Re Eylewood Ltd and Others

JurisdictionIreland
CourtHigh Court
JudgeMs. Justice Finlay Geoghegan
Judgment Date05 March 2010
Neutral Citation[2010] IEHC 57
Date05 March 2010
Docket Number[No. 677 COS/2009]

[2010] IEHC 57

THE HIGH COURT

[No. 677 COS/2009]
Eylewood Ltd & Ors, In Re
IN THE MATTER OF EYLEWOOD LIMITED (UNDER THE PROTECTION OF THE COURT)
AND IN THE MATTER OF WOODMAN INNS LIMITED (UNDER THE PROTECTION OF THE COURT)
AND IN THE MATTER OF THE COMPANIES (AMENDMENT) ACT 1990
AND IN THE MATTER OF THE COMPANIES (AMENDMENT) (NO. 2) ACT 1999
AND IN THE MATTER OF AN APPLICATION PURSUANT TO ORDER 75A OF THE RULES OF THE SUPERIOR COURTS 1986
AND IN THE MATTER OF A PETITION BY TWEEDY GROUP OF BARS LIMITED

COMPANIES (AMDT) ACT 1990 S7(7)

COMPANIES (AMDT) ACT 1990 S9(1)

COMPANIES (AMDT) ACT 1990 S18

COMPANIES (AMDT) ACT 1990 S13(1)

COMPANIES (AMDT) ACT 1990 S13(7)

COMPANIES (AMDT) ACT 1990 S24

COMPANIES (AMDT) ACT 1990 S2

COMPANIES (AMDT) ACT 1990 S4

COMPANIES (AMDT) ACT 1990 S19(H)

CHIEF JUSTICE IN VANTIVE HOLDINGS UNREP SUPREME 11.8.2009 2009 IESC 68

COMPANIES (AMDT) ACT 1990 S19(E)

COMPANIES (AMDT) ACT 1990 S22(1)(F)

COMPANIES (AMDT) ACT 1990 S22(1)(G)

COMPANIES (AMDT) ACT 1990 S24(4)

WOGANS (DROGHEDA) LTD UNREP COSTELLO 7.5.1992 1992/9/2889

CISTI GUGAN BARRA TEORANTA 2009 1 ILRM 182

COMPANIES (AMDT) (NO.2) ACT 1999 S25A(1)(D)

COMPANIES (AMDT) ACT 1990 S22(6)(E)

IARNROD EIREANN v IRELAND 1996 3 IR 321 1995 2 ILRM 161 1995 8 2405

O'NEILL v RYAN 1993 ILRM 557

FOSS v HARBOTTLE 1843 2 HARE 461

PRUDENTIAL ASSURANCE CO LTD v NEWMAN INDUSTRIES LTD (NO.2) 1982 CH 204

CONSTITUTION ART 40.3.2

CONSTITUTION ART 43

BLAKE v AG 1982 IR 117

DODD STATUTORY INTERPRETATION IN IRELAND 2008 PAR 11.51

BYRNE v GREY 1988 IR 31

MISUSE OF DRUGS ACT 1977 S26(1)

VISCOUNT SECURITIES LTD, IN RE 1978 112 ILTR 17

PLANNING & DEVELOPMENT ACT 1963 S56(1)(A)

COMPANIES (AMDT) ACT 1990 S22

COMPANIES (AMDT) ACT 1990 S22(1)(C)

COMPANIES (AMDT) ACT 1990 S22(6)

COMPANIES (AMDT) ACT 1990 S22(5)

COMPANIES (AMDT) ACT 1990 S24(5)

COMPANIES (AMDT) ACT 1990 S24(6)

COMPANIES (AMDT) ACT 1990 S24(7)

COMPANIES (AMDT) ACT 1990 S24(8)

COMPANIES (AMDT) ACT 1990 S24(4)

COMPANIES (AMDT) ACT 1990 S22(6)(E)

COMPANIES (AMDT) ACT 1990 S24(4)(C)

COMPANIES (AMDT) ACT 1990 S24(4)(A)

