18 authorities. I pressed both Counsel for their estimates of the time needed for the hearing. Both Counsel stated that the matter was suitable to be heard as an ordinary interim application. As the list was heavy on 11 th April 2008, the hearing did not begin until mid afternoon on that day. I heard Counsel for the Company for a period in excess of one hour but by that time I was satisfied, notwithstanding the assurances of both Counsel, that it would require a hearing of approaching a day in length to give proper attention to the many points as to jurisdiction and as to discretion which were being argued. Because I had begun hearing the matter on that day, I did not require the Company to go away and start again before a different judge but I arranged for the matter to be adjourned to the earliest date when I was free to continue the hearing and that was the 18 th April 2008.

12

On the 18 th April 2008, the evidence was supplemented by 3 further witness statements and a statement from an accountant on behalf of the Company. I had pre-read all of the evidence before the hearing started. Both Counsel had submitted fresh skeleton arguments. The skeleton argument of Counsel for Mountain ran to 20 pages. The hearing took a full day. Indeed, I had to press both Counsel to conclude their submissions in order that the hearing could be completed within the day.

13

The 18 th April 2008 was a Friday and I gave judgment on Monday 21 st April 2008, as described above. Various applications for costs were made and argued on 21 st April 2008. Those applications have been repeated or modified in the written submissions which have now been made to me.

The 1986 rules

14

Before describing the various applications for costs, I should refer to rule 2.12(3) of the 1986 Rules which provides:

“If the court makes an administration order, the costs of the applicant, and of any person whose costs are allowed by the court, are payable as an expense of the administration.”

15

Rule 2.67 of the 1986 Rules states the order of priority in which the expenses of the administration are payable. Rule 2.67(1)(c) refers to the costs of the applicant and of any person appearing on the hearing of the application. Rule 2.67 acknowledges that when the administration order was made the court may have allowed the costs of a person who then appeared but rule 2.67 does not, in my judgment, indicate that any such person has any entitlement to an order for costs on that occasion. Such an order will only be made if the court thinks fit to make it. Rules 2.67(2) and (3) provide for the court in certain circumstances to have power to alter the order of priorities set out in rule 2.67(1).

The applications in relation to costs

16

The Company has applied for an order that the costs of the application be an expense of the administration. The Company has also applied for an order that Mountain do pay the Company's costs of the application from the time that Mountain served its evidence in opposition to the application (8 th April 2008). As a result of the Company's application for its costs to be paid by Mountain, the Company's application for its costs to be an expense of the administration is expressed as relating only to the costs of the application and the initial supporting evidence. However, I interpret the Company's position to be that if I do not make an order for its costs against Mountain, the Company would wish to have all its costs as an expense of the administration....

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