Openhydro Group Ltd (in Provisional Liquidation)
| Jurisdiction | Ireland |
| Judge | Mr Justice Maurice Collins |
| Judgment Date | 21 May 2021 |
| Neutral Citation | [2021] IECA 151 |
| Docket Number | High Court Record No. 2018 No. 311 COS |
| Year | 2021 |
| Court | Court of Appeal (Ireland) |
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[2021] IECA 151
Faherty J
Haughton J
Collins J
High Court Record No. 2018 No. 311 COS
Court of Appeal Record No. 2019 No. 65
THE COURT OF APPEAL
Costs – Appointment of an examiner – Petition – Petitioners appealing against costs order – Whether costs should follow the event
Facts: The petitioners, Ms Gilmore, Mr Gilmore, Mr O’Flynn, Mr Kelliher, Mr O’Mahony and Ashley Nominees Ltd, petitioned the High Court to appoint an examiner to OpenHydro Group Ltd (In Provisional Liquidation), as well as to a related company, OpenHydro Technology Ltd (In Provisional Liquidation). That petition was refused by the High Court (Creedon J) on 7 September 2018, after a contested two day hearing. On 1 February 2019, the Judge ordered that the petitioners should pay the costs of the Naval Energies SAS and Naval Group SA, who, as creditors of the Company, had opposed the appointment of an examiner. The petitioners had urged the High Court to make no order for costs. In doing so they placed significant reliance on an earlier costs ruling of the Court of Appeal in the proceedings. However, the Judge was not persuaded to depart from the principle that costs should follow the event and proceeded to make an order for the costs of the proceedings in favour of the creditors. The petitioners appealed to the Court of Appeal against that costs order.
Held by Collins J that it appeared anomalous and unfair that, having successfully opposed the petition, the creditors should be awarded their costs on the basis that costs ought to follow the event in the ordinary way whereas, if their opposition had been unsuccessful, it seemed likely that they would have escaped any adverse costs consequences and the petitioners would have been left to bear their own costs. He held that if he was undertaking an entirely de novo assessment of where the costs should fall, he might have been inclined to make no order in respect of the costs of the petition in the High Court. However, he considered that some weight must be given to the fact that the Judge came to a different conclusion, albeit without adequately explaining the basis for it. In the circumstances, it appeared to him that the appropriate order to make was that the creditors should recover 50% of their costs from the petitioners, such costs to be the subject of adjudication in the default of agreement. He accordingly set aside the High Court order and substituted for it an order in those terms.
Collins J held that, as regards the costs of the appeal, the petitioners had succeeded in part; they had not, however, obtained the order which they sought and which it was the purpose of the appeal to obtain. In these circumstances, he held that it would not be just to the creditors to award the petitioners the full costs of the appeal. His provisional view was that an order giving the petitioners 50% of their costs of the appeal would best meet the justice of the case.
Appeal allowed.
JUDGEMENT of Mr Justice Maurice Collins delivered on 21 May 2021
This appeal arises from an unsuccessful High Court petition to appoint an examiner to OpenHydro Group Limited (In Provisional Liquidation) ( “the Company”), as well as to a related company, OpenHydro Technology Ltd (In Provisional Liquidation). That petition was refused by the High Court (Creedon J) on 7 September 2018, after a contested two day hearing. On 1 February 2019, the Judge ordered that the petitioners, Ann Gilmore, Brendan Gilmore, Donal O'Flynn, Patrick Kelliher, Oliver O' Mahony and Ashley Nominees Limited ( “the Petitioners”) should pay the costs of the Naval Energies SAS and Naval Group SA, who, as creditors of the Company, had opposed the appointment of an examiner (“ the Creditors”).
The Petitioners had urged the High Court to make no order for costs. In doing so they placed significant reliance on an earlier costs ruling of this Court in these proceedings to which I shall refer further below. However, the Judge was not persuaded to depart from the principle that costs should follow the event and proceeded to make an order for the costs of the proceedings in favour of the Creditors.
It is that costs order that is the subject of this appeal.
