Re Coolfadda Developers Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 25 May 2009
• Neutral Citation: [2009] IEHC 263
• Court: High Court
• Date: 25 May 2009

[2009] IEHC 263

THE HIGH COURT

[No. 202 COS/2009]

Coolfadda Developers Ltd, In Re

IN THE MATTER OF COOLFADDA DEVELOPERS LIMITED

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 to 2006

COMPANIES ACT 1963 S214

COMPANIES ACT 1963 S216

MCCANN & COURTNEY COMPANIES ACTS 1963-2006 2ED 2008 436

GENPORT LTD, IN RE UNREP MCCRACKEN 21.11.1996 1997/3/1050

COMPANIES ACT 1963 S213

BULA LTD, IN RE 1990 1 IR 440

FRENCH APPLICATIONS TO WIND UP COMPANIES 2ED 2008 PARA 4.4.5.2

PRACTICE NOTE (CH D: COMPANIES COURT: WINDING UP: ADJOURNMENT) 1977 3 AER 64 1977 1 WLR 1066

COURTNEY THE LAW OF PRIVATE COMPANIES 2ED 2002 PARA 25.053

DEMAGLASS HOLDINGS LTD (WINDING UP PETITION: APPLICATION FOR ADJOURNMENT), IN RE 2001 2 BCLC 633

MINREALM LTD, IN RE 2008 2 BCLC 141 2007 EWHC 3078 (CH)

NEW CAP REINSURANCE CO LTD v HIH CASUALTY & GENERAL INSURANCE LTD 2002 2 BCLC 228 2002 EWCA CIV 300

MOSS CROSS-FRONTIER INSOLVENCY OF INSURANCE COMPANIES 2001 3

COURTNEY THE LAW OF PRIVATE COMPANIES 2ED 2002 PARA 23.001

COMPANIES ACT 1963 S226

COMPANIES ACT 1963 S231

COMPANIES ACT 1963 S231(1)(B)

COMPANY LAW

Winding up

Practice and procedure - Creditors meeting - Appeal against decision of chairman - Application to appoint alternative liquidator - Applicant creditor - Statement of affairs - Amount shown as owing to applicant disputed by applicant - Evidence of debt rejected by chairman of meeting - Higher amount not allowed by chairman - Whether higher amount should have been allowed - Function of court in appeal under O 74, r 71 - Whether court must determine value of debt - Whether court must determine whether correct procedure followed by chairman - Factual dispute - Conflicting evidence regarding amount of debt - A&M Construction Ltd (Unrep, McCracken J, 22/2/1995) and In Re A Company (No 4539/1993) [1995] 1 BCLC 459 considered - Companies Act 1963 (No 33), ss 266 and 267 - Rules of the Superior Courts 1986 (SI 15/1986), O 74, r 71 - Relief granted (2009/115 COS - Laffoy J - 30/3/2009) [2009] IEHC 412

In re Jim Murnane Ltd (In Liquidation)

Facts: This case arose out of a petition by a construction company for it to be wound up on the grounds of insolvency. On the date of the hearing of the petition, the company applied for an adjournment of the petition and essentially sought the continuation of the provisional liquidation, the provisional liquidator having been appointed previously on the application of the company. The objective of the adjournment was to allow completion of existing building contracts, which, it was represented, were at risk of termination by the employer on the making of a winding up order. It was believed that allowing the contracts to finish would maximise funds which would be available for creditors. A partnership comprising of the directors of the company was the site owner and employer in the case of three of the developments concerned and also had a majority interest in another development. No authority directly on the point in issue was cited to the court in this case.

Held by Laffoy J. in refusing to adjourn the hearing of the petition to wind-up the company: That the issue for determination was whether it would be a proper exercise of the Court’s discretion to adjourn the company’s petition to wind up and to continue the appointment of the provisional liquidator for an indefinite period to enable the company to build out existing contracts. The application herein was unprecedented and consequently was considered on the basis of principle by reference to the relevant legislation and having regard to the circumstances of the company. S. 226 of the Act of 1963 empowered the Court to appoint a liquidator provisionally at any time after the presentation of a petition and the primary function of that appointment was to ensure the preservation of the company’s assets until the winding up order was made. The proposed extension of the appointment of the provisional liquidator in this case was clearly not envisaged by the Act of 1963 and in fact the proposal of the company went against the spirit and intendment of that Act. It appeared from the evidence that the primary beneficiaries of the provisional liquidator being allowed to finish out the developments would be the site owners and secured creditors of the developments. This was not an exceptional case and it would not have been a proper exercise of the Court’s discretion to make the order as sought.

