Re, Comet Food Machinery Company Ltd (in voluntary liquidation)

• Jurisdiction: Ireland
• Judgment Date: 26 January 1999
• Date: 26 January 1999
• Docket Number: [S.C. No. 327 of 1996]
• Court: Supreme Court

Supreme Court

[S.C. No. 327 of 1996]

In re Comet Food Machinery Co. Ltd. (In liquidation)

In the matter of the Companies Acts 1963 to 1990 and in the matter of Comet Food Machinery Company Limited (in

and

oluntary liquidation)

Cases mentioned in this report:-

In bonis Morelli; Vella v. Morelli [1968] I.R. 11.

In re British & Commonwealth plc. [1993] A.C. 426; [1992] 3 W.L.R. 853; [1992] 4 All. E.R. 876.

In re British and Commonwealth Holdings plc. [1992] Ch. 342; [1992] 2 W.L.R. 931; [1992] 2 All E.R. 801.

Re Embassy Art Products [1988] B.C.L.C. 1

Company - Winding up - Examination of directors - Whether creditors can have directors examined in relation to management of company - Criteria to be used in deciding application by creditor for examination order - Companies Act, 1963 (No. 33), ss. 245 and 280.

Appeal from the High Court.

The facts are summarised in the headnote and are fully set out in the judgment of Keane J., infra.

Proceedings were commenced by a notice of motion dated the 18th April, 1996. The matter came before the High Court (Costello P.) on the 4th November, 1996, which granted the relief sought.

Notice of appeal was filed on the 29th November, 1996. The appeal was heard by the Supreme Court (O'Flaherty, Keane and Murphy JJ.) on the 17th December, 1998.

In January, 1996, the applicant, Ritco Limited, obtained judgment for the sum of £255,000 against Comet Food Machinery Company Limited (hereafter "Comet"). The respondents, Mr. Branagan and Mr. Maguire, were directors of Comet. In November 1995, between the institution of proceedings and obtaining judgment, a resolution to wind up Comet was passed. It was learned that a new company, Comet Food Equipment Limited (hereafter "Equipment") was formed which occupied the same premises as Comet, had Mr. Branagan and Mr. Maguire as shareholders and had Mr. Branagan and his wife as directors. Former employees of Comet worked for Equipment.

From the statement of affairs it appeared that Comet had a deficiency of liabilities over assets and that trade creditors had been paid prior to the liquidation. The applicant was concerned that Comet was put into liquidation and Equipment formed to frustrate its claim for damages. It brought an action seeking the examination on oath of the respondents under the terms of s. 245 of the Companies Act, 1963. In an ex tempore judgment on the 4th November, 1996, Costello P. granted the application.

The respondents appealed to the Supreme Court.

Held by the Supreme Court (O'Flaherty, Keane and Murphy JJ.), in dismissing the appeal, 1, that the power of the High Court to order the examination of persons under s. 245 was discretionary and that the application may be made by a creditor of the company.

2. That, before being entitled to an examination order, a creditor must demonstrate that the examination would probably result in some benefit accruing to him. In reaching its decision the court would ordinarily attach considerable weight to the views of the liquidator that an examination was necessary, though the views of a creditor or contributory would not attract the same weight.

Re Embassy Art Products [1988] B.C.L.C. 1 considered.

3. That it could not be said that the application in this case was brought without hope of recovering any benefit or for reasons of pique on the part of the applicant, as if the suspicion of the applicant was well founded an application could be made for the return of improperly transferred assets.

4. That in appeals from...