Bayview Hotel (Waterville) Ltd v Companies act 2014

JurisdictionIreland
JudgeMs. Justice Butler
Judgment Date08 September 2022
Neutral Citation[2022] IEHC 516
CourtHigh Court
Docket Number[2021 53 COS]
In the Matter of Bayview Hotel (Waterville) Limited
And in the Matter of the Companies Act, 2014

[2022] IEHC 516

[2021 53 COS]

THE HIGH COURT

Company – Winding up – Payment of debts – Petitioner seeking that the company be wound up – Whether the company was unable to pay its debts

Facts: The petitioner, Williams Holding Ltd, by petition filed on 19th March, 2021, sought that Bayview Hotel (Waterville) Ltd (the company) be wound up by the High Court either on the grounds that it was unable to pay its debts (s. 569(1)(d) of the Companies Act 2014) or, alternatively, on the basis that winding up the company would be just and equitable (s. 569 (1)(e)). The petitioner claimed that a sum of €479,249 was advanced by it to the company in 1986 which sum was secured by a mortgage debenture over the company’s assets. Two additional creditors supported the petition. The combined sum claimed to be owed by the company to those three creditors was some €1,514,200. The petition was opposed by two other creditors who between them claimed to be owed a total of €489,565. The fault line between the two groups of creditors lay in their respective association with or allegiance to one of the two men involved in taking over the Bayview Hotel in 1986, Mr Noonan and Mr O’Shea. These groups were described by counsel appearing on the petition as the Noonan interests and the O’Shea interests respectively. Those opposing the petition (the O’Shea interests) asserted that a forced sale by a liquidator would impair the value of the company’s main asset, the hotel, resulting in less funds becoming available to discharge the amounts owed to them. They argued that a voluntary sale by agreement “between the parties” would be financially more productive. The petitioner contended that the extent of the falling out between the two groups was such that agreement on the voluntary sale of the company’s property was completely unrealistic. It was also contended that court supervision would be required to deal with the conflicting claims being made on the proceeds of sale.

Held by Butler J that she had declined to deem the company unable to pay its debt in consequence of the non-payment of the amount demanded in the s. 570 notice in circumstances where she accepted that there was an issue raised as to the liability of the company to pay that particular debt. Butler J was nonetheless satisfied that the petitioner and Thursley Developments Ltd had proved that the company was unable to pay its debts, having had regard to the company’s accounts, the directors’ reports attached thereto and to the total of the debts claimed by the creditors who had responded to the petition. Butler J accepted that the value of the hotel was greater than that shown in the company accounts although the value may be somewhat less than the estimate provided in circumstances where there were potentially serious issues to be resolved as to the title to part of the hotel premises of which the valuer was unaware. Taking the valuation of the hotel at its height, Butler J held that it may well be the case that the company’s assets exceeded its liabilities; however, the asset base of the company was largely comprised of the hotel property and it could not continue to conduct its business if it had to realise that property in order to meet its debts. Butler J held that as a consequence of an inability to pay routine expenses the company had not made annual returns to the CRO since 2016 and was at risk of being struck off the registrar of companies as a result of this failure. For those reasons, the petitioner had satisfied the court that the company was unable to pay its debts within the meaning of s. 569(1)(d).

Butler J granted the petition under s. 569(1)(d). Butler J appointed Mr Murray of Friel Stafford Accountants as official liquidator of the company. Butler J made an order that the directors of the company prepare a statement as to the affairs of the company pursuant to s. 593(1).

Petition granted.

JUDGMENT of Ms. Justice Butler delivered on the 8 th day of September, 2022

Introduction
1

. By petition filed on 19 th March, 2021 the petitioner, Williams Holding Ltd. (“the petitioner”) seeks that Bayview Hotel (Waterville) Ltd (“the company”) be wound up by the court either on the grounds that it is unable to pay its debts (s. 569(1)(d) of the Companies Act, 2014) or, alternatively, on the basis that winding up the company would be just and equitable (s. 569 (1)(e) of the 2014 Act). As its name suggests, the company is the owner of and previously operated a hotel in Waterville, County Kerry. The company has not traded, save for a very limited extent, since a lockdown was imposed due to the outbreak of Covid 19 in March 2020, but the issues giving rise to this petition largely predate those events.

