Newbridge Credit Union Limited (In Liquidation) & Companies Act, [2017] IEHC 542 (2017)

Docket Number:2016 362 COS
 
FREE EXCERPT

THE HIGH COURT2016 No. 362 COSIN THE MATTER OF

NEWBRIDGE CREDIT UNION LTD (IN LIQUIDATION)

AND IN THE MATTER OF SECTION 682 AND SECTION 683 AND SECTION 819 OF THE COMPANIES ACT 2014

BETWEEN

JIM LUBYAPPLICANTAND

LIAM KEOGH, BEN DONNELLY, MICHAEL MURPHY, BREDA REID, ANNA MUNKO, PADDY O’CARROLL, PAUL MAHER, PAT RUDDY, MARIA MCDONALD, CHARLIE CAWLEY AND GEORGE WILLOUGHBYRESPONDENTSAND

THE DIRECTOR OF CORPORATE ENFORCEMENTNOTICE PARTYAND

THE CREDIT UNION DEVELOPMENT ASSOCIATIONAMICUS CURIAE

Judgment of Mr. Justice Robert Haughton delivered this 25th day of September, 2017

Paragraph No Title

1 Introduction

2 The key arguments and statutory provisions

2.4 The 1997 Act

2.6 The 2011 Act

3 Respondent/CUDA arguments

4 The constitutional arguments

5 The Issues

6 Principles of statutory interpretation

7 Issue (1) – do the 1997 Act and 2011 Act establish separate and distinct frameworks for winding up credit unions?

8 Issue (2) – does the Reporting and Restriction Regime apply to the directors of NCU?

9 Conclusion

1. Introduction

1.1 By order of the High Court dated 16 December, 2013, (Charleton J.) the applicant (“the liquidator”) was appointed Official Liquidator of Newbridge Credit Union Limited (“NCU”) on foot of a petition presented by the Central Bank of Ireland (“CBI”).

1.2 Proceeding on the assumption that the provisions of the Companies Acts 1963 – 2009 and/or the provisions of the Companies Act 2014 (“the 2014 Act”) relating to the reporting and restriction of directors of companies applied to the directors of the NCU, the liquidator applied to the Director of Corporate Enforcement (“the DCE”) to be relieved of his obligation to seek restriction orders in respect of the directors of the credit union. The liquidator was relieved of his obligation to seek restriction in respect of two directors who had been appointed shortly before the NCU went into liquidation. Despite his application to be relieved in respect of all of the directors, the liquidator was not relieved by the DCE of the obligation to seek orders in respect of the remainder of the NCU directors being the above named respondents.

1.3 Accordingly by Notice of Motion issued on 30 September, 2016, the applicant applied for restriction of the respondents pursuant to sections 682, 683 and 819 of the 2014 Act (which will be referred to as “the Reporting and Restriction Regime”), or alternatively pursuant to the previous regime provided for in s.56 of the Company Law Enforcement Act, 2001 (“the 2001 Act”) and section 150 in Chapter 1 of Part vii of the Companies Act 1990 (as amended) (“the 1990 Act”). The liquidator also sought a declaration/direction under section 631 of the 2014 Act that these provisions apply to the liquidation of NCU. That issue falls to be determined by this court by way of a preliminary hearing directed by order of Barrett J. of 21 November, 2016.

1.4 One respondent, namely Ms Maria McDonald, appeared at the hearing and was represented by counsel who argued against the application of the Reporting and Restriction Regime to directors of credit unions.

1.5 The DCE, being of the considered view that the Reporting and Restriction Regime applies to the directors of a credit union, was joined as a notice party by the order of Barrett J.

1.6 The Credit Union Development Association (“CUDA”) sought and was granted leave by Barrett J. to participate as an amicus curiae. CUDA was incorporated in 2003 and is one of two credit union representative bodies whose role is officially recognised by government, the CBI and the Credit Union Advisory Council, a statutory body established to advise the Minister for Finance on matters relating to the credit union movement. CUDA is owned and funded by a group of credit unions and provides services in the area of representation, strategic development and competency development. CUDA argued that the Reporting and Restriction Regime, whether pre- or post the 2014 Act, does not apply to the directors of credit unions.

2. The key arguments and statutory provisions

2.1 In written and oral submissions Counsel for the liquidator submitted that a credit union could be wound up under three separate and distinct statutory regimes: firstly under Part 7 of the Central Bank and Credit Institutions (Resolution) Act 2011 (“the 2011 Act”); secondly under Part X of the Credit Union Act, 1997 (“the 1997 Act”); thirdly under Chapter 3 of Part 22 of the 2014 Act. Chapter 3 does not apply to the present winding up.

