Ken Fennell v Appelbe

• Jurisdiction: Ireland
• Judge: Ms. Justice Faherty
• Judgment Date: 12 July 2022
• Neutral Citation: [2022] IECA 160
• Court: Court of Appeal (Ireland)
• Docket Number: Record Number: 2020/237

In the Matter of Alvonway Investments Limited (In Voluntary Liquidation)

And in the Matter of Section 819 of the Companies Act 2014

Between/

Ken Fennell

Applicant/Respondent

and

Joseph O'Donovan (Otherwise Joe Donovan), Brendan O'Brien and Fergus Appelbe

Respondents/Appellant

[2022] IECA 160

Costello J.

Faherty J.

Haughton J.

Record Number: 2020/237

THE COURT OF APPEAL

Companies – Disqualification – Companies Act 2014 s. 819 – Appellant appealing against an order restricting the appellant from acting as a director or secretary of a company for five years unless the company meets the requirements set out in s. 819(3) of the Companies Act 2014 – Whether the High Court judge erred in making the restriction order against the appellant in the absence of any case being made out by the respondent for the appellant to answer

Facts: The High Court, by order dated 9 October 2020, granted a declaration under s. 819 of the Companies Act 2014 restricting the appellant, Mr Appelbe, from acting as a director or secretary of a company for a period of five years unless the said company meets the requirements set out in subsection (3) of s. 819. The order followed the delivery of the judgment of the High Court (Quinn J) on 29 July 2020. The application for the order pursuant to s. 819 of the 2014 Act was brought by the respondent, Mr Fennell (the Liquidator), who was appointed the liquidator of Alvonway Investments Ltd on 24 March 2014. The appellant appealed to the Court of Appeal against the said order. The appellant’s overarching argument was that the High Court judge erred in making the restriction order against him in the absence of any case being made out by the Liquidator for the appellant to answer.

Held by Faherty J that she perceived no error in the approach adopted by the High Court judge and accordingly, she would dismiss the appeal.

Faherty J held that as the appellant had not succeeded in his appeal, it followed that, provisionally, the Liquidator should be entitled to his costs.

Appeal dismissed.

UNAPPROVED

JUDGMENT of Ms. Justice Faherty delivered on the 12 ^th day of July 2022

1 . By Order dated 9 October 2020, the High Court granted a declaration under s. 819 of the Companies Act 2014 (“the 2004 Act”) restricting Mr. Appelbe (hereinafter “the appellant”) from acting as a director or secretary of a company for a period of five years unless the said company meets the requirements set out in subsection (3) of s.819.

2 . The Order followed the delivery of the judgment of the High Court (Quinn J.) on 29 July 2020. The appellant appeals the said Order.

3 . The application for the Order pursuant to s.819 of the 2014 Act was brought by the Mr. Ken Fennell (hereinafter “the Liquidator”) who was appointed the liquidator of Alvonway Investments Limited (hereinafter “the Company”) on 24 March 2014.

Background and procedural history

4 . The Company was incorporated on 31 January 2005. It was one of a number of companies owned and operated by the first named respondent (“Mr. O'Donovan”) in the motion before the High Court. The Company's primary asset was Wilton Shopping Centre in Cork.

5 . Certain loan facilities made available to Mr. O'Donovan, and partnerships and companies associated with him, were acquired by the National Asset Management Agency (“NAMA”) in early 2011. The assets acquired included a guarantee and indemnity provided by the Company dated 1 February 2007 in respect of a related company, Padlake Limited, and a loan facility advanced to the Company by Anglo Irish Bank under a facility letter of 19 March 2010. Following a series of engagements between NAMA and Mr. O' Donovan, on 26 August 2013, the National Asset Loan Management DAC (formerly National Asset Loan Management Limited (NALM”) issued letters of demand to the Company calling for payment of a total sum of just under €420m. On 28 August 2013, NAMA appointed a statutory receiver, Eoin Ryan (“the Statutory Receiver”) over the assets of the Company.

6 . On 18 February 2014, NAMA presented a petition to wind up the Company. The Liquidator was appointed by Order of the High Court dated 24 March 2014.

7 . At the time of the Liquidator's appointment, the directors of the Company were Mr. Donovan, Mr. Brendan O'Brien and the appellant. The appellant was appointed a director of the Company on 25 February 2005 (the same date as Mr. O'Donovan), which was some 25 days after its incorporation. He holds a 3.75% shareholding in the Company.

