Comhlucht Paipear Riomhaireachta Teo v Udaras Na Gaeltachta

• Jurisdiction: Ireland
• Judge: McCarthy J.,
• Judgment Date: 23 November 1989
• Neutral Citation: 1989 WJSC-SC 1106
• Docket Number: 241/87
• Court: Supreme Court
• Date: 23 November 1989

1989 WJSC-SC 1106

THE SUPREME COURT

Finlay C.J.

Hederman J.

McCarthy J.

241/87

242/87

262/87

COMHLUCHT PAIPEAR RIOMHAIREACHTA TEO v. UDARAS NA GAELTACHTA

BETWEEN

COMHLUCHT PAIPEAR RIOMHAIREACHTA TEO (IN VOLUNTARY LIQUIDATION)

PLAINTIFF

AND

UDARAS NA GAELTACHTA G.T. CARPETS LIMITED (IN VOLUNTARY LIQUIDATION)

AND

VINCENT DUIGNAN

DEFENDANTS

Citations:

COMPANIES ACT 1963 S390

COMPANIES ACT 1862 S69

COMPANIES ACT 1963 S286

COMPANIES ACT 1948 S361 (UK)

COMPANIES (CONSOLIDATION) ACT 1908 S278

COMPANIES ACT 1862 S164

COMPANIES (CONSOLIDATION) ACT 1908 S210

COMPANIES ACT 1948 S320 (UK)

COMPANIES ACT 1963 S281

COMPANIES ACT 1963 S285(2)

COMPANIES ACT 1963 S285(8)

RED BREAST PRESERVING CO (IRL) LTD, IN RE 1958 IR 234

PACIFIC COAST SYNDICATE LTD, In re 1913 2 CH 26

COMPANIES ACT 1963 S193

LONDON METALLURGICAL CO, In re 1885 1 CH 758

HOME INVESTMENT SOCIETY, IN RE 1880 14 CH 167

DOMINION OF CANADA PLUMBAGO CO, In re 1884 27 CH 33

DRONFIELD SILKSTONE COAL CO (NO 2), In re 1883 23 CH 511

SMITH, Ex parte 3 CH 125

NATIONAL BUILDING & LAND INVESTMENT CO, IN RE EX PARTE CLITHEROE 15 LR IR 47

BANK OF HINDUSTAN, CHINA & JAPAN, IN RE, EX PARTE LEVICK LR 5 EQ 69

MADRID BANK V PELLY LR 7 EQ 442

TRENT & HUMBER SHIP-BUILDING CO, BAILEY & LEETHAM'S CASE, IN RE LR 8 EQ 94

HALSBURY'S LAWS OF ENGLAND 4TH ED V7(2) PARA 1803

BULA LTD V TARA MINES LTD 1987 IR 85, 1988 ILRM 149, 1987 IR 494

COMPANIES ACT 1963 S245

PEPPARD & CO LTD V BOGOFF 1962 IR 180, 97 ILTR 12

S.E.E CO LTD V PUBLIC LIGHTING SERVICES LTD 1987 ILRM 255

JACK O'TOOLE LTD V MACEOIN KELLY ASSOCIATES 1986 IR 277

COMPANIES ACT 1963 S298

COMPANIES ACT 1963 S261(1)(b)

UDARAS NA GAELTACHTA ACT 1979

COMPANIES ACT 1963 S285

COMPANIES ACT 1862 S144

Synopsis:

COMPANY

Plaintiff

Action - Costs - Security - Defendant's motion - Court's discretion - Relevant factors - Insolvent company - Defendant's costs, if awarded, payable in priority to costs and expenses of winding up - (241, 242 & 262/87 - Supreme Court - 23/11/89)

|Comhlucht Paipear Riomhaireachta Teo. v. Udaras na Gaeltachta|

WINDING UP

Creditors

Priorities - Action - Costs - Payment - Costs of successful defendant payable before costs of liquidation - (241, 242 & 262/87 - Supreme Court - 23/11/89) [1990] 1 I.R. 320 [1990] ILRM 266

|Comhlucht Paipear Riomhaireachta Teo. v. Udaras na Gaeltachta|

PRACTICE

Costs

Security - Company - Insolvency - Liquidation - Subsequent action - Defendant's costs - Ability of plaintiff company to pay such costs - Winding up - Preferential payments - Discretion of court - Relevant factors - In the event of a defendant being awarded his costs of the plaintiffs” action, such costs would be payable in priority to the costs and expenses of the winding up of the plaintiff company - There was no reason to believe that the plaintiff company would be unable to pay the costs of a successful defendant - Companies Act, 1963, ss. 281, 285, 286, 390 - (241, 242 & 262/87 - Supreme Court - 23/11/89) [1990] 1 IR 320

|Comhlucht Paipear Riomhaireachta Teo. v. Udaras na Gaeltachta|

1 Judgment of McCarthy J., delivered the 23rd day of November 1989.

2 These are three appeals heard as one arising from the refusal of Costello J., to make orders under section 390 of the Companies Act 1963that the Plaintiff company do furnish security for the costs of each of the three Defendants in these proceedings. For convenience, I will treat the three appeals as one and refer to the parties as C.P.R., Udarás, G.T. Carpets, and Duignan.

