Allied Irish Banks Plc v O'Driscoll
| Jurisdiction | Ireland |
| Judge | Ms. Justice Costello |
| Judgment Date | 12 July 2018 |
| Neutral Citation | [2018] IEHC 422 |
| Docket Number | [2017 No. 239 COS] |
| Court | High Court |
| Date | 12 July 2018 |
[2018] IEHC 422
THE HIGH COURT
Costello J.
[2017 No. 239 COS]
IN THE MATTER OF MARLBORO HOLDINGS (DGT) LIMITED (IN VOLUNTARY LIQUIDATION) AND
IN THE MATTER OF THE COMPANIES ACTS, 2014
AND IN THE MATTER OF SECTION 588, 638 AND 698 (9) OF THE COMPANIES ACT, 2014
Liquidators – Creditors meeting – Companies Act 2014 – Appellant seeking appointment of liquidators – Whether liquidator was validly elected
Facts: The issue for decision in this case was whether the second respondent, Mr Fitzpatrick, was validly elected liquidator of Marlboro Holdings (DGT) Ltd (the company) at a meeting of creditors held on the 23rd July, 2017. This in turn depended upon whether the chairman of the meeting, the first respondent, Mr O’Driscoll, was correct to rule the value of the claim of the applicant, Allied Irish Banks plc (the bank), as unascertained and therefore nil.
Held by the High Court (Costello J) that the respondent ought not to have excluded the bank from voting at the creditors meeting to the full value of its claim of €1,508,122.60. Costello J held that Mr Donohue and Mr Pyne of Mssrs O’Connor & Pyne & Co. Chartered Accountants and Registered Auditors should have been appointed the liquidators of the company at the meeting; that being so it was appropriate that they be appointed as joint liquidators of the company in place of Mr Fitzpatrick notwithstanding the delay which had occurred in this case.
Costello J held that, while the reliefs sought in the notice of motion were pursuant to ss. 588, 698 (9) and 638 of the Companies Act 2014, it was not possible to make an order in this case pursuant to s. 698 (9) and she preferred to make the order pursuant to s. 588 (4) and (5), rather than s. 638 appointing Mr Donohue and Mr Pyne as joint liquidators instead of Mr Fitzpatrick.
Order granted.
The issue for decision in this case is whether the second named respondent, Mr. Fitzpatrick, was validly elected liquidator of Marlboro Holdings (DGT) Ltd (‘the company’) at a meeting of creditors held on the 23rd July, 2017. This in turn depends upon whether the chairman of the meeting, the respondent, was correct to rule the value of the claim of the applicant as unascertained and therefore nil.
By letter of sanction dated 3rd September, 2010 Allied Irish Banks Plc (‘the bank’) offered the company three facilities, being the renewal of three existing facilities in the amount of €1,095,000 in respect of the first facility, €500,000 in respect of the second facility and €399,000 in respect of the third facility subject to the terms and conditions therein set out. Each of the facilities was to be repaid or refinanced by the 31st March, 2011. The facility letter was accepted on the 27th September, 2010.
In the event the facilities were neither repaid nor refinanced and ultimately the properties securing the facilities were sold by the company and the net proceeds of sale were applied in diminution of the relevant outstanding loan facilities. There were negotiations in 2015 and 2016 to try to compromise the personal indebtedness of the respondent, the residual debt of the company and the debt of a related company, Thomas J. O'Driscoll & Associates Ltd. The global settlement of €1.15 million offered in April 2015 was rejected by the bank's credit committee and the bank made a counter offer on 17 December 2015. Ultimately the negotiations were unsuccessful and the respondent's agent, Ms. Olivia O'Leary, by email dated 11 March 2016 said that ‘what was agreed months ago is off the table. Currently we don't have any offer to give AIB.’ Thereafter, by letter of demand of the 7th October, 2016 the bank demanded repayment from the company of the residual sums then due on foot of each of the three loan facilities. In respect of the first facility the balance outstanding was €911,037.76; in respect of the second facility, €363,552.38 and in respect of the third facility, €223,323.63. The total balance due in respect of the three facilities was €1,497,883.77. There was no response to say that these sums were not due and owing.
