Ballylea Developments Ltd [in Voluntary Liquidation] v Companies Act 2014
| Jurisdiction | Ireland |
| Judge | Mr Justice Dignam |
| Judgment Date | 16 May 2023 |
| Neutral Citation | [2023] IEHC 261 |
| Court | High Court |
| Docket Number | 2022 No. 48 COS |
In the Matter of Ballylea Developments Limited (In Creditors' Voluntary Liquidation)
In the Matter of Dexbury Limited (In Creditors' Voluntary Liquidation)
And in the Matter of the Companies Act 2014
[2023] IEHC 261
2022 No. 48 COS
THE HIGH COURT
Judgment of Mr Justice Dignam delivered on the 16 th day of May 2023 .
The first, second, fourth, sixth, seventh, eighth and ninth-respondents seek, by Notice of Motion, an “ Order, whether pursuant to Section 631 of the Companies Act 2014 or otherwise, declaring that the Applicant, as liquidator of the companies named in the title to the proceedings, shall be personally liable in respect of any and all costs orders made against him in the proceedings.” For the purpose of this judgment I propose to adopt the approach of the applicant's written submissions and will refer to these respondents as “the moving parties”.
The “proceedings” referred to were issued by the applicant (who is the respondent to this motion) by Originating Notice of Motion dated the 8 th March 2022. The applicant is the liquidator of Ballylea Developments Limited and Dexbury Limited, both of which are in creditors' voluntary liquidation, and for the purpose of this judgment I will refer to him as “the liquidator”. In that Originating Notice of Motion he seeks various reliefs under sections 608 and 612 of the Companies Act 2014 arising from the sale of certain property and payments made to the moving parties. It is not necessary to refer to these proceedings in any detail. The liquidator's claim is summarised in paragraphs 4–9 of his affidavit grounding that Originating Notice of Motion and in particular in paragraphs 5–7 where he says:
“5. Since my appointment as liquidator to Ballylea and Dexbury, I have carried out extensive inquiries into the way the net sale proceeds arising from the sale of the property known as Marine House, Clanwilliam Court, Clanwilliam Place, Dublin 2…were dealt with by Ballylea and Dexbury. It appears to me that certain payments from the net sale proceeds were made to the Respondents for which Ballylea and Dexbury did not receive any consideration. Consequently, I believe that there has been an improper transfer of the assets of Ballylea and Dexbury in favour of the Respondents. Additionally, I believe there has been misfeasance, breach of duty and breach of trust on the part of the First and Third Named Respondents whereby they have misapplied and or retained property of Ballylea and Dexbury.
6. On or about 3 March 2016, Dexbury sold the property to Hibernia REIT Plc (“Hibernia”) for the sum of €26,525,000.00 pursuant to a written contract of sale (“the Contract for Sale”)…
7. Before dealing with how the sale proceeds of the Property were dealt with by Ballylea and Dexbury, it was necessary for me to examine the complex way the Property came to be sold and to detail the various agreements which Ballylea and Dexbury purportedly entered into. Having done so, I became extremely concerned that Ballylea and Dexbury entered into a fictitious joint venture whereby Ballylea took the profits of the sale of the Property to Hibernia even though it did not own the Property. The purpose of this joint venture was to prevent Dexbury paying capital gains tax…on the proceeds of same. The joint venture only came into being after Hibernia – quite properly – refused to take a sub-sale of the Property from Ballylea in circumstances where Ballylea was heavily indebted to the National Asset Management Agency (“NAMA”). The joint venture was, therefore, a sham transaction that was designed to avoid payments to Revenue and NAMA. From my investigations to date, it appears the mechanism put in place to deal with the net proceeds of sale of the Property, including the purported joint venture was designed by Brian Conroy, and it was put in place by him. Rather than pay CGT to Revenue or repay NAMA, Brian Conroy directed that the proceeds of sale of the Property be paid to the Respondents. For the reasons that will be explained in this affidavit, I believe that these payments were fraudulent.”
There followed an extensive exchange of affidavits. It is stated in the moving parties' written submissions that there are eleven affidavits in respect of that substantive application.
