Marcon Developments

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 12 October 2010
• Neutral Citation: [2010] IEHC 373
• Court: High Court
• Date: 12 October 2010

[2010] IEHC 373

THE HIGH COURT

[No. 473 COS/2010]

Marcon Developments, In Re

IN THE MATTER OF MARCON DEVELOPMENTS

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 - 2009

COMPANIES ACT 1963 S214

COMPANIES ACT 1990 S185(2)

GILT CONSTRUCTION LTD, RE 1994 2 ILRM 456

NAIAD LTD,IN RE UNREP MCCRACKEN 13.2.1995 1995/4/1234

EUROCHICK IRL LTD, IN RE UNREP MCCRACKEN 23.3.1998 1998/18/6863

HAYES HOMES, IN RE LTD UNREP O'NEILL 8.7.2007 2004/21/4850 2004 IEHC 253

PERMANENT FORMWORK SYSTEMS LTD, IN RE UNREP LAFFOY 23.5.2007 2007/50/10712 2007 IEHC 268

BALBRADAGH DEV LTD, IN RE 2009 1 IR 597

RSC O.74 R82(1)

COMPANIES ACT 1963 S280

COMPANY LAW

Winding up

Petition - Resolution - Reaction to presentation of petition - Largest unsecured creditor - Insolvency - Supervision of court - Resignation of company's auditors - Issues requiring investigation - Funding of liquidation - Undertaking to discharge costs - Whether company should be involuntarily wound up by court - Whether creditors would suffer prejudice or detriment if order made - Whether debtor companies in position to satisfy liabilities - In re Gilt Construction Ltd [1994] 2 ILRM 456; In re Naiad Ltd (Unrep, McCracken J, 13/2/1995); In re Eurochick (Irl) Ltd (Unrep, McCracken, 23/3/1998); In re Hayes Homes Ltd [2004] IEHC 253 (Unrep, O'Neill J, 8/7/2004); In re Permanent Formwork Systems Ltd [2007] IEHC 268 (Unrep, Laffoy J, 23/5/2007) and In re Balbradagh Developments Ltd [2008] IEHC 329, [2009] 1 IR 597 considered - Companies Act 1963 (No 33), s 214 - Companies Act 1990 (No 33), s 185(2) - Order made (2010/473COS - Laffoy J - 12/10/2010) [2010] IEHC 373

In re Marcon Developments Ltd

Facts The petitioner herein sought an order that Macron Developments (the company) be wound up by the Court and that Pearse Farrell be appointed official liquidator of the company. The petition was based on a demand under section 214 of the Companies Act 1963 served on the company on 5 July 2010. The demand sought payment of the sum of €2,096,371.67 in respect of which the petitioner had obtained judgment in the Commercial Court on 7 December 2009. Following the service of the petition on the company a meeting of the board of directors of the company was held and subsequently at a later meeting a resolution was passed to wind up the company (creditors' voluntary winding-up) and to appoint Mr. Wallace as liquidator. The petition herein was strenuously resisted by the company on the basis that the company should be wound up as a creditors' voluntary winding up. The petitioner relied on three grounds, namely; 1. the resignation of the company's auditors due to dissatisfaction with the flow of information from the Board of Directors, 2. issues which require investigation in relation to the conduct of the affairs of the company, namely what happened to €9m that was listed on the balance sheet on 31 July 2007 and 3. the availability of funding to enable the issues arising to be investigated in the liquidation and, if necessary, pursued through litigation. In relation to the last ground, the petitioner offered to discharge the fees of the liquidation.

Held by Laffoy J. in allowing the application: That the company was hopelessly insolvent and it was reasonable to infer that the move to initiate a creditors' voluntary winding up on the part of the company was a reaction to the presentation of the petition. If the costs of the liquidation were underwritten by the petitioner that would be to the advantage of the petitioner and to the generality of the unsecured creditors. Moreover, if assets were recovered they would be available to meet the claims of the creditors in the first instance, rather than the costs of the liquidation. Furthermore, there were matters which the liquidator of the company would have to investigate and the task facing the liquidator was very formidable and it was probable the liquidator would require directions from the court throughout the course of the liquidation. On balance, a winding up order would be to the benefit, rather than the detriment, of the generality of the unsecured creditors of the company and it would be preferable that the winding up be under the supervision of the Court from the outset. Mr. Farrell would have been appointed as liquidator if the creditors' voluntary winding up had not intervened and therefore he ought to be appointed by the Court.

Reporter: L. O'S.

