Bell lines Ltd ((in Liquidation)) and the Companies Acts 1963-2003
| Jurisdiction | Ireland |
| Judge | Ms. Justice Dunne |
| Judgment Date | 28 April 2006 |
| Neutral Citation | [2006] IEHC 188 |
| Court | High Court |
| Docket Number | [No. 23COS/1997] |
| Date | 28 April 2006 |
AND
[2006] IEHC 188
THE HIGH COURT
Company law - Liquidation - Preferential claim - Creditors - Employees - Restitution- Unjust enrichment - Subrogation - Whether claim for preferential status possible pursuant to s. 285 Companies Act 1963 and Directive 80/987/EEC/
Facts: In 1997, a liquidator was appointed to the companies at issue and in 2005, the liquidator sought an order inter alia confirming that the French creditors of the French branch of the companies were permitted to claim in the Irish liquidation of the companies, an order that the official liquidator deduct from the dividends amounts due to French creditors, an order that the English Insolvency Service (DTI) be admitted subject to adjudication in the liquidation as a preferential creditor in respect of employees and an order that the English Insolvency Service and the Northern Ireland Department of Employment and Learning (DEL) had preferential claims as to wages, holiday pay and pensions. The liquidator sought to rely on the provisions of s. 285 Companies Act 1963, read together with Directive 80/987/ EEC and argued that the payments would be treated as preferential claims by operation of law from a restitutionary right of subrogation to the position of the person whose debt had been discharged. It was submitted that the claim for preferential status would proceed on the same basis as restitutionary remedies.
Held by Dunne J. that the legislature had by s. 285 given certain types of creditors priority over other unsecured creditors. There was no unjust enrichment in the sense contended for. It was not possible to obtain on foot of subrogation preferential status. None of the authorities cited entailed that the right of subrogation extended to an entitlement not just to seek to have the debt repaid but also to step into the status that the employee. The body of unsecured creditors ranked equally amongst themselves. The claim would be refused.
Reporter: E.F.
EVERSON v BARRASS v SECRETARY OF STATE FOR TRADE & INDUSTRY & BELL LINES LTD 1999 ECR 198/98
EEC DIR 80/987 ART 3
COMPANIES ACT 1963 S285
COMPANIES ACT 1963 S285(6)
EEC DIR 80/987 ART 2
GOFF & JONES THE LAW OF RESTITUTION
BOSCAWEN v BAJWA 1995 4 AER 769
HIGHLAND FINANCE (IRL) LTD v SACRED HEART COLLEGE OF AGRICULTURE & ORS 1998 2 IR 180 1997 2 ILRM 87 1997/4/1200
ORAKPO v MANSON INVESTMENTS LTD 1977 3 AER 1
DOWNER ENTERPRISES LTD, RE 1974 1 WLR 1460
MOULE v GARRETT 1872 IR 7 EX 101
PROTECTION OF EMPLOYEES (EMPLOYER'S INSOLVENCY) ACT 1984 S10(1)
PROTECTION OF EMPLOYEES (EMPLOYER'S INSOLVENCY) ACT 1984 S10(2)
FOOD CONTROLLER v CORK 1923 AC 648
COMPANIES (CONSOLIDATED) ACT 1908 S186
COMPANIES (CONSOLIDATED) ACT 1908 S209
PROTECTION OF EMPLOYEES (EMPLOYER'S INSOLVENCY) ACT 1984 S10
Ms. Justice Dunne delivered on the 28th day of April, 2006
The above entitled companies (the companies) formed a substantial Irish owned shipping business based in Waterford. On 4 th July, 1997, David Hughes (the liquidator) of Ernst and Young, Accountants, was appointed official liquidator of the companies. By an amended composite notice of motion dated 25 th July, 2005, the liquidator has sought, inter alia, the following reliefs:
a c. An order confirming that French creditors of the French branch of Bell Lines Limited are permitted to claim in the Irish liquidation of Bell Lines Limited notwithstanding the appointment of a liquidator in France, and an order that the official liquidator deduct from dividends in respect of amounts due to French creditors in the liquidation of Bell Lines Limited (in liquidation) any payment which such creditors may have received from the French insolvency fund or from the French liquidator in respect of such amounts.
