Re Greendale Developments Ltd ((in Liquidation)) (No. 2)

• Jurisdiction: Ireland
• Judgment Date: 01 January 1998
• Date: 01 January 1998
• Docket Number: [S.C. No. 130 of 1996]
• Court: Supreme Court

Supreme Court

[S.C. No. 130 of 1996]

In re Greendale Developments Ltd. (In Liquidation) (No. 2)

In the matter of Greendale Developments Limited (In Liquidation) (No. 2) and in the matter of the Companies Acts, 1963 to 1990

Liam McQuaid

Applicant

and

Stephen Fagan and May Malone, Respondents

Cases mentioned in this report:-

In re Anglo-French Co-operative Society, Ex Parte Pelly [1882] 21 Ch. D. 492; 47 L.T. 638; 31 W.R. 783.

Braddock v. Tillotson's Newspapers Ltd. [1950] 1 K.B. 47, C.A.; [1949] 2 All E.R. 306.

Buchanan Ltd. v. McVey [1954] I.R. 89; 90 I.L.T.R. 121.

Charterbridge Corpn. Ltd. v. Lloyds Bank Ltd. [1970] Ch. 62; [1969] 3 W.L.R. 122; [1969] 2 All E.R. 1185; [1969] 2 Lloyd's Rep. 24.

In re Etic [1928] 1 Ch. 861.

In re Express Engineering Works Ltd. [1920] 1 Ch. 466; 89 L.J. Ch. 379; 122 L.T. 790; 36 T.L.R 275.

Flitcroft's Case [1882] 21 Ch. D. 519; 52 L.J. Ch. 217; 48 L.T. 86; 31 W.R. 344.

Hutton v. West Cork Railway Co. [1883] 23 Ch. D. 654; 52 L.J. Ch. 689; 49 L.T. 420; 31 W.R. 827.

In re Lee, Behrens and Co. [1932] 2 Ch. 46.

Meek v. Fleming [1961] 2 Q.B. 366; [1961] 3 W.L.R. 532; [1961] 3 All E.R. 148.

Multinational v. Multinational Services [1983] I Ch. 258; [1983] 3 W.L.R. 492; [1983] 2 All E.R. 563, C.A.

Murphy v. Minister for Defence [1991] 2 I.R. 161.

O'Callaghan v. District Judge Clifford [1993] 3 I.R. 603.

O'Reilly v. Cassidy [1995] 1 I.L.R.M. 306.

Parke v. Daily News Ltd. [1962] Ch. 927; [1962] 3 W.L.R. 566; [1962] 2 All E.R. 929.

Parker & Cooper Ltd. v. Reading, [1926] 1 Ch. 975.

Roper v. Ward [1981] I.L.R.M. 408.

In re S.M. Barker Ltd. [1950] I.R. 123.

Smyth v. Tunney [1996] 1 I.L.R.M. 219.

Company Law - Winding up - Misfeasance - Ultra vires payments to officers of company - Effect of consent of shareholders - Whether misfeasance proceedings appropriate - Whether rights of set off can arise in misfeasance proceedings - Companies Act, 1963 (No. 33), s. 298 - Companies Act, 1990 (No. 33), s. 142.

Practice and procedure - Appeal to Supreme Court - Fresh evidence - Whether evidence in existence but unobtainable at trial - Whether credible and influential on result of case - Whether grounds to interfere with High Court discretion to grant or refuse an adjournment of trial.

Appeal from the High Court.

The facts are summarised in the headnote and are set out in the judgment of Keane J., infra.

On the 3rd July, 1995, the High Court ordered the winding up of Greendale Developments Limited ("the company"), and the applicant was appointed official liquidator. A notice of motion was issued by the applicant on the 20th September, 1995, seeking, inter alia,relief under s.298 (2) of the Companies Act 1963, as amended, and a mareva injunction. The motion was listed for the 20th September, 1995, but was adjourned from time to time as affidavits were exchanged.

The matter was finally listed for trial on the 30th January, 1996, and heard on that date. The High Court (Costello P.) delivered judgment on the 12th March, 1996. The first respondent was ordered to pay the liquidator £456,062.69 and costs. A stay was granted for 6 months.

By notice of appeal dated the 23rd April, 1996, the first respondent sought to appeal the judgment and order of the High Court.

By notice of motion dated the 29th July, 1996, which was heard on the 31st July, 1996, the stay on execution was extended until the 11th October, 1996.

By notice of motion dated the 11th October, 1996, the first respondent sought to have the proceedings remitted to the High Court for a re-trial, or for leave to adduce new evidence. It was ordered that the notice of motion and appeal should be listed for hearing together.

The hearing took place on the 18th to the 20th December, 1996, and on the 14th January, 1997.

Greendale Developments Limited ("the company"), a property development company, had three shareholders, being the respondents, and R.B. The directors of the company were the first respondent and R.B.

