Re Clare Textiles Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Costello
• Judgment Date: 01 January 1993
• Neutral Citation: 1992 WJSC-HC 3202
• Docket Number: [1992 No. 47P],No. 47P/1992
• Court: High Court
• Date: 01 January 1993

1992 WJSC-HC 3202

THE HIGH COURT

No. 47P/1992

CLARE TEXTILES LTD

IN THE MATTER OF CLARE TEXTILES LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 - 1990

Citations:

COMPANIES (AMDT) ACT 1990 S2

COMPANIES (AMDT) ACT 1990 S15

COMPANIES (AMDT) ACT 1990 S29

COMPANIES (AMDT) ACT 1990 S10

COMPANIES (AMDT) ACT 1990 S2(2)

RSC O.75A r14

COMPANIES (AMDT) ACT 1990 S17

COMPANIES (AMDT) ACT 1990 S16(e)

COMPANIES (AMDT) ACT 1990 S9

COMPANIES (AMDT) ACT 1990 S18

COMPANIES (AMDT) ACT 1990 S17(1)

COMPANIES (AMDT) ACT 1990 S24

COMPANIES (AMDT) ACT 1990 S10(2)

COMPANIES (AMDT) ACT 1990 S29(3)

Synopsis:

COMPANY

Insolvency

Court - Protection - Examiner - Remuneration - Powers - Duties - Unauthorised activities - Part of remuneration and legal costs disallowed - Rules of the Superior Courts, 1986, order 75A - Companies (Amendment) Act, 1990, ss. 2, 9, 10, 16–18, 29 - (1992/47 P - Costello J. - 2/10/92) - [1993] 2 I.R. 213

|In re Clare Textiles Ltd.|

1 Judgment of Mr. Justice Costello Delivered the 2nd day of October 1992

2 Clare Textiles Limited carried on business as manufacturers of textile materials at Station Road, Ennis, Co. Clare. Having experienced serious financial difficulties it applied for the appointment of an Examiner under Section 2 of the Companies (Amendment) Act, 1990. On the 13th January 1992 the Court appointed Mr. Noel Connellan to that office. The Examiner's first report under Section 15 dated 26th January 1992 and his second report under Section 18 containing his proposals for a scheme of arrangement was dated the 23rd February 1992. For reasons to be explained later the Court refused to confirm his proposals for a scheme of arrangement and on the 2nd March 1992 ordered that the company be wound up. The Examiner has now applied for an order under Section 29 for payment of remuneration, costs and expenses. The company incurred liabilities during the protection period whilst its business was carried on and the Examiner has certified (under Section 10) these as having been properly incurred. They amount, according to his affidavit, to £92,126.97p. His claim for remuneration is for the sum of £55,360 which with VAT comes to £66,985.60p. In addition he claims legal costs. The account prepared by his solicitor claimed fees amounting to £33,535, outlay amounting to £7,649.80p which when VAT is added amounts in all to £48,227.15p. Thus the total claimed for preferential payment out of the company's assets as a result of the examinership amounts to £207,339.72p. The Examiner has pointed out that during the protection period whilst he was carrying on the company's business income was generated from trading amounting to £35,224.25p.

3 Adequately to explain and adjudicate upon the issues which now arise require me to go back over some of the history of the examinership.

4 The Court makes an order under Section 2 appointing an examiner to examine a company's affairs when it considers that such an order would be likely to facilitate the "survival of the company andthe whole or part of its undertaking as a going concern" [Section 2(2) (emphasis added)]. In its petition and affidavit grounding the application in the present case the company advanced detailed reasons why it held out the hope that the company could survive as a going concern. It was explained that the company's English parent had been engaged in detailed negotiations for a sale of its shares, that a purchase would involve the injection of new capital in the company, that the parent company had been negotiating a sale of its premises to a property company which would lease them back, that the parent company, its principal creditor, had capitalised £500,000 of its debt and had agreed to write down the balance proportionally in any composition of creditors. The Director and Secretary of the company, Mr. Sabire, informed the Court that the company was anxious to continue to trade and to maintain the employment of its employees and he expressed the opinion that the company was capable of surviving as a going concern. In the light of this evidence the Court made a Section 2 order. In addition it conferred on the Examiner a number of specific powers which had been requested at the time of his appointment and made an order under Section 9 vesting the functions of the directors in the Examiner.

5 The Examiner's first duty was, having examined the company's affairs, to report to the Court under Section 15. He is required by Order 75A Rule 14 to deliver his report by making an ex-parte application for leave to deliver it. He is also required by this rule to draw the attention of the Court to any particular aspects of the report which may be relevant to the exercise by the Court of its functions under the Act. In the light of a misunderstanding disclosed in a recent affidavit filed by the Examiner as to the Court's role on the delivery of a report under Section 15 I should explain that Section and Section 17.

6 Having given liberty to deliver a report the Court will only make an order for a hearing on foot of the Section 15 report in certain limited circumstances. An order for a hearing depends entirely on the opinions expressed by the Examiner in his report. Briefly, if the Examiner expresses an opinion (a) that the company would not be capable of survival, or (b) that the formulation of a scheme of arrangement would not facilitate the company's survival, or (c) that an attempt to continue the whole or part of the company's undertaking would not be more advantageous than a winding-up order, or (d) that there is evidence of serious irregularities in relation to the company's affairs, then an order for a hearing will be directed by the Court [Section 17(1)]. In the present case the Examiner expressed no opinion on the matters referred to in Section 17(1) and accordingly the Court had no power to order a hearing on foot of the Section 15 report. The Court's only function was to give the Examiner liberty to deliver the report. The order made was an administrative not a judicial one. Having been given liberty to deliver the Section 15 report the Examiner was then required to carry out the further functions detailed in the Act including the preparation and delivery of a second report under Section 18.

7 The Examiner has advanced the argument in support of his present application that the Court had "approved" his Section 15 report, that it had "approved" the course of action proposed in his Section 15 report, and that the remuneration and costs which he now claims were incurred with the Court's approval. But this is a misconception of the section. The Court neither approves or disapproves of the Section 15 report when liberty to deliver it is given. It has no statutory function or power to express an opinion on the proposals (if...