Re Eurofood IFSC Ltd (Companies Acts 1963-2005) (No. 2)

• Jurisdiction: Ireland
• Judge: FENNELLY J.
• Judgment Date: 03 July 2006
• Neutral Citation: [2006] IESC 41
• Date: 03 July 2006
• Docket Number: 147/04,[S.C. No. 147 of 2004]
• Court: Supreme Court

[2006] IESC 41

THE SUPREME COURT

Murray C.J.

Denham J.

McGuinness J.

Geoghegan J.

Fennelly J.

147/04

EUROFOOD IFSC LTD, IN RE

IN THE MATTER OF EUROFOOD IFSC LIMITED

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2001

EC TREATY ART 234

EC TREATY ART 68

COMPANIES ACT 1963 S220(2)

STAUBITZ-SCHREIBER C1-04

EEC REG 1346/2000 ART 3

EEC REG 1346/2000 ART 16(1)

EEC REG 1346/2000 ANNEX C

EEC REG 1346/2000 ART 3(2)

EEC REG 1346/2000 ART 16(2)

CONFLICT OF LAWS

Jurisdiction

Insolvency - Centre of main interests -Wholly owned subsidiary - âÇÿHead office test'- Where insolvency proceedings opened -Main insolvency proceedings - CouncilRegulation (EC) No 1346/2000 - Held maincentre in Ireland (147/2004 - SC - 3/7/2006)[2006] IESC 41, [2006] 4 IR 307In re Eurofood IFSC Ltd (No 2)

Facts: In July 2004, the Supreme Court referred questions to the European Court of Justice ("ECJ") for a preliminary ruling pursuant to Article 234 concerning the interpretation of the Insolvency Regulation. In May 2006, the ECJ gave its judgment. The issue in this judgment was whether the answers provided by the ECJ were determinative of the matter.

Held by the Supreme Court (Murray CJ, Denham, McGuinness, Geoghegan and Fennelly JJ) in dismissing the appeal that the ECJ had clearly resolved the issue.

Reporter: R.W.

1 JUDGMENT delivered on the 3rd day of July, 2006 by FENNELLY J.

2 In July 2004, this Court referred questions to the Court of Justice of the European Communities (hereinafter "the European Court") for preliminary ruling pursuant to Article 234 of the Treaty Establishing the European Community. These questions concerned the interpretation of Council Regulation (EC) No. 1346/2000 of 29th May 2000 ("the Insolvency Regulation"). They arose in the context of an appeal to this Court from the judgment of Kelly J delivered on 23rd March 2004, whereby he ordered the winding up of Eurofood IFSC Limited ("the company"). By order of Lavan J dated 27th January 2004, the High Court had appointed a Provisional Liquidator. The appeal concerns insolvency proceedings for the purposes of the Insolvency Regulation. The legal basis for that measure was Title IV of the Treaty. Accordingly, only this Court had jurisdiction to refer the questions by virtue of Article 68 of the Treaty. This judgment concerns the orders that should now be made by the Court in the light of the answers provided by the European Court in its judgment of 2nd May 2004.

3 This judgment should be read together with the two judgments which I delivered on behalf of the Court on 27th July 2004, principally the first or principal of those judgments. As will become apparent, it will not be necessary to refer in any detail to my second judgment of that date concerning the question of recognition of the judgment of the Civil and Criminal Court of Parma in Italy.

4 This Court referred the following questions to the European Court:

5 1. Where a petition is presented to a court of competent jurisdiction in Ireland for the winding up of an insolvent company and that court makes an order, pending the making of an order for winding up, appointing a provisional liquidator with powers to take possession of the assets of the company, manage its affairs, open a bank account and appoint a solicitor all with the effect in law of depriving the directors of the company of power to act, does that order combined with the presentation of the petition constitute a judgment opening insolvency proceedings for the purposes of Article 16, interpreted in the light of Articles 1 and 2, of Council Regulation (EC) No 1346 of 2000?

6 2. If the answer to Question 1 is in the negative, does the presentation, in Ireland, of a petition to the High Court for the compulsory winding up of a company by the court constitute the opening of insolvency proceedings for the purposes of that regulation by virtue of the Irish legal provision (section 220(2) of the Companies Act, 1963) deeming the winding up of the company to commence at the date of the presentation of the petition?

