Bula Ltd v Crowley (No. 4)

• Jurisdiction: Ireland
• Judge: Denham J.
• Judgment Date: 11 April 2003
• Neutral Citation: [2003] IESC 28
• Court: Supreme Court
• Docket Number: S.C.Appeal No. 185/02,[S.C. Nos. 185, 271, 272 and 334 of 2002]
• Date: 11 April 2003

[2003] IESC 28

THE SUPREME COURT

Denham J.

Murray J.

McGuinness J.

S.C.Appeal No. 185/02

S.C.Appeal No. 271/02

S.C.Appeal No. 272/02

S.C.Appeal No. 334/02

BULA LTD & ORS v. CROWLEY & TARA MINES LTD

Appeal No. 185/02

In the Matter of The Companies Acts 1963–2001 and In the Matter of Section 316 of The Companies Act 1963 and In the Matter of Bula Limited (In Receivership) and In the Matter of an Application by Laurence Crowley, The Receiver of Bula Limited

And

Appeal No. 271/02

In the Matter of the Companies Acts, 1963–2001 In the Matter of Section 316 of The Companies Act, 1963 and In the Matter of Bula Limited (In Receivership) and In the Matter of An Application By Laurence Crowley, Receiver of Bula Limited

And

Appeal No. 272/02

Between/

Bula Limited (In Receivership), Bula Holdings, Richard Wood and Michael J. Wymes

Plaintiffs/Appellants

And

Laurence Crowley and Tara Mines Limited

Defendants/Respondents

BULA LTD & ORS v. CROWLEY & TARA MINES LTD

And

Appeal No. 334/02

In the Matter of The Companies Acts, 1693–2001 and In the Matter of Section 316 of The Companies Act, 1963 and In the Matter of Bula Limited (In Receivership) and In the Matter of An Application by Laurence Crowley, Receiver of Bula Limited

Citations:

BULA LTD, RE 2002 2 ILRM 513 2002/4/879

COMPANIES ACT 1963 S316

COMPANIES ACT 1990 S171

COMPANIES ACT 1990 316(A)(1)

COMPANIES ACT 1990 S172

KEANE, COMPANY LAW IN THE REPUBLIC OF IRELAND 3ED PAR 22.01

COMPANIES ACT 1990 316(A)

EDENFELL HOLDINGS LTD 1999 1 IR 443

GOWER PRINCIPLES OF MODERN COMPANY LAW 5ED 1992 438

LIGHTMAN & MOSS THE LAW OF RECEIVERS & ADMINISTRATORS OF COMPANIES 3ED PAR 7–032

BANK OF CYPRUS (LONDON) V GILL 1980 2 LLOYDS 51

ROUTESTONE LTD V MINORIES FINANCE LTD 1997 BCC 180

CHARNLEY DAVIES LTD (NO 2), RE 1990 BCLC 760

CUCKMERE BRICK CO LTD V MUTUAL FINANCE LTD 1971 2 AER 633 1971 CH 949

TRANS TEC AUTOMOTIVE (CAMPSIE) LTD 2001 BCC 403

RSC O.40 r31

RSC O.40 r1

RSC O.40 r28

RSC O.40 r29

RSC O.40 r30

HUGHES V O'ROURKE & ORS 1986 ILRM 538

MCG (G) V W (D) 2000 4 IR 1 2000 2 ILRM 451 1999/17/5236

BELVILLE HOLDINGS LTD V REVENUE COMMISSIONERS 1994 1 ILRM 27

RSC O.58 r18

RSC O.58 r19

REICHEL V MCGRATH 1889 14 AC 665

BELTON V CARLOW CO COUNCIL 1997 1 IR 172

MCCAULEY V MCDERMOTT 1997 2 ILRM 486

AINSWORTH V WILDING 1896 1 CH 673

BULA LTD V TARA MINES LTD (NO 1) 1987 IR 85

Synopsis:

COMPANY LAW

Receivership

Sale of assets - Section 316 application - Duties of receivers - Duty of care - Power of sale - Credit and security - Conflict of interest - Confidentiality - Valuation of assets - Fair market value - Current market value - Whether court should approve sale of assets of company - Whether assets of company undervalued - Whether receiver exercised reasonable care - Companies Act, 1963 (185, 271, 272 & 334/2002 - Supreme Court - 11/4/2003)

Bula Ltd v Crowley - [2003] 2 IR 430

1 11th day of April, 2003 by Denham J.

Denham J.

1. Litigation

2 Four appeals are considered in this judgment, which appeals are part of a series of seven appeals by these parties which have been before this Court this term. Three appeals of this series have been heard by the Court and judgment was delivered on the 13 ^th day of February, 2003. As pointed out in that judgment these appeals are part of a long line of litigation between the parties, stretching over decades.

2. Parties

3 The parties in this litigation are as follows: (a) Bula Limited (In Receivership), hereinafter referred to as Bula; (b) Bula Holdings, hereinafter referred to as Holdings; (c) Thomas C. Roche who died in 1999 is not a party but is still named in some proceedings: (d) Thomas J. Roche is also named in some proceedings but is no longer a party in the litigation; (e) Richard Wood: (f) Michael Wymes; (g) Laurence Crowley, hereinafter referred to as the Receiver, is the Receiver appointed by the Banks over the assets of Bula; (h) the Northern Bank Finance Corporation Limited; (i) Ulster Investment Bank Limited; (j) Allied Irish Investment Bank Limited: these three banks are referred to collectively as the Banks. Richard Wood and Michael Wymes are directors of Bula and Holdings. Michael Wymes is the moving party in the overall litigation. Thomas C. Roche (now deceased) and Thomas J. Roche, who took no part in the proceedings, were directors of Bula.

