Honniball v Cunningham

• Jurisdiction: Ireland
• Judgment Date: 27 October 2006
• Date: 27 October 2006
• Docket Number: [2001 No. 7654 P]
• Court: High Court

Honniball v. Cunningham

Clifford Honniball

Plaintiff

and

Brian Cunningham,Defendant, and, by order, B.P.I. Property Company Limited,Notice Party

[2006] IESC 326,

[2001 No. 7654 P]

High Court

Practice and procedure - Judgment - Execution - Charging order - Meaning of "public company" - Constitutionality of rule allowing party to seek charging order ex parte - Whether court can make order charging share in private company - Whether charging order valid where no time limit provided within which debtor should show cause - Interim order - Non-disclosure - Discretion to discharge interim order for non-disclosure - Joinder of notice party - Whether necessary to join company as notice party where charging order made over share in company - Rules of the Supreme Court (Ireland) 1853, O. XLVI - Rules of the Superior Courts 1962 (S.I. No. 72) - Rules of the Superior Courts 1986 (S.I. No. 15), O. 46 - Debtors (Ireland) Act 1840 (3 & 4 Vict., c. 105), ss. 23 and 24 - Common Law Procedure Amendment Act (Ireland) 1853 (16 & 17 Vict., c. 113), s. 132 - Statute Law Revision Act 1874 (No. 2) (37 & 38 Vict., c. 96) - Companies Act 1963 (No. 33), s. 33(1) - Companies (Amendment) Act 1983 (No. 13) - Interpretation Act 2005 (No. 23), ss. 5 and 6.

Equity - Remedy - Equitable execution - Appointment of receiver - Interest in property - Debtor legal owner - Whether receiver can be appointed by way of equitable execution over proceeds of sale where no sale contemplated.

By order of the High Court (O Caoimh J.), the plaintiff recovered a sum of money, plus costs, against the defendant. The execution and registration of the judgment was stayed on the condition that (1) the defendant discharge the debt by prescribed instalments, (2) the defendant create a mortgage over certain premises in favour of the plaintiff as security within four weeks and (3) the defendant agree not to create any charge, lien or encumbrance over the premises.

The first two conditions were not complied with and the plaintiff entered judgment and applied ex parte for an order, pursuant to O. 46, r. 1 of the Rules of the Superior Courts 1986 and ss. 23 and 24 of the Debtors (Ireland) Act 1840, charging the defendant's share in the notice party, a private company limited by shares, of which the defendant was the sole member. The plaintiff also applied for a receiver to be appointed by way of equitable execution over such distribution as might be made in respect of the share, or in the alternative, over the proceeds of sale of same. The court made the charging order and appointed a receiver by way of equitable execution. The court also ordered that the notice party be joined as a notice party in the proceedings.

The charging order was not described in absolute terms, but it failed to provide a time limit within which the defendant should show cause. However, the application to appoint the receiver was returnable shortly thereafter.

The defendant applied to have the orders discharged.

In relation to the charging order, the defendant submitted that the court ought not to have made a charging order because the notice party was not a "public company", within the meaning of s. 23 of the Act of 1840. He further submitted that the rule, if requiring the application to be made ex parte in circumstances where there was no urgency, would be unconstitutional.

The defendant also argued that the plaintiff showed a lack of candour in making the application without fully disclosing various other means to which he had previously resorted to secure payment of the judgment debt and, in particular, the fact that he had registered a judgment mortgage over the premises.

In relation to the order appointing the receiver by way of equitable execution, the defendant argued that same was not available where reliefs were available at law to the judgment creditor. He submitted that he had not sold, and did not intend to sell, his share and that he therefore had no equitable interest in the proceeds of a share sale.

Held by the High Court (Laffoy J.), in discharging the orders joining the notice party and appointing the receiver and declaring the charging order absolute, 1, that a private company limited by shares, incorporated under the Companies Act 1963, had sufficient attributes of publicity to be a "public company" for the purposes of an application for a charging order under s. 23 of the Debtors (Ireland) Act 1840.

MacIntyre v. Connell (1851) 1 Sim. N. S. 225 followed.

2. That a consideration of the text, purpose and context of the Act of 1840 did not permit restricting the meaning of "public company" in s. 23 to the meaning ascribed to that expression in the modern company law code.

3. That a rule of court which allowed a judgment creditor to pursue against a judgment debtor the type of remedy provided for in s. 23 without giving notice to the judgment debtor was not constitutionally infirm, provided it contained a mechanism for the judgment debtor to be heard without undue delay.

Haughey v. Moriarty [1999] 3 I.R. 1 mentioned.

