Middleview Ltd v Companies Acts 1963 - 2013
| Jurisdiction | Ireland |
| Judge | Mr Justice Cregan |
| Judgment Date | 21 December 2015 |
| Neutral Citation | [2015] IEHC 860 |
| Docket Number | [2015 No. 59 COS] |
| Court | High Court |
| Date | 21 December 2015 |
[2015] IEHC 860
THE HIGH COURT
Cregan J.
[2015 No. 59 COS]
IN THE MATTER OF MIDDLEVIEW LIMITED (DISSOLVED)
AND
IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2013
AND
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 12 (B) OF THE COMPANIES (AMENDMENT) ACT 1982 AS INSERTED BY SECTION 46 OF THE COMPANIES AMENDMENT (NO. 2) ACT 1999
Company – S. 12 (B) of the Companies (Amendment) Act 1982 – The NAMA Act 2009 – Costs of preparation of audited accounts – Responsibility of directors
Facts: Following the grant of the order by the High Court to NALM for restoring the company to the register, one of the directors of the company brought the present proceedings seeking an order for costs for preparing and finalising the company accounts from NALM. The NALM contended that it was the sole responsibility of the directors of the company to file outstanding returns and that NALM did not take over those liabilities while acquiring the rights of the bank in the loan agreement and debentures executed by the company with the bank.
Mr. Justice Cregan granted orders to the effect that NALM should bear the costs of preparing audit of account for two years and that NALM and the directors should bear the costs of preparing the accounts for the another two years on a 50/50 basis. The Court held that the term “all other persons” appearing under second para of s. 12 (B) of the Companies (Amendment) Act 1982 gave wide discretion to the Court to make provisions for directors as well as NALM in order to place them in the same position as nearly as possible as if the company had not been struck off. The Court found that since there was an agreement by NALM to prepare audited accounts for two relevant years, the costs for the same should be borne by it. The Court, however, held that there existed legal responsibility upon the directors for ensuring that the company had sufficient funds to discharge its auditor's fee to prepare the audited accounts of the company.
The issue which arises in this case is who should bear the costs of preparing and finalising company accounts to bring them up to date when an order has been made restoring a company to the register. It raises a question of interpretation, and application, of section 12B (3) of the Companies (Amendment) Act 1982 as inserted by section 46 of the Companies Amendment (No. 2) Act 1999.
In order to understand the context to this application it is necessary to set out the background facts leading to this application.
The company, Middleview Ltd, was incorporated on 14th October, 1993. It was an investment property company. As part of its business the company purchased certain lands and properties, and entered into loan agreements with Anglo Irish Bank Corporation, under which the bank agreed to advance loans totalling approximately €300,000,000 to the company. As security for its obligations the company executed a debenture dated 19th December, 2007 granting fixed and floating charges over its properties.
On 1st November, 2010 pursuant to Part 6 of the NAMA Act 2009 (the “2009 Act”) NAMA acquired all of the rights of the bank in the loan agreements and the debenture.
By letter dated 27th March, 2014 the Petitioner in this case (a NAMA group entity within the meaning of the 2009 Act), informed the company that an event of default had taken place and demanded repayment of the monies then due. Despite that demand, the company failed to discharge its liability.
NALM then appointed Simon Coyle and Tom O'Brien of Mazars as joint receivers over the assets and property of the company on 28th March, 2014.
The company was struck off the Register of Companies on 28th March, 2014 for its failure to file annual returns in the Companies Registration Office.
NALM wanted the company to be restored to the Register of Companies so that its receivers could take steps to realise the company's assets, in order to recover amounts due by the company under the agreement.
In the circumstances, on 6th February, 2015 NALM brought an application before the High Court seeking an order that the company should be restored to the Register of Companies. This order was in fact made on the 2nd day of March, 2015.
The application to restore the company came before the court on 2nd March, 2015. The application was grounded upon an affidavit of Margaret Magee of NALM who set out all the above matters.
