Greendale Developments Ltd v

• Jurisdiction: Ireland
• Judge: Keane J.
• Judgment Date: 20 February 1997
• Neutral Citation: 1997 WJSC-SC 1093
• Court: Supreme Court
• Date: 20 February 1997

1997 WJSC-SC 1093

THE SUPREME COURT

Blayney, J.

Keane, J.

Murphy, J.

130/96

GREENDALE DEVELOPMENTS LTD v.

IN THE MATTER OF GREENDALE DEVELOPMENTS LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 - 1990

Citations:

COMPANIES ACT 1963 S298(2)

SMYTH V TUNNEY 1996 1 ILRM 219

SM BARKER LTD, IN RE 1950 IR 123

BUCHANAN LTD & ANOR V MCVEY 1954 IR 89

MULTINATIONAL FUEL & PETROCHEMICAL CO V MULTINATIONAL FUEL & PETROCHEMICAL SERVICES LTD 1983 1 CH 258

O'CALLAGHAN V CLIFFORD 1993 3 IR 603

O'REILLY V CASSIDY 1995 1 ILRM 306

BRADDOCK V TILLITSON NEWSPAPERS LTD 1949 2 AER 307

MEEK V FLEMING 1961 3 AER 148

ANGLO FRENCH CO-OP SOCIETY, IN RE EX PARTE PELLY 1882 21 CH 492

FLITCROFTS CASE 1882 21 CH 519

ETIC LTD, IN RE 1938 1 CH 861

COMPANIES ACTS 1963 – 1990

HUTTON V WEST CORK RAILWAY CO 1883 23 CH 654

LEE BEHRENS & CO LTD, IN RE 1932 2 CH 46

PARKE V DAILY NEWS LTD 1962 CH 927

ROPER V WARD & ORS 1981 ILRM 408

CHARTERBRIDGE CORPORATION LTD V LLOYDS BANK LTD 1970 CH 62

COMPANIES (CONSOLIDATION) ACT 1908

COMPANIES ACT 1990 S142

MURPHY V MIN FOR DEFENCE 1991 2 IR 161

Synopsis:

Company

Directors - liquidation - s.298 Companies Act,1963 - whether impugned payments intra vires - unanimous shareholder assent - whether payments reasonably incidental to company's business - whether misfeasance proceedings appropriate - whether set-off possible - whether "new evidence" should be adduced - refusal of adjournment - remittal for rehearing - whether appellants prejudiced - Held: Payments ultra vires when not to company's benefit - no right of set-off where no mutuality of debts - "new evidence" which merely goes to credibility of witness only admissible where must have led to a different conclusion - rehearing refused - (Supreme Court: - Blayney J., Keane J., Murphy J. - 20/02/1997) - [1998] 1 IR 8

|In Re Greendale Developments Ltd (In Liquidation) and the Compa

nies Acts 1963–1990|

1 Judgment delivered on the 20th day of February, 1997 by Keane J. [NEM DISS]

Introduction

2 Greendale Developments Limited (hereafter "the company") was incorporated on the 29th April 1988. Its nominal capital consists of one million shares of £1 each and it has a paid up share capital of £18. The shareholders are Mr. and Mrs. Stephen Fagan (hereafter sometimes referred to as "the Appellants") and Mr. Rory Burgess, each of whom holds one third of the issued shares in the company. The directors of the company at all material times were Mr. Fagan and Mr. Burgess. The company was formed in order to carry out a development at Islandbridge, Dublin. With this in view, the company bought what will be referred to in this judgment as "the Islandbridge site", consisting of an office building which was in a somewhat dilapidated state, and a large site at the rere adjoining the River Liffey. The company built approximately 80 town houses on the site at the rere, the actual building work being carried out by a company called Flynn Building and Civil Engineering Contractors Limited. That residential development was completed and the 80 houses sold. Substantial structural works were carried out to the office building which was subdivided into five blocks and ultimately sold in 1994 by the company for a sum of £1,100,000.

3 Acrimonious disputes developed between Mr. Fagan and Mr. Burgess as to the manner in which the company's affairs were being conducted and these led eventually to the presentation of a petition by Mr. Burgess seeking relief under s.205 of the Companies Act 1963. It would appear that no motion for directions was brought in relation to that petition and that, while it is still on the file of the High Court, those proceedings are dormant. Mr. Fagan, however, also presented a petition for the winding-up of the company on the ground that the disputes between Mr. Burgess and himself rendered it "just and equitable" that such an order should be made. On the 3rd July 1995, the High Court made an order winding-up the company on that ground and appointed Mr. Liam McQuaid (hereafter "the liquidator") to be the official liquidator.