RE TRAFFIC GROUP 2008 3 IR 253

MCEANEY CONSTRUCTION LTD 2008 3 IR 744

COMPANIES ACT 1963 S72(1)

COMPANIES (AMDT) ACT 1990 S24(5)

COMPANIES (AMDT) ACT 1990 S25A(1)(D)

COMPANIES (AMDT) ACT 1990 S25A(1)(C)

COMPANIES (AMDT) ACT 1990 S22(2)

CHITTY ON CONTRACTS 30ED VOL II SPECIFIC 2008 PAR 44.116

CHITTY ON CONTRACTS 30ED VOL II SPECIFIC 2008 PAR 44.128

ROWLETT ON PRINCIPAL & SURETY 5ED 1999 P143

HALSBURY 5ED VOL 49 PAR 1139 CHAP 8

HALSBURY 5ED VOL 49 PAR 1139 CHAP 9

COMPANIES (AMDT) ACT 1990 S25A

COMPANIES (AMDT) ACT 1990 S25A(1)(d)

COMPANIES (AMDT) (NO.2) ACT 1999 S25

COMPANIES (AMDT) ACT 1990 S24(6)

SELUKWE LTD UNREP COSTELLO 20.12.1991 1992/4/1028

COMPANIES (AMDT) ACT 1990 S25A(1)(A)

COMPANIES (AMDT) ACT 1990 S25A(2)(B)

WILLIAM HOCKLEY LTD 1962, IN RE 1 WLR 555

COUNTY BOOKSHOPS LTD v GROVE 2002 EWHC 1160 (CH) 2003 1 BCLC 479

COMPANY LAW

Examinership

Scheme of arrangement - Opposition by petitioner to scheme - Petitioner sole member of company - Payments made in course of examinership - Application to remove examiner - Whether proposal recommendation supported by facts - Whether removal of directors might be included in proposals - Whether conditional agreement with investor sufficient to ground confirmation of proposal - Whether scheme of arrangement might include compulsory transfer of shares by member - Whether property rights in shares with nil market value - Whether infringement of right to participate - Whether proposals were fair and equitable to member - Statutory interpretation - Contingent creditors - Whether continuing rights of guarantors after confirmation of scheme - Vantive Holdings [2009] IESC 68 [2010] 2 IR 118; Cisti Gugan Barra Teoranta [2008] IEHC 251 [2009] 1 ILRM 182; Iarnrod Eireann v Ireland [1996] 3 IR 321; O Neill v Ryan [1993] ILRM 557; Foss v Harbottle (1843) 2 Hare 461; Prudential Assurance Co. Ltd v Newman Industries Ltd (No. 2) [1982] Ch 204; Blake v Attorney General [1982] IR 117; Byrne v Grey [1988] IR 31; Claim of Viscount Securities Ltd (1978) 112 ILTR 17; Re Traffic Group [2007] IEHC 445 [2008] 3 IR 253; Wogans (Drogheda) Limited (Unrep, Costello J, 7/5/1992); Re Selukwe Ltd (Unrep, Costello J, 20/12/1991); Re William Hockey Ltd [1962] I WLR 555 and County Bookshops Ltd v Grove [2002] EWHC 1160 [2003] 1 BCLC 479 considered - McEaney Construction Ltd [2008] 3 IR 744 distinguished - Companies (Amendment) Act 1999, s.18, 19(h), 22, 23,24, 25, Companies Act 1963, s. 72 - Confirmation of scheme of arrangement refused (2009/677COS - Finlay Geoghegan - 5/3/2010) [2010] IEHC 57

Eylewood Limited (In Liquidation)

Facts the petitioner had succeeded in having an examiner appointed over two companies which it owned. The examiner presented two schemes of arrangement to the High Court for approval, pursuant to s. 18 of the Companies (Amendment) Act 1990. The Examiner failed to put before the Court any appraisal of the facts or factors relied upon or reasons for the opinion expressed and recommendation made.