A dispute developed between the first respondent and R.B., leading to the winding-up of the company on the 3rd July, 1995, on the "just and equitable" ground. The applicant was appointed official liquidator of the company. The applicant formed the view that substantial sums were owed by the respondents to the company which required to be repaid. In addition to disputing the claims made by the liquidator, the respondents claimed that they were entitled to set off, as against any sums found to be owing by them to the company, sums which they claimed the company owed them.

The applicant applied to the High Court, pursuant to the provisions of s.298 (2) of the Companies Act, 1963, as amended, seeking an order directing the respondents to repay or restore monies or property belonging to the company, and an injunction restraining the respondents from disposing of assets.

The High Court (Costello P.) held that the liquidator had established that the sums in question were owed by the first respondent to the company, and that he was not entitled to set off the sums claimed by him against the money due to the company. No order was made, however, against the second respondent on the basis that she was not an officer of the company.

The first respondent appealed the judgment and order of the High Court. An application was also made to the Supreme Court seeking that the proceedings be remitted for trial in the High Court, or in the alternative, that the Court would give leave to adduce new evidence not readily available in the High Court. It was contended that since the company was solvent at all times and that any payments made to the respondents had been assented to by all members of the company, they did not constitute "misfeasance" within the meaning of s. 298 of the Companies Act, 1963.

Heldby the Supreme Court (Blayney, Keane and Murphy JJ.) in dismissing the appeal, 1, that a company must only spend monies which were reasonably incidental to the carrying on of the business of the company. Where the payments were not expressly authorised by the memorandum or articles of association of the company, and were accordingly ultra vires, this could not be cured by the shareholders assenting to the payments.

Hutton v. West Cork Railway Co. [1883] 23 Ch. D. 654 applied;In re Lee, Behrens and Co.[1932] 2 Ch. 46,Parke v. Daily News Limited[1962] Ch. 927 andRoper v. Ward[1981] I.L.R.M. 408 followed.

Per curiam:If all corporators agreed to a transaction which was honest andintra vires the company then, regardless of how informal the manner of the agreement, it bound the company.

Buchanan Ltd. v. McVey [1954] I.R. 89 followed.

2. That where the company suffered damage as a result of the payments madeultra vires the company, misfeasance proceedings for the recovery of monies under s. 298 of the Companies Act, 1963, were appropriate.

In re S.M. Barker Ltd. [1950] I.R. 123 distinguished.

3. That rights of set off only arose in the case of actions between parties and the debts were required to be mutual. A director, liable to pay money to a company as a result of misfeasance proceedings, was not entitled to set off, as against that liability, a debt owed by the company to him. This was the case regardless of the solvency or otherwise of the company.

In re: Anglo-French Co-Operative Society, Ex Parte Pelly [1882] 21 Ch. D. 492 applied.

4. That in order to adduce fresh evidence in an appeal to the Supreme Court, the evidence must have been in existence and unobtainable with reasonable diligence for use at the trial. Furthermore, while not required to be decisive or incontrovertible, it must be apparently credible and probably have an important influence on the result of the case.

Murphy v. Minister for Defence [1991] 2 I.R. 161 and Meek v. Fleming[1961] 2 Q.B. 366 followed.

5. That no grounds had been established on which the Court could interfere with the manner in which the High Court exercised its discretion to grant or refuse an adjournment of the trial. The respondents were fully aware of, and their counsel had been fully instructed in, the matters in issue. The findings of the High Court were supported by credible evidence and founded on a true interpretation of the law.

Cur. adv. vult

Blayney J. 20th February, 1997

I agree with the judgment about to be delivered by Keane J.

Keane J.

Introduction

Greendale Developments Limited ("the company") was incorporated on the 29th April, 1988. Its nominal capital consists of one million shares of £1 each and it has a paid up share capital of £18. The shareholders are Mr. and Mrs. Stephen Fagan ("the respondents") and Mr. Rory Burgess, each of whom holds one third of the issued shares in the company. The directors of the company at all material times were the first respondent and Mr. Burgess. The company was formed in order to carry out a development at Islandbridge, Dublin. With this in view, the company bought what will be referred to in this judgment as "the Islandbridge site",consisting of an office building which was in a somewhat dilapidated state, and a large site at the rear adjoining the River Liffey. The company built approximately 80 town houses on the site at the rear, the actual building work being carried out by a company called Flynn Building and Civil Engineering Contractors Ltd. That residential development was completed and the 80 houses sold. Substantial structural works were carried out to the office building which was subdivided into five blocks and ultimately sold in 1994, by the company for a sum of £1,100,000.

Acrimonious disputes developed between the first respondent and Mr. Burgess as to the manner in which the company's affairs were being conducted and these led eventually to the presentation of a petition by Mr. Burgess seeking relief under s. 205 of the Companies Act, 1963. It would appear that no motion for directions was brought in relation to that petition and that, while it is still on the file of...