John Joyce v Wellingford Construction Ltd, John Shaw and Patrick Carroll

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 17 November 2005
• Neutral Citation: [2005] IEHC 392
• Docket Number: [No. 314 COS/2005]
• Court: High Court
• Date: 17 November 2005

[2005] IEHC 392

THE HIGH COURT

[No. 314 COS/2005]

JOYCE v WELLINGFORD CONSTRUCTION LTD & ORS

IN THE MATTER OF WELLINGFORD CONSTRUCTION

LIMITED

AND IN THE MATTER OF THE COMPANIES ACT 1963 TO 2005

AND IN THE MATTER OF AN APPLICATION UNDER SECTIONS

205 AND 213 OF THE COMPANIES 1963

BETWEEN

JOHN JOYCE

PETITIONER

AND

WELLINGFORD CONSTRUCTION LIMITED, JOHN SHAW AND PATRICK CARROLL

RESPONDENTS

COMPANIES ACT 1963 S205

COMPANIES ACT 1963 S213

COMPANIES ACT 1963 S218

COMPANIES ACT 1963 S220(2)

COMPANIES ACT 1948 S227

A I LEVY (HOLDINGS) LTD, IN RE 1964 CH 19 1963 2 WLR 1464 107 SJ 416 1963 2 AER 556

LYNCH MONAHAN & O'BRIEN LTD UNREP COSTELLO 14.10.1986 1986/7/1039

PAT RUTH LTD, IN RE 1981 ILRM 51

INDUSTRIAL SERVICES CO (DUBLIN) LTD & COMPANIES ACT 1963 S218, IN RE 2002 4 IR 394

COMPANY LAW

winding up

Assets - Validation of sale of company asset after presentation of winding up petition Whether sale should be validated where assets exceed liabilities - Oppression of member - Re AI Levy (Holdings) Ltd [1963] 2 All ER 556 applied - Companies Act 1963 (No 33), s 218 - Order refused

Facts: The substantive proceedings involved a claim by the petitioner under s. 205 of the Companies Act 1963 for relief against what he contended was oppression of his position as a minority shareholder. The relief claimed also sought in the alternative the winding up of the company. In the present application, the second and third respondents sought an order under s. 218 of the Act of 1963 validating a sale of a significant company asset.

Held by Clarke J. in adjourning the matter generally with liberty to re-enter that he was not prepared to make an order under s. 218 at this stage. However, he would be prepared to validate a sale which was achieved having complied with conditions, including that the property was offered for sale on the open market through a neutral auctioneer and the instructions were to obtain the most commercially advantageous contract.

Reporter: R.W.

Mr. Justice Clarke

2 1.1 The substantive proceedings in this matter involve a claim by the petitioner ("Mr. Joyce") under s. 205 of the Companies Act 1963("the 1963 Act") for relief against what he contends is oppression of his position as a minority shareholder in Wellingford Construction Limited ("Wellingford"). The oppression is alleged against the second named respondent ("Mr. Shaw") and the third named respondent ("Mr. Carroll"). The relief claimed, as is normal in such cases, raises not only the possibility of one or other opposing side being required by the court to buy out the other but also, as an alternative, seeks the winding up of the company. There is, therefore, before the court a petition to wind up Wellingford. It should be noted, however, that there is no suggestion from either side that the assets of Wellingford are not sufficient to meet all of its creditors. Therefore the situation in which the company finds itself is unusual (but by no means unique) in that there is a petition in being which seeks to have it compulsorily wound up by the court in circumstances where its assets exceed its liabilities. It will be necessary to return, to some extent, to the contentions of the parties in respect of the underlying application under s. 205 in due course.

3 1.2 In the application now before me, Mr. Shaw and Mr. Carroll ("the moving parties") seek an order under s. 218 of the 1963 Act, validating a sale of a significant company asset. I turn first to the legal reason why such an order is required and my jurisdiction to make such an order at this stage.

The fact that there is before the court an application to wind up the company does alter the company's situation in a number of material respects. It is necessary to turn first to the provisions of s. 218 of the 1963 Act which provides:-

"In a winding up by the court, any disposition of the property of the company, including things in action, and any transfer of shares or alteration in the status of the members of the company, made after the commencement of the winding up, shall, unless the court otherwise orders, be void".

2 1.4 Under s. 220(2) of the 1963 Act the winding up of a company by the court is deemed (save in the limited circumstances specified in subs. (1) which have no application here) to have commenced at the time of the presentation of the petition for the winding up.

