Re, Edenfell Holdings Ltd

• Jurisdiction: Ireland
• Court: Supreme Court
• Judge: Keane J.
• Judgment Date: 01 January 1999
• Neutral Citation: 1998 WJSC-SC 6718
• Date: 01 January 1999
• Docket Number: [1995 No. 220 Cos. and S.C. Nos. 302, 305,,302/97

1998 WJSC-SC 6718

THE SUPREME COURT

O'Flaherty, J.

Keane, J.

Barron, J.

302/97

305/97

308/97

310/97

311/97

IN RE EDENFELL HOLDINGS LTD.

IN THE MATTER OF EDENFELL HOLDINGS LIMITED (IN LIQUIDATION AND IN RECEIVERSHIP

AND

IN THE MATTER OF THE COMPANIES ACTS 1963– 1990

AND

IN THE MATTER OF AN APPLICATION PURSUANT TO S.316 OF THE COMPANIES ACT 1963 AS AMENDED

Citations:

COMPANIES ACT 1963 S316

COMPANIES ACT 1963 S218

COMPANIES ACT 1963 S316A

COMPANIES (AMDT) ACT 1990

Synopsis

Company Law

Receiver; duty of care; sale of encumbered company property; duty to get best price for sale of property; whether higher offer should have been accepted, though conditional on encumbrance; whether receiver exercised all reasonable care in accepting offer in question; whether undue delay in notifying other interested parties of offer; s.316A Companies Act, 1963

Held: Appeal allowed; receiver without the benefit of hindsight, was entitled to accept only unconditional offer Edenfell Holdings Ltd., In re - Supreme Court: O'Flaherty J., Keane J., Barron J. - 23/04/1998 - [1999] 1 IR 458

1 JUDGMENT delivered the 23rd day of April, 1998 by Keane J. [NEM DISS]

2 There were two applications before the High Court in this matter. The first was by the Receiver of Edenfell Holdings Limited (hereafter "the Company"). He had been appointed pursuant to a power in a debenture dated the 3rd September 1992 made between the company and Anglo Irish Bank Corporation plc. (hereafter "the Bank"). That debenture contained a fixed charge in favour of the bank on lands at Carrigaline, County Cork.

3 The Receiver was appointed on the 25th May 1995. On the 19th June 1995, the High Court made an order for the compulsory winding up of the company and appointed Mr. Paul Flynn as Liquidator. The application by the Receiver was made pursuant to s.316 of the Companies Act 1963(hereafter "the Principal Act") and sought directions in relation to a contract the Receiver had entered into for the sale of the lands at Carrigaline to a company called Astra Construction Services Limited (hereafter "Astra"). The Receiver sought, if necessary,

4 (a) an order directing him to complete the contract;

5 (b) an order directing the Liquidator to join in the completion of the contract and to convey to Astra such interest as he (the Liquidator) might retain in a strip of land adjoining the Carrigaline lands.

6 The second application was brought by Mr. Denis Barrett, who is a director of the company and owns 25% of its shares. This application was also made pursuant to s.316 of the Principal Act and, in it, an order was sought.

7 (a) directing the Receiver not to complete the contract with Astra; and

8 (b) directing the manner and method of marketing or reselling the Carrigaline lands, and;

9 (c) directions as whether the Receiver was entitled to deduct a sum of £105,000 from the proceeds of the sale to Astra or of any other sale.

10 The facts should now be set out in more detail.

11 In November 1995 - i.e. at some months after both the Receiver and the Liquidator had been appointed - a company called Stormdust Limited (hereafter "Stormdust") applied to the High Court seeking liberty to issue proceedings claiming specific performance of an alleged agreement by the company to sell the Carrigaline lands to Stormdust for the price of £920,000. At the same time, the Receiver applied to the court for a declaration pursuant to s.218 of the Principal Act declaring that the alleged agreement was void. Liberty having been given by the court and directions given as to how the issue should be tried, it was heard by McCracken J. who gave judgment on the 28th June 1996. He held that there was no enforceable agreement by the company to sell the lands to Stormdust. He also expressed the view that, even if there had been such an enforceable agreement, the sale should not have been sanctioned pursuant to s.218. The Receiver was awarded his costs of the proceedings, when taxed and ascertained, against Stormdust.

