National Asset Loan Management Ltd v Middleview Ltd

• Jurisdiction: Ireland
• Judge: the President
• Judgment Date: 26 October 2017
• Neutral Citation: [2017] IECA 290
• Date: 26 October 2017
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2017] IECA 290 [2016 No. 129]

[2017] IECA 290

THE COURT OF APPEAL

Ryan P.

The President

Irvine J.

Faherty J.

Neutral Citation Number: [2017] IECA 290

[2016 No. 129]

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

BETWEEN

NATIONAL ASSET LOAN MANAGEMENT LIMITED

PETITIONER/APPELLANT

AND

MIDDLEVIEW LIMITED

RESPONDENT/NOTICE PARTY

GARRETT KELLEHER

NOTICE PARTY/RESPONDENT

Jurisdiction of the High Court – Restoration of a Company – Register of Companies – Appellant seeking to appeal against High Court judgment – Whether s. 12(B)(3) of the Companies (Amendment) Act 1982 gives the High Court jurisdiction to order the petitioner/appellant to pay the costs of auditing the respondent/notice party

Facts: The respondent/notice party, Middleview Ltd, was an investment company with large borrowings from Anglo Irish Bank which were taken over under the National Asset Management Agency Act 2009 and then acquired by the petitioner/appellant, National Asset Loan Management (NALM). The company was struck off the Register of Companies on 28th March 2014 for failing to file returns. NALM applied to the High Court to have it restored, giving notice to parties specified by company law and also to the notice party/respondent, Mr Kelleher, a director of the company. On 2nd March 2015, Cregan J made the order sought and left over for further consideration a claim by Mr Kelleher for a direction that NALM pay the accountancy fees of preparing the company's audited accounts. When that matter was heard, the Court found in favour of the notice party, ordering NALM to pay for the accounts for 2010 and 2011 in full and to cover 50% of the cost of years 2012 and 2013. In his judgment on the issue, Cregan J made observations about the affidavit evidence furnished by a senior official of NALM, Mr Malbasha, and that body's lawyers returned to court to request reconsideration by the judge, not of his decision but of the perceived personal criticisms. Cregan J delivered a second judgment on 29th January 2016 addressing his previous comments, rejecting the complaints made by NALM and confirming what he had said in the previous judgment. The appellant appealed to the Court of Appeal. The issues for determination on the appeal were: (i) Did s. 12(B)(3) of the Companies (Amendment) Act 1982 give the High Court jurisdiction in the circumstances of the case to order NALM to pay the costs of auditing the company? (ii) If there was jurisdiction, was the trial judge entitled on the evidence in the affidavits and particularly having regard to the matters disputed in the affidavits of Mr Kelleher and Mr Malbasha to make the order that he did regarding the audit costs for 2010 and 2011? (iii) If so, was the judge entitled to make an order for NALM to pay 100% of the audit costs for 2010 and 2011 and 50% of the costs for 2012 and 2013? (iv) In the second judgment, which followed submissions by NALM that the trial judge was in error as a matter of fact in regard to the conclusions he reached on the affidavit of Mr Malbasha, did the trial judge err as a matter of law in a manner that is open to the Court to correct? (v) If the answer to this question is yes, is it nevertheless appropriate or prudent to embark on a review of the second judgment?

Held by Ryan P that the interpretation placed on the subsection by the High Court whereby it held that the dispute about auditing costs could be resolved by the order restoring the company was incorrect. Ryan P held that it was not open to the Court to resolve a dispute as to yes or no to an agreement to pay the accountancy fees when the only material before the Court was on affidavit. Ryan P held that, having noted that the court held that it was probable that the appellant would discharge the accountancy fees for those later years, that conclusion, whether sound or otherwise, did not give rise to a legal liability, still less to one that could be attached to the restoration order. Neither could Ryan P find justification for the 50/50 split of the charges. Ryan P did not consider it the function of the Court to exercise an appellate function on the matter of the later judgement.

