Bell lines Ltd ((in Liquidation)) and the Companies Acts 1963-2003

• Jurisdiction: Ireland
• Judge: Mr. Justice Fennelly
• Judgment Date: 18 March 2010
• Neutral Citation: [2010] IESC 15
• Court: Supreme Court
• Docket Number: [S.C. No. 367 of 2006]
• Date: 18 March 2010

[2010] IESC 15

THE SUPREME COURT

Fennelly J.

Macken J.

Finnegan J.

Appeal No 367/06

Bell Lines Ltd (In Liquidation) & Ors

IN THE MATTER OF BELL LINES LIMITED (IN LIQUIDATION) BELL FREIGHT TRANSPORT GROUP LIMITED (IN LIQUIDATION) BELL (MERTENS TERMINAL) LIMITED (IN LIQUIDATION) BELVIEW SHIPS AGENTS AND STEVEDORES LIMITED (IN LIQUIDATION)

AND WATERFORD MULTIPORT LIMITED (IN LIQUIDATION) AND IN THE MATTER OF THE COMPANIES ACTS, 1963 TO 2003

BELL LINES LTD & ORS, IN RE UNREP DUNNE 28.4.2006 2006/6/1019 2006 IEHC 188

EEC DIR 80/987 ART 3

EVERSON & BARRASS v SECRETARY OF STATE FOR TRADE & INDUSTRY & BELL LINES LTD (IN LIQUIDATION) 1999 ECR I-8903 2000 1 CMLR 489 2000 AER (EC) 29

COMPANIES ACT 1963 S285

COMPANIES ACT 1963 S285(2)

COMPANIES ACT 1963 S285(2)(B)

COMPANIES ACT 1963 S285(2)(C)

COMPANIES ACT 1963 S285(2)(D)

COMPANIES ACT 1963 S285(2)(H)

COMPANIES ACT 1963 S285(2)(I)

COMPANIES (AMDT) ACT 1982 S10

COMPANIES ACT 1963 S285(6)

PROTECTION OF EMPLOYEES (EMPLOYERS INSOLVENCY) ACT 1984 S10

STATION MOTORS LTD (IN VOLUNTARY LIQUIDATION) v ALLIED IRISH BANKS LTD 1985 IR 756 1985/3/707

RAMPGILL MILL LTD, IN RE 1967 CH 1138 1967 2 WLR 394 1967 1 AER 56

OXFORD ENGLISH DICTIONARY 2ED 1989 VOL 1

VON COLSON & KAMANN v LAND NORDRHEIN-WESTFAHLEN 1984 ECR 1891 1986 2 CMLR 430

MARLEASING SA v LA COMERCIAL INTERNACIONAL DE ALIMENTACION SA 1990 ECR I-4135 1993 BCC 421 1992 1 CMLR 305

COMPANY LAW

Liquidation

Preferential creditors - Subrogation - Recoupment - UK guarantee institution - Payments in respect of employees - Whether debt gains priority - Whether debt acquires preferential status by subrogation or recoupment - Whether debt can obtain preferential status when legislation does not provide for it - Whether statutory framework excludes equitable principles of subrogation - Station Motors Ltd v AIB Ltd [1985] IR 756 and Re Rampgill Mill Ltd [1967] 1 Ch 1138 considered - Companies Act 1963 (No 33), s 285 - Companies (Amendment) Act 1982 (No 10), s 10 - Protection of Employees (Employer's Insolvency) Act 1984 (No 21) , s 10 - Directive 80/987/EEC - Liquidator's appeal allowed (367/2006 - SC - 18/3/2010) [2010] IESC 15

Re Bell Lines Ltd

Facts: The appeal raised the question as to whether a body which pays off preferential creditors could step into their shoes and benefit from the preferential status of those creditors? A liquidator had applied to the High Court for a determination that a UK agency should be admitted subject to adjudication as a creditor in the Liquidation, in respect of the relevant payments as a preferential creditor insofar as payments had been made in respect of Irish preferential debts, pursuant to s. 285 Companies Act 1963. The ordinary creditors had resisted on the basis that there was no provision for preferential status for the guarantee institution. It was argued that the UK agency did not "advance the money, that the payments were not made out of a sum advanced but were paid directly to the employees and that the section only applied to monies advanced prior to the winding up.

Held by the Supreme Court per Fennelly J. (Macken, Finnegan JJ.), that the omission from the Act of 1984 did not affect the proper interpretation of s. 285 of the Act of 1963, if the latter provision properly interpreted allowed for the claim of the UK agency. The Court was satisfied that the UK agency was entitled to appropriate priority. The Court would allow the appeal.

Reporter: E.F.

1 Judgment delivered by Mr. Justice Fennelly on the 18th day of March 2010.

2 Judgment delivered by Fennelly J. [nem diss]

3 1. This appeal raises a succinct technical point in a liquidation. Does a body which pays off preferential creditors step into their shoes and benefit from the preferential status of those creditors?

