Re Fencore Services Ltd
| Jurisdiction | Ireland |
| Judge | Miss Justice Laffoy |
| Judgment Date | 15 February 2010 |
| Neutral Citation | [2010] IEHC 358 |
| Court | High Court |
| Date | 15 February 2010 |
[2010] IEHC 358
THE HIGH COURT
COMPANIES ACT 1963 S214
COMPANIES ACT 1963 S266
MERCANTILE MARINE ACT 1955
COMPANIES ACT 1963 S101
RSC O.74 r69
SOUTHARD & CO LTD, IN RE 1979 1 WLR 546 1979 1 AER 582
HAYES HOMES LTD, IN RE UNREP O'NEILL 8.7.2004 2004/21/4850 2004 IEHC 124
PERMANENT FORMWORK SYSTEMS LTD, IN RE UNREP LAFFOY 23.5.2007 2007/50/10712 2007 IEHC 268
BALBRADAGH DEVELOPMENTS LTD, IN RE 2009 1 IR 597 2008/3/494 2008 IEHC 329
JD SWAIN LTD, IN RE 1965 1 WLR 909 1965 2 AER 761
GILT CONSTRUCTION LTD, IN RE 1994 2 ILRM 456 1994/10/2939
COMPANY LAW
Winding up
Involuntary - Secured creditor - Voluntary winding up following petition - Entitlement to vote at creditors' meeting - Whether court should exercise discretion in favour of involuntary winding up - In re Southard & Co Ltd [1979] 1 WLR 546; In re Hayes Homes Ltd [2004] IEHC 253 (Unrep, O'Neill J, 8/7/2004); In re Permanent Formwork Systems Ltd [2007] IEHC 268 (Unrep, Laffoy J, 23/5/2007); In re Balbradagh Developments Ltd [2008] IEHC 329, [2009] 1 IR 597 and In re Gilt Construction Ltd [1994] 2 ILRM 456 considered - Companies Act 1963 (No 33), ss 101 and 214 - Mercantile Marine Act 1955 (No 29) - Rules of the Superior Courts 1986 (SI 15/1986), O 74, r 69 - Order made (2010/29COS - Laffoy J - 15/2/2010) [2010] IEHC 358
In re Fencore Services Ltd
Judgment of Miss Justice Laffoy delivered on the 15th day of February, 2010.
This petition to wind up Fencore Services Limited (the company) was presented by Danske Bank A/S trading as National Irish Bank (the petitioner) on 13 thJanuary, 2010. It was made returnable for 8 th February, 2010.
The petition is grounded on an unsatisfied demand under s. 214 of the Companies Act 1963 (the Act of 1963). The demand was made on 14 th December, 2009. In it the petitioner demanded the payment of sums due on two term loans and on an overdraft facility which aggregated €5,686,143.60. The petition was verified by a short affidavit sworn on 15 th January, 2010 by Michael Leonard, an official of the petitioner. The affidavit explained why the petitioner, which is a secured creditor, was pursuing the compulsory winding up route, rather than the receivership route. It disclosed that the company was involved in the shipping business. A ship owned by the company, the M. V. Kilcoe, which was chartered out and regularly visited Marseilles, was the subject of a mortgage in favour of the petitioner. The petitioner could appoint a receiver on foot of the mortgage, but such receiver might not be recognised in France. The purpose of seeking a winding up order was that a liquidator appointed by the Court would be recognised in all countries of the European Union and would, therefore, be in a position to protect the interests of all of the creditors of the company, including the petitioner.
The petition was advertised in two national daily newspapers and in Iris Oifigiúil on 19 th January, 2010. The petitioner proposed that George Maloney, chartered accountant, be appointed official liquidator. There was a letter of consent from Mr. Maloney before the Court and also an affidavit of his suitability to act as official liquidator. If the company had not been voluntarily wound up between the presentation of the petition and the return date, the Court would have made a winding up order when the petition was heard on 8 th February, 2010, because the proofs were in order and it would clearly have been proper to make such order.
However, in the intervening period between the presentation of the petition and the return date the company issued a notice dated 20 th January, 2010 pursuant to s. 266 of the Act of 1963 that a creditors' meeting would be held on 2 nd February, 2010. The petitioner received the notice on 25 th January, 2010 and Mr. Leonard is aware that it was advertised in one national daily newspaper on 21 st January, 2010. For present purposes, I am assuming that the notice of the creditors' meeting was properly advertised.
