Belohn Ltd and Another v Companies Acts

JurisdictionIreland
JudgeMr. Justice Hogan
Judgment Date09 April 2013
Neutral Citation[2013] IEHC 157
CourtHigh Court
Date09 April 2013
Belohn Ltd & Merrow Ltd, In re
IN THE MATTER OF THE COMPANIES (AMENDMENT) ACT 1990
AND IN THE MATTER OF BELOHN LIMITED
AND IN THE MATTER OF MERROW LIMITED

[2013] IEHC 157

[No. 129/2013 COS]
[No. 143/2013 COS]

THE HIGH COURT

COMPANY LAW

Examinership

Ex parte appointment of interim examiner -Previous appointment of receiver by bank invalid- Application by bank to set aside appointment of examiner - Practice and procedure - Provisional nature of order appointing interim examiner - Whether failure to furnish letter of consent de minimus - Whether failure to trade immediately following appointment of examiner evidence of lack of candour - Exclusion of directors from day to day running of company - Whether unusual circumstances justifying appointment of interim examiner - Whether time provided by bank for repayment of loan realistic and reasonable - Three day time period for making of application for appointment of examiner - Whether appropriate to set aside ex parte order for non-disclosure by petitioners -Monaghan UDC v Alf-A-Bet Promotions Ltd [1980] ILRM 64; DK v Crowley [2002] 2 IR 744; Dellway Investments Ltd v National Asset Management Agency [2011] IESC 14, [2011] 4 IR 1; Doyle v Gibney [2011] IEHC 10, (Unrep, Hogan J, 18/1/2011); Re Custom House Capital Ltd [2011] IEHC 298, [2011] 3 IR 323; O(A) v Minister for Justice and Law Reform [2012] IEHC 1, (Unrep, Hogan J, 6/1/2012) considered - Companies (Amendment) Act 1990 (No 27), ss 2, 3 and 3A - Companies Act 1990 (No 33), s 180 - Companies (Amendment) (No 2) Act 1999 (No 30), s 9 - Order set aside (2013/129COS & 2013/143COS - Hogan J - 9/4/2013) [2013] IEHC 157

In re Belohn Ltd

Facts: Merrow Ltd {‘Merrow’} was the sole shareholder of Belohn Ltd (‘Belohn’) which had substantial loan facilities with the Bank of Scotland (‘the Bank’) at an approximate balance of €4,000,000.00 owing by the 3rd October 2012. In consideration of these facilities, the Bank held two mortgage debentures (created in 1981 and 2008 respectively) which gave charges over Company premises, undertakings and assets, uncalled capital, goodwill and moveable plant. Merrow also was indebted to the Bank, though to the lesser figure of approximately €1,000,000.00. On the 10 th October 2012, the Bank appointed a receiver to Belohn which was challenged by the company. On the 22 nd March 2013, it was decided before the High Court that the appointment was invalid as the Bank should have made the Deed of Appointment of the Receiver under seal pursuant to the terms of the debentures. In substitution, an interim examiner was appointed to Belohn.

On the same day judgment was delivered in the case of Belohn, the Bank appointed a receiver to Merrow. In response, Merrow successfully applied on the 24 th March for an order for an interim examiner to be appointed which effectively put the company under the protection of the court. This order was made ex parte under s. 3A of the Companies (Amendment) Act 1990 (‘the 1990 Act’) (as inserted by s. 9 of the Companies (Amendment) (No.2) Act 1999). The Bank subsequently sought to challenge the respective decisions of Belohn and Merrow, insisting that the orders appointing interim examiners should be discharged as a result of a lack of candour. The Bank relied on the fact that following the decision of the 22 nd March, Belohn did not recommence trading until the 30 th March which they argued showed they had no intention to trade its way out of difficulties.

Held by Hogan J that In the case of Belohn, the appointment of an interim examiner was beneficial as the company had been under receivership for the 6 months prior to discharge, meaning an examiner”s report would help the court to make a final decision on examinership. In terms of the argument of a lack of candour on the part of Belohn, it was determined that there was no trading in the period between the 22 nd and the 30 th March because there was an issue over acquiring new insurance cover, which was excusable considering the receiver had just been discharged.