Ryan P held that the appeal would be allowed in respect of the substance of judgment on the order under s. 12(B)(3) of the 1982 Act for the payment of the accountancy fees. Ryan P would not interfere with the conclusions or order made in respect of the judge's comments on the affidavit evidence.

Appeal allowed.

JUDGMENT of the President delivered on 26th October 2017

Introduction

1 This appeal is concerned with the jurisdiction of the High Court when making an order for the restoration of a company that has been struck off the Register of Companies. If the High Court is satisfied it is just, it may order that the company be restored to the register and may by the order give directions and make provisions to put the company in the same position as if it had not been struck off and to put all other persons in the same position as if the company had not been struck off. The judgment of Cregan J. that is the primary subject of appeal in this case opens with a succinct statement of the issue that the Court had to address as follows:

'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.'

2 Middleview Ltd. was an investment company with large borrowings from Anglo Irish Bank which were taken over under the National Asset Management Agency Act 2009 and then acquired by National Asset Loan Management ('NALM'). The company was struck off the Register of Companies on 28th March 2014 for failing to file returns. NALM applied to the High Court to have it restored, giving notice to parties specified by company law and also to Mr. Garrett Kelleher, a director of the company. On 2nd March 2015, Cregan J. made the order sought and left over for further consideration a claim by the notice party, Mr. Kelleher, for a direction that NALM pay the accountancy fees of preparing the company's audited accounts. When that matter was heard, the Court found in favour of the notice party, ordering NALM to pay for the accounts for 2010 and 2011 in full and to cover 50% of the cost of years 2012 and 2013. In his judgment on the issue, Cregan J. made observations about the affidavit evidence furnished by a senior official of NALM, Mr. Peter Malbasha, and that body's lawyers returned to court to request reconsideration by the judge, not of his decision but of the perceived personal criticisms. Cregan J. delivered a second judgment on 29th January 2016 addressing his previous comments, rejecting the complaints made by NALM and confirming what he had said in the previous judgment. In the result, the issues in this appeal are first the original orders as to the payment of accountancy costs and, secondly, the justifiability of the judge's criticisms of Mr. Malbasha.

3 It is convenient to consider the arguments about the substantive issue of statutory interpretation and application separately from the judicial comments on the affidavit evidence proffered by NALM. The decision of the High Court under that primary head did not depend on the judge's observations or conclusions on the affidavits.

Background

4 Following failure by the company to meet a demand for repayment of money due on 28th March 2014, NALM appointed receivers over Middleview. As it happened, earlier on the same day, Middleview had been struck off the Register of Companies for failing to file annual returns with the Companies Registration Office. NALM applied to the High Court on 6th February 2016 to have Middleview restored to the Register for the purpose of realising the company's assets and recovering some of the loans. The CRO did not object to the application on condition that an order under be sought under the Companies Acts providing for delivery of the outstanding returns. Mr. Garrett Kelleher, one of Middleview's directors, did not object to the application, but raised an issue concerning payment of the cost of preparing the returns and the Court put the matter back for later consideration. In an affidavit dated 13th March 2015, Mr. Kelleher complained that the company or the directors should not have to pay for preparation of the returns. He argued that sole responsibility lay with NALM for the company's being struck off because they would not pay the auditors, KPMG, despite promising to do so and having the benefit of all the company's income. He sought an order pursuant to section 12(B)(3) for payment of the cost by NALM.

5 In response, Mr. Peter Malbasha swore a replying affidavit dated 9th April 2015 on NALM's behalf. He said that it was the responsibility of the directors to discharge their duties under the Companies Acts notwithstanding any receivership process. Nevertheless, NALM had attempted to release funds to discharge the audit fees but that was done in contemplation of cooperation from the directors which was not forthcoming. The approval of such funding was done for the purpose of preserving the value of its security. NALM argued that it was the lack of co-operation from the directors that caused Middleview to be struck off for having failed to file its annual returns, rather than any default on its part. Mr. Malbasha also claimed that the receivers had only been validly appointed in April 2015 following the restoration of Middleview to the register.

6 In a replying...