Bandon Motors (Bandon) Ltd. -v- Water Sun Ltd. & anor, [2018] IEHC 191 (2018)

Docket Number:2016 783 P
Party Name:Bandon Motors (Bandon) Ltd., Water Sun Ltd. & anor
 
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THE HIGH COURT[2016 No. 783P]

BETWEEN

BANDON MOTORS (BANDON) LIMITEDPLAINTIFFAND

WATER SUN LIMITED AND NYHAN MOTORS BANDON LIMITEDDEFENDANTS

JUDGMENT of Mr. Justice David Keane delivered on the 13th April 2018

Introduction

  1. Two applications are before the court. The plaintiff company seeks an interlocutory injunction restraining the defendant companies from presenting a petition to wind it up. The defendant companies seek liberty to cross-examine two of the deponents who have sworn affidavits in support of the plaintiff company’s injunction application.

    The underlying proceedings

  2. The plenary summons in this case issued on 29 January 2016. The plaintiff’s motion of the same date was filed on the same day. The principal relief claimed under the general indorsement of claim in the plenary summons is a perpetual, or permanent, injunction in the same terms as those of the interlocutory injunction now sought i.e. one restraining the defendants from presenting a winding up petition against the plaintiff in the Central Office of the High Court, together with damages for ‘malicious’ abuse of process. The defendants entered a memorandum of appearance on 4 February 2016.

  3. When the present application came on for hearing on 3 and 4 May 2016, the plaintiff had not then delivered a statement of claim. In the absence of a properly particularised claim, it is necessary to attempt to identify the issues that the plaintiff seeks to have tried from the averments contained in the affidavits exchanged between the parties and the written and oral submissions on which they rely.

    Background

  4. The plaintiff’s interlocutory injunction application is grounded on an affidavit of Kevin Barry, sworn on 29 January 2016. Mr Barry is the sole director and registered shareholder of the plaintiff company, Bandon Motors (Bandon) Limited (‘the new company’), which was incorporated on 5 September 2013.

  5. Mr Barry avers that, shortly after its incorporation, the new company acquired the business and assets of a company named Bandon Motors Limited (‘the old company’). For many years prior to the incorporation of the new company, Mr Barry was an employee of the old company, though never a director or shareholder. A Mr Bob Clarke swore an affidavit on 18 February 2016 in support of the new company’s injunction application, in which he avers that he was a director of, and primary shareholder in, the old company. He is now a sales manager with the new company. He does not disclose whether he has a beneficial interest in the ownership of it (see paragraph 24 below).

  6. The business of the old company principally comprised the ownership and operation of a Ford motor vehicle dealership trading as Bandon Motors located on the Clonakilty Road in Bandon, County Cork, together with the operation and ownership of an adjacent petrol filling station. The new company now operates that dealership and has its registered office at that address. The dealership employs 27 people.

  7. Mr Barry deposes that the new company entered into an agreement to purchase the business and assets of the old company after the latter fell into financial difficulties, despite the underlying profitability of its motor dealership, because it could not service its bank borrowings. Mr Barry does not disclose either the material terms of that purchase agreement or the basis upon which the new company was able to fund its acquisition of the business of the old one. Mr Barry refers to the transaction several times as ‘a management buyout’ but does not disclose which of the management personnel of the old company, if any apart from him, were involved in it; what level of funding was necessary to enable it to occur; or what was the source of that funding.

  8. Mr Clarke avers that the old company sold its business and assets to the new company ‘in the manner described by Mr Barry in the … affidavits sworn by him’, without acknowledging that, in those affidavits, Mr Barry has provided little or no information or detail concerning the manner in which the new company acquired the business of the old one.

  9. Mr Barry avers that, just prior to the conclusion of its purchase of the old company’s assets in December 2013, the new company agreed with a Mr Con Nyhan to sell its petrol filling station property to him for a consideration of €900,000. It appears to be common case that there had been a number of meetings between Mr Clarke, Mr Barry and Mr Nyhan between October and December 2013 in the context of the purchase by Mr Nyhan, through another company controlled by him, of a separate property, situated on the Cork Road in Bandon (‘the Cork Road property’), that the old company also owned.