It was further said that an interim examiner order made ex parte under the 1990 Act could be challenged by any affected creditor in order to secure its discharge as it would be unconstitutional for a court to make a final order that would override property rights until the creditor was at least afforded an opportunity to be heard. In the case of Merrow, it was found that when the Bank appointed a receiver to Merrow on the 22 nd March, the former had given just 45 minutes for the latter to make full repayment of the loan. This was held to be unrealistic and unreasonable and therefore difficult to see whether the appointment of the receiver was valid without the prerequisite bona fide demand for repayment. Nevertheless, the court”s only consideration was the validity of the interim examiner order. The Bank had argued that it should be discharged due to a lack of candour on the part of the company, specifically that Merrow had failed to disclose an email correspondence from the Bank”s solicitor which showed a willingness on the part of the receiver to hand over all relevant documents to the company directors. It was held that whilst the court was satisfied that this was a bona fide mistake giving the short period of time in which the petition was prepared, the information in the email was very relevant to the exercise of discretion under s. 3A of the 1990 Act to appoint an interim examiner. The order was therefore discharged.

The ex parte order under s.3A set aside

COMPANIES (AMDT) ACT 1990 S2

COMPANIES (AMDT) ACT 1990 S3(A)

COMPANIES (AMDT)(NO.2) ACT 1999 S9

COMPANIES (AMDT) ACT 1990 S5(1)

COMPANIES (AMDT) ACT 1990 S5(2)

COMPANIES (AMDT) ACT 1990 S3(7)

COMPANIES (AMDT) ACT 1990 S3(B)(2)

COMPANIES (AMDT)(NO.2) ACT 1999 S10

ADAM v MIN FOR JUSTICE 2001 3 IR 53

K (D) v CROWLEY 2002 2 IR 744

DOMESTIC VIOLENCE ACT 1996 S3

DELLWAY INVESTMENTS LTD v NATIONAL ASSET MANAGEMENT AGENCY (NAMA) 2011 4 IR 1

EAST DONEGAL CO-OPERATIVE LTD v AG 1970 IR 317

CUSTOM HOUSE CAPITAL LTD, IN RE 2011 3 IR 323

EUROPEAN COMMUNITIES (MARKETS IN FINANCIAL INSTRUMENTS) SI 60/2007 ART 166

DALY v REVENUE COMMISSIONER 1995 3 IR 1

COMPANIES (AMDT) ACT 1990 S3(4)

ALF-A-BET PROMOTIONS LTD v MONAGHAN UDC 1980 ILRM 65

EIRCOM LTD, IN RE UNREP KELLY 30.3.2012 2012 IEHC 107

CHAMBERS v KENEFICK 2007 3 IR 526

DOYLE v GIBNEY & ORS 2012 1 ILRM 194 2011 IEHC 10

COMPANIES (AMDT) ACT 1990 S3(6)

COMPANIES ACT 1990 S180(1)(A)

COMPANIES ACT 1963 S107(1)

INTERPRETATION ACT 2005 S18(H)

COMPANIES (AMDT) ACT 1990 S3(A)(2)

COMPANIES (AMDT) ACT 1990 S9

COURTNEY LAW OF PRIVATE COMPANIES DUBLIN 2012 PARA 23.040

CONSTITUTION ART 34.1

CONSTITUTION ART 34.3.1

STATE (QUINN) v RYAN 1965 IR 170

WHITE v DUBLIN CITY COUNCIL 2004 1 IR 545

LOCAL GOVERNMENT (PLANNING & DEVELOPMENT) ACT 1963 S82(3)(A)

O(A) v MIN FOR JUSTICE UNREP HOGAN 6.1.2012 2012/36/10573 2012 IEHC 1

TIVWAY LTD, IN RE 2010 3 IR 49 2010 IESC 11

1

1. This is an application by Bank of Scotland to set aside the appointment made by me ex parte on Saturday 23 rd of March, 2013, pursuant to s. 2 of the Companies (Amendment) Act 1990 ("the 1990 Act") of an interim examiner to Belohn Ltd. This company runs and operates a well known bar and restaurant, Foley's Bar and Restaurant, at 1 Merrion Row, Dublin 2. The sole registered shareholder of Belohn is a company known as Merrow Ltd.