12 Stormdust appealed to this court against the judgment and order of McCracken J. and, on 10th October 1996, the Receiver issued a notice of motion returnable for the 18th October seeking an order striking out the appeal for want of prosecution. That motion was adjourned until the 1st November 1996 and then for a further period of two weeks, Stormdust having undertaken to lodge books of appeal within that period.

13 The debt due to the bank at the date the Receiver was appointed was £929,841.40. The only asset of the company was the Carrigaline lands. On the 26th March 1996, a company called Anglo Eire Property Company Limited (hereafter "Anglo Eire"), which was involved in the property development business in the Cork city area, made an offer for the purchase of the lands for the sum of 1.3 million pounds. This offer was "subject to contract": it was also conditional on planning permission being obtained for the development of the lands and title being established. On the 26th September 1996, Anglo Eire increased their offer for the lands to 1.6 million pounds. That offer was no longer conditional on planning permission being obtained, but was subject to there being a successful outcome of the appeal then pending to this court in the Stormdust proceedings.

14 Subsequent to that increased offer, Astra were introduced as a potential purchaser by Mr. John McDonnell, the manager of the Limerick branch of the bank. They said they were willing to enter into an unconditional contract with the Receiver to purchase the lands for the sum of £1.5 million, the sale to be closed on the 19th December 1996, and to pay Stormdust a sum of £100,000 in consideration of their withdrawal of their appeal to this court. The Receiver was told of the offer on November 13th and discussed it with two auctioneers, Mr. Pat Chesser and Mr. Frank Ryan. The latter advised him that the offer should be accepted. It was, however, to remain open only until close of business on 22nd November. The Receiver was informed on November 20th that the time limit had been extended to the close of business on 25th November 1996. In the meantime, as already noted, the application to this court was adjourned until November 29th.

15 Although the draft contract as furnished to the solicitors for Astra included a condition that the purchaser was to be satisfied by the Receiver on closing that the Stormdust litigation had been disposed of, the Receiver was only prepared to accept the Astra offer on the basis that that litigation would be disposed of completely by the payment of £100,000 and this is in fact what happened. On the 25th November, the contract with Astra was signed by the Receiver and, on the same day, the solicitor for Stormdust executed an agreement withdrawing the appeal and acknowledging that £100,000 had been paid in full and final settlement of all claims by Stormdust.

16 However, the Receiver wished to ascertain whether any improved offer could be obtained from other interested parties before he closed with Astra. Accordingly, in addition to writing on the 21st November 1996 by fax to the solicitors for the Liquidator, informing him of the Astra offer, he instructed the auctioneers, Messrs. Chesser and Ryan, to contact all the parties who had expressed an interest in purchasing the property to invite them to submit any better offers. Mr. Ryan wrote by fax on the 21st November to sixteen possible purchasers or their agents inviting them to make improved offers but this elicited only two responses. The first was from the solicitors for Anglo Eire, Messrs. Martin Sheehan & Company, and was received on November 25th. It was as follows:-

" We refer to your fax of the 21st November 1996 and our subsequent telephone conversation with your Mr. Frank Ryan. We note that an offer has been made from the other party interested in the property of £1.5 million but that this offer is without any liability to the Receiver in respect of the outstanding Supreme Court appeal."

" Our client instructs us that their previous offer of 1.6 million is confirmed by our clients on the same basis as the offer from the other party but as our clients have not been privy to the legal documentation in respect of the outstanding Supreme Court appeal, which we understand is to be heard on the 15th January 1997, the offer is subject to our clients being furnished with copies of all the...