Re Edenpark Construction Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Francis D. Murphy
• Judgment Date: 01 January 1994
• Neutral Citation: 1994 WJSC-HC 646
• Docket Number: No. 957P/1992,[1992 Nos. 957P and 1530P]
• Court: High Court
• Date: 01 January 1994

IN RE EDENPARK CONSTRUCTION LTD

IN THE MATTER OF EDENPARK CONSTRUCTION LIMITED AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990

AND

IN THE MATTER OF EDENPARK HOMES LTD AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990

1994 WJSC-HC 646

No. 957P/1992

No. 1530P/1992

THE HIGH COURT

Synopsis:

COMPANY

Insolvency

Court - Protection - Examiner - Remuneration - Claim to remuneration, costs, and expenses - First claim on assets of company - Certain liabilities incurred by company to have same priority - Examiner's certification of such liabilities - Certificate in writing not required - Winding up ordered after appointment of examiner - Companies (Amendment) Act, 1990, ss. 10, 29 - (1992/957 P - Murphy J. - 17/12/93)- [1994] 3 IR 126

|In re Edenpark Construction Ltd.|

WORDS AND PHRASES

"Certified"

Statute - Certification - Requirement - Method - Written certification desirable but not compulsory - (1992/957 P - Murphy J. - 17/12/93)- [1994] 3 IR 126

|In re Edenpark Construction Ltd.|

Citations:

COMPANIES (AMDT) ACT 1990

COMPANIES (AMDT) ACT 1990 S29

COMPANIES (AMDT) ACT 1990 S10

ATLANTIC MAGNETICS LTD 1993 2 IR 561

COMPANIES (AMDT) ACT 1990 S16

1 Judgment of Mr. Justice Francis D. Murphy delivered the 17th day of December 1993.

2 On the 11th day of February, 1992 the Directors of Edenpark Construction Limited (Construction) presented a petition for the appointment of an Examiner pursuant to the provisions of the Companies (Amendment) Act, 1990. On the same date Mr. Patrick McSweeney F.C.A. was appointed Interim Examiner. He was appointed Examiner on the 2nd March, 1992.

3 On the 9th March, 1992 a petition was presented by the same Directors for the appointment of an Examiner in respect of Edenpark Homes Limited (Homes), a company which was related to Construction to the extent that Construction owned 25 of the shareholding in Homes and two Directors were common to both companies. Mr. McSweeney was appointed Examiner of Homes on the 9th March, 1992. On the 25th day of May, 1992 both examinerships were terminated by the Court on the application of the Examiner. In the case of Construction, the examinership had endured for a period of 105 days and in the case of Homes it had lasted 77 days. On the 11th day of May, 1992 it was ordered that Construction and Homes be wound up by the Court and that Mr. Sean Sheehan be appointed Official Liquidator of both companies. On the 26th May, 1992 Allied Irish Banks Plc appointed Mr. Tom Grace Receiver over each of those companies.

4 The present Motions are for Orders approving "the Examiner's fees and expenses" and are dated the 15th July, 1992. The matter came before the Court on the 21st April, 1993 grounded upon the Affidavits of Mr. McSweeney sworn on the 15th July, 1992 and the 8th December, 1992 and Affidavits sworn by Messrs. Morris Buckley and Tom Grace on behalf of A.I.B. and Mr. Thomas J. Browne on behalf of Anglo Irish Bank Corporation as well as Affidavits sworn on behalf of the Revenue Commissioners, who were also given notice of the application. Subsequent to the hearing on the 21st April last, Mr. McSweeney was given liberty to file and did file an Affidavit exhibiting certificates which he had purported to issue pursuant to Section 10 of the Companies Act, 1990 during the course of the examinership. The matter was re-entered on the 6th December, 1993 to afford the parties an opportunity of commenting on the certificates aforesaid which had not been before the Court at the date of the original hearing.

