O'Mahony v Horgan

JurisdictionIreland
JudgeHamilton C.J,O'Flaherty J.
Judgment Date01 January 1996
Neutral Citation[1995] IESC 6
CourtSupreme Court
Docket Number[S.C. No. 219 of 1993]
Date01 January 1996
O'MAHONY v. HORGAN
IN THE MATTER OF JOHN HORGAN LIVESTOCK LTD.

AND

IN THE MATTER OF THE COMPANIES ACT, 1963– 1990

BETWEEN:

VAL O'MAHONY
Claimant/Respondent

and

JOHN HORGAN, JIM HORGAN AND PETERHORGAN
Respondents

[1995] IESC 6

HAMILTON C.J.

O'FLAHERTY J.

BLAYNEY J.

219/93

THE SUPREME COURT

Synopsis:

INJUNCTION

Interlocutory

Defendant - Assets - Preservation - Remedy - ~Mareva~ injunction - Principles applicable - Plaintiff's proofs - Likelihood of successful claim and of dissipation of respondent's assets for purpose of defeating judgment for plaintiff - Dissipation in ordinary course of business insufficient - Limit placed on amount of damages payable by plaintiff on foot of his undertaking - (219/93 - Supreme Court - 7/11/95) 1995 2 I.R. 411 1996 1 ILRM 161

|O'Mahony v. Horgan|

Citations:

COMPANIES ACT 1963 S298(2)

COMPANIES ACT 1990 S204

COMPANIES ACT 1990 S202(10)

COMPANIES ACT 1963 S297

COMPANIES ACT 1963 S297A

COMPANIES (AMDT) ACT 1990 S138

COMPANIES (AMDT) ACT 1990 S139

NIPPON YUSEN KAISHA V KARAGEROGIS 1975 1 WLR 1093

MAREVA COMPANIA NAVIERA SA V INTERNATIONAL BULKCARNIERS SA 1975 2 LLYODS 509

THIRD CHANDRIS SHIPPING CORPORATION V UNIMARINE SA 1979 QB 645

Z LTD V AZ 1982 1 QB 558

FLEMING V RANKS 1983 ILRM 541

BARCLAY-JOHNSON V YUILL 1980 1 WLR 1259

LISTER & CO V STUBBS 1890 45 CH D 1

POLLY PECK INTERNATIONAL PLC V NADIR 1992 142 NLJ 671

JUDICATURE ACT (IRL) ACT 1877 S28(8)A

1

7th day of November1995by Hamilton C.J. (Blayney ageed).

2

The Claimant/Respondent herein (hereinafter called the Liquidator) is the liquidator of John Horgan Livestock Limited (hereinafter called theCompany).

3

The Respondents herein are and were Directors of the Company which had been incorporated on the 13th day of February, 1973.

4

The Company's objects were to carry on business as importers and exporters of live cattle, pigs, sheep and horses, and dealers in cattle, pigs, sheep and horsesgenerally and in all facets of such business.

5

An order for the winding up of the Company was made on the 11th day of November, 1991 following the presentation of a petition by the Revenue Commissioners on foot of a debt of £1,174,514.65 on the 8th day of November, 1991.

6

On that date by order of the High Court, the Liquidator was appointed Liquidator of the company.

7

A statement of affairs was filed in the High Court in March 1992 showing an estimated deficiency of £11,653,992.00.

8

On the 18th day of June, 1993, the Liquidator caused to be issued a Notice of Motion which was served on each of the Respondents named herein seeking against each of the said Respondents:-

9

(a) An order pursuant to the terms of Section 298(2) of the Companies Act, 1963.

10

(b) A Declaration pursuant to Section 204 of the Companies Act, 1990declaring that the Respondents as Directors of the Company are in breach of Section 202(10) of the Companies Act, 1990and are personally liable without limitation of liabilityfor all, or such part, as the Court may specify of the debts and other liabilities of the Company, by reason of the fact that the contravention aforesaid of Section 202(10) has contributed to the company's inability to pay all of its debts and/or has resulted in substantial uncertainty to the assets and liabilities of the company and/or has substantially impeded the orderly winding up thereof.

11

(c) A Declaration pursuant to Section 297 or 297A of the Companies Act, 1963(as inserted by Section 138 of the Companies (Amendment) Act, 1990) declaring that the respondents, as Directors of the Company will be personally responsible without limitation of liability for any of the extra liabilities of the Company or for such part thereof as the Court may direct or for such relief under Section 139 of the Companies Act, 1990as the Court shall seem meet.

12

In addition other relief as sought in the Notice of Motion was claimed against the Respondents.

13

The grounds upon which such relief was sought are set forth in detail in the Notice of Motion and the application was grounded on the affidavit of the Liquidator sworn on the 17th day of June 1993 and the documents and correspondence therein exhibited.