  10. The new company received that sum from Mr Nyhan but, in Mr Barry’s words, the legal transfer of the title to the petrol station was not attended to. Mr Barry does not explain why not. Nor does he exhibit any contractual documentation evidencing that agreement for sale. He does aver that Mr Nyhan, either directly or through a company owned or controlled by him, subsequently went into occupation of the petrol station premises before leasing it to a third party in or about November 2014. Mr Barry further deposes that he later instructed the new company’s solicitors to seek to regularise the position, which prompted them to write to Mr Nyhan’s solicitors to that end on 18 November 2015, but without eliciting any response.

  11. In a subsequent affidavit, sworn on 18 February 2016, Mr Barry elaborates on the circumstances of that agreement. He exhibits a letter dated 14 January 2014 from a third-party petrol station operator to him on behalf of the old company, offering to purchase the petrol filling station for €900,000. Mr Barry avers that the petrol station operator was only interested in purchasing the filling station and had no interest in taking on the old company’s motor dealership, employees or creditors.

  12. According to Mr Barry and Mr Clarke, Mr Nyhan agreed to match that offer and, in addition, to provide the new company with an unsecured five-year interest free loan of up to €500,000 in consideration for which he was to receive a 40% shareholding in the new company in lieu of interest on the loan, though only at the end of that five-year period.

  13. Mr Barry also exhibits to that affidavit an agreement dated 20 December 2013 between the old company and its bank, whereby the bank agreed to accept €900,000 in full and final discharge of the old company’s (unspecified) indebtedness on certain terms and conditions, most notably the payment of that sum to the bank’s solicitors before 8 p.m. on that date. Given the old company’s pressing need under that agreement to compromise its indebtedness to the bank through the payment of €900,000 by close of business on 20 December 2013 and the strong implication that it was only able to do so with funds received in that amount – either directly or through the new company – from Mr Nyhan’s purchase of the filling station, the significance of an offer in the same amount by a third party the following month is not readily apparent.

  14. Mr Barry avers that it was a term of the agreement between the old company and the bank that the new company was to take on all of the rights and entitlements of the employees of the old company and not to effect any redundancies. However, the agreement that Mr Barry exhibits deals only with the settlement of the old company’s indebtedness to the bank. It does not contain the term alleged or any term referable to the proposed acquisition of the business of the old company by the new company. Indeed, it makes no reference whatsoever, whether directly or indirectly, to the proposed transfer of the old company’s business to any other entity. Nor does it make any mention of the new company.

  15. Mr Barry asserts that the advantages of the proposed transaction with Mr Nyhan from the latter’s perspective were essentially fourfold: first, he would obtain ownership of the petrol filling station; second, he would have access to Ford commercial vehicles from the new company at cost price; third, he would have a future equity stake in the Ford dealership business of the new company; and fourth, the funds he advanced to the new company would not be susceptible to any clawback by his creditors.

  16. The first of those propositions adds little to the court’s understanding of the loan element of the transaction. Mr Barry has exhibited an offer of €900,000 for the purchase of the petrol station received the following month from a third party that strongly suggests Mr Nyhan had acquired it in December 2013 at full market value. Hence, it is difficult to see how the opportunity to make that acquisition for that sum could also act as an incentive to make a further €500,000 available to the company as an unsecured interest free five-year fixed term credit facility.

  17. The second proposition is unsupported by any evidence of an agreement whereby Mr Nyhan or any of his companies was to be provided by the new company with Ford commercial vehicles at cost price.

  18. On the fourth proposition, Mr Barry exhibits a letter dated 24 September 2014 from a firm of solicitors representing Mr Nyhan’s daughter, Laura, to the solicitors for Henry Ford & Son Ireland, expressing the belief of that firm of solicitors that neither the National Asset Management Agency (‘NAMA’) nor any other creditor of Mr Nyhan would have grounds to take action against Ms Nyhan in respect of the unspecified funds invested by her in the new company. It is not immediately apparent how the relevant assurance – that Mr Nyhan’s creditors had no actionable claim to the funds in question – could be said to be contingent upon the investment of those funds in the new company, rather than upon the lawful entitlement to those funds (wherever invested) of Ms Nyhan rather than her father.

  19. Thus, the third proposition is the only one upon which the new company’s claim that the loan transaction had obvious...

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