Held by Ms. Justice Finlay Geoghegan in making an order pursuant to s. 24(3) of the Act refusing to confirm each of the schemes of arrangements and an order pursuant to s. 26 of the Act that each company cease to be under the protection of the Court that, having regard to the nature of the property right inherent in holding shares in a company, shares which were worthless, in the sense of having no monetary value, continued to constitute a property right which was primarily protected by Article 40.3.2 of the Constitution.

That a statutory provision had to primarily be construed from the words used by the Oireachtas in the sub-section itself, but also by placing them in a context of the entire of the section and the remaining provisions of the Act. The more radically a statutory enactment eroded a constitutional right, the more it was to be expected to be expressed with absolute clarity. That ss. 22 and 24 of the Act of 1990 permitted a scheme of arrangement to include the compulsory transfer by a member of all its shares in the company.

That it was permissible for an examiner to include in proposals for a scheme of arrangement a provision that a member transfer all of its shares in the subject company; to propose amendments to the Articles of Association to enable effect be given to such provision; and to request the Court to make appropriate orders under s. 24(8), if it confirmed the scheme.

That the entire section 25A intended, first, to protect the right of a creditor to enforce a guarantee of debts of a company which was the subject of a write-down in a scheme of arrangement, secondly, to limit the right of guarantors to enforce a guarantee and, thirdly, to make express provision in certain circumstances for payment by a company to the guarantor rather than to the creditor in accordance with the scheme. Section 25A(1)(a), of itself, provided that the writing-down of a debt owed by a company to a creditor in a scheme of arrangement did not automatically discharge the liability of the guarantor unless there was a contrary provision in the guarantee. However, it had to be read in conjunction with section 25A(2)(b) which preserved the right of a guarantor to contend in accordance with the law of sureties that by reason of an act done by a creditor in connection with the scheme of arrangement that liability under the guarantee was discharged.

That the term "contingent creditor" included a guarantor with a contingent right of indemnity against a company in respect of which the guarantor had guaranteed its debts to a creditor. That there was a failure to address the positions of the directors of the company as contingent creditors in the schemes of arrangement.

Re Traffic Group [2008] 3 I.R. 253 at p. 260 and McEnaney Construction Limited [2008] 3 I.R. 744 considered.

Reporter: P.C.

1

JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 5th day of March, 2010

2

1. Eylewood Limited ("Eylewood") trades as "Muldoon's Late Bar and Oxygen Niteclub" from a licensed premises in the city of Waterford. Woodman Inns Limited ("Woodman") trades as "Woodman Bar and Ruby's Niteclub" from a licensed premises in the city of Waterford. Eylewood and Woodman are each wholly owned subsidiaries of Tweedy Group of Bars Limited ("the Petitioner"). The Petitioner is the sole member of each of Eylewood and Woodman.

3

2. Mr. Robert Tweedy ("Mr. Tweedy") and his sister, Ms. Anne Tweedy, are directors of each of the Petitioner, Eylewood and Woodman. Mr. Tweedy Senior, their father, is also a director of Woodman. Mr. Tweedy and Ms. Tweedy each hold 50% of the issued share capital of the Petitioner.

4

3. On 28 th October, 2009, the Petitioner presented a petition, pursuant to the Companies (Amendment) Act 1990 ("The Act"), seeking the appointment of Mr. Kevin Hughes as Examiner of each of Eylewood and Woodman. The Petitioner had, at that time, two other wholly owned subsidiaries; Cherryfox Taverns Limited, which also operated a licensed premises in Waterford, and Ulysses Taverns Limited, which had operated a licensed premises but ceased to trade in 2006. No application was made in relation to those companies.

5

4. On 5 th November, 2009, Mr. Hughes ("the Examiner") was appointed as Examiner of each of Eylewood and Woodman, pursuant to s. 2 of the Act.

6

5. On 4 th February, 2010, the Examiner filed in Court two reports, pursuant to s. 18 of the Act, with proposals for schemes of arrangement for each of Eylewood and Woodman. In his reports, he recommended that the Court confirm the proposals for the schemes of arrangement appended to each report.

7

6. The confirmation hearing was initially fixed by order of the Court (Clarke J.) for 11 th...

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