14

On the 23rd day of June, 1993 the Liquidator caused to be issued a Notice of Motion claiming the following relief against the second-named Respondent in the said proceedings and the Appellant herein:-

15

(1) An interlocutory injunction restraining the second named Respondent from collecting or receiving the sum of £71,000 with accrued interest representing monies payable under a Policy of Insurance with Norwich Union and the subject matter of proceedings entitled "The High Court Record No. 1992 No. 5972P between James Horgan, Plaintiff and Norwich Union Fire Insurance Society and John Horgan Ltd. (in liquidation) Defendants".

16

(2) Alternatively, an interlocutory injunction restraining the second named Respondent from disposing of or dissipating or charging the said sum of £71,000 with accrued interest thereon.

17

This application was grounded on the proceedings already referred to, the affidavit of the Liquidator and one Tom Tobin.

18

By Order dated the 28th day of June 1993, the learned trial judge, Murphy J. ordered:-

19

that the second named Respondent, Jim Horgan, be restrained pending trial of this Action orfurther order in the meantime from disposing of or dissipating or charging the sum of £71,000 with accrued interest thereon representing monies payable under a Policy of Insurance with Norwich Union Insurance Society and the subject matter of proceedings between James Horgan, Plaintiff and Norwich Union Fire Insurance Society and John Horgan Ltd. (in liquidation) Defendants, and granted liberty to the said Respondent to apply for the removal or variation of this Order if and when so advised and on giving not less than 14 days notice to the Claimant of any intention to so apply."

20

Counsel's note of the ex-tempore judgment delivered by the learned trial judge was adopted by him as a proper transcript of the judgmentherein.

21

In the course of this judgment he stated:-

"Mr. O'Mahony, in his affidavit, avers to a significant list of wrongdoings in particular the failure to keep proper or adequate records. On the financial side, he states that he estimates the deficiency at £11.6 million and he expresses the view that loans to Directors amount to £2.4 million and after certain payments the balance due on foot of these loans is £1.9 m. There are a number of other matters queried. But for all of the detail in thisaffidavit, the crucial topic is dealt with in Paragraph 47 where Mr. O'Mahony avers as follows:-"

22

I am naturally concerned having regard to the manner in which the affairs of the Company were conducted to ensure that the said sum of£71,000 should be available to meet any decree which may be made in favour of the Company in liquidation against the second named Respondent and apprehensive that in the absence of such order the said sums will not be available."

23

In the course of his judgment the learned trial judge set forth the criteria to be taken into account in considering whether an injunction of the type sought, generally known as a Mareva injunction, should be granted and listed them as follows:-

24

2 "1. The Plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge toknow.

25

2. The Plaintiff should give particulars of his claims against the Defendant, stating the grounds of his claims and the amount thereof and fairly stating the points made against it by the Defendant.

26

3. The Plaintiff should give some grounds for believing that the Defendant had assets within the jurisdiction. The existence of a Bank Account is normally sufficient.

27

4. The Plaintiff should give some grounds for believing that there is a risk of the assets being removed or dissipated.

28

5. the plaintiff must give an undertaking in damages, in case hefails."

29

It appears from his judgment that the learned trial judge was satisfied that the criteria set forth at 1, 2 and 3 had been met by theLiquidator.

30

He then went on to say that:-

"The real issue is whether the Plaintiff has given any grounds for believing that there is any risk of dissipation. All the Plaintiff has said is that he is apprehensive in this regard. That is a far cry undoubtedly from evidence of conscious abuse."

31

He then went on to deal with the question of an undertaking andstated:-

"Mr. O'Mahony has, perhaps surprisingly agreed to do that because his personal liability will be indemnified by the Revenue Commissioners. I have stressed the infirmities in the Plaintiffsapplication. Counsel for the Respondent has analyzed still further the weaknesses and contradictions but without providing any affidavit in reply. It seems to be that it must be recognised that the Respondent, having been given notice and have been afforded an opportunity to adjourn the matter declined an invitation to put in such an affidavit. The Respondents resist the applications on the basis of their submission. On the face of it, there is reason for considerable concern as to the manner in which the Respondents carried on the business of the Company. One may criticise the lack of detail given by Mr. O'Mahony in relation to the allegation. His computation of the Directors indebtedness to the Company may be criticised. But that criticism would be entertained more readily if there was a denial on affidavit. No direct evidence is given that monies would be dissipated but in the context of the sums involved and the parties obligations to the Banks, the concern of the official liquidator has not been shown to be displaced. On the overall complexities of the matter, the probabilities that monies will cease to be retained is likely. It seems to be that the injunction should be granted in the specific circumstances of the case. The...

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