4. That where a charging order was deficient in not providing a time limit within which the defendant should show cause, the fact that the parties would be before the court on another application shortly after the making of the order, at which time the defendant would have the opportunity to inform the court whether or not it would be applying to have the charging order discharged, obviated any injustice to the defendant.

5. That the court had a discretion to discharge an interim order on the ground of non-disclosure. The court might have regard, in this context, to the materiality of the facts not disclosed, the extent of the culpability on the part of the party granted the order in respect of the failure to disclose and the overall circumstances of the case which led to the application.

Bambrick v. Cobley [2005] IEHC 43, [2006] 1 I.L.R.M. 81 and F. McK. v. D.C. [2006] IEHC 185, (Unreported, High Court, Clarke J., 26th May, 2006) followed.

6. That, where judgment was given with a conditional stay on execution and the judgment debtor failed to comply with conditions, the judgment creditor was not precluded from pursuing any process of execution provided by law and could pursue two or more such processes cumulatively until the debt was discharged.

7. That the court would not appoint a receiver by way of equitable execution over property of which a judgment debtor was the legal owner and which could be the subject of legal process. Such remedy was only available where the judgment debtor had only an equitable interest in the property.

National Irish Bank Ltd. v. Graham [1994] 1 I.R. 215applied. In re Shephard, Atkins v. Shephard (1889) 43 Ch. D. 131 and Holmes v. Millage [1893] 1 Q.B. 551 followed.

8. That a receiver could not be appointed by way of equitable execution over the proceeds of sale of a share owned by a judgment debtor where no such sale had taken place or was contemplated. In such circumstances, the judgment debtor had no equitable interest in the proceeds of a share sale; he was merely the legal owner of the share.

9. That, where a charging order was made over a share owned by a judgment debtor in a particular company, it was not necessary to join the company as a notice party to the proceedings as, subject to being served with notice of the making of the charging order, the company was bound by same.

Cases mentioned in this report:-

Bambrick v. Cobley [2005] IEHC 43, [2006] 1 I.L.R.M. 81.

Haughey v. Moriarty [1999] 3 I.R. 1.

Holmes v. Millage [1893] 1 Q.B. 551.

MacIntyre v. Connell (1851) 1 Sim. N.S. 225.

F. McK. v. D.C. [2006] IEHC 185 (Unreported, High Court, Clarke J., 26th May, 2006).

Munster and Leinster Bank v. O'Shea (1934) 70 I.L.T.R. 247; [1934] L.J. Ir. 2.

National Irish Bank Ltd. v. Graham [1994] 1 I.R. 215.

National Land Bank Ltd. v. O'Dea (1926) 60 I.L.T.R. 55.

Northern Bank v. Cooney [1940] I.R. 207; (1940) 74 I.L.T.R. 130.

In re Shephard, Atkins v. Shephard (1889) 43 Ch. D. 131.

Plenary summons

The facts have been summarised in the headnote and are more fully set out in the judgment of Laffoy J., infra.

The proceedings were commenced by way of plenary summons dated the 20th May, 2001. By order dated the 1st May, 2003, the High Court (O Caoimh J.) gave judgment in favour of the plaintiff. By order dated the 3rd October, 2006, on foot of an ex parte application by the plaintiff, the High Court granted a charging order in favour of the plaintiff, appointed a receiver by way of equitable execution and joined the notice party as a notice party in the proceedings.

By way of motion on notice dated the 22nd November, 2006, the defendant sought to have the order of the 3rd October discharged.

The matter was heard before the High Court (Laffoy J.) on the 17th October, 2006.

Cur. adv. vult.

Laffoy J. 27th October, 2006

Background in outline

[1] The plaintiff is a judgment creditor of the defendant in the sum of EUR850,000 and costs, when taxed and ascertained, on foot of an order dated the 1st May, 2003, made in this court by O Caoimh J. in the substantive proceedings. The plaintiff has averred in an affidavit sworn on the 3rd October, 2006, that the defendant is the sole member of the notice party, a limited liability company registered in the State, and that he owns the sole issued share in the notice party. That averment was made by reference to the particulars filed in the companies registration office on behalf of the notice party. The averment has not been contradicted by the defendant, who, in an affidavit sworn on the 13th October, 2006, has attested to the accuracy of matters averred to in an affidavit sworn by his solicitor, Mr. Peter Dempsey, on the same day. In para. 21 of his affidavit Mr. Dempsey averred as follows:-

"There is no liability on the part of the notice party for any debt to the plaintiff and no distribution on foot of the existing shareholding...