Eteams International ((in Liquidation)) v The Governor & company of the Bank of Ireland

• Jurisdiction: Ireland
• Judge: Mr. Justice John MacMenamin
• Judgment Date: 08 May 2020
• Neutral Citation: [2020] IESC 23
• Court: Supreme Court
• Docket Number: [Appeal No. 148/19]
• Date: 08 May 2020

BETWEEN:

ETEAMS INTERNATIONAL (IN LIQUIDATION)

APPELLANT

V.

THE GOVERNOR

AND

COMPANY OF THE BANK OF IRELAND

RESPONDENT

[2020] IESC 23

The Chief Justice

O’Donnell J.

MacMenamin J.

Charleton J.

O’Malley J.

[Appeal No. 148/19]

THE SUPREME COURT

Costs – Liquidation – Debt purchase agreement – Appellant seeking to appeal from the Court of Appeal – Whether the Court of Appeal erred in ruling that the costs of the appeal in that Court should be borne by the liquidator personally rather than by the appellant

Facts: The appellant, Eteams International (the Company), entered into a debt purchase agreement with the respondent, the Bank of Ireland, whereby the Bank agreed to purchase debts owing to that Company by its former customers. When the Company subsequently went into liquidation, the decision was made to challenge the Bank’s claim to monies thus collected. The ensuing proceedings were brought in the name of the Company, not the liquidator, Mr Fitzpatrick. The case was made that the agreement in question was actually a loan secured on the Company’s debts and therefore not a true sale of Eteams’ debts to the Bank. It was contended that the Bank’s interest in the debts was to be treated as security rather than actual ownership. From this, it was said to follow that because the agreement had not been registered as a charge as would have been required under the Companies Act 1963, the Bank’s claim against the liquidator was void. The High Court determined that the standard form invoice discounting agreement was not invalid by reason of non-registration. The Court of Appeal upheld that decision in the substantive judgment. In an appeal to the Supreme Court, brought in the name of the Company, it was argued that the Court of Appeal erred in ruling that the costs of the appeal in that Court should be borne by the liquidator personally rather than by the Company.

Held by MacMenamin J that these proceedings were initiated in the name of the Company, but it was clear that they should have been brought in the name of the liquidator. MacMenamin J noted that the appeal to the Court of Appeal was brought on the instructions of Mr Fitzpatrick; so, too, was the application for leave to appeal to the Supreme Court. MacMenamin J held that, at all stages, the proceedings under s. 280 of the 1963 Act should never have been brought in the name of the Company. MacMenamin J found that the appeal before the Supreme Court had been replete with assertions and innuendo on both sides. MacMenamin J held that the proceedings were not only irregularly initiated, but continued, in the Company’s name where, be it said on the basis of some past experience, Mr Fitzpatrick should have had awareness of the issue himself. MacMenamin J held that simply because one party seeks to cast an aura of suspicion over the other, or invites a court to draw inferences of bad faith or outright misconduct, will not be sufficient, for any conclusion absent clear and cogent evidence to sustain such findings. MacMenamin J was content therefore, simply to ground his conclusion on the same limited basis as that of the Court of Appeal, which was that the Company did not have locus standi to bring the proceedings, and that from an early date, the liquidator had ample warning of the Bank’s intention to render him personally liable.

MacMenamin J held that he would dismiss the appeal and affirm the order of the Court of Appeal awarding the costs of that appeal to the Bank against the liquidator personally, and order that the liquidator be precluded from having any recourse to the assets of the Company for the purpose of satisfying the costs order.

Appeal dismissed.

