Re Atlantic Magnetics Ltd ((in Receivership))

• Jurisdiction: Ireland
• Judgment Date: 01 January 1993
• Date: 01 January 1993
• Docket Number: [1991 No. 14,035P; S.C. No. 328 of 1991]
• Court: Supreme Court

Supreme Court

[1991 No. 14,035P; S.C. No. 328 of 1991]

In re Atlantic Magnetics Ltd. (In receivership)

In the matter of Atlantic Magnetics Limited (In Receivership) (under the protection of the Court), And in the matter of The Companies Acts, 1963 to 1990. Westdeutsche Landesbank (Ireland) Limited

Appellant

and

Atlantic Magnetics Limited (In receivership) (under the protection of the Court) and Peter Fitzpatrick (The Examiner appointed by the Court), Respondents

The Governor and Company of the Bank of Ireland, Appellant

and

Peter Fitzpatrick and Atlantic Magnetics Limited (In receivership) (under the protection of the Court)

Respondents

Cases mentioned in this report:—

Bristol Airport v. Powdrill [1990] Ch. 744; [1990] 2 W.L.R. 1362; [1990] 2 All E.R. 493; [1990] B.C.L.C. 585.

Re Presswell Ltd. (Unreported, High Court, Murphy J., 7th November, 1991).

Company - Examiner - Petition - Appointment - Criteria - Onus - Burden of proof - Timescale of examinership - "Likely to facilitate the survival of the company" - Discretion - Exercise - Companies (Amendment) Act, 1990 (No. 27), s. 2.

Company - Examiner - Powers - Vesting of directors' powers - Charged property - Expenses - Charge on book debts - Monies therefrom sought by examiner - Purposes - Continuation of examinership - Leave of High Court - Order therefor - Whether referrable to"costs and remuneration of examiner" - Companies (Amendment) Act, 1990 (No. 27), ss. 2, 6, 9, 11 and 29.

Petition and Motions on Notice.

By a petition presented by the company to the High Court on the 20th October, 1991, and in its grounding affidavit it was stated and deposed that the company engaged in the manufacture and sale of floppy discs had been incorporated on the 29th August, 1988, and that its nominal share capital was £384,000. Pursuant to a debenture and chattel mortgage of the 31st March, 1989, the applicant, Westdeutsche Landsesbank (Ireland) Ltd. had at 5.30 p.m. on Friday the 18th October, 1991, appointed Mr. John Donnelly a receiver over the property of the company. On Saturday the 19th October the company's board concluded that the assets of the company exceeded its liabilities by some £2.5m and resolved therefore to petition the High Court for the appointment as an examiner of Mr. Peter Fitzpatrick of Messrs. Coopers & Lybrand. Following certain adjournments the High Court (Lardner J.) by interim order made on Friday the 15th November, 1991, appointed Mr. Fitzpatrick as examiner to the company and discharged Mr. Donnelly as receiver and directed him to cease to act in that capacity. Further orders were made on the 21st, 22nd and 25th November as appears from the judgment of the Chief Justice, post.

The applicants sought a stay on the order of the 21st November, 1991, but this was refused by the High Court as was the request by the Bank of Ireland that the examiner give to the High Court an undertaking as to damages. On Tuesday the 26th November, 1991, the Bank of Ireland obtained a stay upon the order of the High Court.

The appeals were heard by the Supreme Court (Finlay C.J., Hederman, McCarthy, O'Flaherty and Egan JJ.) on the 21st December, 1991.

Sections 2, 9, 11 and 29 of the Companies (Amendment) Act, 1990, provide as follows:—

"2. — (1) Where it appears to the court that —

• (a) a company is or is likely to be unable to pay its debts, and

• (b) no notice of a resolution for the winding-up of the company has been given under section 252 of the Principal Act more than 7 days before the application hereinafter referred to, and

• (c) no order has been made for the winding-up of the company,

• it may, on application by petition presented, appoint an examiner to the company for the purpose of examining the state of the company's affairs and performing such duties in relation to the company as may be imposed by or under this Act.

