Re Don Bluth Entertainment Ltd

Judgment Date13 May 1994
Date13 May 1994
Docket Number[1992 No. 5218 (A) P.]
CourtSupreme Court

High Court

Supreme Court

[1992 No. 5218 (A) P.]
In re Don Bluth Entertainment Ltd.
In the matter of Don Bluth Entertainment Ltd., and in the matter of The Companies Acts, 1963 to 1990

Cases referred to in this report:—

In re Atlantic Magnetics Ltd. [1993] 2 I.R. 561.

Ayerst v. C. & K. (Construction) Ltd. [1976] A.C. 167; [1975] 3 W.L.R. 16; [1975] 2 All E.R. 537.

In re Clare Textiles Ltd. [1993] 2 I.R. 213.

In re Holidair Ltd. [1994] 1 I.R. 416; [1994] 1 I.L.R.M. 481.

In re Humber Ironworks & Shipbuilding Company (1869) L.R. 4 Ch. App. 643.

In re Lines Brothers Ltd. [1983] Ch. 1; [1982] 2 W.L.R. 1010; [1982] 2 All E.R. 183.

In re Lines Brothers Ltd. (No. 2) [1984] Ch. 438; [1984] 2 W.L.R. 905; [1984] B.C.L.C. 227.

Smyth v. Tunney [1993] 1 I.R. 451.

Company - Examiner - "Protection period" - Remuneration, costs and expenses of examiner - Liabilities incurred by company during protection period - Examiner's appointment preceded by period as interim examiner - Interim examiner purporting to certify costs of petition as liability incurred by company during protection period - Petition presented in names of majority of board of directors - Whether liability incurred by company - Whether incurred during protection period - Standard to be adopted by examiner in certifying liabilities incurred by company during protection period - Companies (Amendment) Act, 1990 (No. 27), ss. 10 and 29.

Company - Examiner - Company ultimately wound up by court - Company incurring certified liabilities during protection period in foreign currency - Date on which liabilities to be converted to Irish currency - Whether date of presentation of winding up petition - Whether date of repayment - Agreement not providing for interest on such liabilities - Whether implied term for interest - Whether interest continuing to accrue after commencement of winding up - Companies (Amendment) Act, 1990 (No. 27), ss. 10 and 29.

Motion on notice.

The facts and the relevant statutory provisions are summarised in the headnote and fully set out in the judgment of Murphy J., infra.

An interim examiner was appointed by the High Court (Morris J.) on the 7th August, 1992, on foot of a petition presented that day. The appointment of the examiner was confirmed by the High Court (Murphy J.) on the 27th August, 1992. On the 8th October, 1992, the High Court (Murphy J.) ordered that the protection period cease forthwith. A liquidator was appointed on a provisional basis the following day, and was appointed as official liquidator on the 2nd November, 1992.

By notice of motion the former examiner sought an order (a) approving his fees and expenses; and (b) directing the official liquidator to pay the fees and expenses as approved.

The motion was heard by the High Court (Murphy J.) on the 21st December, 1992, and the 19th February, 1993.

MKB Investments B.V. appealed to the Supreme Court against so much of the judgment and order of the High Court as confined its claim to the Irish punt equivalent of the debt due to it as of the date of presentation of the winding up petition. Notice of appeal was filed on the 26th October, 1993.

The appeal was heard by the Supreme Court (Finlay C.J., Egan and Blayney JJ.) on the 6th May, 1994.

Section 29 of the Companies (Amendment) Act, 1990, provides that the High Court may make such orders as it thinks proper for payment of the "remuneration and costs of, and reasonable expenses properly incurred by" an examiner, such payment to be made out of the revenue of the business of the company or the proceeds of the realisation of its assets, unless the court otherwise orders. Remuneration, costs and expenses sanctioned by the court "shall be paid in full and should be paid before any other claim, secured or unsecured . . . in any . . . winding up of the company".

Section 10 of the Act of 1990 provides that liabilities incurred by the company during"the protection period" and certified by the examiner "at the time they are incurred to have been incurred in circumstances where, in the opinion of the examiner, the survival of the company as a going concern during the protection period would otherwise be seriously prejudiced" shall be treated as "expenses properly incurred for the purposes of section 29".

For the purposes of s. 10, "protection period" is "the period, beginning with the appointment of an examiner, during which the company is under the protection of the court".

