Re Coolfadda Developers Ltd

• Jurisdiction: Ireland
• Judge: Denham J.
• Judgment Date: 14 July 2009
• Neutral Citation: [2009] IESC 54
• Court: Supreme Court
• Docket Number: [Record No: 229/2009]
• Date: 14 July 2009

[2009] IESC 54

THE SUPREME COURT

Denham J.

Fennelly J.

Macken J.

[Record No: 229/2009]

Coolfadda Developers Ltd, In Re

In the Matter of Coolfadda Developers Limited And in the Matter of the Companies Acts, 1963 - 2006

COMPANIES ACT 1963 S216

COMPANIES ACT 1963 S226

MHMH LTD & ORS v CARWOOD BARKER HOLDINGS LTD 2006 1 BCLC 279

COMPANY LAW

Winding up

Provisional liquidator - Adjournment - Jurisdiction - Whether court has jurisdiction to adjourn winding up petition - Whether trial judge erred in consideration of circumstances of case - MHMH Ltd & Others v Carwood Barker Holdings [2004] EWHC 3174 (Ch), [2006] 1 BCLC 279 followed - Companies Act 1963 (No 33), ss 216 and 226 - Company's appeal dismissed (229/2009 - SC - 14/7/2009) [2009] IESC 54

Re Coolfadda Developers Ltd

Denham J.

Judgment delivered by Denham J. [nem diss]

1 This is an appeal by Coolfadda Developers Limited, a construction company, in provisional liquidation, hereinafter referred to as "the Company", from the refusal by the High Court (Laffoy J.) of its application for an adjournment of the winding up petition.

2 Submissions were made by Lyndon MacCann S.C., counsel on behalf of the Company, who sought an adjournment as part of a series of adjournments over a time to enable the Company to complete building contracts.

3 Rossa Fanning B.L. appeared on behalf of the provisional liquidator. He supported the provisional liquidation proceeding, and similarly supported the application for an adjournment. Counsel informed the Court that the provisional liquidator expected, on his understanding of the matter, that the Company would do better in an extended provisional liquidation.

4 This is an appeal against a refusal of the High Court to adjourn the winding up petition and to continue the provisional liquidation to a date in July. Consequently it might appear to be a moot. However, that is not the case. What is in essence being sought is a facility to seek and obtain adjournments, in this provisional liquidation, over a period of time to complete building contracts.

5 The issue to be determined is as follows: whether it is appropriate, in the particular circumstances of this case, to allow a provisional liquidation of the Company to continue so as to maximise returns to the Company's creditors or whether it is appropriate instead for the Court to make a winding up order, which wouldinter alia permit employers on building contracts being carried out by the Company to terminate such contracts, which may have a detrimental effect on the Company's creditors.

6 This is a novel application. In a sense the Company is seeking to have the provisional liquidator act to some extent as if he were an examiner.

7 The facts of the case were set out in the petition and supporting affidavits. The Company is a construction company, based in Bandon, Co. Cork. It was founded to service a market in the construction sector for the delivery of turnkey building projects. Initially the Company traded successfully. However, with the changes in the economy, its fortunes have declined. The Company decided, in light of its cash insolvency, that the most appropriate option was provisional liquidation. On the 22^nd April, 2009 the Company presented a petition to the High Court and on the same day the High Court appointed Michael McAteer of Grant Thornton as provisional liquidator of the Company. On the 11^th May, 2009 the petition came on for hearing before the High Court and the Company applied for an adjournment of the winding up petition, with the provisional liquidator remaining in place, with a view to seeking subsequent adjournments so that, prior to the making of any winding up order, the Company would finish out its construction work on eight separate development sites, which are at different stages of completion. The Company submitted that it would maximise returns to the Company, and hence be in the best interests of the creditors, if employers on construction contracts with the Company were not in a position to invoke the termination clauses which they would be able to do if a winding up order were made. Laffoy J. reserved judgment and on the 18^th May, 2009 indicated that she was not satisfied to adjourn the winding up petition and keep the provisional liquidator in place on an extended basis. On the 25^th May, 2009 the learned trial judge gave a written judgment setting out the reasons for refusing the application, and on the 28^th May, 2009 a formal order was made refusing an adjournment of the winding up petition to July. It is against this judgment and order that the appeal has been brought.

8 The Company filed fourteen grounds of appeal. In essence it was submitted that:

9 (i) the learned trial judge erred in finding that an adjournment of the petition with the provisional liquidator remaining in place was not envisaged by the Companies Act, and was contrary to the spirit of the legislation;

10 (ii) the learned trial judge erred in failing to have regard to the wide jurisdiction and discretion conferred by ss.216 and 226 of the Companies Act;

11 (iii) that the learned trial judge erred in holding that the appointment of a provisional liquidator was merely a "stop-gap" measure;

12 (iv) that the learned trial judge erred in failing to hold that the Court's jurisdiction and discretion ought to be exercised in a manner consistent with the best interests of the creditors;

13 (v) that the learned trial judge erred in her consideration of the circumstances of the case;

14 (vi) that the learned trial judge erred in distinguishing the circumstances of the Company from insurance companies where orders of the type sought have previously been made.

15 9. I would affirm the judgment and order of the High Court, subject to two reservations.

16 10. First, I am satisfied that the Court does have jurisdiction in an exceptional case to adjourn, from time to time, a winding up petition. Such jurisdiction would arise rarely, and consequently a court would seldom be required to consider exercising such a discretion.

17 11. An example given to this court by counsel illustrates an appropriate analogy. InMHMH Ltd. & Others v. Carwood Barker Holdings Ltd [2006] 1 B.C.L.C. 279 it was held that in the unusual circumstances of the case, for the creditable reason of realising a substantial asset of the companies for the benefit of the creditors, the Court would make an exception to the rule that a winding up petition ought not to be left outstanding for a substantial period of time. The time was to be let run so that payment of outstanding monies would be received. There was no other asset but this claim for monies. The companies were shells. Evans-Lombe J. stated at pp.283 and 284 that:-

"I was taken by Mr Marks through a series of authorities, both English and Commonwealth. One thing that emerges from all those authorities, of which the most often cited example isRe Highfield Commodities Ltd [1984] B.C.L.C. 623, is the flexibility of the remedy for the appointment of provisional liquidators of companies. Sir Robert Megarry V-C,...