2

2. There is little doubt but that Belohn is significantly indebted to Bank of Scotland. While the precise extent of that debt may be in dispute, it would seem that the full extent of the loan is in the region of €4m. Belohn has other creditors (principally trade creditors), but these would appear to be fairly small in comparison. Merrow is indebted to Bank of Scotland for a sum which is in the region of €1m. and it has no other creditors.

3

3. The Bank appointed a receiver to Belohn in October, 2012. In a reserved judgment delivered on Friday 22 nd March, 2013, Gilligan J. held that this appointment was invalid because the receiver had not been appointed by deed under seal. Up to that point, no receiver had ever been appointed to Merrow.

4

4. As will become clear more detail in the course of the judgment, the Bank, however, appointed a receiver to Merrow at about 5.10pm on that Friday afternoon. The directors of Merrow learnt of this appointment in the mid-afternoon of Sunday, 24 th March. Within a matter of hours, Merrow had also petitioned the Court for examinership and at about 10.45pm that evening at a special sitting which was held in my own private residence, I made an order (which was also made perforce ex parte) under s. 3A of the 1990 Act (as inserted by s. 9 of the Companies (Amendment) (No.2) Act 1999) ("the 1999 Act") granting Merrow interim protection until 2pm on the following day. The Bank also now seeks to set aside that order on the ground of alleged lack of candour on the part of the petitioners.

The nature of an order appointing an interim examiner
5

5. The very fact the Bank of Scotland have applied to have the order appointing an interim examiner thereby placing the company under the protection of the court discharged, obliges us to consider afresh the nature of the examinership system. It is true that the examinership procedure is generally disliked by secured creditors because the appointment of an examiner not only tends to involve the company incurring additional costs, but it also affects the otherwise settled scheme of priorities for creditors. Just as importantly, it also postpones the right of those creditors to enforce their loan agreements during the course of the examinership procedure.

6

6. There is accordingly no doubt that both the act of placing companies under the protection of the court and the appointment of an examiner...

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17 cases
  • Re KH Kitty Hall Holdings Ltd & Companies Act 2014
    • Ireland
    • Court of Appeal (Ireland)
    • 4 October 2017
    ...has been a lack of candour on the part of the petitioner ( Re Wogans (Drogheda) Ltd., High Court, 7th May 1992, Re Belohn Ltd. (No.2) [2013] IEHC 157, [2013] 2 I.L.R.M. 407). Nevertheless, the overall tendency of the courts has been to appoint examiners in the light of these policy object......
  • G v The Child and Family Agency
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    ...was the nature of an order obtained without notice to the respondent (see also In the Matter of Belohn Ltd & Anor v. Companies Acts [2013] 2 I.L.R.M. 407; [2013] I.E.H.C. 157). In conclusion, therefore, I think the more correct description of such an order is that it is provisional in nat......
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    ...reviews the relevant authorities—including, in particular, Bambrick v. Cobley [2005] IEHC 43; [2006] 1 I.L.R.M. 81 and Re Belohn Ltd. [2013] IEHC 157; [2013] 2 I.L.R.M. 407—with enviable clarity. Baker J. then adopted a test which emphasises the materiality of the non-disclosure, i.e. i......
  • Roderic O'Beirne v Bank of Scotland Plc
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    • Court of Appeal (Ireland)
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    ...The overall circumstances of the case which lead to the application in the first place.” (p. 89) 79 . Pentire relied on Re Belohn Ltd. [2013] IEHC 157, [2013] 2 I.L.R.M. 407, where in the context of examinership proceedings, there had been a failure to disclose certain communications from a......
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