3 1.5 Therefore in the event that the company is ultimately wound up by order of the court, that winding up will be deemed (under s. 220(2)) to have commenced at the time of the presentation of the petition. Therefore, under s. 218, any disposition of the property of the company after the presentation of the petition will be void "unless the court otherwise orders".

4 1.6 In those circumstances it is clear that any disposition of the property of a company while there is pending before the court a petition to wind up such company, is open to the risk that it may be declared void.

5 1.7 In those circumstances the question of the exercise by the court of its power to "otherwise order" and thus approve of a disposition of the property arises. Both parties to this application are agreed that the jurisdiction of the court to approve of a disposition arises even though a winding up order has not yet been made. In considering the then operative equivalent provision under the United Kingdom Companies Act 1948 (s. 227) Buckley J. in Re A.I. Levy (Holdings) Limited (1963) 2 All ER 556 found that there was jurisdiction under the relevant section to authorise a sale of property notwithstanding that a winding up order had not yet been made. Having reviewed the facts which, it was contended, made it in the interest of the unsecured creditors of the company concerned that the sale under consideration go ahead immediately Buckley J. went on to say the following:-

"In those circumstances, this being a case in which it appears to me to be manifest that the transaction is one which must benefit the unsecured creditors of the company if in due course a winding up order is made, the reason which effected the mind of Vaisey J., that is to say that the liquidator should be given an opportunity to investigate the matter and bring it before the court representing the interests of all the creditors, does not affect my mind, for I do not think that the liquidator could make the position clearer to me than it is at the present time on the facts. With the greatest respect to Vaisey J. from whose view as to jurisdiction I think I am, in the circumstances, at liberty to differ, I hold that I have jurisdiction and that on the facts of this case I should exercise my jurisdiction here and now, notwithstanding that no winding up has yet bee made".

6 1.8 I agree that the position as identified by Buckley J. in Levy represents the proper interpretation of s. 218 of the 1963 Act (which is in identical terms to s. 227 of the United Kingdom Companies Act 1948) and it seems to me therefore that there is a jurisdiction to make an order under s. 218 validating a sale of any of the companies assets in an appropriate case even where a winding up order has yet to be made.

7 1.9 In the application currently before the court the moving parties seek such an order. It is opposed by Mr. Joyce.

8 1.10 Before passing on to the issues which arise between the parties on this question it should be noted that when the matter originally came before the court the respondents sought validation of the sale by the company of two types of property as specified in the schedule to the motion. The first was a property known as "Derg Marina, Killaloe, Co. Clare" whose sale by the company remains in dispute between the parties. The second set of properties consisted of various apartments in specified blocks at a property known as Ballyvalley 1, Killaloe, Co. Clare. No dispute as to the sale of such properties by the company arose and the court has already validated those sales. The dispute with which I am concerned relates, therefore, to Derg Marina.

2 2.1 Wellingford is the owner of Derg Marina. The property comprises lands and berths and ancillary structures to the marina adjacent to Lough Derg. The lands were purchased in early 2003 for €4 million. Wellingford has also been involved in the development and sale of the apartments at Ballyvalley 1, Killaloe which, as I indicated above, have already been the subject of a court validation order. Mr. Joyce is a 45% shareholder in the company. Mr. Shaw is also entitled to 45% of the shareholding while Mr. Carroll is entitled to the remaining 10% of the shareholding. It should also be noted that the same three parties and in the same shares, hold certain other lands through a partnership.

3 2.2 While it would be impossible and inappropriate at this stage to express any views as to the merits or otherwise of the contentions which the parties put forward in the substantive s. 205 proceedings it should be noted, by way of background, that Mr. Joyce alleges in those proceedings that he has been excluded, in an oppressive manner, from the management of the company and also relies upon a contention that the decision (to which I will refer) of the company to sell Derg Marina is, in itself, an example of such oppression.

4 2.3 The respondents contend that Mr. Joyce misappropriated certain funds of the company, which alleged misappropriation is currently, it would appear, under investigation by Grant Thornton.

5 2.4 For completeness it should also be noted that both Mr. Joyce and Mr. Shaw have, in parallel proceedings, sued for a dissolution of the partnership through which they, together with Mr. Carroll, own certain other properties.

6 2.5 Whatever else may be in dispute it is abundantly clear from the above brief recitation of the current state of the parties interlinked commercial interests...