An interim examiner was appointed to D.B.E. Ltd., and subsequently appointed as examiner, on foot of a petition presented in the names of a majority of the directors of the company. During the period of his appointment as interim examiner, a certificate was issued by the examiner for the purposes of s. 10 of the Act of 1990, in respect of "the costs of services rendered" (without specifying an amount) from the date of his appointment to the termination thereof, by solicitors acting for the petitioners, and who had also acted for the company for some time prior to the presentation of the petition. The bill of costs ultimately presented by the solicitors referred to both the costs of the petition (before and after the appointment of the examiner as interim examiner) and to services provided to the company after the appointment of the examiner, in relation to the procuring of loans.

The order appointing the examiner had specifically provided that the court would not sanction any expenses incurred by the company after the making of the order except for liabilities incurred, and certified by the examiner, to a lender known as MKB (or such other lender as the court might approve) "in respect of borrowings by the company not exceeding one million Irish punts." The examiner borrowed US$1,050,000 from MKB and certified it pursuant to section 10. There was no formal loan agreement, but MKB had made loans to the company, prior to the appointment of the examiner, which had been subject to interest. The examiner had not certified for interest on the loans.

The protection of the court was subsequently terminated, a provisional liquidator appointed and ultimately an official liquidator. The former examiner then applied, pursuant to s. 29 of the Act of 1990, for the sanction of the court in respect of the payment of his remuneration, costs and expenses, including expenses certified pursuant to section 10.

The Official Liquidator contended that the appropriate conversion date for the liabilities incurred in US dollars was the date of the presentation of the winding up petition. Since the date of the presentation of the petition, the Irish pound had depreciated in value against the dollar, and MKB contended that in order for the debt to be repaid in full, the appropriate conversion date was the date of repayment.

Held by Murphy J., 1, that the court had a discretion in relation to the payment of an examiner's remuneration, costs and expenses, including liabilities incurred by the company and certified by the examiner pursuant to section 10.

In re Clare Textiles Ltd. [1993] 2 I.R. 213 applied.

Semble: That since the combined operation of ss. 10 and 29 would frequently result in some creditors of a company being paid in full at the expense of secured creditors or creditors with a statutory preference in a winding up, it was important that an examiner should exercise great care and professional expertise in issuing certificates under s. 10; and that an examiner from whom such a certificate was sought should require the directors managing the business of the company to submit to him their proposals in relation to any particular liabilities which they proposed to incur and to satisfy him as to how the services or goods to be obtained would benefit the company and, in particular, how they would contribute to the survival of the company during the protection period.

2. That, notwithstanding that the petition for the appointment of the examiner had been presented in the names of directors of the company, the services of the solicitors had been rendered at the request of and for the benefit of the company itself, and were costs incurred by the company rather than the directors personally.

3. That insofar as the examiner had purported to certify liabilities already incurred, the certificate had no statutory effect; and that insofar as he had purported to certify the costs of proceedings leading to the confirmation of the provisional appointment, the certificate was likewise invalid, in that "the protection period" for the purposes of s. 10 commenced with and postulated the existence of an examiner.

Per curiam: That since the Act of 1990 did not confer any priority on the costs of a petitioner for the appointment of an examiner, and since an examiner could not certify such costs as they would have been incurred prior to his appointment, it would be inappropriate to alter the scheme of the Act because of the appointment of an interim or provisional examiner whose certificate purported to confer a priority which the legislation withheld.

Semble: That the solicitors should be admitted as a creditor in the winding up for the costs which the court had refused to sanction.

4. That the court would sanction payment of the costs of the company's solicitors in relation to advice on the borrowings by the company during the protection period, and direct the official liquidator to pay same, once taxed.

5. That with regard to the loans procured during the protection period, it was implicit in the transaction that they would carry interest on the same terms as previous advances, so that this was the liability certified by the examiner.

6. That with regard to the certification of liabilities incurred in foreign currency, since the company was now in liquidation, and since it was the actions of the official liquidator which would enable the certified creditors to be paid, the rules for the conversion of foreign currency into national legal tender in a liquidation...

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    ... ... In In Re Don Bluth Entertainment Limited , Murphy J. inter alia considered whether the discretion conferred upon an examiner by the then relevant statutory provisions ... ...
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    ...identical to what is now contained in s. 554, sub-sections (3) to (5). Mr. Lavelle recalled that in Re: Don Bluth Entertainment Ltd. [1994] 3 I.R. 141 and Re: Holidair [1994] 1 I.R. 416 the Supreme Court had found that s. 29 of the Act of 1990 in its original form meant that certified liabi......

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