Joint liquidators directed to repay a rebate of non-domestic rates on a restitutionary basis
Joint liquidators were directed to repay a rebate of non-domestic rates to a parent company of a company in creditors’ voluntary liquidation, however the parent company was ordered to pay the liquidators’ costs of the application.
The joint liquidators of HCL Social Care Limited (HCL), a company in creditors’ voluntary liquidation, sought directions under s.112 Insolvency Act 1986 as to the appropriate distribution of a non-domestic rates rebate received from a local authority, and an order in respect of their costs of the application.
HCL entered CVL in 2020 after it had been mandated to close its premises during the Covid-19 pandemic. In 2021, the local authority sent HCL’s parent company (who was jointly liable) a demand for non-domestic rates. Some companies which had been forced to close were entitled to a rebate of rates. Pending a decision regarding the right to a rebate, the parent company paid the local authority £105,000 to avoid enforcement action. Thereafter the local authority made a rebate payment of £87,000 into the liquidators’ insolvency estate account.
The Court held that the rebate, together with any further rebate up to £20,000 (factoring in interest), shouldn't be treated as part of the general insolvency estate but should be paid over to the parent company on a restitutionary basis. The parent company had made the payment to the local authority as a gesture of goodwill to afford more time to sort the rebate claim, and on the basis that it would receive any rebate. The payment of the rebate into the liquidators’ insolvency estate account meant that HCL had been unjustly enriched.
The Court also held that justice and fairness also required that the costs of the application should fall on the parent company as beneficiary of the rebate and costs should not be paid out of HCL’s general assets to the detriment of its creditors.
Lennon v Health Care Resourcing Group Ltd [2024] EWHC 3034 (Ch).
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