2

. The petitioner claims that a sum of €479,249 was advanced by it to the company in 1986 which sum is secured by a mortgage debenture over the company's assets. Two additional creditors support the petition. The combined sum claimed to be owed by the company to these three creditors is some €1,514,200. The petition is opposed by two other creditors who between them claim to be owed a total of €489,565. According to the company's accounts there are also some smaller, trade creditors who have not responded to the petition. The fault line between the two groups of creditors lies in their respective association with or allegiance to one of the two men involved in taking over the Bayview Hotel in 1986, Mr. Robert Noonan and Mr. Michael (Haulie) O'Shea. These groups have been described by counsel appearing on the petition as the Noonan interests and the O'Shea interests respectively. Whilst not entirely legally exact, I will adopt this as a useful description of the competing interests.

3

. In due course I will examine the case made against the petitioner's claim to be owed the sum claimed. In very broad terms those opposing the petition (the O'Shea interests), who are coincidentally largely unsecured creditors, accept that the company's property will have to be sold to meet the company's indebtedness. However, they assert that a forced sale by a liquidator will impair the value of the company's main asset, the hotel, resulting in less funds becoming available to discharge the amounts owed to them. They argue that a voluntary sale by agreement “between the parties” would be financially more productive. The petitioner contends, for reasons that may become apparent as I describe the history of the interactions between the parties, that the extent of the falling out between the two groups is such that agreement on the voluntary sale of the company's property is completely unrealistic. It is also contended that court supervision will in any event be required to deal with the conflicting claims being made on the proceeds of sale.

History of Interactions between the Parties
4

. It is difficult to describe the history of the interactions between the Noonan and the O'Shea interests for a number of reasons. Firstly, there was clearly a significant level of business dealings between Mr. Noonan and Mr. O'Shea over an extended period of time in respect of other ventures which had a bearing on the way they interacted as regards this company. Secondly, there is considerable disagreement between the parties as to the terms of many of the key transactions. Thirdly, and most surprisingly from the court's perspective, there was a striking lack of formality and a consequent lack of any documentary record of much of what was allegedly agreed between the two men. As some of the disputed events took place over 35 years ago, the task facing any court attempting to ascertain exactly what was agreed is a challenging one. The following account therefore is not definitive, and it is acknowledged that many of its elements are disputed. Nonetheless it is intended to provide a sufficient overview to enable the arguments made by the parties to be understood.

5

. The company was incorporated by third parties in 1957 and has operated a hotel at Waterville since that date. Historically the business ran into some difficulty as a result of which the petitioner effectively acquired the company in 1986. The petitioner is a company incorporated in the Isle of Man and is owned and/or controlled by Mr. Noonan and members of his family. The circumstances in which the petitioner acquired the company are the subject of some dispute, to which I shall return, but the petitioner is now the sole registered shareholder in the company. Originally the petitioner nominated the company's directors but when those nominees retired in 2002 they were replaced by Mr. O'Shea and his wife. The investment made by the petitioner in the company in 1986 enabled the company to clear its then existing debts. In exchange the company executed an “all sums due” mortgage debenture in favour of the petitioner on 6 th June, 1986 which was registered on 23 rd June, 1986. I will return to the terms of this debenture. It is not disputed that the petitioner advanced the sum of €479,249 to the company nor that the company is liable to repay that sum to the petitioner. As shall be seen, the issue is whether that sum is currently due or may only be claimed by the petitioner after the hotel has been sold.

6

. Mr. O'Shea contends notwithstanding that the petitioner owns 100% of the issued share capital of the company, himself and Mr. Noonan agreed in 1986 that the hotel was to be a joint venture in which Mr. O'Shea was entitled to 50% of the equity. Mr. O'Shea's claim to 50% of the shares in the company is the subject of proceedings taken by him against the petitioner in 2018 (Record No. 2018/ 10899P). Much of the factual evidence in this case is derived from affidavits in the 2018 proceedings which have been exhibited by Mr. O'Shea in his replying affidavit to the petition. Mr. O'Shea claims...

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