Liquidators, Do Not Brush Aside Personal Liability For Costs At Super Speed

Did you know that when a liquidator makes a court application, it is important to identify the appropriate applicant, not only as a procedural matter, but also from a costs perspective?

All good where the liquidator succeeds in the court application

As we pointed out in our Legal Update of 13 May 2013 ("Liquidators' Costs in a Preference Claim"), procedurally, there is a distinction between court applications made by a company acting through its liquidator, and those made by the liquidator in that capacity. In the case noted in the Legal Update1, the liquidators were successful in impugning certain pre-petition payments by the company as unfair preferences. It was held that the liquidators, who were the applicants of record2, "are entitled to recover any part of their costs not recovered from the Respondent out of the Company's assets".

But life does not always treat us well

So far, so good. What if the court decides against a liquidator? The recent decision in Super Speed Limited (In Liquidation) v. Bank of Baroda (HCCW 273/2012, 11 November 2015) provides much food for thought. There, the liquidators applied for certain post-petition loans to the company to be set aside on the ground that they were dispositions rendered void by section 182 of the CWUMPO. The application was dismissed3 and the decision was upheld on appeal4.

Unsurprisingly, costs were awarded to the respondent bank. It appears the company had insufficient assets to pay the bank's costs. The November decision concerns the bank's application for orders requiring the liquidators and their funder, as non-parties to the section 182 application, to pay the costs awarded to it.

No costs order made against the liquidators (on that occasion)

As regards the application against the liquidators, the learned judge observed an inconsistency between two authorities from the English Court of Appeal5 and indicated a preference to follow Metalloy i.e., the applicant must show impropriety, not just unreasonableness, on the part of the liquidator. In the present case, the learned judge concluded that the bank had not made out a case of impropriety (Metalloy), and in any event it was not just to grant the bank's application taking into account all relevant considerations (Dolphin Quays).

Turning to the application against the funder, impropriety need not be established. Under the funding agreement, the funder has promised to (amongst other things) pay the liquidators' costs and meet any...