Re Dr Developments (Youghal) Ltd ((in Liquidation))

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 25 July 2011
• Neutral Citation: [2011] IEHC 307
• Docket Number: [No. 185 COS/2010]
• Court: High Court
• Date: 25 July 2011

Dr Developments (Youghal) Ltd (In Liquidation), In re

IN THE MATTER OF DR DEVELOPMENTS (YOUGHAL) LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

Ex-Parte Application

of

Gerard Murphy Official Liquidator

[2011] IEHC 307

[No. 185 COS/2010]

THE HIGH COURT

COMPANY LAW

Liquidators

Official liquidator - Proposed arrangement - Court sanction - Liquidator's duties - Whether liquidator entitled to sell property without sanction of court - Whether gross proceeds of sale must be paid into liquidation account - Whether the court has inherent jurisdiction make orders modifying rules relating to sales of assets - Whether the court may authorise liquidator to enter agreement - Rights of secured creditor - Whether secured creditor entitled to rely on security - Obligation on Official Liquidator to distinguish between proceeds from assets subject to fixed charges and floating charges - Whether official liquidator should be remunerated from liquidation assets if doing significant work for exclusive financial benefit of charge holder - Whether Court sanction required for any agreement reached for remuneration for work done on behalf of secured creditor - Conflict of interest - Fiduciary obligations and general rules applicable to liquidator's remuneration - Whether Court sanction required where Revenue Commissioners underwrite liquidation costs and remuneration - Re McCairns (PMPA) plc (In Liquidation) [1992] ILRM 19 followed - Companies Act 1963 (No 33) s228(d) - Rules of the Superior Courts 1986 (SI 15/1986) O 74, r 38 - Directions given (2010/185COS - Finlay Geoghegan J - 25/7/2011) [2011] IEHC 307

In re DR Developments (Youghal) Ltd

COMPANIES ACT 1963 S229

COMPANIES ACT 1963 S231(2)(A)

KEANE COMPANY LAW 4ED PARA 36.107

BELFAST EMPIRE THEATRE OF VARIETIES, IN RE 1963 IR 41

COMPANIES ACT 1963 S231(3)

RSC O.74 r44

RSC O.74 r117

MCCAIRNS (PMPA) PLC (IN LIQUIDATION), IN RE 1992 ILRM 19

COMPANIES ACT 1963 S284

BANKRUPTCY ACT 1988 1ST SCHED r24

COMPANIES ACT 1963 S285(7)

COMPANIES ACT 1963 S228(D)

RSC O.74

RSC O.74 r47

RSC O.74 r128

RSC O.74 r38

Ms. Justice Finlay Geoghegan

1 On 17^th May, 2010, an order was made for the winding up of DR Developments (Youghal) Ltd. ("the Company") and the appointment of Mr. Gerard Murphy as Official Liquidator thereof.

2 In this application, brought by motionex parte, the Official Liquidator sought the sanction of the court for approval to act as "agent for AIB Bank plc." in respect of the sale of certain charged assets of the Company. The application changed in the course of the hearing for which the Official Liquidator was present in person. I understand that the proposal now is that the charged assets be sold by the Official Liquidator and that he obtain the sanction of the court for certain arrangements (which have not been finalised) with AIB in relation to such sales.

3 The factual background to the application is that the Company was a development and construction company. Whilst the Official Liquidator does not appear to have obtained a statement of affairs from the directors of the Company, nor any cooperation from them, he is of the view that all the assets of the Company are subject to a fixed and floating charge in favour of AIB plc. The Official Liquidator, in his grounding affidavit and earlier reports to the court, has not made clear whether he has been advised by his solicitor on the validity of the charges in favour of AIB to which he refers. The remainder of this judgment is upon an assumption that the Official Liquidator, upon advice, is satisfied that there exist valid charges in favour of AIB.

4 The assets of the Company principally comprise a semi-completed development known as Radharc Na Mara, Ballyvergan East, Imokilly, Youghal, County Cork, and a small site at Porter's Lane, Youghal, County Cork. The realisation of the partly completed development site presents particular difficulties. There is a bond given by AIB in favour of Cork County Council. There appear to be certain planning conditions which require to be fulfilled, including an obligation to construct a number of units on the site to be provided to the Council as social and affordable housing. The transfer of the common areas also appears to remain outstanding.

5 AIB has not appointed a receiver and has not gone into possession of the charged property. Accordingly, it would appear that pursuant to s. 229 of the Companies Act1963, the property is now in the custody of the Official Liquidator.

6 The Official Liquidator has informed the court that on the indebtedness figures provided to him by AIB and his understanding of the current value of the properties, that the amounts due to AIB far exceed the potential realisations from the properties. Accordingly, in the Official Liquidator's view, there are no potential assets available to discharge his costs and expenses as Official Liquidator in the winding up or for unsecured creditors. It is also assumed that the Official Liquidator has satisfied himself that the sums claimed by AIB are owed by the Company.

7 Notwithstanding the apparent absence of any potential discharge of his remuneration and expenses, the Official Liquidator and his solicitor have properly taken steps to investigate the precise position in relation to the partly completed development, which includes a contract for sale in respect of one unit. He has also engaged an engineer to correct mapping errors and a valuer to value the assets of the Company. He also has engaged in negotiations with Cork County Council. He and his solicitor have thus acquired a significant knowledge and understanding of the development site in question.

8 The Official Liquidator also states that he has met with an official of AIB branch in Fermoy, County Cork, who has suggested that he would act "as an agent for the Bank in respect of the sale of the development site" by reason of the knowledge he has gained of the site. Whilst it may make good sense for the liquidator to attempt to sell the charged assets he is now correctly of the view that it would not be appropriate for him, as Official Liquidator,...