In the Matter of Novi Reinsurance Company Limited (Record No. 2001 317 COS) distinguished and not regarded as precedent for the application herein having regard to the special features of the insurance industry.

Reporter: L.O’S.

1 Judgment of Miss Justice Laffoy delivered on the 25th day of May, 2009.

The proceedings

2 This is a petition by Coolfadda Developers Limited (the company) that it be wound up on the grounds of insolvency. Following the passing of a special resolution to wind up the company on 20 ^th April, 2009, the company presented a petition to the Court on 22 ^nd April, 2009, which was verified by the affidavit of Conor Slattery, one of the directors of the company, the other directors being Vera Slattery, Paul Collins and Geraldine Collins. The petition was returnable for 11 ^th May, 2009.

3 On 22 ^nd April, 2009, on the application of the company, the Court appointed Michael McAteer as provisional liquidator. It was made clear in the verifying affidavit that it was the intention of the company to seek to have the petition adjourned on 11 ^th May, 2009 and thereafter from time to time. The company is a construction company. The objective of seeking the continuation of the provisional liquidation was to finish out existing building contracts, which it was represented, were at risk of termination by the employer on the making of a winding up order. Finishing out the contracts, it was believed, would maximise funds which would be available for creditors.

4 When the petition came on for hearing on 11 ^th May, 2009, counsel for the company applied to have the petition adjourned. When the Court queried the likely duration of the provisional liquidation, counsel for the company suggested that the Court might initially adjourn the petition until early July this year, at which point the position could be reviewed by the Court.

5 The petition had been duly advertised in accordance with the Rules of the Superior Courts. The proofs were in order and a winding up order could have been made. No creditor or contributory appeared on the hearing of the petition. The Court was informed by counsel for the company that there had been one notice of intention to appear on behalf of a creditor, that creditor being Cygnum Timber Frame Limited, which had served a statutory demand under s. 214 of the Companies Act 1963 (the Act of 1963) on 12 ^th March, 2009, the amount of the debt demanded being approximately €550,000. The Court was told by counsel for the company that the position of that creditor was neutral.

6 The provisional liquidator was represented by counsel at the hearing of the petition and he put a report before the Court. In the report, the provisional liquidator stated that he has been in regular discussions with the secured creditors, from who he had sought, and was confident of reaching agreement on, funding for the completion of the company's projects, or parts thereof. One unsecured creditor, Bank of Ireland, had already indicated that it was willing to fund the company's completion of a project in the event of the continuation of the provisional liquidator in his role. The unsecured creditors had not expressed any objection to the continuation of the provisional liquidation. The Court was informed that the provisional liquidator was taking a neutral stance on whether the provisional liquidation should be continued, but he could see force in adopting that approach. It was suggested that, if the provisional liquidation was continued, the Court might direct the provisional liquidator to furnish updating reports to the Court at regular intervals.

7 On 11 ^th May, 2009 I adjourned the petition for one week, because I wanted to reflect on whether it was appropriate to accede to the application to adjourn the petition and allow the provisional liquidation to continue. No authority directly in point had been cited by counsel. In the circumstances, I was concerned to ensure that granting an adjournment would constitute a proper exercise of the Court's discretion.

8 Having considered the relevant legislation, the authorities and also the circumstances of the company, which was the crucial factor, on 18 ^th May, 2009 I gave my decision, outlining the reasons therefor, that the petition would not be adjourned and the provisional liquidation continued indefinitely. I adjourned the petition for one week to enable the company and the provisional liquidator to consider the matter.

9 I have been asked to give the reasons for my decision in writing. That is the purpose of this judgment.

The issue

10 The issue is whether it would be a proper exercise of the Court's discretion to adjourn the company's petition to wind up and to continue the appointment of Mr. McAteer as provisional liquidator for an indefinite period to enable the company to build out existing contracts.

The Court's discretion generally

11 Section 216 of the Act of 1963, dealing with the powers of the Court on the hearing of a petition to wind up a company, provides:

"On hearing a winding-up petition, the court may dismiss it, or adjourn the hearing conditionally or unconditionally, or make any interim order, or any other order that it thinks fit, but the court shall not refuse to make a winding-up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the...