4 Following his appointment, the liquidator began to investigate the affairs of the company and, over the next few months, interviewed Mr. Fagan and Mr. Burgess on a number of occasions and examined the books and records of the company and Statements of Affairs prepared by Mr. Fagan and Mr. Burgess. The liquidator formed the view, as a result of his investigations, that substantial sums were owed by Mr. Fagan to the company. He was also concerned that Mr. and Mrs. Fagan might dissipate assets which they personally owned, including in particular the proceeds of the sale of a house called "Springfield" in Churchtown before he (the liquidator) could obtain and execute any order from the court requiring the repayment of the monies allegedly owing by Mr. Fagan to the company. Accordingly, a notice of motion in these proceedings was issued on his behalf on the 20th September 1995 in which he claimed inter alia:-

5 2 " (1) An order pursuant to the provisions of s.298 (2) of the Companies Act 1963as amended directing Mr. and Mrs. Fagan to repay or restore monies or property belonging to the company which had been either misapplied or retained by them or for which they had become liable or accountable to the company together with interest on these sums and compensation in respect of the alleged misapplication of these monies; and

6 (2) An injunction restraining Mr. and Mrs. Fagan from disposing of the proceeds of Springfield."

7 The motion was listed for hearing on September 20th, 1995 on which day Mr. Fagan was represented in court by counsel. The motion was adjourned on certain undertakings having been given by Mr. Fagan through his counsel and thereafter was adjourned again from time to time as affidavits were exchanged between the parties. On 11th December 1995 the liquidator swore an affidavit in which he said that he believed that Mr. and Mrs. Fagan were jointly and severally liable to the company in the sum of £302,387.18 after the giving of any credits and that they further owed the sum of £129,714.58 to the company in respect of "Springfield". He exhibited with that affidavit a report with copies of the documents which, he said, verified how the claim was made up.

8 Mr. Fagan swore an affidavit in response to the liquidator's affidavit on the 22nd January 1996 and appeared in court on that date without being represented by solicitor or counsel. The matter appeared on that day in the examiner's list, as it had done on a number of previous occasions, and the judge dealing with that list, Murphy J, directed that the matter should be mentioned before the President with a view to obtaining a date for a hearing. The President gave leave for the matter to be mentioned on the Thursday call over of Chancery cases on January 25th, 1996 for the purpose of seeing if an early date would be available and on that date the President, having heard counsel for the liquidator and Mr. Fagan (who was again appearing in person), listed the matter for trial on January 30th.

9 At the hearing before the President on January 30th, Mr. Fagan was represented by junior counsel, Mr. Anthony Hunt. At the beginning of the hearing, Mr. Hunt applied for an adjournment on the ground that he was not ready to deal with the case and that, in any event, the proceedings should have been by way of plenary hearing. The President expressed the view that the hearing should continue but that, if necessary, Mr. Hunt could renew his application. The hearing then proceeded and the liquidator, Mr. Fagan and Mr. Burgess were cross-examined at some length on the affidavits sworn by them. In addition to disputing the claims made by the liquidator, it was submitted on behalf of Mr. and Mrs. Fagan that they were entitled to set off against any sums found to be owing by them monies which, it was alleged, on their behalf, were owing by the company to them.

10 The President having reserved his judgment, it was delivered on the 12th March 1996. He held that the liquidator had established that the sums in question were owed by Mr. Fagan to the company and he also held that Mr. Fagan was not entitled to set off the sums claimed by him against the money due to the company. In the result, he said that he would order Mr. Fagan to pay to the liquidator on behalf of the company the sum of £435,750.06. He made no order, however, against Mrs. Fagan, holding that since she was not an officer of the company within the meaning of s.298 of the Companies Act 1963, no order could be made against her under that section. He was of the view that the only order that could have been made against her was in her capacity as a "promoter" of the company, but that since none of the claims against her related to any of the transactions at the time of the formation of the company or during its "promotion" by her, no order could be made against her in that capacity either.

11 Notice of appeal from the judgment and order of the President was served on behalf of Mr. Fagan. In addition, an application was made to this court on his behalf by way of notice of motion seeking inter alia the following orders:-

12 i " (i) An order directing that these proceedings should be remitted for trial in the High Court at which (the Appellants) will be afforded a reasonable opportunity to prepare and present their defence and to obtain discovery of documents from (the liquidator);

13 (ii) In the alternative, an order giving (the Appellants) leave to adduce new evidence which was not readily available in the High Court - being Exhibit A to the grounding affidavit herein."

14 When the notice of motion appeared in the list in this court, it was ordered that the notice of motion and the appeal should be listed for hearing together. Both matters came on for hearing in this...