Mr. Leonard attended the creditors' meeting accompanied by the petitioner's solicitor and Mr. Maloney. The meeting was chaired by Noel Hanley, a director of the company. The meeting was told that earlier on that day the members of the company had passed a resolution for the voluntary winding up of the company and nominated Alan Fitzpatrick, a chartered company secretary, as liquidator. A statement of affairs was presented to the meeting. Mr. Leonard raised certain queries in relation to the statement of affairs and received answers which he considered were not satisfactory. Neither the petitioner, nor any of the other creditors present at the meeting, nominated an alternative liquidator. However, it was made clear on behalf of the petitioner that it did not intend to withdraw its petition. Mr. Fitzpatrick was appointed liquidator.
Mr. Leonard swore a second affidavit grounding the petition on 5 th February, 2010 setting out the reasons why the Court should make a winding up order rather than to permit the creditors' voluntary winding up to proceed. Three affidavits were sworn on 5 th February, 2010 on behalf of the company in response to the petition: by Mr. Hanley, Mr. Fitzpatrick and Daniel J. Hanley, the company's solicitor. A further affidavit was sworn on 8 th February, 2010 by Mr. Hanley specifically in response to Mr. Leonard's second affidavit.
The petition was heard on 8 th February, 2010.
Before outlining the reasons put forward by the petitioner for seeking a winding up by the Court, it is convenient to consider the statement of affairs put to the creditors' meeting.
The liabilities of the company are listed as follows:
| The petitioner (secured debt) | €5,676,158 |
| Bank of Scotland Ireland | €843,170 |
Trade creditors:
| Green Star Shipping Ltd. | €2,900,000 | |
| Hanley & Lynch | €24,200 | |
| Park Chambers | €13,118 | €2,937,318 |
| Renee Hanley | €1,000,000 |
| Revenue Commissioners (PAYE) | €13,527 |
| Obligations under leases | €11,000 | |
| Total: | €10,481,173 |
As regard the attitude of the creditors, Bank of Scotland Ireland did not attend the creditors' meeting but it was represented by counsel on the hearing of the petition and supported the petition and the compulsory winding up of the company. The Court was informed that it has no formal security. Green Star Shipping Company Limited (Green Star), Hanley & Lynch, the company's solicitors, and Park Chambers, the company's auditors, and Renee Hanley (Mrs. Hanley) were represented at the creditors' meeting by proxies. Mr. Leonard has averred in his second affidavit that Mr. Hanley, who held three proxies, indicated that those creditors were minded to vote for the company's nominee as liquidator, if an alternative proposal for liquidator was put forward. The Revenue Commissioners did not attend the creditors' meeting and were not represented at the hearing of the petition.
The petitioner has raised issues in relation to the status of Green Star and Mrs. Hanley as creditors of the company.
The assets of the company are listed in the statement of affairs, showing the estimated realisable value of the assets based on the opinion of the directors, as follows:
| Fixtures and fittings | €1,000 |
| Insurance claim | €3,500,000 |
| Debtors | Nil |
| Fencore Varna Limited | €500,000 |
| Motor vehicles | € 10,000 |
| M. V. Vaagen | €250,000 |
| Total: | €4,261,000 |
The petitioner has raised issues in relation to the insurance claim and Fencore Varna Limited (Varna).
The statement of affairs shows a total deficit of €6,220,173.
The petitioner's primary concern in relation to Green Star is identifying what interest it has in what the petitioner asserts is the principal asset of the company, the M.V. Kilcoe, which is the subject of a ship's mortgage in favour of the petitioner. That mortgage, a copy of which has been exhibited, was executed on 13 th August, 2008 by the company in favour of the petitioner and it was registered in the register maintained under the Mercantile Marine Act 1955 (the Act of 1955) on 20 th August, 2008. Contemporaneously with the mortgage, the company executed a deed of covenant in favour of the petitioner. In clause 8 of the deed of covenant the company undertook, inter alia, with the petitioner -
(i) at all times to remain the sole, absolute and beneficial owner of the vessel (para, (c)) and
(ii) not to sell or agree to sell or transfer or assign "the Secured Property", which was defined as including, in addition to the vessel, earnings arising out of the ownership, possession, use or operation of the vessel, or to dispose of the vessel or any share or interest therein (para (d)).
Mr. Leonard averred in his second affidavit that in recent times the M. V. Kilcoe had been under charter to an Algerian State Agency known as CNAN. Under clause 4.1(b) of the deed of covenant, the earnings, including charter receipts, were assigned in favour of the petitioner by way of security.
As appears from Mr. Leonard's second affidavit, what gave rise to concern on the part of the petitioner was that there was entered in the register a transaction which was described as "Bill of Sale" dated 16 th January, 2009 from the company to Green Star, which was registered on 28 th January, 2009. An extract from the register certified on 20 th July, 2009 by the Register of Shipping Port of Cork has been exhibited by Mr. Leonard, which shows the name of the ship as "Kilcoe".
In his first replying affidavit Mr. Hanley averred that he...
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