Unusually, both Petitioners and Creditors were shareholders of the Company. At the time of the petition, the Petitioners collectively held just over 12% of the issued shares, whereas Naval Energies SAS held approximately 71%. The Petitioners (or some of them) had founded the Company in 2004 and had originally held the majority of its shares. Naval Energies SAS (then called DCNS SA) acquired its majority shareholding between 2010 and 2013. It was described in the papers as “ a leading contractor in the international naval market”, with operations in four continents and 16 countries. OpenHydro Technology Limited is a wholly-owned subsidiary of the Company.
According to the examinership petition, the Company specialised in “the design, manufacture, installation and maintenance of marine turbines generating renewable energy from tidal streams.” The petition described it as “ a development company at an advanced pre-commercialisation stage of development.” Its business clearly required significant capital. Its capital requirements were, it appears, largely funded by the Creditors, both through equity investment and through the provision of debt facilities. In an affidavit sworn on their behalf to oppose the petition, it is stated that since 2010 the Creditors had invested a combined total of more than €260 million by way of equity investment (including share buybacks) and debt finance.
In July 2018, the Creditors resolved not to continue funding the Company. On 26 July 2018, on the petition of Naval Energies SAS, the High Court (Costello J) appointed Michael McAteer and Stephen Tennant as provisional liquidators to the Company. At that point, the Creditors calculated that they were owed a combined amount of more than €120 million by the Company, making them its largest creditors. The Creditors presented a petition to wind-up OpenHydro Technology Limited at the same time and Mr McAteer and Mr Tennant were appointed provisional liquidators of that company on the same date.
The Petitioners then petitioned to have an examiner appointed to the Company (and to OpenHydro Technology Ltd as a related company). That petition did not issue until 17 August 2018. However, in contrast to the position obtaining where a receiver stands appointed to the company the subject of a petition (where, by virtue of section 512(4) of the Companies Act 2014, a petition will not be heard if the receiver has stood appointed for a period of at least three days prior to the presentation of the petition), there is no statutory time-limit within which a petition has to be presented following the appointment of a provisional liquidator. The Creditors were, nonetheless, very critical of what they characterised as the Petitioners' delay in bringing the petition.
In any event, on the same day (17 August 2018) the High Court (O' Regan J) made an order appointing Ken Fennell as interim examiner to the Company and to OpenHydro Technology Ltd (“ the Interim Examiner”).
The High Court (McDonald J) subsequently directed that both winding-up petitions and the examinership petition should be heard together, with the examinership petition to be heard first. That hearing took place on 6 and 7 September 2018, at the conclusion of which Creedon J gave her ruling ex tempore. The Judge noted that the Petitioners acknowledged that the survival of the Company was almost entirely dependent on whether an investor could be found to make the investment necessary to fund its on-going loss-making operations while its technology was brought to fruition. She noted that, while the independent expert's report stated that there was a reasonable prospect of survival, that opinion was significantly reliant on the cash flow projections which had been provided by the Petitioners which showed positive cash generation in years 3 to 5. Those projections had not been audited by the independent expert. The Judge noted the views of the Interim Examiner but observed that no concrete detail of any proposed investment had been provided. She noted that there was disagreement on the evidence about the projected future cash flows of the Company (the Petitioners' projections had been described as “ speculative and unrealistic” by the Creditors' expert accountant) and the level of investment required to generate those cash flows. While no “ definitive evidence” of the scale of the required investment was before the court, it was “ significant”. The Judge then observed that the historical financial position was “ there for all to see”. The Company had not made a profit in 14 years and after 14 years was still claiming to be in the pre-commercialisation stage. In these circumstances, she said, she was not satisfied that the Petitioners' had met the requirement to establish that the Company and the related company had a reasonable prospect of survival and the petition was refused on that basis. The Judge then discharged the Interim Examiner and made orders for the winding up of both companies, with the provisional liquidators being appointed as joint liquidators. Those orders were subject to a short stay to enable an appeal to be brought to this Court. At the request of the Creditors, the issue of costs was deferred.
An appeal was indeed brought by the Petitioners and it was...
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