Judgment of Mr. Justice John MacMenamin dated the 8 ^th day of May, 2020

Introduction

1 This appeal arises from a ruling on costs given by the Court of Appeal in proceedings originally brought in the High Court by the appellant company (“Eteams”; “the Company”), against the respondent (“the Bank”). The ruling ( [2019] IECA 186), was made consequent on a substantive judgment on the principal issue in the case which was of some legal and commercial significance ( [2019 IECA 145]). Prior to the liquidation, Eteams had entered into a debt purchase agreement with the Bank, whereby the Bank agreed to purchase debts owing to that Company by its former customers. When the Company subsequently went into liquidation, the decision was made to challenge the Bank’s claim to monies thus collected. The ensuing proceedings were brought in the name of the Company, not the liquidator. The case was made that the agreement in question was actually a loan secured on the Company’s debts and therefore not a true sale of Eteams’ debts to the Bank. It was contended that the Bank’s interest in the debts was to be treated as security rather than actual ownership. From this, it was said to follow that because the agreement had not been registered as a charge as would have been required under the Companies Act, 1963 (“the 1963 Act”), the Bank’s claim against the liquidator was void. The High Court determined that the standard form invoice discounting agreement was not invalid by reason of non-registration ( [2017] IEHC 393). The Court of Appeal upheld that decision in the substantive judgment. But the issue now before this Court is a net one. In this appeal, brought in the name of the Company, it is argued that the Court of Appeal erred in ruling that the costs of the appeal in that Court should be borne by the liquidator personally rather than by the Company.

2 The liquidator, Anthony Fitzpatrick, was appointed in 2013, when Eteams went into voluntary liquidation. The High Court judgment contained an extensive consideration of legal authorities from the neighbouring jurisdiction. The Court of Appeal delivered a comprehensive judgment affirming the High Court order. As to the merits of the appeal, counsel for the liquidator points out that the substantive issue raised in the case had not previously been determined in the Irish courts, and that the Court of Appeal observed that the appeal was neither frivolous nor vexatious. Counsel for the Bank accepts that this contention might be true of the case, as brought and determined in the High Court, but now submits that the High Court judgment was so definitive as to have militated against the advisability of bringing an appeal to the Court of Appeal. He submits that the Court of Appeal did not err when it determined in its supplemental ruling that the liquidator personally should bear the costs of the appeal, holding that it was clear that the proceedings should have been brought by the liquidator in his own name. Despite the many other avenues this Court was invited to explore in this appeal, the question actually to be determined is very clear. It is confined to whether the Court of Appeal was justified in making the costs award. That decision turned on the narrow issue of an application of the applicable words of s.280(1) of the 1963 Act which, insofar as material, provided:

“(1) The liquidator or any contributory or creditor may apply to the court to determine any question arising in the winding up of a company, or to exercise in relation to the enforcing of calls or any other matter, all or any of the powers which the court might exercise if the company were being wound up by the court.

(2) The Court, if satisfied that the determination of the question or the required exercise of power will be just and beneficial, may accede wholly or partially to the application on such terms as it thinks fit or may make such other order on the application as it thinks just.”

3 The Court of Appeal held that the Company had no locus standi to bring the proceedings. It rejected the liquidator’s various submissions, which included the contention that, at the application for directions in the High Court, the Bank had successfully applied to have carriage of the proceedings. The application for leave to this Court, as well as the decision on costs, again sought to raise the legal issue on the invoice discounting agreement. But this Court granted leave on the costs issue only, expressing the view that the law on the validity of the charge was clear as determined by the Court of Appeal and, therefore, did not come within the criteria laid down in the 33 ^rd Amendment to the Constitution ([2019] IESCDET 236).

Submissions of the Appellant

4 In this appeal, counsel for the appellant laid emphasis on the fact that Baker J., speaking on behalf of the Court of Appeal (Whelan. Baker and Costello JJ.), had not criticised the appeal as being frivolous or vexatious. He referred to dicta of Lynch J., speaking for this Court in Southern Mineral Oil Limited (in liquidation) v. Cooney [1997] 3 I.R. 549, submitting that the authority was distinct from the circumstances of the case presently before this Court. While accepting that, in Tucon Process Installations Limited (in voluntary liquidation) v. The Governor and Company of the Bank of Ireland [2016] IECA 211, the Court of Appeal had held in rather similar circumstances that the appellant company did not have locus standi to bring proceedings, counsel pointed out that that Court nonetheless had not made a personal order for costs against that company’s liquidator - again coincidentally, Mr. Fitzpatrick. Counsel submitted that in Tucon and the instant case, the Court of Appeal erred in exercising its discretion in that the liquidator could not, in the circumstances, be deemed to be the Company: the more so in the circumstance that, in the High Court, the Bank had applied for and had taken up carriage of the proceedings. Counsel referred to more recent dicta of McKechnie J., on behalf of this Court in The Revenue Commissioners v. Anthony J. Fitzpatrick in his capacity as Liquidator of Ballyrider Limited (in voluntary liquidation) (31st July, 2019, Appeal No. 2016/107) to the effect that, in...