4 2. The claim is made by the Insolvency Agency of the United Kingdom in the Liquidation of the Bell group of companies. The Agency was obliged, following a decision of the European Court of Justice, to discharge the claims of more than 200 Bell employees in the United Kingdom. The Agency claims, with the support of the liquidator, the same right to preferential treatment in the liquidation as would have been enjoyed by the employees if they had not been paid. The High Court (Unreported, High Court, Dunne J., 28 ^th April, 2006) rejected the claim. The liquidator appeals. The Port of Waterford represents the general body of unsecured creditors.

5 3. The Bell Group was, at one time, an important and successful group of shipping and transport companies, principally based in the Port of Waterford. On the 4 ^th July, 1997, David Hughes of Ernst and Young, chartered accountants, was appointed as official liquidator to the companies.

6 4. A number of employees were based in the United Kingdom; one was in Northern Ireland. Following the collapse of the group, all employees in the United Kingdom were made redundant. They made their claims against the relevant Insolvency Service, established in England, for the purposes of Council Directive 80/987/E.E.C. of 20 October, 1980, 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, O.J. L283/23 28.10.1980. That Directive was designed to provide for employees a certain minimum level of protection in the event of such insolvency. It required the Member States to establish a "guarantee institution." Article 3 of the Directive provided:-

7 2 "1. Member States shall take the measures necessary to ensure that guarantee institutions guarantee, subject to Article 4, payment of employees' outstanding claims resulting from contracts of employment or employment relationships and relating to pay for the period prior to a given date.

8 2. At the choice of the Member States, the date referred to in paragraph 1 shall be: - either that of the onset of the employer's insolvency;

9 · - or that of the notice of dismissal issued to the employee concerned on account of the employer's insolvency;

10 · - or that of the onset of the employer's insolvency or that on which the contract of employment or the employment relationship with the employee concerned was discontinued on account of the employer's insolvency."

11 5. The Agency function in the United Kingdom has been performed by the United Kingdom Department of Government bearing various names but currently it is titled the Department for Business Innovation and Skills. A similar function in respect of the employee based in Northern Ireland is performed by the Northern Ireland Department for Employment and Learning. From this point on, I will simply refer to the UK Agency, as if there were only one.

12 6. The UK Insolvency Service resisted the claims of the former employees of the group, claiming that they should make their claims in this jurisdiction. Questions were referred by an Industrial Tribunal to the European Court of Justice. In Everson and Barrass v. Secretary of State for Trade and Industry and Bell Lines Limited (in liquidation) ( Case 198/98) [1999] ECR I 8903 the Court of Justice determined that the "competent institution......for payment to those employees of outstanding claims is that of the State within whose territory they were employed."

13 7. Thus the UK Agency was obliged, by virtue of Article 3 of the Directive, to discharge the claims of a number of the employees in respect of wages and a number of other entitlements and did in fact do so. Part of the sums so paid related to preferential debts due to the employees under the Companies Acts and fall to be considered in the present appeal. Payments which were made in respect of redundancy and minimum notice are not covered by the relevant section and are not claimed to rank for preferential treatment.

14 8. The liquidator applied in the High Court for a determination that the UK Agency should be admitted, subject to adjudication as a creditor in the Liquidation, in respect of the relevant payments, as a preferential creditor insofar as payments had been made in respect of Irish preferential debts.

Relevant Statutory Provisions

15 9. Section 285 of the Companies Act 1963 (as amended) ("the Act of 1963") deals with preferential claims in a winding up. The relevant date, for the purposes of the present case is the date of the appointment of the provisional liquidator. The appeal is concerned with wages and certain other sums due at the relevant date to employees as described in the section. Section 285(2) of the Act of 1963 provides for three headings, (b), (c) and (d) of preferential payment. Two more, (h) and (i), were added by section 10 of the Companies (Amendment) Act 1982. The combined provision is, so far as relevant, as follows:-

"In a winding up there shall be paid in priority to all other debts-"

(b) all wages or salary (whether or not earned wholly or in part by way of commission) of any clerk or servant in respect of services rendered to the company during the 4 months next before the relevant date;

(c) all wages (whether payable for time or for piece work) of any workman or labourer in respect of services rendered to the company during the 4 months next before the relevant date;

(d) all accrued holiday remuneration becoming payable to any clerk, servant, workman or labourer (or in the case of his death to any other person in his right) on the termination of his employment before or by the effect of the winding-up order or resolution;

(h) all sums due to any employee pursuant to any scheme or arrangement for the provision of payments to the employee while he is absent from employment due to ill health;

(i) any payments due by the company pursuant to any scheme or arrangement for the provision of superannuation benefits to or in respect...