The company filed unaudited abridged financial statements for the year ended 31st December, 2015 in the Companies Registration Office on the 23rd November, 2016. The accounts were dated 9th November, 2016 and were signed by the respondent and Ms. Olivia O'Leary, the directors of the company. The accounts described creditors: amounts falling due after more than one year as being €1,484,844. The carrying amount of financial liabilities is stated as €1,499,637. In the notes to financial statements at Clause 2.2 the directors state:
‘2.2 Going concern
The company incurred a loss before tax for the year of €46,498 and has a negative shareholders' funds [sic] of €1,090,407. The company is dependent on the continued support of its bankers. The company is currently in negotiation with AIB in relation to the residual debt. The directors have prepared the financial statements on a going concern basis on the assumption that the negotiations with AIB will have a favourable outcome.’
No agreement was in fact reached and the bank's solicitors served a statutory notice pursuant to s. 570 of the Companies Act, 2014 on the 2nd June, 2017 formally demanding payment of the sum of €1,508,122.60 from the company.
The company's solicitor replied to the bank's solicitor by email dated 15 June, 2017 stating ‘our client disputes the extent of the debt alleged and requires details as to what how [sic] the sum Claimed is arrived at.’. It did not write asserting that the debt had been compromised and that the debt had been reduced to nil. Instead on 9th June, 2017 the company resolved to place the company in voluntary liquidation. On the 12th June, 2017 the company published a notice pursuant to s. 585 of the Act of 2014 in the Irish Daily Mail advising creditors of a meeting fixed for the 23rd June, 2017. The company did not properly notify the bank as a creditor of the company of the meeting pursuant to s. 587 (2) of the Act of 2014. On the 16th June, 2017 Ms. Mary Whelan, case manager of the bank, wrote to the directors of the company notifying them of this omission and requesting that they arrange for the notice to be forwarded immediately to the bank and to confirm the name and address of the proposed liquidator. The letter stated:
‘As a list of creditors has not been received, please note that pursuant to s. 587 (4) of the Companies Act, 2014, Aaron Sweeney of AIB Bank will attend at the registered office of the company at 3.30 pm on Monday the 19th June, 2017 to inspect the list of creditors.’
By email dated 19th June, 2017 Ms. Olivia O'Leary emailed documents to Ms. Whelan in relation to the proposed creditor's meeting. Those documents stated that the person to be proposed for appointment as liquidator had not yet been decided but in the email Ms. O'Leary identified the proposed liquidator as Mr. Tony Fitzpatrick of Fitzpatrick Dwyer & Co. Clonmoney House, Newenham Street, Limerick. She said that there was a list of creditors in the front desk for Aaron Sweeney to pick up at any time on Monday that suited. The list of creditors listed AIB Bank as the first creditor. Other creditors included directors of the company, Olive O'Driscoll, Thomas O'Driscoll and Olivia O'Leary.
On 23rd June, 2017 the members of the company resolved to wind up the company and nominated Mr. Fitzpatrick to be the liquidator of the company. At the creditors meeting on the 23rd June, 2017, the bank was represented by Mr. Aonghus Carney and its solicitor, Mr. Donnchadha Murphy of Barry C. Galvin and Son solicitors and they were accompanied by Mr. Barry Donoghue, one of the bank's nominees to act as liquidators of the company. Mr. Carney and Mr. Murphy were presented with a directors' estimated state of affairs as at 23rd June, 2017. No value whatsoever was attributed to the bank's debt. Note 1 of the schedule of unsecured creditors stated:
‘The AIB debt is in dispute and therefore the directors have decided that, as same is not ascertained, it would be misleading to include any amount in the statement of affairs at this time.’
The total unsecured creditors (excluding the bank) was €28,961. Of this, €23,857 was made up of the respondent, the chairman of the meeting, and his wife, Ms. Olive O'Driscoll and their fellow director Ms. Olivia O'Leary.
The minutes of the meeting records that a representative of the bank sought to nominate Barry Donohue and/or Conor Pyne as liquidator but the respondent concluded that there were three creditors entitled to vote and that the bank's debt was unascertained and therefore its vote was nil. Mr. Carney questioned the respondent in relation to the treatment of the debt of the bank and asked that a minimum value be allocated to the claim for the purpose of voting but this was refused. The respondent said that the bank had entered into a deal and then subsequently reneged on it. Therefore, there was uncertainty as to the bank's debt and it was not entitled to any vote on the appointment of a liquidator. As result the respondent, his wife and Ms. O'Leary, as the three creditors held to be entitled to vote at the meeting, secured the nomination of Mr. Fitzpatrick to act as liquidator.
The bank was dissatisfied with the conduct of the creditors meeting and with the decision of the respondent not to allow the bank to vote at the meeting in respect of its debt. The bank claims that the indebtedness had been recognised in the filed accounts of the company over many years and that the actions of the respondent appeared to have been motivated solely...
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