While this exchange of affidavits was going on, the moving parties' solicitors wrote to the liquidator's solicitors by letter dated the 18 th May 2022 raising a number of matters. These included the question of security for costs and the funding of the litigation. The liquidator's solicitor replied by letter dated the 1 st June 2022 and there then followed an exchange of correspondence. As this correspondence provides much of the context for the current application and, indeed, canvassed many of the issues that were raised at the hearing, it may be helpful to refer to some of the contents of these letters.
In the letter of the 18 th May 2022 the moving parties' solicitors asserted that the moving parties had a prima facie defence and expressed concern that the liquidator would be unable to meet any costs order. They went on to say “ In view of the fact that the Applicant in these proceedings is the Liquidator personally, and that in the ordinary course any costs orders which might be made in the Respondents' favour would be enforceable directly against the Liquidator and his assets, we would ask your client to confirm that he unequivocally accepts personal liability in respect of any costs orders which are adverse to him. If the Liquidator refuses to provide that confirmation, then we must necessarily reserve our clients' entitlement to seek security for costs.” They also sought information as to how the liquidator would discharge the moving parties' costs. The letter also raised the possibility that the liquidator may have entered some form of arrangement to fund the litigation, possibly with a commercial litigation funder and sought information in relation to this. The letter requested the liquidator's solicitor to “ confirm within 14 days from the date of this letter: (1) that your client accepts that he will be personally responsible for discharging any costs order which might be made in our clients' favour, and (2) how the Applicant is funding the litigation and whether, in particular, the litigation is being funded (or part-funded) by third parties…”. It concluded by reserving the moving parties' entitlement to make an application for security for costs (which, of course, could only be made against the companies).
Ultimately, the liquidator's solicitor confirmed that no third party was funding the litigation and so I will not refer further to that particular issue.
In their response of the 1 st June 2022, the liquidator's solicitor described the assertion that the moving parties had a prima facie defence as “without foundation and preposterous” and set out the reasons for this. They also stated that the legal authorities do not support an application for security for costs and referred to Re Ballyrider Limited (Unreported, Supreme Court, McKechnie J 31st July 2019) (a case to which I return), Re Eteams International [2020] IESC 23 and Re Cherryfox Limited [2020] IECA 123 in support of this position. They described the moving parties' solicitor's letter as containing a “ threat to bring an application for security for costs” and that such threat was a “ deliberate intimidatory tactic which attempts to ‘gag’ [the liquidator] and prevent a case with public interest elements from being prosecuted…that is indicative of [the moving parties'] attempts to delay and obfuscate [the liquidator's] attempts to conclude the winding up of the Companies”. They also expressed the view that such an application would be bound to fail. The letter did not address the moving parties' request for confirmation that the liquidator would be personally liable for any costs order made in the liquidator's underlying motion in favour of the moving parties (the respondents to the liquidator's motion) though it did refer to paragraph 88(5)(i) of Re Ballyrider and stated that the liquidator would be entitled to have recourse to the assets of the Companies in respect of the costs incurred by him. This seemed to implicitly acknowledge that he would be personally liable if an order for costs were made against him but he could in turn have recourse to the assets of the companies.
By letter dated the 21 st June 2022 the moving parties' solicitor stated that, contrary to what was said in the liquidator's solicitor's letter, they had not sought security for costs and reserved their right to do so. They also referred to the Ballyrider decision, noting that in his judgment McKechnie J addressed various scenarios and the costs implications of those scenarios depending on whether the company in liquidation or the liquidator is the party. They referred to the liquidator's solicitor's reliance on sub-paragraph 88(5)(i) of McKechnie J's judgment to the effect that where a liquidator brings or defends proceedings in his own name he is usually entitled to have recourse to the company's assets to meet any adverse costs order made against him and described this as being “undoubtedly correct, but is of cold comfort to our clients (and to your client presumably), as the Companies have no assets from which to discharge any liability for costs. Given that obvious fact, it is surprising that your client has, for reasons which are not clear to us, failed to expressly confirm that if a costs order is made in our clients' favour, your client will bear personal liability for...
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