8 . The most recent accounts for the Company available to the Liquidator following his appointment were for the year ending 30 September 2011. A Statement of Affairs prepared by Mr. O'Brien for the Statutory Receiver on 28 August 2013 indicates that as at 28 August 2013, the Company had assets totalling €49,077,234 and liabilities totalling €122,586,082, resulting in a net deficit of approximately €73.5m. This did not include the guaranteed obligations of Padlake Limited. As noted by the High Court judge in his judgment, as of 31 December 2010, the Company's liabilities, including its guaranteed liabilities, exceeded the value of its assets by approximately €300m. It is not disputed that the Company was insolvent at the time the Liquidator was appointed.

9 . On 1 April 2014, the solicitors for the Liquidator, Ronan Daly Jermyn (“RDJ”) wrote to the appellant advising of the Liquidator's appointment on 24 March 2014 and that pursuant to the Order of the High Court of the same date, the appellant was required to file in court a statement of affairs within 21 days from the date of the Order. They advised that once perfected, a true copy of the Order would be forwarded to him. On 2 April 2014, the Liquidator himself wrote to the appellant requesting that he would forward to the Liquidator “any records, documents or property” he may have in his possession and that if he did not have such documents, records or property, that fact should be communicated to the Liquidator in writing. The appellant was also requested to complete a questionnaire attached by the Liquidator and return it within fourteen days of the date of the letters. On 3 April 2014, RDJ duly forwarded a copy of the High Court Winding Up Order to the appellant and reminded him that he was required to file a statement of affairs within 21 days from the date of the said Order.

10 . Similar correspondence to that referred to above was sent to Mr. O'Brien by and on behalf of the Liquidator.

11 . On 4 April 2014, the appellant wrote to RDJ advising that he “was not aware that a liquidator had been appointed, not that much turns on that”. He further stated:

“I confirm my complete commitment to fully cooperating with the liquidator. Unfortunately I have very little knowledge of what happened in this company”.

He enquired as to the other directors to whom the Liquidator may have written. By letter of 8 April 2014, RDJ confirmed to the appellant that they had also written to Mr. O'Brien and Mr. O'Donovan as directors of the Company.

12 . On 27 May 2014, RDJ wrote to the appellant advising that on 12 May 2014 the High Court had extended the time for him to file a statement of affairs up to and including Monday 30 June 2014. On 20 June 2014, the appellant wrote to RDJ noting the High Court Order of 12 May 2014. He went on to state:

“We have checked with the receiver Mr. Eoin Ryan and he has furnished me with a statement of affairs prepared on the 28 ^th of August 2013 and completed by [Brendan O'Brien].

Brendan O'Brien was as far as I know the person who had all of these details. I certainly was not and I can confirm on oath if necessary that I accept Brendan O'Brien's statement of affairs as completed on the 28 ^th of August 2013 and I attach it.

Do you require me to do an affidavit in this situation?

What further steps [does] the liquidator require. Please advise when this matter is returnable to as I consider it appropriate for me to be represented to explain my position.”

13 . As deposed to at para. 31 of the Liquidator's grounding affidavit in the within motion, on 29 June 2014, the High Court acceded to the Liquidator's request to dispense with the need for the Company's directors to file a statement of affairs. This was in light, inter alia, of the fact that Mr. O'Brien had furnished a statement of affairs to the Statutory Receiver in August 2013.

14 . By letter 26 March 2018, the Office of the Director of Corporate Enforcement (“the ODCE”) notified the Liquidator that he had not been relieved of his obligation to make an application under s.819 of the 2014 Act for restriction orders in respect of each of the three directors. The ODCE also advised that it would be appropriate to seek an order for disqualification as against Mr. O'Donovan.

15 . By notice of motion dated 13 July 2018, the Liquidator applied for a disqualification order pursuant to s.842 of the 2014 Act in respect of Mr. O'Donovan, or in the alternative a restriction order against him pursuant to s.819. The notice of motion also sought restriction orders pursuant to s.819 against Mr. O'Brien and the appellant. The application was grounded on the Liquidator's affidavit sworn 16 July 2018.

16 . It appears that a principal impetus for the orders sought by the Liquidator was the making of two payments totalling €450,032 from the Company's current account on 27 August 2013 (“the August 2013 Payments”), the day prior to NAMA's appointment of the Statutory Receiver. One of those payments (€300,000) was to a firm of accountants, MC2 Accountants Ltd. and the other (€150,000) was to Mr. O'Donovan. The payment to MC2 Accountants Ltd. was the subject of a separate application by the Liquidator under s.286 of the Companies Act 1963 and/or s.604 of the 2014 Act, which was ultimately compromised.

17 . At para. 9 of his affidavit, the Liquidator avers that the Company was “grossly insolvent” at the date of his appointment....