Hibernia REIT v Companies Act 2014

JurisdictionIreland
JudgeMr. Justice David Barniville
Judgment Date25 March 2020
Neutral Citation[2020] IEHC 144
Date25 March 2020
CourtHigh Court
Docket Number[2019 No. 356 COS.]

IN THE MATTER OF HIBERNIA REIT PUBLIC LIMITED COMPANY

AND

IN THE MATTER OF THE COMPANIES ACT, 2014

AND

IN THE MATTER OF A PROPOSED REDUCTION OF CAPITAL PURSUANT TO SECTIONS 84 AND 85 OF THE COMPANIES ACT, 2014

[2020] IEHC 144

David Barniville J.

[2019 No. 356 COS.]

[2019 No. 137 COM.]

THE HIGH COURT

COMMERCIAL

Special resolution – Reduction of capital – Companies Act 2014 – Company seeking orders under part 3, chapter 4 of the Companies Act 2014 (as amended) confirming a special resolution approving a reduction of the Company’s capital – Whether the Company’s accounts were prepared on an unlawful and improper basis, such that they could not properly be relied upon by the court in determining the Company’s application

Facts: Hibernia REIT Public Limited Company applied to the High Court for orders under part 3, chapter 4 of the Companies Act 2014 (as amended) confirming a special resolution approving a reduction of the Company’s capital and for various ancillary orders. The Company’s application was opposed by Mr Farrington who claimed to be a creditor of the Company. Mr Farrington sought to oppose the Company’s application on various grounds. Among the grounds relied upon by Mr Farrington were that the Company was indebted to him in the sum of in excess of €2 billion (on foot of an invoice sent by Mr Farrington to the Company in late January, 2020) and that the Company’s accounts were prepared on an unlawful and improper basis, such that they could not properly be relied upon by the court in determining the Company’s application. Various other grounds of opposition were put forward by Mr Farrington (with the support of Mr Butler, a person put forward on his behalf as an expert). The grounds of opposition put forward by Mr Farrington (some of which were supported by Mr Butler) were strongly resisted by the Company in affidavit evidence before the court and in written and oral submissions.

Held by Barniville J that the Company had complied with the statutory requirements which must be met in order for the court to confirm a reduction of capital and to make the ancillary orders sought. Barniville J concluded that there was no basis whatsoever for any of the grounds of objection raised by Mr Farrington. Barniville J was not satisfied that Mr Farrington was a creditor of the Company. Even if, contrary to that conclusion, Mr Farringdon was a creditor, Barniville J found that he had not established an entitlement to object to the Company’s application under the applicable statutory provisions. Furthermore, Barniville J concluded that there was no basis whatsoever for any of the other grounds of objection sought to be raised by Mr Farrington (with the support of Mr Butler). Finally, insofar as Mr Farrington requested the court to make a reference to the Court of Justice of the European Union (CJEU), pursuant to Article 267 TFEU, Barniville J concluded that there was no issue of EU law on which the court required assistance or guidance from the CJEU under the preliminary reference procedure. Barniville J therefore declined to make a reference to the CJEU as requested by Mr Farrington.

Barniville J held that it was appropriate to grant the reliefs sought by the Company. He therefore made an order under s. 85(1) of the 2014 Act confirming the special resolution approving the reduction of the Company’s capital by reducing the share premium account by the reduced sum of €50,000,000, such that the reserve resulting from the reduction would be treated as profits available for distribution within the meaning of s. 117 of the 2014 Act. Barniville J further direct that pursuant to s. 85(5) of the 2014 Act, the provisions of s. 85(4) should not apply as regards any of the classes of creditors of the Company. He made an order pursuant to s. 86 of the 2014 Act approving a revised minute of the reduction of capital to reflect the reduced amount sought by the Company. Barniville J also made the balance of the orders sought in the originating notice of motion. Finally, he gave the Company liberty to apply.

Orders granted.

JUDGMENT of Mr. Justice David Barniville delivered on the 25th day of March, 2020
Introduction
1

This is my judgment on an application by Hibernia REIT Public Limited Company (the “Company”) for orders under part 3, chapter 4 of the Companies Act, 2014 (as amended) (the “2014 Act”) confirming a special resolution approving a reduction of the Company's capital and for various ancillary orders.

