Decobake Ltd and The Companies Act 2014

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 25 June 2019
• Neutral Citation: [2019] IECA 169
• Date: 25 June 2019
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2019] IECA 169

IN THE MATTER OF DECOBAKE LIMITED

AND

IN THE MATTER OF THE COMPANIES ACT 2014.

BETWEEN/

PAUL COYLE

AND

MARGARET COYLE

APPELLANTS/DIRECTORS

AND

DENIS MCHUGH

PETITIONER/RESPONDENT

AND

DECLAN DELACY LIQUIDATOR OF DECOBAKE LIMITED NOTICE PARTY

[2019] IECA 169

Costello J.

Peart J.

McGovern J.

Costello J.

Neutral Citation Number: [2019] IECA 169

Record No. 2017/367

THE COURT OF APPEAL

Winding up – Company – Petition – Respondent seeking the winding up of the company – Whether the respondent was required to obtain leave of the court pursuant to s. 678(1)(b) of the Companies Act 2014 prior to proceeding with the petition

Facts: On the 29th June, 2017, a petition was presented for the winding up of Decobake Ltd (the company) and on the same day Gilligan J appointed Mr DeLacy provisional liquidator to the company. On the 24th July, 2017, the High Court (Keane J) made an order that the company be wound up and various ancillary orders. He refused an application for a stay by the appellants/directors, Mr and Ms Coyle. The appellants appealed the judgment and order of the 24th July, 2017 on the following grounds: (i) the petitioner/respondent, Mr McHugh, was required to obtain leave of the court pursuant to s. 678(1)(b) of the Companies Act 2014 prior to proceeding with the petition presented on the 29th June, 2017; (ii) the trial judge erred in deeming service good of the notice issued pursuant to s. 570 of the 2014 Act on the 3rd May, 2017, served on the 4th May, 2017; (iii) the judge erred in failing to take due cognisance of the wishes of the creditors and contributories of the company pursuant to s. 590 not to have the company wound up; (iv) the judge erred in deeming the company to be insolvent in all the circumstances; (v) the judge erred in law in failing to act proportionately in making an order winding up the company in circumstances where the appellant had tendered payment via his solicitors in excess of the amount demanded by the petitioner/respondent and any other creditors’ claims who were present in court on the 24th July, 2017; (vi) the judge erred in law by failing to take cognisance adequately of the accountant’s report exhibited by the first appellant which showed the company to be solvent; (vii) the judge erred in law in failing to exercise his discretion not to make the winding up order and by disregarding the interests of the company and its forty employees and its contributories; (viii) the judge erred in law by relying upon the provisional liquidator’s report to conclude inter alia that the company was insolvent in circumstances where the provisional liquidator stated that he could not make a complete adjudication on the financial status of the company.

Held by the Court of Appeal (Costello J) that the appellants had not raised any ground upon which the order of the High Court should be reversed.

Costello J held that she would refuse the appeal and affirm the order of the High Court.

Appeal dismissed.

JUDGMENT of Ms. Justice Costello delivered on the 25th day of June, 2019.

1 On the 29th June, 2017 a petition was presented for the winding up of Decobake Limited (‘the company’) and on the same day Gilligan J. appointed Mr. Declan DeLacy provisional liquidator to the company. On the 24th July, 2017 the High Court (Keane J.) made an order that the company be wound up and various ancillary orders. He refused an application for a stay by the appellants. The appellants appealed the judgment and order of the 24th July, 2017 and this is my judgment in respect of that appeal.

Grounds of Appeal

2 There are eight grounds of appeal set out in the notice of appeal, they are:-

(i) that the petitioner was required to obtain leave of the court pursuant to s. 678(1)(b) of the Companies Act, 2014 prior to proceeding with the petition presented on the 29th June, 2017.

(ii) The trial judge erred in deeming service good of the notice issued pursuant to s.570 of the Companies Act 2014 on the 3rd May, 2017, served on the 4th May, 2017.

(iii) The trial judge erred in failing to take due cognisance of the wishes of the creditors and contributories of the company pursuant to s.590 not to have the company wound up.

(iv) The trial judge erred in deeming the company to be insolvent in all the circumstances.

