Emo Oil Limited -v- Sun Alliance & London Insurance Company, [2009] IESC 2 (2009)

Docket Number:30/06
Party Name:Emo Oil Limited, Sun Alliance & London Insurance Company
Judge:Kearns J.

THE SUPREME COURTDenham J.Kearns J.De Valera J.[S.C. No. 30 of 2006]BETWEEN EMO OIL LIMITED PLAINTIFF/RESPONDENTANDSUN ALLIANCE AND LONDON INSURANCE PLC.DEFENDANT/APPELLANTJUDGMENT of Mr. Justice Kearns delivered the 22nd day of January, 2009This is an appeal from the judgment of the High Court (Gilligan J.) delivered on 25th November, 2005 in which he determined a preliminary issue in these proceedings in favour of the plaintiff relating to the interpretation of the terms of a policy of insurance entered into by the parties. The policy of insurance was for "catastrophe credit" insurance pursuant to which the plaintiff, an importer and distributor of oil products, claims an indemnity from the defendant.The specific matter in issue is whether, when a winding up petition on grounds of insolvency was presented in respect of one of the plaintiff's buyers during the period of the policy, but the winding up order in respect of that company was made after the expiration of the policy, the liquidation of that company can be said to have "occurred" within the period of the policy. The agreed wording of the preliminary issue is:- "Whether the insolvency of the insured buyer occurred within the period of insurance under the terms of the policy of insurance, having regard to the terms of section 220(2) of the Companies Act, 1963." In his judgment, Gilligan J. held that the term "insolvency" in the policy should be interpreted by reference to the date of the commencement of a winding up, as opposed to the date on which a winding up order is made and that, accordingly, the winding up occurred within the term of the policy. It is from that finding that this appeal is brought.FACTUAL BACKGROUND The plaintiff and the defendant entered into a contract for "catastrophe credit insurance" on 1st May, 1997. This policy was renewed by correspondence on varied terms at various dates, the last of which was from the period from 1st August, 2001 to 31st July, 2002, which said term was extended to the 31st August, 2002.The policy provided for cover inter alia in the following circumstances:- "The insurance provided:The company will indemnify the insured in respect of the aggregate insured losses in excess of the deductible arising during the normal course of the insured's business from the insolvency or protracted default of an insured buyer.PROVIDED THAT: (A) The insolvency or protracted default of the insured buyer occurs during the period of insurance …"The policy defines "insolvency" by reference to a number of events, including the following:- "Insolvency shall mean that one of the following has occurred in respect of the insured buyer …· A proposal for a voluntary arrangement has been made and approved under Part I of the (English) Insolvency Act, 1986 (hereinafter referred to as the Act).· An administration order has been made by the court under Part II of the Act.· The appointment of an administrative receiver on behalf of debenture holders or other creditors under Part III of the Act.· A resolution has been passed for the voluntary winding up or an order for winding up has been made by the court under Part IV of the Act.· A bankruptcy order has been made by the court under Part IX of the Act.· Liquidation has occurred as defined in section 247 of the Act (other than a voluntary winding up solely for the purpose of amalgamation or reconstruction on a solvent basis) …· A compromise or arrangement between the insured buyer and his creditors has been sanctioned by the court under section 425 of the Companies Act, 1985.· A valid assignment or composition has been made by the insured buyer for the benefit of his creditors.Or the equivalent as stipulated or in accordance with the local law of the countries specified under the Geographical Limits." The "Geographical Limits" are described as "Eire and U.K.".On 29th August, 2002, the plaintiff presented a Petition seeking the winding up of one of its customers, Dev Oil & Gas Limited ('Dev Oil'). A winding up order was made on 11th September, 2002, i.e. after the expiry of the period of insurance under the policy. If a deduction is made in respect of VAT, the plaintiff alleges that it has suffered a net loss of 647,990.72 from the insolvency of Dev Oil. It further alleges that Dev Oil was an insured buyer within the terms of the policy and that Dev Oil's debts are insured losses under the policy.RELEVANT STATUTORY PROVISIONSThe definition of "insolvency" under the policy is set out above and the issue is the date of the insolvency for the purposes of the policy. It is the defendant's case that only the following limb of the definitions provided is relevant in determining the issue:- "A resolution has been passed for the voluntary winding up or an order for winding up has been made by the court under Part IV of the English Insolvency Act 1986". The policy provides a possible extension of the definition in that it states "or the equivalent as stipulated or in accordance with the local law of the countries specified under the Geographical Limits". As already noted, the geographical limits are stated in the Schedule to be "Eire and UK".Under Irish law, it is provided by the Companies Acts 1963 - 2006 that a liquidation may occur in one of the following two ways:-(A) A company may be wound up by the High Court under the jurisdiction given to it under s.212 of the Act of 1963, or(B) A company may be wound up voluntarily in circumstances outlined in s.251 of the 1963 Act.In defining when liquidation 'has occurred', the policy refers to the definition in s.247 of the English Insolvency Act, 1986, or its equivalent in accordance with Irish Law. There is no equivalent provision in this jurisdiction to s.247(2) of the Act of 1986, which provides:-"For the purposes of … (certain parts of the Act of 1986), a company goes into liquidation if it passes a resolution for voluntary winding up, or an order for its winding up is made by the court at a time when it has not already gone into liquidation by passing such a resolution." The Irish Companies Acts 1963 - 2006 do not contain an equivalent provision. The Irish 'equivalents' of Part IV of the Act of 1986 are elaborated in ss.212 and 251 of the Companies Act, 1963.Given that the decision of the High Court was based on the plaintiff's arguments arising out of s. 220(2) of the Act of 1963 and in particular the deeming provisions therein contained, it is important to set out that provision which is as follows:- "In any other case (except where before the presentation of a petition a resolution has been passed by the company for voluntary winding up), the winding up of a company by the court shall be deemed to...

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