b d. An order that the English Insolvency Service (DTI) be admitted subject to adjudication as a creditor in the liquidation of Bell Lines Limited in respect of payments lawfully made to employees of that company from the English equivalent of the Redundancy and Employers Insolvency Fund, as a preferential creditor insofar as such payments were in respect of Irish preferential debts due to employees of Bell Lines Limited and as an unsecured creditor insofar as such payments were in respect of Irish unsecured debts due to employees of Bell Lines Limited; and a similar order in favour of the Northern Ireland Department of Employment and learning in respect of payment of a debt due to a Northern Ireland employee of Bell Lines Limited.
c h. An order that in principle the English Insolvency Service (DTI) and the Northern Ireland Department of Employment and Learning (DEL) have preferential claims to the extent to which payments made by them are preferential under Irish Law in respect of wages, holiday pay and pension but that their claims for payments relating to redundancy and minimum notice are not preferential.
Affidavits were sworn by the liquidator herein on 17 th June, 2005, 11 th July, 2005, 19 th July, 2005, 28 th September, 2005 and 18 th November, 2005, relating to the issues referred to above. I propose to deal with the issues raised in respect of paras. (d) and (h) of the notice of motion. It was not necessary to deal with para. (c). Written submissions were furnished to me on behalf of the liquidator and on behalf of the notice party herein, the Port of Waterford (the notice party).
In his oral submission Mr. Shipsey, on behalf of the liquidator, indicated that at the time of the liquidation there were two hundred and nine employees of the companies based in the UK. Those employees made claims for sums due in respect of minimum notice, holiday pay, preferential wages, redundancy and pension to the relevant insolvency agency where they were based, namely the English Insolvency Service (DTI) in respect of UK employees based in England and Wales and to the Northern Ireland Department of Employment and Learning (DEL) in respect of payment of a debt due to a Northern Ireland Employee of Bell Lines Limited. Initially the DTI and DEL refused to pay the amounts due and following proceedings before an industrial tribunal in Bristol the matter was referred to the European Court of Justice. The European Court of Justice found that the UK employees were entitled to claim in the UK from DTI. The judgment of the European Court was delivered on 16 th December, 1999, in a matter entitled Everson and Barrass v. Secretary of State for Trade and Industry and Bell Lines Limited [1999] EC C-198/98, in which it was held "where the employees adversely affected by the insolvency of their employer were employed in a member State by the branch established in that State of a company incorporated under the laws of another member State, where that company has its registered office and in which it was placed in liquidation, the competent institution, under Article 3 of Directive 80/987 on the approximation of the laws of the member States relating to the protection of employees in the event of the insolvency of their employer for payment to those employees of outstanding claims is that of the State within whose territory they were employed." Accordingly on the basis of that decision the DTI and DEL made payments in respect of wages, holiday pay and pension together with redundancy and minimum notice to the relevant employees.
Mr. Shipsey submits that the monies paid by the DTI and DEL insofar as the monies concerned relate to categories of payment referred to in s. 285 of the Companies Act, 1963 should be treated as preferential claims arising under s. 285. He argues that this is so by virtue of the wording of s. 285 itself or alternatively, it arises out of the interpretation of s. 285 read together with EU Directive 80/987/EEC. It is also submitted that the payments should be treated as preferential claims by operation of law from a restitutionary right of subrogation to the position of the person whose debt has been discharged.
Section 285 of the Companies Act sets out the provisions in relation to preferential payments in a winding up.
Subs. 2 In a winding up there shall be paid in priority to all other debts
(a) The following rates and taxes...
(b) All wages or salary...
(c) All accrued holiday remuneration...
(i) Any payments due by the company... for the provision of superannuation benefits to or in respect of employees...
Subs. 3 provides for a monetary limit in respect of the amount to which priority is given in the case of any one claimant.
Subs 6, Where any payment has been made -
(a) To any clerk, servant, workman or labourer in the employment of a company, on account of wages or salary; or
(b) To any such clerk, servant, workman or labourer or, in the case of his death to any other person in his right, on account of accrued holiday remuneration; or
(c) To any such clerk, servant, workman or labourer while he is absent from employment due to ill health or pursuant to any scheme or arrangement for the provision of superannuation benefit to or in respect of him; out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid up to the amount by which the sum, in respect of which the clerk, servant, workman or labourer or other person in his right, would have been entitled to priority in the winding up have been diminished by reason of the payment having been made.
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Bell lines Ltd ((in Liquidation)) and the Companies Acts 1963-2003
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