Lobar Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Irvine
• Judgment Date: 10 May 2018
• Neutral Citation: [2018] IECA 129
• Docket Number: [2018 No. 56]
• Court: Court of Appeal (Ireland)
• Date: 10 May 2018

IN THE MATTER OF LOBAR LIMITED AND IN THE MATTER OF THE COMPANIES ACT 2014

BETWEEN

LOBAR LIMITED

APPELLANT

- AND -

MICHAEL GLADNEY

RESPONDENT/PETITIONER

[2018] IECA 129

Irvine J.

Irvine J.

[2018 No. 56]

THE COURT OF APPEAL

Stay application – Winding up company – Appointment of liquidator – Appellant seeking a continuation of a stay on an order of the High Court – Whether the balance of justice warranted the refusal of the stay application

Facts: The High Court ordered that the appellant, Lobar Ltd, be wound up under the provisions of the Companies Act 2014, and that Mr Kirby, chartered accountant, be appointed liquidator. The High Court granted a stay on that order, conditional upon the company serving a notice of appeal within 10 days of the perfection of the order in which case the stay would continue until the date of the first directions hearing in the Court of Appeal. That hearing took place on the 20th April 2018 on which date no application was made for an extension of the stay earlier granted. The stay expired and the liquidator was appointed. The company applied to the Court of Appeal for a continuation of the stay. Having submitted that arguable grounds of appeal had been established, which were bona fide, the company submitted that the Court must look for the “middle ground” when it comes to establishing where the balance of justice is to be found. In particular, the prejudice to the company if a stay was to be refused was emphasised; if the winding up order was allowed to remain in place, there was no basis upon which the company could pursue an appeal.

Held by Irvine J that the balance of justice warranted the refusal of the stay application. Irvine J held that the first significant factor that weighed in that balance was the fact that the company was clearly insolvent and as matters stood, the company could not pay its debts; it was not in a position to discharge the liabilities of the petitioner, Mr Gladney. Irvine J held that the second factor that weighed in the balance was that if the Court refused the stay, it was permitting a company which it knew to be insolvent to continue to trade in an unsupervised fashion, and in so doing risked a grave injustice being perpetrated upon the general body of creditors. Finally, Irvine J was satisfied that the liquidation would be gravely prejudiced if the stay were to be granted and the appellant were to lose its appeal, insofar as the liquidation would date back to the date of the presentation of the petition, thus significantly increasing the complexity and costs of the liquidation to the potential prejudice of creditors.

Irvine J held that she would refuse the stay.

Motion refused.

JUDGMENT of Ms. Justice Irvine delivered on the 10th day of May 2018

Background facts

1 This judgment concerns an application on behalf of the appellant, Lobar Ltd., (‘the company’) for a continuation of a stay on an order of the High Court which was made on the 29th January 2018 and later amended on the 5th February 2018. The order provided that the company be wound up by the court under the provisions of the Companies Act 2014, and further provided that Mr. Myles Kirby, chartered accountant, be appointed liquidator. The stay granted by the High Court was conditional upon the company serving a notice of appeal within 10 days of the perfection of the High Court order in which case the stay would continue until the date of the first directions hearing in the Court of Appeal. That hearing took place on the 20th April 2018 on which date no application was made for an extension of the stay earlier granted. That being so, on the date upon which this Court heard the present application, the stay had expired and the liquidator had been appointed.

2 A notice of expedited appeal was filed on behalf of the company on the 14th February 2018. The grounds of appeal may be summarised as follows:

(i) the petitioner, Michael Gladney, does not fall within the category of persons/parties entitled to present a petition to wind up the company under s. 571(1) of the Companies Act 2014. He was not a creditor within the meaning of that section;

(ii) the High Court judge erred in law and in fact in concluding that the Revenue Commissioners were a creditor of the company within the meaning of s. 571 of the Companies Act 2014;

(iii) the trial judge erred in law and in fact in determining that Michael Gladney, as agent of the Revenue Commissioners, was a creditor within the meaning of s. 571 of the 2014 Act;

(iv) the trial judge erred in law and in fact in determining that the petitioner was the Revenue Commissioners and not Michael Gladney;

(v) the High Court judge erred in law and in fact in concluding that the Revenue Commissioners were a creditor of the company within the meaning of the section and that Michael Gladney, as their agent, could be considered a creditor within the meaning of the section.

3 The respondent's notice was filed on the 22nd February 2018. In that notice, Mr. Gladney, the petitioner, as Collector General and an officer of the Revenue Commissioners, is stated to be a creditor of the company and a person entitled to present a petition to wind it up under s. 571(1). In the alternative, it is asserted that the Revenue Commissioners are creditors of the company and that Mr. Gladney, as Collector General and an officer of the Revenue Commissioners, is authorised to present a petition to wind up the company under the aforementioned section.

4 It is not necessary to set out the entire basis upon which the respondent opposes the appeal. The respondent's notice does, however, seek to rely upon the fact that the company is clearly insolvent and that the debt, the subject matter of the petition, remains due and unpaid. In addition, the respondent reserved the right to expand on the grounds of opposition on the hearing of the appeal.

The stay application

5 The company's application to extend the stay granted in the High Court was brought on foot of a notice of motion dated the 20th April 2018 and was supported by an affidavit sworn by Mr. John Quinn, solicitor, on the 20th April 2018. Noteworthy is the fact that no affidavit was filed by Mr. Patrick Maguire, a director of the company, whom, it would appear was, at the time the notice of appeal was filed, instructing Mr. Quinn on behalf of the company.

6 The affidavit of Mr. Quinn is somewhat unusual insofar as it has been used as a vehicle to advance legal submissions which should not be included in an affidavit, for reasons which are obvious. Then, he gives hearsay evidence concerning the company's finances, its ongoing building activities and its potential prospects. Based upon information relayed to him by Mr. Maguire, he advises that the company expects to be able to trade out of its difficulties and reduce its tax liabilities further but that if the court were to decline the stay the company will not be in a position to complete the works on the contracts in which it is presently involved.

7 In the concluding section of his affidavit, Mr. Quinn expresses concern that unless this appeal is determined, the respondent will continue to seek orders from the High Court on the basis of Article 2 of Council Regulation No.2015/848, in circumstances where it is not entitled to do so. Finally he states that if the stay is not granted, the liquidator will be appointed and the appeal will be moot. As we now know the liquidator was appointed prior to the hearing of the stay application

8 In a letter dated the 27th April 2018, Mr. Quinn advised the Revenue's solicitors that he would...