Bula Ltd v Tara Mines Ltd (No 1)

• Jurisdiction: Ireland
• Judge: McCARTHY J.
• Judgment Date: 13 May 1988
• Neutral Citation: 1988 WJSC-SC 921
• Court: Supreme Court
• Docket Number: (222-86)
• Date: 13 May 1988

In Re BULA LTD

IN THE MATTER OF BULA LIMITED

AND

IN THE MATTER OF THE COMPANIES ACTS,1963–1983

1988 WJSC-SC 921

(222-86)

(243-86)

THE SUPREME COURT

Synopsis:

WINDING UP

Petitioner

Onus of proof - Secured creditor - Motive - Debenture holder - Receiver already appointed - Ore body being sole asset of insolvent mining company - Discretion of court - Petition dismissed - The State owned 49% of the shares of Bula Ltd., Bula Holdings owned 40.8% of the shares and the remaining 10.2% of the shares were owned by other private interests - Bula was a mining company which had never traded and which was insolvent; its only asset was a body of ore, containing deposits of lead and zinc, which was alleged to be worth #1b - The liabilities of the company exceeded #30m - On 14/2/86 three banks were owed #15.5m by Bula and on that date the banks presented a petition in the High Court for an order directing that Bula be wound up by the court - The three petitioners were holders of debentures issued by Bula and they had already appointed a receiver of the assets of Bula - The receiver had experienced great difficulties in his endeavours to sell Bula's only asset - On 30/3/63 Munster Base Metals made payments on behalf of Bula to the petitioners and to another bank; subsequently Munster obtained judgment for #690,000 against Bula and on 18/11/85 Munster registered that judgment as a judgment mortgage against the property of Bula - Munster and Bula opposed the petition but a majority of Bula's creditors, both in number and value, supported the petition - On 18/7/86 the High Court (Costello J.) ordered that Bula be wound up by the court - The judge took the view that Bula was unable to pay its debts, that the majority of creditors in number and value supported the petition, that the petitioners had established a prima facie right to the relief sought in their petition, that the Munster judgment mortgage would be rendered invalid (due to the operation of ss. 220 and 286 of the Act of 1963) in ease of the general creditors when the winding-up order was made, that such order would not prejudice the receiver's attempts to sell Bula's assets, and that the evidence of the opponents had not displaced the petitioners” prima facie right to such order - Munster appealed against the order of the High Court - Held, in allowing the appeal, that the petitioners had not presented their petition for the purpose of recovering the moneys owed to them by Bula but for the purpose of eliminating the possibility of Munster becoming a secured creditor and that, therefore, the presentation of the petition constituted an abuse of the process of the court - Held that the petitioners” prima facie right to a winding-up order had been displaced by their ulterior motive - Held that it had not been shown that a liquidator in a winding up of Bula would be in a better position to sell the assets of that company than the receiver appointed by the petitioners - Companies Act, 1963, ss. 213, 220, 286, 309 - (222-243/86 - Supreme Court - 13/5/88) - [1990] 1 I.R. 440

|In re Bula Ltd.|

PRACTICE

Procedure

Abuse - Process of the court - Company - Liquidation - Petition of secured creditor - Ulterior motive - ~See~ Winding up, petitioner - (222-243/86 - Supreme Court - 13/5/88) [1990] 1 IR 440

|In re Bula Ltd.|

Citations:

COMPANIES ACT 1963 S213

COMPANIES ACT 1963 S309

CONVEYANCING ACT 1881 S21

BOWES V HOPE LIFE 11 HLC 389

BRIGHTON HOTEL CO, IN RE LR 6 EQ 339

WESTERN OF CANADA OIL, IN RE LR 17 EQ 1

ST THOMAS'S DOCK CO, IN RE 2 CH 116

GREAT WESTERN FOREST OF DEAN, IN RE 21 CH 769

KRASNAPOLSKY REST & WINTER GARDEN, IN RE 1892 3 CH 174

P & J MCCRAE LTD, IN RE 1961 1 AER 302

A COMPANY, IN RE 1983 BCLC 492

GREENWOOD, IN RE 1900 2 QB 306

VAMUR, IN RE 1963 AER

ITHACA SHIPPING CO, IN RE 84 LLOYDS 507

STRONGE, IN RE 1940 IR 382

PORTSTEWART TRAMWAY CO, IN RE 1896 1 IR 265

BORO OF PORTSMOUTH TRAMWAY CO, IN RE 1892 2 CH 362

CHAPEL HOUSE COLLIERY CO, IN RE 24 CH 259

1 [Nem diss]McCARTHY J.

McCARTHY J.

2 Bula is owned as to 49 per cent by the State, 40.8 per cent by Bula Holdings and 10.2 per cent by the Wright family, represented by Cathal N. Young. Bula has never traded and, as a going concern, is hopelessly insolvent. Its liabilities exceed £30m. and its sole asset is buried in the ground at Nevinstown, Navan, Co. Meath being zinc and lead deposits, unworked by Bula, but claimed to be of enormous value (a figure as high as £1b, has been postulated as the marketed value). Northern Bank Finance Corporation Limited, Ulster Investment Bank Limited and Allied Irish Investment Bank Limited (the Banks) are creditors for approximately £15m, of which some £10m, represents interest. Michael J. Wymes, Richard Wood, Thomas C. Roche and Thomas J. Roche (the guarantors) are directors of Bula, shareholders in Bula Holdings, and have personally guaranteed without limit the amount of the advances made by the Banks, upon which interest is currently running at some £5,000 per day. Munster Base Metals Limited (Munster) on 30th March 1983 made payments on behalf of Bula to the Banks and to Northern Bank Limited of a total sum which with interest as of 18th November 1985 amounted to approximately £690,000. Having obtained judgment for that sum Munster registered the judgment against Bula on the 18th November 1985. On 8th October 1985 the Banks, in exercise of their powers under several debentures, appointed Laurence Crowley as receiver over Bula, the charge effected by the debentures covering all of the assets, there being only one asset, the ore body at Nevinstown. Since that time, Mr. Crowley has attempted to find a buyer for this sole asset, the development of which, permitted by planning permission granted in December 1983, was significantly affected by difficulties of access. Tara Mines Limited, a rival concern, owns and works the ore body on lands immediately adjoining the Bula lands and is a party to an agreement with the Minister for Energy, to which agreement I shall revert.

3 On the 14th February 1986, four days before the Munster judgment registered as a judgment mortgage would have achieved a certain priority as a secured creditor, the Banks presented a petition for the winding-up of Bula, which presentation, if the petition were as it was granted by an order for winding-up, nullify the Munster claim to priority over unsecured creditors. It was avowedly for the purpose of defeating the Munster manoeuvre towards becoming a secured creditor that the petition was presented. It was not for the purpose of recovering the Banks' debts, a purpose itself of questionable validity, much less to produce a benefit to a class of creditors to which the petitioners belong. In fact, the petitioners are the only members of the class to which they belong; whatever nicety of distinction may lie between creditors secured by debenture and the creditors secured by the registration of a judgment mortgage, in the instant case...