3 The facts underlying the proceedings have been set out in detail in the Judgment of Costello J., and I confine myself to stating certain salient features.

4 In January 1982, G.T. Carpets lent a sum of £170,000.00 to C.P.R., on terms contained in a letter of the 13th January 1982. After several demands the loan was repaid in June 1982 at a time when C.P.R., was insolvent. (The learned Trial Judge found that it was "grossly insolvent at the dates on which the repayment of the loan took place"). The original advance was effected by means of two giro credits drawn on the account of G.T. Carpets in Northern Bank Limited, Gweedore, Co. Donegal, and was repaid from the account of C.P.R., in Trinity Bank, Dame Street, Dublin, initially by transfer into Duignan's personal account in Allied Irish Bank Plc., Foster Place, Dublin, and thence to G.T. Carpets; the amount transferred to Allied Irish Banks was greater than the amount of the loan and Duignan also paid himself the sum of £6,200.00 in respect of fees claimed to be due by C.P.R.

5 C.P.R. went into voluntary liquidation on the 4th August 1982 and John McStay was appointed Liquidator. In the name of C.P.R., he has instituted these proceedings. Earlier, on the 17th October 1985, he had instituted proceedings in the matter in his own name as plaintiff but on the 12th May 1986, with the consent of the respective defendants, obtained an Order of the High Court that C.P.R., be substituted for him as plaintiff in these proceedings and it was further ordered that the action be adjourned for plenary hearing. At no stage in the proceedings has any point been taken as to whether or not proceedings brought to recover monies allegedly paid so as to be deemed a fraudulent preference of the creditors of the company should be brought in the name of the company or in that of the liquidator. Clearly, such proceedings, if successful, enure for the benefit of the creditors of the company in liquidation; on the identity of the proper plaintiff I express no view.

6 In his Affidavit sworn the 2nd November 1985 grounding the Special Summons issued in his own name, the liquidator exhibited a copy of the Statement of Affairs of the Company as of the 30th June 1982. Whilst the Company was clearly insolvent, the Statement of Affairs disclosed that, as of that date, a sum of £361,992.00 was available for unsecured creditors, after allowing for a secured creditor in the sum of £66,192.00 and preferential creditors at £75,909.00. Udarasás is a company established by Udarás na Gaeltachta Act 1979and holds all the share capital of G.T. Carpets which it put into liquidation on the 14th October 1984. Costello J., has described in detail what appears to be the manner in which the loan was paid and repaid in what may be described, at first sight, as somewhat unusual, and also detailed apparent conflicts between various officers of Udarás and G.T. Carpets as well as Duignan as to what exactly took place. In effect, the learned Trial Judge carried out an elaborate examination of the events surrounding the loan and the personal payment to Duignan; his conclusion may fairly be summarized by quoting from certain parts of his Judgment:-

(a) Udarás

"(15) There is another factor to be taken into account in the particular circumstances of this case - namely, the conduct of each of the Defendants in the light of the requests made to them for information concerning this transaction. I'm entitled to look behind the corporate facade presented by the two Defendants to the realities of this case; it will then be seen that the officials of Udarás na Gaeltachta acting as its officers have proffered one version of this transaction whilst other officials of Udarás na Gaeltachta acting as officers of its subsidiary have proffered a conflicting version. Neither Defendant has explained how this conflict arose and indeed, on this motion, have simply ignored its existence. When, perfectly reasonably, the Liquidator sought further elucidation the request made to An tUdarás' was ignored and when made to an tUdarás' subsidiary was evaded. This conduct, in my view, constitutes special circumstances justifying the refusal of the present application. The Liquidator acted reasonably in requesting these Defendants to elucidate the discrepancy and to give him further information concerning the transaction. An tUdarás unreasonably ignored it. It was reasonable to institute proceedings against them in the light of the information the Liquidator had. The strength of the Plaintiff's case combined with the Defendants' conduct justifies me in refusing this application.... In the circumstances of this case and in particular the conduct of the Defendant and its subsidiary to which I have referred it seems to me that it would be wholly inappropriate to make an order which might have the effect of permanently staying this section when there are documents in existence whose production may materially assist in establishing where (if any where) liability arises under the section."

(b)G.T. Carpets

"He has shown in my view the existence of special circumstances as to why the Court's discretion should be exercised in his favour on the motion by this Defendant. They are similar to those to which I have already referred in considering the application of An tUdarás. The officers of G.T. Carpets Limited must have been well aware of the conflict between the version of the loan transaction which they gave to the Liquidator and that given by the officers of the parent company. They offered no explanation for this conflict and, through their Solicitors, have evaded answering the reasonable requests for further information which the Liquidator has made. In addition, they have in their possession or procurement relevant documents which, on discovery, should help to elucidate the parties liability in this claim."

(c)Vincent Duignan

"(19) Without adjudicating in any final way on the matter it seems to me that the documentary evidence which has been produced shows that on the issue raised by the (this) Defendant the Plaintiff's case is a strong one. But in addition there are other circumstances which the Liquidator has established which entitle me to exercise my discretion against the Applicant. The Liquidator was, in my judgment, entitled to asked this Defendant for further information about the payment...