(v) The trial judge erred in law in failing to act proportionately in making an order winding up the company in circumstances where the appellant had tendered payment via his solicitors in excess of the amount demanded by the petitioner/respondent and any other creditors' claims who were present in court on the 24th July, 2017.

(vi) The trial judge erred in law by failing to take cognisance adequately of the accountant's report exhibited by the first appellant which showed the company to be solvent.

(vii) The trial judge erred in law in failing to exercise his discretion not to make the winding up order and by disregarding the interests of the company and its forty employees and its contributories.

(viii) The trial judge erred in law by relying upon the provisional liquidator's report to conclude inter alia that the company was insolvent in circumstances where the provisional liquidator stated that he could not make a complete adjudication on the financial status of the company.

3 The company and the appellants were represented by a solicitor, Mr. Maher, who applied on the 30th June, 2017 to have the provisional liquidator removed and then subsequently by Mr. Herbert Kilcline solicitor and Mr. Ronnie Hudson BL. They appeared on behalf of the company and the appellants at the hearing of the petition on the 24th July, 2017 and signed the notice of appeal, which was also signed by senior counsel.

4 Thereafter, the appellants progressed the appeal without the benefit of legal representation. The appellants filed written submissions and presented oral submissions together with a speaking note which attempted greatly to widen the scope of the appeal. It is important therefore to note the limited circumstances in which an appellate court may consider a new point on appeal which was not raised in the High Court.

Scope of the Appeal

5 In Lough Swilly Shellfish Growers v Bradley [2013] 1 IR 227, O'Donnell J. held:-

‘there is a spectrum of cases in which a new issue is sought to be argued on appeal. At one extreme lie cases such as those where argument of the point would necessarily involve new evidence, and with the consequent effect on the evidence already given (as in KD (otherwise C) v MC [1985] IR 697 for example); or where a party seeks to make an argument which was actually abandoned in the High Court (as in Movie News Limited v Galway County Council [Unreported, Supreme Court, 25th July 1997]);or, for example where a party sought to make an argument which was diametrically opposed to that which was had been advanced in the High Court and on the basis of which the High Court case had been argued and perhaps evidence adduced. In such cases leave would not be granted to argue a new point of appeal. At the other end of the continuum lie cases where a new formulation of argument was made in relation to a point advanced in the High Court, or where new materials were submitted, or perhaps where a new legal argument was sought to be advanced which was closely related to arguments already made in the High Court, or a refinement of them, and which was not in any way dependent upon the evidence adduced. In such cases, while a court might impose terms as to costs, the Court nevertheless retains the power in appropriate cases to permit the argument to be made.’

This statement of principle is binding upon this court.

6 The second point to bear in mind is that new evidence may not be adduced on appeal against a final order save with leave of the court. Leave must be sought in advance of the hearing of the appeal by way of a notice of motion and a grounding affidavit setting out the special grounds which would justify this Court granting the party special leave to adduce the further evidence in question.

7 In light of these principles, I propose to consider the eight grounds of appeal raised in the notice of appeal. If it is necessary, I shall then consider the further arguments advanced by the appellants outside the scope of their notice of appeal.

Was it necessary for the petitioner to make an application pursuant to s.678(1)(b) of the Companies Act, 2014 pursuant to Order 74, r. 83 of the Rules of the Superior Courts prior to proceeding with the petition?

8 Section 678 of the Companies Act 2014 provides as follows:-

‘(1) When in relation to a company—

(a) a winding-up order has been made,

(b) a provisional liquidator has been appointed, or

(c) a resolution for voluntary winding up has been passed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court may impose.’

9 The ground of appeal refers to subparagraph (c) but it is clearly an error and in fact it was intended to refer to subparagraph (b). When the argument based upon s.678 of the Act of 2014 was raised in the High Court, the trial judge rejected the argument on the basis that the pre-existing winding up petition was not an action or proceedings against the company within the meaning of s. 678(1) of the Act of 2014. Given the fact that a provisional liquidator had been appointed to the company on the 29th June, 2017 on foot of the petition which the petitioner sought to move, I can see no basis upon which it could be said that such a petitioner was required to obtain relief pursuant to s. 678(1) in order to proceed with the petition.

10 Counsel for the appellants argued in the High Court that O. 74, r. 83 of the Rules says that an application under inter alia s. 678 should be made by a motion on notice in case of a court ordered winding up and by way of an originating notice of motion in a...