Kinsella v Somers

• Jurisdiction: Ireland
• Judge: Mr. Justice Declan Budd
• Judgment Date: 23 November 1999
• Neutral Citation: [1999] IEHC 44
• Court: High Court
• Docket Number: 152 COS/1998
• Date: 23 November 1999

[1999] IEHC 44

THE HIGH COURT

152 COS/1998

KINSELLA v. SOMERS

IN THE MATTER OF AN APPLICATION UNDER SECTION 316 (1) OF THE

COMPANIES ACT, 1963, AS AMENDED BY SECTION 171 OF THE COMPANIES

ACT 1990

AND IN THE MATTER OF AN APPLICATION

BETWEEN

DONAL KINSELLA

APPLICANT

AND

BERNARD SOMERS

RESPONDENT

Citations:

COMPANIES ACT 1963 S316

COMPANIES ACT 1990 S171

COMPANIES ACT 1963 S316(1)

COMPANIES ACT 1963 S316(1A)

ALLIANCE & DUBLIN GAS ACT 1866

GAS ACT 1976

GAS REGULATION ACT 1982 S4

GAS (AMDT) ACT 1982

GAS (AMDT) ACT 1987

GAS (AMDT) ACT 1993

GAS REGULATION ACT 1982 S5

GAS REGULATION ACT 1982 S6

GAS REGULATION ACT 1982 S8

GAS REGULATION ACT 1982 S7

GAS REGULATION ACT 1982 S7(3)

COMPANIES ACT 1963 PART VII

COMPANIES ACT 1963 S98

GAS REGULATION ACT 1982 (S7) ORDER 1986 SI 110/1986

COMPANIES ACT 1963 S323

COMPANIES ACT 1963 S319

PMPS LTD & MOORE V AG 1983 IR 339

HEALY V HEALY HOMES LTD 1973 IR 309

COMPANIES ACT 1963 S318

RSC O.26 r4

IRISH OIL & CAKE MILLS LTD V DONNELLY COSTELLO 27.3.1983 1986/6/798

SMITHS LTD V MIDDLETON 1979 3 AER 842

COMPANIES ACT 1948 (UK)

COHEN COMMITTEE REPORT ON COMPANY LAW AMENDMENT (1945)

INSOLVENCY ACT 1986 (UK)

HOLOHAN V FRIENDS PROVIDENT & CENTURY LIFE OFFICE 1966 IR 1

HUISH V ELLIS 1995 BCC QB 462

B JOHNSON & CO (BUILDERS) LTD, IN RE 1955 1 CH 634

DOWNSVIEW NOMINEES LTD V FIRST CITY CORP LTD 1993 BCC 46, 1993 2 WLR 86

CUCKMERE BRICK CO LTD V MUTUAL FINANCE LTD 1971 CH 949

TSE KWONG LAW V WONG CHIT SEN 1983 1 WLR 1349

GOMBA HOLDINGS (UK) LTD V MINORIES FINANCE LTD 1989 BCLC 115

PICARDA LAW RELATING TO RECEIVERS MANAGERS & ADMINISTRATORS 2ED 115–116

LATHIA V DRONSFIELD BROS LTD 1987 BCLC 321

COURTNEY LAW OF PRIVATE COMPANIES (1994)

LYNCH MARSHALL & O'FERRALL CORPORATE INSOLVENCY & RESCUE

Synopsis

Company Law

Company; receivership; application for directions; applicant is director and shareholder of company; respondent is receiver of company; receiver provided applicant with information on receivership; application for directions pursuant to s.316, Companies Act, 1963; applicant seeks from receiver further information as to assets of company since inception of receivership, information as to respondent's fees and accounts in respect of receivership; whether applicant entitled to be furnished with accounts and documents by receiver in course of receivership; whether applicant has adduced evidence that he is being unfairly prejudiced by some actual or proposed action or omission on part of receiver; whether applicant proved that the matter comes within the peculiar circumstances in which the court would consider it just to make an order; whether there was a failure to show that the information required for specific purpose; whether there was a failure to show receiver had not acted reasonably in refusing to provide further information to applicant.

Held: Application refused.

Kinsella v. Somers - High Court: Budd J. - 23/11/1999

The applicant had been a director of a company of which the respondent was acting as receiver. The majority of the assets of the company had been disposed of by the receiver. The applicant brought an application seeking information regarding the affairs of the company. The High Court found that the applicant had been afforded as much information as the receiver could reasonably furnish. Also it was held that the applicant had not shown sufficient cause for the court to exercise its discretion to grant the relief sought and accordingly the application was refused.