2

As I explain below, the Company's application was opposed by Richard Farrington who claims to be a creditor of the Company. Mr. Farrington sought to oppose the Company's application on various grounds. Among the grounds relied upon by Mr. Farrington were that the Company was indebted to him in the sum of in excess of €2 billion (on foot of an invoice sent by Mr. Farrington to the Company in late January, 2020) and that the Company's accounts were prepared on an unlawful and improper basis, such that they could not properly be relied upon by the court in determining the Company's application. Various other grounds of opposition were put forward by Mr. Farrington (with the support of Cormac Butler, a person put forward on his behalf as an expert). The grounds of opposition put forward by Mr. Farrington (some of which were supported by Mr. Butler) were strongly resisted by the Company in affidavit evidence before the court and in written and oral submissions.

Structure of Judgment
3

I will in the course of this judgment attempt to summarise the evidence before the court which is relevant to the Company's application. I stress the word “relevant,” as much of the material and purported evidence on which Mr. Farrington sought to rely was not evidence in any meaningful sense of the term and was entirely irrelevant to the court's consideration of the Company's application. I will then outline the statutory provisions relevant to the Company's application and to some of the cases relevant to the interpretation and application of those statutory provisions. Having done so, I will consider the grounds of objection sought to be relied upon by Mr. Farrington in the context of my consideration of the application of the relevant statutory provisions. I will then set out my conclusions.

4

It will also be necessary for me, in the course of this judgment, to make certain observations about the purported expert evidence relied upon by Mr. Farrington as, in my view, the expertise of Mr. Butler, in the particular area relevant to this application, was not established. Nor did he make any attempt to demonstrate to the court that he understood the particular duties and obligations of an expert. Furthermore, Mr. Butler went far beyond what is appropriate for an expert and, in truth, became an advocate for Mr. Farrington. In so acting, Mr. Butler made a number of entirely improper and inappropriate assertions without any justification and which were unsupported by any evidence.

Summary of Conclusions and Decision
5

For the reasons set out in detail in this judgment, I have concluded that the Company has complied with the statutory requirements which must be met in order for the court to confirm a reduction of capital and to make the ancillary orders sought. I have concluded that there is no basis whatsoever for any of the grounds of objection raised by Mr. Farrington. I am not satisfied that Mr. Farrington is a creditor of the Company. Even if, contrary to that conclusion, Mr. Farringdon is a creditor, he has not established an entitlement to object to the Company's application under the applicable statutory provisions. Furthermore, I have concluded that there is no basis whatsoever for any of the other grounds of objection sought to be raised by Mr. Farrington (with the support of Mr. Butler). Finally, insofar as Mr. Farrington requested the court to make a reference to the Court of Justice of the European Union (CJEU), pursuant to Article 267 TFEU, I have concluded that there is no issue of EU law on which the court requires assistance or guidance from the CJEU under the preliminary reference procedure. I have, therefore, declined to make a reference to the CJEU as requested by Mr. Farrington.

6

In conclusion, therefore, I will make the orders sought by the Company.

The Company's Application
7

By an originating notice of motion, issued on 25th September, 2019, the Company sought various orders under ss. 85 and 86 of the 2014 Act. The principal relief sought by the Company was an order pursuant to s. 85(1) of the 2014 Act confirming a special resolution approving the reduction of the Company's capital by reducing the share premium account by €600,000,000 or by such lesser amount as the court might determine, such that the reserve resulting from the reduction of capital could be treated as profits available for distribution within the meaning of s. 117 of the 2014 Act. The Company also sought an order pursuant to s. 85(5) of the 2014 Act that s. 85(4) should not apply as regards any of the classes of creditors of the Company (or should not apply in respect of such class or classes of creditors of the Company as the court might determine). Ancillary orders were also sought under s. 86 of the 2014 Act.

8

The Company's application was grounded on an affidavit sworn by Thomas Edwards-Moss on 25th September, 2019. Mr. Edwards-Moss swore four further affidavits in support of the Company's application. On the same date as the originating notice of motion was issued, a motion was issued on behalf of the Company seeking to have the proceedings entered in the Commercial List. On 14th October, 2019, the High Court (Haughton J.) made an order that the proceedings be entered in the Commercial List. The court listed the Company's reduction of capital application for hearing on 5th November, 2019 and made a number of further directions in respect of the hearing. In addition, the court was...

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2 cases
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    • Ireland
    • High Court
    • 11 May 2020
    ...High Court and by the Court of Appeal in a number of recent cases. The cases were very recently considered by me in Re Hibernia Reit plc [2020] IEHC 144. The approach to be adopted was helpfully set out by Barrett J. in the High Court in Re Permanent TSB Group Holdings plc [2015] IEHC 500. ......
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