Bula Ltd ((in Liquidation))

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 20 June 2002
• Neutral Citation: 2002 WJSC-HC 879
• Court: High Court
• Docket Number: 108/2002
• Date: 20 June 2002

2002 WJSC-HC 879

THE HIGH COURT

108/2002

BULA LTD, RE

IN THE MATTER OF BULA LIMITED (IN RECEIVERSHIP)

AND

IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 316 OF THE COMPANIES ACT 1963 TO 1990

Citations:

COMPANIES ACT 1963 S316(A)

COMPANIES ACT 1963 S316

CONVEYANCING & PROPERTY LAW ACT 1881 S6(2)

CONVEYANCING & PROPERTY LAW ACT 1881 S6(3)(ii)

BULA V TARA MINES LTD & ORS UNREP SUPREME 15.1.1999 2000/19/7440

BULA LTD & ORS V TARA MINES LTD & ORS UNREP LYNCH 6.2.1997 1997/1/219

BULA LTD & ORS V CROWLEY & ORS UNREP BARR 29.4.1997 1998/12/4046

COMPANIES ACT 1963 S319

COMPANIES ACT 1963 S323

COMPANIES ACT 1963 S320

COMPANIES ACT 1963 S316(2)

LIGHTMAN & MOSS THE LAW OF RECEIVERS & ADMINISTRATORS OF COMPANIES 2000 7–005

DOWNSVIEW NOMINEES V FIRST CITY 1993 AC 295

YORKSHIRE BANK V HULL 1999 1 WLR 1713

MEDFORTH V BLAKE 2000 CH 86

HOLOHAN V FRIENDS PROVIDENT & CENTURY LIFE OFFICE 1966 IR 1

STANDARD CHARTERED BANK LTD V WALKER 1982 3 AER 938

DONOGHUE V STEPHENSON 1932 AC 580

AMERICAN EXPRESS INTERNATIONAL BANKING V HURLEY 1986 BCLC 52

USHER COMPANY LAW IN IRELAND 1986 439

MCGOWAN V GANNON 1983 ILRM 516

CASEY V INTERNATIONAL BANK 1979 IR 364

TSE KWONG LAM V WONG CHITSEN 1983 1 WLR 1349

IRISH OIL & CAKE MILLS LTD V DONNELLY UNREP COSTELLO 27.3.1984 1986/6/798

COLSON V WILLIAMS 56 LJCH 539

EDENFELD HOLDINGS LTD 1999 1 IR 443

CUDMORE BRICK 1971 CH 949

BUILDING SOCIETY ACT 1976 S82

BUILDING SOCIETY ACT 1989 S26

ROADS ACT 1993 S84

HOUSING (MISCELLANEOUS PROVISIONS) ACT 1992

HOUSING (SALE OF DWELLINGS) REGS 1993 SI 267/1993 REG 14

PLANNING & DEVELOPMENT ACT 2000 S96

EMMET ON TITLE 19ED PARA 13.004

HALSBURYS LAW OF ENGLAND 4ED VOL 42 PARA 94

HALSBURYS LAW OF ENGLAND 4ED VOL 42 PARA 827

WOLSTENHOLME & CHERRY'S CONVEYANCING STATUTES VOL 3 139

WOLSTENHOLME & CHERRY'S CONVEYANCING STATUTES VOL 3 219

LEWIN THE LAW OF TRUSTS 6ED 511

LEWIN THE LAW OF TRUSTS 6ED 585

FARRAND CONTRACT & CONVEYANCE 4ED 251

FARRAND CONTRACT & CONVEYANCE 4ED 309

SUDBROOK TRADING EST V EGGLETON 1982 AER 1 444

JONES V SHERWOOD COMPUTER SERVICES PLC 1992 1 WLR 277

COMPANIES ACT 1990 S172

KUWAIT AIRWAYS CORP V IRAQI AIRWAYS CO 2000 EWCA CIV 284

LIESBOSCH DREDGER V SS EDISON 1933 AC 449

TRANSTEC AUTOMOTIVE LTD, IN RE 2001 BCC 403

GOSLING & HOLOHAN V FRIENDS PROVIDENT SOCIETY 1966 IR 1

BULA LTD V CROWLEY UNREP CARROLL 15.12.2000 2000/3/897

Synopsis:

- [2002] 2 ILRM 513

Facts: The proceedings concerned the sale of the main assets, an ore body, of a company ("Bula") which was in receivership. The receiver of the company brought an application pursuant to section 316 A of the Companies Act, 1963 seeking court approval for the sale of the ore body for the sum of £27.5 million to a neighbouring company ("Tara mines"). The application was opposed by the directors of Bula on a number of grounds. The directors contended that the receiver had a conflict of interest in acting as receiver. In

addition it was claimed that the assets of the company were grossly undervalued and that the value of the ore body was over £60 million. It was submitted that the receiver should sell the shares of Bula and not the assets. Furthermore it was claimed that the receiver should await the final resolution of related litigation. It was argued that the receiver's bargaining position was all the greater given that the prospective purchaser, Tara Mines, was a neighbour.