1 JUDGMENT of Mr. Justice Declan Budd delivered on the 23rd day of November, 1999

2 The Applicant is a businessman and is a Director and shareholder of the Dublin Gas Company ("the Company) which has been in receivership since a debenture holder, Bord Gáis Eireann, appointed the Respondent as Receiver under the terms of a mortgage debenture, dated the 17th of September, 1984, made between the Dublin Gas Company of the one part and Bord Gáis Eireann of the other part. The matter comes before the High Court by way of a motion for directions under Section 316 of the Companies Act, 1963, as amended by the Companies Act, 1990, Section 171, which substituted subsection 1 and inserted subsections (1A) and (1B). Conflict has arisen between the parties as to the appropriateness of the applicability of Section 316 to the situation and also as to the construction of the wording of Section 316.

3 Section 316 concerns the power of the Receiver and other persons to apply to the Court for directions and reads as follows:-

"316(1) Where a receiver of the property of a Company is appointed under the powers contained in any instrument, any of the following persons may apply to the court for directions in relation to any matter in connection with the performance or otherwise by the receiver of his functions, that is to say-"

4 i (a) (i) the receiver;

5 (ii) an officer of the company;

6 (iii) a member of the company;

7 (iv) employees of the company comprising at least half in number of the persons employed in a full-time capacity by the company;

8 (v) a creditor of the company; and

9 i (b) (i) a liquidator

10 (ii) a contributory

11 and on any such application, the court may give such directions, or make such order declaring the rights of persons before the court or otherwise, as the court thinks just.

12 (1A) An application to the court under subsection (1), except an application under paragraph (a) (i) of that subsection, shall be supported by such evidence that the applicant is being unfairly prejudiced by any actual or proposed action or omission of the receiver as the court may require."

13 In the Notice of Motion the Applicant is seeking directions under the amended Section 316 and in essence is seeking information about the nature of the assets of the Company since the inception of the Receivership, the changing nature of such assets, their estimated value and the basis for such evaluation, the manner of sale of such assets as were sold and the presale method of advertisement, the proceeds of sale realised and an account of offers received for the sale of each asset. He is also seeking accounts in respect of the Respondent's fees, accounts in respect of the receivership on a yearly basis and an opportunity to inspect the documents relating to the receivership. The Receiver responds that he has already furnished appropriate information to the Company back in October, 1993, and also that he had then expressed willingness to give further information to the Company on clarification of what further information was being sought. In respect of the present application the Receiver maintains that the Applicant neither as a director nor as a shareholder of the Company has an entitlement to the type of information being sought and in any event the lapse of time and the insolvent nature of the Company are such that it would no longer be just or equitable for him to have to furnish this, particularly in the light of the failure of the Applicant and other directors to take up the invitation given to the Company to indicate the nature of information being requested back in 1993 and 1994.

BACKGROUND

14 In or about 1981 or 1982 the Applicant acquired over 400,000 shares in the Dublin Gas Company for about £300,000. He became a director of the Company in 1982. The Company was the creature of the Alliance and Dublin Gas Act, 1866 and more recently was affected by the Gas Act, 1976, the Gas Regulation Act, 1982and the Gas (Amendment) Acts, 1982, 1987and 1993. Under Sections 4, 5 and 6 of the Gas Regulation Act, 1982the Company was given power to borrow and to charge the property of the Company to secure such borrowing. Under Section 8 of the Gas Regulation Act, 1982a security on the undertaker's property could be enforced as if it were a charge created under the Companies Acts. Section 7 of the Gas Regulation Act, 1982affected the position of receivers. By Section 7(3) of the Gas Regulation Act, 1982, the Minister for Industry and Commerce was given power by Order to apply all or any of the provisions of Part VII and Section 98 of the Companies Act with modifications to or in respect of receivers of the property of an undertaker or as respects assets coming into the hands of such a receiver.

15 By S.I. No 110 of 1986, being the Gas Regulation Act, 1982(Section 7) Order 1986, the Minister for Energy, in exercise of the powers conferred on him by Sections 7(3) of the Gas Regulation Act 1982made an order applying Sections 316 and 323 of the Companies Acts 1963(No. 33 of 1963) to or in respect of the receiver of the property of the Company or as respects assets coming into the hands of that receiver. It is noteworthy that the Minister only made Sections 316 and 323 applicable to the situation.

16 The State had become a major stakeholder in the Company. The Company borrowed from Bord Gáis Eireann, a semi-state body, on foot of the debenture. The price of oil dropped from $40.00 to $19.00 per barrel. It had been envisaged and hoped by the directors of the Company, particularly by the Applicant, that the Minister for Energy would regulate prices having due regard to the prevailing conditions and so the Company invoked the hardship clause in the contract in this respect. However time passed and the Minister for Energy did not cause the price of gas for the Company to be reduced. The Company had invested considerable sums in improvements to the pipe network and then, in 1986, found Bord Gáis Eireann, as debenture holder, invoking its rights under the debenture and putting in the Respondent as receiver. He duly took control of the assets and is still acting as receiver although the assets have in the meantime been sold. In fact, the Asset Sale Agreement dated the 3rd of November, 1987 between the Dublin Gas Company (In Receivership), Bernard Somers and Bord Gáis Eireann dealt with the sale of...