On 13th March, 2015 Garrett Kelleher, one of the directors of Middleview, and a notice party in the application to restore the company to the register, swore an affidavit, stating that he had no objection to the company being restored to the Register of Companies. He also indicated that he had no objection to cooperating in any way or executing such documents as might be required to bring the returns up to date. However he stated:
“However it is entirely and solely the fault of the petitioner that the company was struck off the register and I believe that they should pay all of the costs associated with having a company restored to the register”.
4. As is set out below, for the years concerned the entire income and revenue of the company was appropriated by the petitioner who had instructed KPMG to prepare the returns. The petitioner ultimately did not pay KPMG and the returns did not get filed. This occurred when they had sole control of the income of the company and, following the appointment of Simon Coyle of Mazars as the receiver and manager on the 27th of March 2014, (sic) they had control of the books and records of the company.
5. I am resident in the U.S. and I do not have the records of the company since the petitioner assumed full control.
6. The company is part of a group of companies and there are a number of other companies which I suspect are now in the same position. I am concerned about the costs of this application and the costs of restoring companies to the register in circumstances where I have very limited funds.
7. Insofar as the petitioner had the benefit of all of the company's income it was incumbent upon them to fund the filing of the returns which they did in respect of some of the other companies in the group.
8. The background to this matter is that on 8th November 2010 NAMA took over my loans under the heading of the “Shelbourne connection”. I cooperated with them from that date and indeed had met them in advance of that date in 2009. There was an interim support letter issued in 2011 and a further forbearance letter issued 5th February 2013. I cooperated fully for a number of years and as is the subject of the Commercial Court proceedings, NAMA simply dispensed with that cooperation and moved to enforcement once most of the assets for which they required me had been disposed of.
9. During the course of this period NAMA took the income from all of the companies including Middleview Ltd. Rental income went into dedicated bank accounts and NAMA made withdrawals. Insofar as there were any expenses which we required to be discharged, we sought to have same discharged by way of a ‘Form A’ request to NAMA. That included the accountancy fees and everything down to the wages of people working for the companies. In this regard I beg to refer to the Form As sent in in respect of the accountancy returns for the group of companies upon which I have marked with the letters ‘GK1F I have signed my name prior to the swearing hereof.
10. As is evident therefrom we had asked NALM to allow KPMG update the accounts of the group of companies. This had been agreed and the work was underway until March of 2014. My understanding is that a lot of the work had been done by KPMG and that NALM simply pulled the plug and declined to pay them to complete it. However once the receivers and managers took control of the company in March 2014 I did not know what happened subsequently or why returns were not filed.”
Mr. Kelleher also stated at para. 11 that he believed that prior to the dissolution of the company, NALM had been in contact with the CRO in order to ensure that the companies were not dissolved; he also stated that he believed the residential rental income which accrued to Middleview is approximately €40,000 per annum and that there were therefore ample funds for the company to discharge its obligations under the Companies Acts.
Mr. Peter Malbasha swore a replying affidavit on behalf of NALM. Mr. Malbasha disagreed with the assertion that it was entirely the fault of the Petitioner that the company was struck off the register; he stated that it was and remained the duty of the directors, including Mr. Kelleher, to comply with the statutory duties to file all outstanding returns; He also stated that it was incorrect to say that the petitioner NALM instructed KPMG to prepare the outstanding returns. He said the preparation of the outstanding returns was entirely a matter for the directors and this responsibility was never taken on by NALM and that NALM never had any direct dealings with KPMG in relation to this matter. However he accepted that an employee of Shelbourne Developments Group, (of which the company was a member), Mr. Wayne O'Dwyer, was responsible for any instruction to KPMG and Mr. O'Dwyer provided updates to NALM in relation to its dealings with KPMG and the progression of the preparation of the outstanding returns. Mr. Malbasha also stated that although the rental income which accrued to the company was paid to the Petitioner that was because of the security in the Petitioner's favour and the existence of such a security could not create an obligation on the part of the Petitioner to fund an auditor's costs.
However significantly Mr. Malbasha stated at para. 9 of his...
To continue reading
Request your trial