Alvonway Investments Ltd ((in Receivership) and (in Liquidation)) v The Companies Act 2014
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 29 July 2020 |
| Neutral Citation | [2020] IEHC 376 |
| Docket Number | 2014/94 COS |
| Court | High Court |
| Date | 29 July 2020 |
IN THE MATTER OF ALVONWAY INVESTMENTS LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)
AND IN THE MATTER OF SECTIONS 819 AND SECTION 842 OF THE COMPANIES ACT 2014
AND
[2020] IEHC 376
Quinn J.
2014/94 COS
THE HIGH COURT
Companies – Disqualification – Companies Act 2014 s. 819 – Applicant seeking orders pursuant to s. 819 of the Companies Act 2014 restricting the second and third respondents from acting as directors of a company unless it meets the requirements as to capital stipulated in subsection (3) of that section – Whether the second and third respondents had acted responsibly in relation to their conduct of the affairs of the Company
Facts: The applicant, Mr Fennell, was appointed liquidator of Alvonway Investments Ltd (the Company) on 24 March, 2014. He applied to the High Court for an order pursuant to s. 842 of the Companies Act 2014 disqualifying the first respondent, Mr O’Donovan, from acting as a director or officer of a company, and orders pursuant to s. 819 of the Companies Act 2014 restricting the second and third respondents, Mr O’Brien and Mr Applebe, from acting as directors of a company unless it meets the requirements as to capital stipulated in subsection (3) of that section. The first respondent consented to a restriction order under s. 819 of the Act in lieu of disqualification, and an order for the liquidator’s costs.
Held by Quinn J that Mr O’Brien had persuaded him that he acted honestly and responsibly in relation to the affairs of the Company. Quinn J could not find that the failure to deliver a completed questionnaire was of itself a justification for finding that Mr O’Brien did not co-operate as far as reasonably could be expected in relation to the conduct of the winding up. Quinn J held that there was no other reason why it would be just and equitable that Mr O’Brien be subject to the restrictions imposed by s. 819(1) of the Act.
Quinn J held that Mr Applebe had not satisfied the court that he had acted responsibly in relation to his conduct of the affairs of the Company. Quinn J made an order pursuant to s. 819 that Mr Applebe shall not, for a period of 5 years, be appointed or act in any way, directly or indirectly, as a director or secretary of a company, or be concerned in or take part in the formation or promotion of a company, unless the company meets the requirements set out in subsection (3) of that section.
Third respondent restricted.
The applicant was appointed liquidator of Alvonway Investments Limited (“the Company”) on 24 March, 2014. This application is for an order pursuant to s.842 of the Companies Act 2014 (“the Act”) disqualifying the first named respondent from acting as a director or officer of a company, and orders pursuant s.819 of the Companies Act 2014 restricting the second and third named respondents from acting as directors of a company unless it meets the requirements as to capital stipulated in subsection (3) of that section.
The first named respondent has consented to a restriction order under s.819 of the Act in lieu of disqualification, and an order for the liquidator's costs. This judgment concerns only the application as against the second and third named respondents.
The Company's principal asset was Wilton Shopping Centre, Cork. At the commencement of its liquidation it was indebted to the National Asset Management Agency (“NAMA”) in a total sum of €419 million, comprising €171.6 million pursuant to a loan granted by Anglo Irish Bank Corporation plc, and a sum of €247.4 million in respect of a guarantee of the debts of a related company, Padlake Limited.
The Company was incorporated on 31 January, 2005. Its principal shareholder and director is the first named respondent, Mr. Joseph O'Donovan.
The Company was one of a number of companies and other entities owned and controlled by Mr. O'Donovan and members of his family, collectively known as the O'Donovan Group.
In 2005, the Company acquired Wilton Shopping Centre at a cost of €137 million with facilities from Anglo Irish Bank of €113 million.
At the time of its liquidation the three respondents were directors of the Company. Mr. O'Donovan was a director from 25 February, 2005, until 19 February, 2007 and from 6 April, 2010, to the time of liquidation. Mr. Applebe was a director from 25 February, 2005, continuously to the time of liquidation. Mr. Applebe holds a 3.75% shareholding in the Company, the balance of the shareholding being held by O'Donovan family entities. Mr. O'Brien was appointed on 15 October, 2010, and he does not hold any shares in the Company.
As at December 2010, the O'Donovan Group was indebted to its bankers in amounts totalling €495 million. This comprised €157.5 million due by the Company, and the balance due by other entities in the Group, most of which was also guaranteed by the Company.