5 The amounts claimed by Mr. McSweeney in relation to Construction were set out in a schedule or exhibit to the Affidavit sworn by him on the 15th day of July, 1992. That document shows the total amounts (including V.A.T) at a sum of £241,727.00. of that sum £127,618.00 (inc. Vat) is the amount claimed by Mr. McSweeney as his professional fee for the services rendered by him as Examiner of Construction. The sum of £17,279.00 (including V.A.T.) is the fee claimed by Messrs. Eugene F. Collins & Son who clearly acted as Solicitors to Mr. McSweeney in his capacity as Examiner and it must be inferred that those fees are claimed as an expense of the examinership. Of the remaining sums claimed the largest is a sum of £33,321.00 due to Messrs. A. & L. Goodbody who acted as Solicitors to Construction. It is less clear whether the other indebtedness (particularly that in favour of certain auctioneers, valuers etc. amounting to £14,245.00) was an expense of the examinership or a liability of Construction. The matter was dealt with in Mr. McSweeney's Affidavit of the 8th December, 1992 in the following terms:-

"19. In the course of the examination, it was necessary to certify certain expenses which are detailed in a schedule exhibited to my Affidavit. Each of those liabilities were certified by me at the time they were incurred because I considered that they were necessary to ensure the survival of the companies. I now beg to refer to a schedule setting out the reasons for incurring such expenses and I now beg to refer to the same upon which marked with PMS 3 I have signed my name before the swearing hereof".

6 The exhibit (PMS 3) is not very informative as to the identity of the person by whom the indebtedness was created though I would infer that under the heading of wages, salaries, fees and expenses the services obtained from Messrs. Michael McDonald, Pat Cooney and Mark Irwin, the Directors and Secretary of the company, were obtained for the benefit of the Examiner because it is stated in the exhibit that "without the assistance of these individuals it would have been impossible for the Examiner to gain a proper understanding of the company's affairs".

7 Before considering further the claims made by Mr. McSweeney and the challenge presented to them by the Respondents, it is necessary to review to some extent the business and assets of both Construction and Homes.

8 Construction was incorporated on the 10th March, 1988. Apparently it carried on business as builders and developers. It had a paid up capital of £100. The majority (if not all) of the Directors together with the Secretary and the Auditors were resident in England. The Statement of Affairs prepared by the Directors on which the petition for the appointment of the Examiner was based shows a deficit of £587,000.00. The liabilities were shown at 2.8 million pounds approx. and the assets at 2.3 million pounds. The liabilities included bank lending in excess of 1.2 million which was secured and the Revenue were Creditors for at least £400,000.00 some of which they would have been preferential in the event of a liquidation. The nature and value of the Bassets are more difficult to identify. The largest single item is "work in progress (Palmerstown)" at £913,000.00. Apart from any difficulty the Examiner might have had in verifying the amount or value of the work in progress, it does seem that the lands in question were the property of Homes and that Construction held a mere licence (no doubt coupled with some other contractual rights) to develop the same. None of the parties before the Court was in a position to explain the precise relationship between Homes and Construction in this regard or to express any view as to whether the proprietorial or contractual interest of Construction in the sites subsisted. In addition to the sites in Palmerstown, Construction had a variety of other, but less valuable, interests. However, it was clear that on any reckoning and even on the most beneficial realisation and disregarding all costs of same that there would be still a massive shortfall for the ordinary trade creditors. It seems difficult to see how Construction could have traded their way out of their disasterous financial position. Nor is it obvious why the secured or potentially preferential creditors would acquiesce in such a course. It could hardly have been for the benefit of the employees as there were a maximum of nine employees (including the Directors and Secretary). Indeed it is difficult to see what entity or business could have been preserved.

9 Counsel on behalf of the Respondents made it clear that they did not challenge in any way the integrity of the former Examiner. They did, however, express in general terms concern at what they considered to be the enormous expenses or liabilities in respect of which the Examiner sought payment, namely, the sum of £241,727.00. It is understandable that concern should be expressed where a company with a known deficiency of at least £500,000.00 incurs further expenses or liabilities in the order of £250,000.00 which must be borne by parties who had no prospect of benefiting from the expensive exercise. But the Respondents make other and more particular points, namely,

10 1. That the date on which the Examiner delivered his Section 15 report, namely, the 2nd March, 1992 he could and should have alerted the Court to irregularities in the manner in which the affairs of the company had been conducted. Certainly the Examiner must have been aware even at that early stage that no accounts of the company had been audited since the date of its incorporation and that no management accounts had been prepared since the 31st of December, 1990. If such irregularities had been identified then the Court might have convened a hearing for the consideration of that report with the probable result that the examinership would have terminated.

11 2. Again it is said that the fact that a petition was presented at the instigation of Mr. McSweeney for the appointment of an Examiner over Edenpark Homes Limited on the 2nd March, 1992 makes it clear that Mr. McSweeney had accepted by that date that Construction was not capable of survival as a going concern except on the basis that some arrangement would be made with this unrelated company.

12 3. That the nature of the company's assets and the extent of...