1. The history of the petition

2 2 1.1 This petition presented by John Sisk & Company Limited (the petitioner) for an order that Marcon Developments (the company) be wound up by the Court and that Pearse Farrell (Mr. Farrell) of Farrell Grant Sparks be appointed official liquidator of the company was presented to the Court on 27 ^th August, 2010. It was given a return date of 22 ^nd September, 2010.

3 3 1.2 The petition was based on a demand under s. 214 of the Companies Act 1963 (the Act of 1963) served on the company by the petitioner's solicitors on 5 ^th July, 2010. The demand sought payment of the sum of €2,096,371.67 in respect of which the petitioner had obtained judgment in the Commercial Court on 7 ^th December, 2009. The sum due on the judgment had been the subject of an earlier demand under s. 214 served on 16 ^th March, 2010, which had not been followed by a winding up petition, as James Doyle, director of the petitioner, has averred "to facilitate the prospect of settlement negotiations". The judgment obtained by the petitioner arose out of a contract entered into by the company with the petitioner for the construction of a hotel and apartments in Ballybrit, County Galway on 24 ^th March, 2006. On 27 ^th August, 2010 the petitioner's solicitors served the petition on the company.

4 4 1.3 Following the service of the petition, on 6 ^th September, 2010 a meeting of the board of directors of the company was held at which it was resolved that meetings of the members and the creditors of the company be convened for 20 ^th September, 2010 with a view to having the company wound up as a creditors' voluntary winding up and Kieran Wallace (Mr. Wallace) of KPMG appointed liquidator for the purpose of the winding up. The creditors' meeting was advertised on 8 ^th September, 2010 in two national daily newspapers.

5 5 1.4 The two meetings were duly held on 20 ^th September, 2010. At the members' meeting, the resolution to wind up the company and to appoint Mr. Wallace as liquidator was duly passed. The subsequent creditors' meeting was chaired by Shane Connolly (Mr. Connolly), who is a director of the company. Two documents have been exhibited which record what happened at the creditors' meeting: a report and minutes of the meeting. Both documents disclose that various queries were raised by creditors at the meeting in relation to the statement of affairs which was presented by the company to the meeting, some of the queries having been raised by the director of the petitioner and the solicitor for the petitioner, who were in attendance. At the end of the question and answer and comment process, and the petitioner's solicitor having been given an opportunity to inspect the winding up resolution and the proxies which had been received by the chairman, the report discloses that the company's solicitor reminded the meeting that the company had nominated Mr. Wallace as liquidator and asked whether the creditors wanted to nominate a liquidator. The petitioner's solicitors' response was that the petitioner was not satisfied with the explanations received from the company and that, as the largest unsecured creditor, wished to nominate Mr. Farrell and asked that Mr. Connolly would exercise his vote in favour of Mr. Farrell. Mr. Connolly declined and Mr. Wallace was deemed to be appointed as liquidator. The report discloses that the petitioner's solicitors had indicated that he did not require a formal vote and accepted that the chairman's vote would ensure that Mr. Wallace's nomination would prevail. A committee of inspection was then appointed, which included the director of the petitioner who was present.

6 6 1.5 While it is accepted by the petitioner that the creditors' voluntary winding up is regular, in that the meetings held on 20 ^th September, 2010 were properly advertised and convened, the meetings were properly conducted and, in particular, Mr. Wallace was properly appointed as liquidator in accordance with the Act of 1963, the petitioner has prosecuted the petition and wishes to have the company wound up under the supervision of the Court and Mr. Farrell appointed as official liquidator for the purposes of the winding up.

7 7 1.6 One creditor appeared in Court on the petition, namely, the Revenue Commissioners. Although an issue was raised at the creditors' meeting by a representative of the Revenue Commissioners as to the amount which appeared in the statement of affairs as being due to the Revenue Commissioners, the Revenue Commissioners informed the Court that they were adopting a neutral stance on the petition. Therefore, I attach no weight to the issue which arose in relation to the amount of the Revenue Commissioner's debt.

8 8 1.7 Mr. Wallace assumed the position of liquidator of the company following the meeting of 20 ^th September, 2009. He has furnished a helpful report to the Court as of 30 ^th September, 2010, which sets out, inter alia, the work he has carried out in his capacity as liquidator. The Court was also informed by counsel for Mr. Wallace that he did not propose participating in the hearing of the petition. The petitioner has made it clear, both in the affidavit evidence and in the submissions of counsel, that the petitioner is not suggesting that Mr. Wallace is unqualified or unfit to act as liquidator and is not criticising Mr. Wallace in any way. No issue arises as to Mr. Wallace's suitability to act as liquidator...