Lascomme Ltd v United Dominions Trust (Ireland) Ltd

JurisdictionIreland
JudgeMr. Justice Keane
Judgment Date01 January 1994
Neutral Citation1993 WJSC-HC 3919
Docket NumberNo. 10229p/1991,[1991 No. 10229P]
CourtHigh Court
Date01 January 1994

1993 WJSC-HC 3919

THE HIGH COURT

No. 10229p/1991
LASCOMME LTD v. UNITED DOMINIONS TRUST (IRL) LTD

BETWEEN

LASCOMME LIMITED TRADING AS BALLYGLASS HOUSE HOTEL
PLAINTIFFS

AND

UNITED DOMINIONS TRUST (IRELAND) LIMITED
DEFENDANT

AND

JAMES GILLIGAN
NOTICE PARTY

Citations:

COMPANIES ACT 1963 S316(1)

COMPANIES (AMDT) ACT 1990 S171

WYMES & ORS V CROWLEY & ORS UNREP MURPHY 27.2.87 1987/4/1221

NEWHEART DEVELOPMENTS LTD V CO-OPERATIVE COMMERCIAL BANK LTD 1978 QB 814

TUDOR GRANGE HOLDINGS LTD V CITIBANK NA 1991 4 AER 1

INSOLVENCY ACT 1986 S35 (UK)

Synopsis:

ACTION

Stay

Motion - Refusal - Company - Directors - Powers - Exercise - Duration - Debenture - Receiver - Appointment - Effect - Litigation by company - Action against creditor who appointed receiver - Motion by creditor to stay action — (1991/10229 P - Keane J. - 22/10/93) - [1993] 3 I.R. 412 - [1994] 1 ILRM 227

|Lascomme Ltd. v. United Dominions Trust (Ireland) Ltd.|

COMPANY

Debenture

Receiver - Appointment - Effect - Directors - Powers - Exercise - Duration - Litigation by company - Action against creditor who appointed receiver - Motion by creditor to stay action - Companies Act, 1963, s. 316 - Companies Act, 1990, s. 217 - (1991/10229 P - Keane J. - 22/10/93) 1993 3 IR 412 1994 1 ILRM 227

|Lascomme Ltd. v. United Dominions Trust (Ireland) Ltd.|

COMPANY

Directors

Powers - Exercise - Duration - Debenture - Receiver - Appointment - Effect - Litigation by company - Action against creditor who appointed receiver - Motion by creditor to stay action - (1991/10229 P - Keane J. - 22/10/93) 1993 3 IR 412 1994 1 ILRM 227

|Lascomme Ltd. v. United Dominions Trust (Ireland) Ltd.|

PRACTICE

Action

Stay - Debenture - Receiver - Appointment - Effect - Debtor company - Institution of action against debenture holder - Powers of company's directors to institute and maintain action - Refusal to stay action - (1991/10229 P - Keane J. - 22/10/93) 1993 3 IR 412

|Lascomme Ltd. v. United Dominions Trust (Ireland) Ltd.|

1

Judgment of Mr. Justice Keane delivered the 22nd day of October 1993.

2

The motions before me arise out of the financial difficulties experienced by the Plaintiff (whom I shall call "the company") who were at the material time operating the Ballyglass House Hotel in the Glen of Aherlow in County Tipperary. In the proceedings, they claim damages for what they allege was the breach of contract and negligence of the Defendants (whom I shall call "the bank") for failing to provide them with a certain loan facility. The notice party (whom I shall call "the Receiver") was appointed receiver over the assets and undertaking of the company by the Defendants in exercise of the power to that effect contained in a debenture dated the 21st December, 1989.

3

The facts, in so far as they are not in dispute, are as follows. The company was formed by Michael Carr and his wife Marie, who are directors and shareholders of the company. The company bought the hotel in December, 1989, the purchase price of £237,500 being funded as to £170,000 by a loan from the bank. In February 1990, there were discussions between Mr. and Mrs. Carr and Mr. Kieron Toner, who was at that time an official of the bank, as to the possibility of a further loan being made available in order to enable the company to improve the facilities of the hotel. That loan was ultimately not forthcoming. The financial position of the company steadily deteriorated and these proceedings were instituted on the 10th July 1991 in which the company claims that the bank agreed to lend the Company the money in question or alternatively that the Company was induced by representations of the bank into believing that there was such a commitment on the part of the bank. The bank for its part denies that there was any such agreement or that any such representations were made. On the 2nd September, 1992, the bank appointed the Receiver. The schedule of assets and liabilities which has been prepared show that as of the 5th September, 1992 there was a deficiency of £122,763.

4

Notice of trial in the proceedings was served on behalf of the company on the 13th October, 1992, and a notice of motion seeking an Order for Discovery was also served on behalf of the company on the 10th November, 1992. The first of the motions now before the Court was thereupon brought on behalf of the bank seeking orders setting aside the notice of trial and the notice of motion and staying the proceedings on the ground that the Receiver had not authorised the taking of these steps. The second motion is one brought by the company seeking an Order pursuant to S.316 (1) of the Companies Act 1963(as substituted by S.171 of the Companies (Amendment) Act 1990) directing that the directors of the company are entitled to maintain the proceedings.

5

While it was conceded on behalf of the bank that the appointment of the Receiver did not put an end to all the powers of the directors, it was submitted on their behalf that their power to institute and maintain proceedings in the name of the company did not extend to an action which would have the effect of endangering the security of the debenture holder. In the event of the action being dismissed with costs in favour of the bank, their security would be endangered since it would be the only asset available to satisfy the order as to costs. It was also urged that, in any event, the cause of action and its fruits, should the company prove successful, were also captured by the debenture and available to satisfy pro tanto the debt due to the bank by the company. Hence, it was said, the bank were in effect being asked to pay for an action by themselves against themselves which would be of no practical benefit to anyone.

6

It is clear that when a Receiver is appointed by a debenture holder under the powers in that behalf in the debenture, the powers vested by law in the directors of the company are not thereby...

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