In early 2011, the Anglo Irish Bank Loan and Guarantee, together with security held by that bank transferred to the National Asset Loan Management Limited (“NALM”), a subsidiary of NAMA.
On 4 March, 2011, Mr. O'Donovan submitted a Connection Business Plan to NAMA concerning the continuation of the Group's activities including the operation of Wilton Shopping Centre.
On 29 July, 2011, Mr. John Mulcahy, Portfolio Manager at NAMA, wrote to Mr. O'Donovan informing him that the Business Plan had been rejected by the NAMA Credit Committee but that NAMA was willing to “consider interim support for this Connection” subject to conditions (“Connection” was the term used by NAMA to refer collectively to the borrowers and obligors in the O'Donovan Group). The conditions ranged from timeframes for certain milestones to be delivered by the Group, through to stipulations concerning such matters as levels of expenditure, approval processes for costs to be incurred and further information and disclosures to be made. The effect was to apply strict operational and financial conditions to the continuing support of NAMA while the performance of the Group was being further assessed.
On 14 November, 2012, NAMA issued a further Interim Support Letter to Mr. O'Donovan extending support for the Connection until 30 April, 2013, subject to conditions.
On 13 May, 2013, Mr. O'Donovan engaged MC2 Accountants Limited, trading as McCarthy McSweeney, (“McCarthy McSweeney”), to assist in arranging new financing to deal with the Company's indebtedness to NALM. The terms of engagement provided for a consulting fee in the sum of €250,000 together with a fee on the complete sale of all properties or loan notes in the amount of 2% of the gross consideration for such sale. The consulting fee was to be paid quarterly in advance “or in full on delivery of a bid in excess of €55 million.” The Company did not seek NAMA's approval prior to engaging the advisors.
On 28 June, 2013, John MacHale, Lead Portfolio Manager at NAMA, wrote to Mr. O'Donovan notifying him of a recommendation made to NAMA's decision-making authority that enforcement action be taken against the Company due to its failure “to significantly progress or implement many of the terms upon which NAMA's support is conditional” and its failure “to act in a manner consistent with maximising the reduction of the Connection's liabilities to NAMA”. This letter invited the Connection to make representations before NAMA would decide on the most appropriate course of action to take.
On 1 July, 2013, McCarthy McSweeney issued an invoice to the Company for its first quarterly fee “per the Letter or Engagement” to the Company in the sum of €62,500 plus VAT.
By letter dated 10 July, 2013, Mr. O'Donovan replied to Mr. MacHale's letter of 28 June, 2013, outlining the steps he had taken to attract parties interested in purchasing the portfolio outright and requested a delay in enforcement action to afford such interested parties time to complete Due Diligence and formulate offers to NAMA for the Connection.
On 21 August, 2013, McCarthy McSweeney issued a second invoice to the Company for the “balance of agreed consulting fee based on delivery of bid, as per letter of engagement” in the sum of €187,500 plus VAT.
On 26 August, 2013, NALM issued letters of demand to the Company on foot of the Facility Letter for €171,631,806 and the Guarantee and Indemnity for €247,428,315. These letters were served on Mr. O'Donovan in his capacity as director and as secretary of the Company on 27 August, 2013. They were not served on Mr. O'Brien or Mr. Applebe.
On 27 August, 2013, Mr. MacHale wrote to Mr. O'Donovan stating that the decision making authority in NAMA had decided that “letters of demand should be served on the debtors within the Connection and failing repayment of the full amount demanded, receivers are to be appointed over the properties forming the security for the loans”.
On the same day, 27 August, 2013, two payments were made from the Company's current account. These payments comprised of:
(1) €300,000.00 to McCarthy McSweeney and
(2) €150,032.00 to Mr. O'Donovan.
(collectively the “August 2013 Payments”). These payments were made without NAMA's prior knowledge or approval.
On 28 August, 2013, NAMA appointed a statutory receiver, Eoin Ryan of McKeogh Gallagher Ryan, over the assets of the Company.
On 18 February, 2014, NALM presented a petition to wind up the Company.
On 24 March, 2014, the applicant was appointed Official Liquidator of the Company by Order of Mr. Justice Charleton.
The Business Plan submitted to NAMA in March 2011 estimated the Group deficiency at circa €300 million as at the end of December 2010. The Company's estimated deficiency in that Business Plan was €73.5 million, excluding its...
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