7 3. Does Article 3 of the said Regulation, in combination with Article 16, have the effect that a court in a Member State other than that in which the registered office of the company is situate and other than where the company conducts the administration of its interests on a regular basis in a manner ascertainable by third parties, but where insolvency proceedings are first opened has jurisdiction to open main insolvency proceedings?

8 4. Where,

9 a) the registered offices of a parent company and its subsidiary are in two different member states,

10 b) the subsidiary conducts the administration of its interests on a regular basis in a manner ascertainable by third parties and in complete and regular respect for its own corporate identity in the member state where its registered office is situated and

11 c) the parent company is in a position, by virtue of its shareholding and power to appoint directors, to control and does in fact control the policy of the subsidiary,

12 in determining the "centre of main interests", are the governing factors those referred to at b) above or on the other hand those referred to at c) above?"

13 5. Where it is manifestly contrary to the public policy of a Member State to permit a judicial or administrative decision to have legal effect in relation persons or bodies whose right to fair procedures and a fair hearing has not been respected in reaching such a decision, is that Member State bound, by virtue of Article 17 of the said Regulation, to give recognition to a decision of the courts of another Member State purporting to open insolvency proceedings in respect of a company, in a situation where the court of the first Member State is satisfied that the decision in question has been made in disregard of those principles and, in particular, where the applicant in the second Member State has refused, in spite of requests and contrary to the order of the court of the second Member State, to provide the provisional liquidator of the company, duly appointed in accordance with the law of the first Member State, with any copy of the essential papers grounding the application?"

14 The European Court gave judgment on the reference for preliminary ruling on 2nd May 2006. It altered the order of the questions and decided that it was unnecessary to answer Question no. 2. Its answers are as follows:

15 2 "1. Where a debtor is a subsidiary company whose registered office and that of its parent company are situated in two different Member States, the presumption laid down in the second sentence of Article 3(1) of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, whereby the centre of main interests of that subsidiary is situated in the Member State where its registered office is situated, can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which location at that registered office is deemed to reflect. That could be so in particular in the case of a company not carrying out any business in the territory of the Member State in which its registered office is situated. By contrast, where a company carries on its business in the territory of the Member State where its registered office is situated, the mere fact that its economic choices are or can be controlled by a parent company in another Member State is not enough to rebut the presumption laid down by that Regulation.

16 2. On a proper interpretation of the first subparagraph of Article 16(1) of Regulation No 1346/2000, the main insolvency proceedings opened by a court of a Member State must be recognised by the courts of the other Member States, without the latter being able to review the jurisdiction of the court of the opening State.

17 3. On a proper interpretation of the first subparagraph of Article 16(1) of the Regulation, a decision to open insolvency proceedings for the purposes of that provision is a decision handed down by a court of a Member State to which application for such a decision has been made, based on the debtor's insolvency and seeking the opening of proceedings referred to in Annex A to the Regulation, where that decision involves the divestment of the debtor and the appointment of a liquidator referred to in Annex C to the Regulation. Such divestment implies that the debtor loses the powers of management that he has over his assets.

18 4. On a proper interpretation of Article 26 of the Regulation, a Member State may refuse to recognise insolvency proceedings opened in another Member State where the decision to open the proceedings was taken in flagrant breach of the fundamental right to be heard, which a person concerned by such proceedings enjoys."

19 The Court has received written submissions on behalf of the principal creditors of the company, namely the Noteholders, and the Bank of America as well as on behalf of the Director of Corporate Enforcement. Each of these parties submitted that it was clear from the judgment of the European Court that the appeal should be dismissed. Counsel for the Provisional Liquidator, acting consistently with the stance his client had adopted at the hearings in 2004, abstained from comment on the merits of the referred questions but made some observations which relate only to the question of recognition covered by question No. 5 referred by this Court and paragraph No. 4 of the answers.

20 On the other hand, the appellant, Dr Enrico Bondi, (hereinafter "the appellant"), the Extraordinary Administrator under Italian law of the Parmalat group and the person appointed by the Parma Court as...