  • (2) Without prejudice to the general power of the court undersubsection (1), it may, in particular, make an order under this section if it considers that such order would be likely to facilitate the survival of the company, and the whole or any part of its undertaking, as a going concern.

  • (3) For the purposes of this section, a company is unable to pay its debts if —

    • (a) it is unable to pay its debts as they fall due,

    • (b) the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities, or

    • (c) section 214 (a) or (b) of the Principal Act applies to the company.

(4) In deciding whether to make an order under this section the court may also have regard to whether the company has sought from its creditors significant extensions of time for the payment of its debts, from which it could reasonably be inferred that the company was likely to be unable to pay its debts.

9. — (1) Where it appears to the court, on the application of the examiner, that, having regard to the matters referred to insubsection (2), it is just and equitable to do so, it may make an order that all or any of the functions or powers which are vested in or exercisable by the directors (whether by virtue of the memorandum or articles of association of the company or by law or otherwise) shall be performable or exercisable only by the examiner.

• (2) The matters to which the court is to have regard for the purpose of subsection (1) are —

  • (a) that the affairs of the company are being conducted, or are likely to be conducted, in a manner which is calculated or likely to prejudice the interests of the company or of its employees or of its creditors as a whole, or

  • (b) that it is expedient, for the purpose of preserving the assets of the company or of safeguarding the interests of the company or of its employees or of its creditors as a whole, that the carrying on of the business of the company by, or the exercise of the powers of, its directors or management should be curtailed or regulated in any particular respect, or

  • (c) that the company, or its directors, have resolved that such an order should be sought, or

  • (d) any other matter in relation to the company the court thinks relevant.

(3) Where the court makes an order under subsection (1), it may, for the purpose of giving full effect to the order, include such conditions in the order and make such ancillary or other orders as it sees fit.

(4) Without prejudice to the generality of subsections (1) and(3), an order under this section may provide that the examiner shall have all or any of the powers that he would have if he were a liquidator appointed by the court in respect of the company and, where such order so provides, the court shall have all the powers that it would have if it had made a winding-up order and appointed a liquidator in respect of the company concerned.

11. — (1) Where, on an application by the examiner, the court is satisfied that the disposal (with or without other assets) of any property of the company which is subject to a security which, as created, was a floating charge or the exercise by the examiner of his powers in relation to such property would be likely to facilitate the survival of the whole or any part of the company as a going concern, the court may by order authorise the examiner to dispose of the property or exercise his powers in relation to it, as the case may be, as if it were not subject to the security.

• (2) Where, on an application by the examiner, the court is satisfied that the disposal (with or without other assets) of —

  • (a) any property of the company subject to a security other than a security to which subsection (1) applies, or

  • (b) any goods in the possession of the company under a hire-purchase agreement,

  • would be likely to facilitate the survival of the whole or any part of the company as a going concern, the court may by order authorise the examiner to dispose of the property as if it were not subject to the security or to dispose of the goods as if all rights of the owner under the hire-purchase agreement were vested in the company.

(3) Where property is disposed of under subsection (1), the holder of the security shall have the same priority in respect of any property of the company directly or indirectly representing the property disposed of as he would have had in respect of the property subject to the security.

(4) It shall be a condition of an order under subsection (2) that —

• (a) the net proceeds of the disposal, and

• (b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would be realised on a sale of the property or goods in the open market by a willing vendor, such sums as may be required to make good the deficiency,

• shall be applied towards discharging the sums secured by the security or payable under the hire-purchase agreement.

(5) Where a condition imposed in pursuance of subsection (4)relates to two or more securities, that condition requires the net proceeds of the disposal and, where paragraph (b) of that subsection applies, the sums mentioned in that paragraph shall be applied towards the sums secured by those securities in the order of their priorities.

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