2.2 Counsel contended that the winding up of NCU is proceeding under the 2011 Act, but argued that whether it is proceeding under the first or second regime, or a combination of both, the provisions of the Companies Acts imposing an obligation on the liquidator to report to the DCE, whether under section 56 of the 2001 Act, or sections 682 and 683 of the 2014 Act, the further provisions of the Companies Acts relating to the restriction of directors of companies apply to directors of credit unions including NCU.

2.3 Counsel contended that the natural and ordinary or literal meaning of section 76 of the 2011 Act and section 134 of the 1997 Act, whether these provisions apply separately or in combination, is that these sections apply all of the winding up provisions of the Companies Acts, including the Reporting and Restriction Regime, to directors of credit unions. It is appropriate at this point to set out the most relevant statutory provisions.

The 1997 Act

2.4 As first promulgated, section 133 empowered the Registrar of Friendly Societies, with whom credit unions were then registered, to petition the High Court for an order winding up a credit union where it was unable to pay sums due and payable to its members or creditors, or there was failure to comply with a provision of the 1997 Act, or less than half the members of the credit union “have a common bond” or in any other case where it appeared to the Registrar to be in the public interest or just and equitable having regard to the interests of all members. Under the Central Bank and Financial Services Authority Act 2003, the CBI (“the Bank” in the 2003 Act) acting through the new Registrar of Credit Unions, replaced the Registrar of Friendly Societies, and became the body entitled to petition for the winding up of a credit union under section 133.

2.5 Section 134 was similarly amended in 2003, and in its amended form reads: –

“134. Winding up under the Companies Acts.

(1) Subject to this section, a credit union may be dissolved by being wound up in accordance with the Companies Acts and, accordingly, those Acts shall, subject to any necessary modifications, apply as if a credit union were a company limited by shares.

(2) In the application of the Companies Acts to the winding up of a credit union –

(a) any reference in those Acts to the Registrar of companies shall be construed as a reference to the Bank;

(b) any reference in those Acts to the articles of association shall be construed as a reference to the rules of a credit union; and

(c) any reference in those Acts to a special resolution shall be construed as a reference to a special resolution within the meaning of this Act.

(3) Without prejudice to subsection (2), where a credit union is being wound up as mentioned in subsection (1), the Bank shall be entitled to appear and be heard in any proceedings relating to the winding up.

(4) Where a credit union is wound up as mentioned in subsection (1), the liability of a present or past member of the credit union for payment of the debts and liabilities of the credit union, the expenses of winding up and the adjustment of rights of contributories among themselves shall be qualified as follows:

(a) no person who ceased to be a member not less than one year before the beginning of the winding up shall be liable to contribute;

(b) no person shall be liable to contribute in respect of any debt or liability contracted after he ceased to be a member;

(c) no person who is not a member shall be liable to contribute unless it appears to the Court that the contributions of the existing members are insufficient to satisfy the just demands on the credit union;

(d) no contribution shall be required from any person exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a past or present member; and

(e) in the case of a share which has been withdrawn, a person shall be taken to have ceased to be a member in respect of that share as from the date of his notice under section 32(1) of intention to withdraw or, as the case may be, the approval of the withdrawal under section 37(3)(b).

(5) Where a credit union is wound up by virtue of this section, sections 293 to 299 of the Companies Act 1963 and sections 202 to 204 of the Companies Act 1990, so far as they relate to the liabilities of directors and officers (within the meaning of those Acts) of a company being wound up, shall apply with any necessary modifications in relation to the officers of the credit union to whom paragraph (a) of the definition of ‘officer’ in section 2 applies.”

The 2011 Act

2.6 As its long title states, the 2011 Act is “An Act to Make Provision for an Effective and Expeditious Resolution Regime for Certain Credit Institutions at the Least Cost to the State; to Amend Certain Enactments; and for Related Matters”. It applies to “designated credit institutions” which include authorised banks, building societies and “a credit union”, and it is not disputed that it applies to NCU. Part 7 sets out the powers of the CBI in relation to the liquidation of authorised credit institutions.

2.7 Section 76, headed “Application of Companies Acts to winding up of designated credit institutions” provides: –

“The Companies Acts apply to the winding-up of a designated credit institution subject to this Part.”

Section 77 provides that the CBI may present a petition for the winding up of a designated credit union where in the bank’s opinion it would be in the public interest, or where...

To continue reading

REQUEST YOUR TRIAL