Held by Mr. Justice Murphy in approving the sale. The receiver's duty was to sell on the open market. The role of the court was to examine whether the receiver had exercised all reasonable care to get the best price reasonably obtainable. The receiver had a power of sale and was entitled to exercise that power. The courts could not fetter that power which arose out of contract. There was no evidence before the courts which would indicate a conflict of interest. The receiver was not the receiver of the shares of the company and was not obliged to consider a sale of the shares. A receiver was not obliged to wait for a rising market before selling. The outstanding litigation was capable of being evaluated. There was no statutory requirement for an independent valuation nor to have more than one buyer. Section 316 dealt with price and not value. The value to a purchaser was immaterial. Ultimately one realistic bid had emerged from an adjoining owner (Tara Mines). There had been no breach by the receiver of his duty owed under section 316 and the court would accordingly allow the receiver's application.

1 Judgment of Mr. Justice Murphy delivered the 20th day of June, 2002.

1. ISSUE

2 This is an application, pursuant to Section 316 A of the Companies Act, 1963, by the Receiver of the Company for the approval of the sale of the assets of the Company, the are body at Nevillstown, Country Meath (the Mine) for £27.5 m to Tara Mines Limited, the adjoining landowner.

3 The Receiver was appointed on the 8th of October, 1985 when the debt of the Company was £14m. On the date of the swearing of the grounding Affidavit herein, over sixteen years later, the indebtedness had risen to £60 m.

Notice Parties

4 2 2.The Notice Parties to this application are:

5 3 2.1the Mortgagee and Debenture Holders, Northern Bank Finance Corporation Limited, Ulster Investment Bank Limited and Allied Irish Investment Bank Limited ("the Banks") who support the application;

6 4 2.2the Company, two of its Directors, Michael J. Wymes and Richard Wood, and Bula Holdings Limited (collectively "Bula"). Both Mr. Wymes and Mr. Wood are guarantors of indebtedness of the Company and oppose the application;

7 5 2.3.the remaining shareholders Thomas J. Roche and the personal representatives of Thomas C. Roche ("Messrs Roche") who support the application, and

8 6 2.4.Tara Mines Limited, the intending purchaser, pursuant to a conditional agreement dated the 9th May, 2001, who also supports the application.

3. Notice of Motion

9 2 3.1.By application of Lawrence Crowley, the Receiver of the Company the following reliefs were sought:

10 1. An Order pursuant to Section 316 of the Companies Act, 1963for directions in connection with the contract entered into for the sale of the property known as the Bula Mine, Navan, County Meath (and more particularly described in the Schedule hereto) by Bula Limited (in receivership) to Tara Mines Limited on the 9th May, 2001;

11 2. Further or in the alternative, an Order approving the sale of the said property to Tara Mines Limited on the terms set forth in the said contract and/or an Order granting direction and/or liberty to Bula Limited (in receivership) to complete the said contract.

12 3.2. On 8th October, 1985 the Receiver was appointed by Ulster Investment Bank Limited pursuant to a debenture dated the 15th February, 1977,

13 Northern Bank Finance Corporation Limited and pursuant to a floating charge dated 25th November, 1974; a mortgage dated 12th July, 1984 and a mortgage dated 8th November, 1984 and

14 Allied Irish Investment Bank pursuant to a debenture dated the 19th July, 1978,

15 3.3. Each security provided for the right to appoint a receiver and for the power to sell.

16 3 3.4.In particular the charge which the Company created in favour of the Northern Bank Finance Corporation Limited, dated 8th November, 1984, is in respect of a mortgage charging the scheduled lands with power of sale and of appointing a Receiver conferred on mortgagees by the Conveyancy and Law Property Act, 1881 (section 6(2)) and, more particularly,:

"6(3)(ii) to sell the mortgage property in such manner and generally upon such terms and conditions as he thinks fit and to convey the same in the name and on behalf of the Company."

4. Grounding Affidavit of Lawrence Crowley.

17 4.1. The deponent was appointed as Receiver on the 8th October, 1985 pursuant to powers contained in certain debentures executed between Northern Bank Finance Corporation Limited, Ulster Investment Bank Limited, Allied Irish Investment Bank Limited (therein referred to as "the Banks") and the Company.

4.2. Contract for Sale

18 A copy of the contract is exhibited and provides for purchase price of £27.5 m (£34.9 m approx).

19 Condition ten applies to Court approval as well as to the closing date, as follows:

20 (a) The Receiver will apply to obtain the approval of the High Court to the sale of subject property and the contract herein and all its provisions are subject to and conditional upon High Court approval or if appealed to the Supreme Court on Supreme Court approval being obtained.

21 (b) The closing date shall be ten working days after the date in which the said approval has been obtained and in any event not later than the 31st December, 2001. In the event that completion does not take place by the 31st December, 2001 solely by reason of the fact that the said approval has not been obtained the purchaser shall be entitled by written notification to the vendor to postpone the closing date which shall continue to be ten working days after the date on which the approval described in subparagraph (a) hereof has been obtained. However, should the said approval not be obtained by the 31st December, 2002 unless otherwise agreed in writing this contract will be deemed to be at an end and the purchaser shall be entitled to the return of its deposit with interest but without compensation or damages.

22 (c) Prior to the closing date the Receiver will establish, to the satisfaction of the purchaser, that the challenges made in the course of litigation both as to the validity of his appointment and continuance in office and to his authority to effect the sale of the assets have failed and have been disposed of and consequently provided no impediment to the completion of the sale and in accordance with the terms of this contract.

4.3. Previous Litigation

23 The Receiver refers to the two legal actions...