3. History

4 These appeals are part of a long history of litigation between the parties. It was the intention of Bula and its directors to engage in major mining operations on its lands and to that end large sums of money were borrowed from the Banks and duly secured by a number of mortgages and debentures which entitled the relevant banks holding security to appoint a receiver over the property of the company in the event of default by Bula in its obligations to the bank in question. Major financial difficulties occurred in consequence of which the Banks called in their loans by formal demands in 1982. On the 8 ^th October, 1985 the Banks appointed Laurence Crowley as the Receiver over Bula's secured property and he then went into possession of the property.

4. Four Appeals

5 There are four appeals considered in this judgment. They are part of a series of seven appeals to this Court. The first three appeals were determined in a judgment delivered on the 13 ^th February, 2003. The matters before this Court now will be referred to as the fourth, fifth, sixth and seventh appeal.

6 (a) The fourth appeal, appeal No. 185/02

7 The fourth appeal is an appeal by Bula, Holdings Richard Wood and Michael Wymes against the judgment and order of the High Court (Murphy J.) delivered on the 20 ^th June, 2002 (now reported at [2002] 2 I.L.R.M. 513) in which the High Court, on the application of the Receiver pursuant to s. 316 of the Companies Act, 1963, made an order approving the sale of the Bula orebody to Tara Mines Limited, hereinafter referred to as Tara, on the terms set out in contract dated the 9 ^th May, 2001, hereinafter referred to as the Contract. The High Court order of the 20 ^th June, 2002 is referred to hereinafter as the s. 316 order.

8 (b) The fifth appeal, appeal No. 271/02

9 The fifth appeal is an appeal by Bula, Holdings, Richard Wood and Michael Wymes against the judgment and order of the High Court (Murphy J.) delivered on the 12 ^th July, 2002 in which the High Court declined to grant a stay on the s. 316 order.

10 (c) The sixth appeal, appeal No. 272/02

11 The sixth appeal is an appeal in a separate set of proceedings, High Court Record No. 2002, No. 10141 Bula Limited (In Receivership), Bula Holdings, Richard Wood and Michael Wymes v. Laurence Crowley,which proceedings were instituted on the 23 ^rd July, 2002 and brought by Bula, Holdings, Richard Wood and Michael Wymes against the order of the High Court (Murphy J.) made on the 1 ^st August, 2002 in which the High Court refused to grant injunctions the effect of which would have been to restrain the vendor and purchaser under the Contract (which contract had been completed pursuant to the s. 316 order) pending the determination of the fourth appeal herein.

12 (d) The seventh appeal, appeal No. 334/02

13 The seventh appeal is an appeal by Bula, Holdings, Richard Wood and Michael Wymes against the order of the High Court (Murphy J.) made on the 5 ^th November, 2002 in which the court declined to amend the s. 316 order perfected on the 25 ^th June, 2002 which purported to embody the judgment made on the 20 ^th June, 2002.

14 The four appeals are brought in each case by Bula, Holdings, Richard Wood and Michael Wymes. Bula, Holdings, Richard Wood and Michael Wymes are hereinafter referred to collectively as the plaintiffs.

5. The fourth appeal, appeal No. 185/02

5.(i) Decision of the High Court

15 On the 20 ^th June, 2002 the High Court made an order approving the sale of Bula orebody to Tara pursuant to s. 316 of the Companies Act, 1963, on the terms set out in the Contract. The learned High Court judge reached the conclusion:

"The Court finds that the Receiver, in selling the asset of the Company which are secured under the various debentures, had exercised all reasonable care necessary to obtain the best price. The price was, in the circumstances, the only price reasonably obtainable for the property as at the time of sale."

16 There has been no breach by the Receiver of his duty under subsection 1 of Section 316A.

17 I will, accordingly, allow the Receiver's Application and make an Order approving the sale of the said property to Tara Mines Limited on the terms set forth in the contract dated the 9 ^th May, 2001 and grant liberty to Bula Limited (in Receivership) to complete the said contract.

"

5.(ii) Appeal

18 On the 2 ^nd July, 2002 the plaintiffs filed thirty-four grounds of appeal. The Court has been furnished with helpful written submissions on the matter and heard oral submissions.

5.(iii) Submissions of Plaintiffs

19 In oral submissions for the plaintiffs, Mr. John Trainor S.C. stated that this, the fourth appeal, the appeal against the s. 316 order, was the main appeal. The most important issues which counsel addressed were as follows. First, he submitted that the statutory test had not been satisfied in that (a) there was no specialist valuer; (b) the sale was at a gross undervaluation; (c) there was a failure to exploit the position of Tara; and (d) the Receiver went to the market at the wrong time. Counsel emphasised that these four aspects of the matter were merely facets of the issue as to whether in all the circumstances the statutory requirements of s. 316 had been met. Counsel opened extensive case law on the test to be applied is a s. 316 application. Counsel submitted further that there had been a lack of fair procedures. Comprehensive case law was opened to the court in oral and written submissions as to the duty of good faith required of the Receiver. Counsel argued...