Re Hayes Homes Ltd

• Jurisdiction: Ireland
• Judge: O'Neill J.
• Judgment Date: 08 July 2004
• Neutral Citation: [2004] IEHC 124
• Docket Number: [2004 No. 216 COS]
• Court: High Court
• Date: 08 July 2004

[2004] IEHC 124

THE HIGH COURT

[2004 No. 216 COS]

HC 253/04

HAYES HOMES LTD, RE

IN THE MATTER OF HAYES HOMES LIMITED (IN VOLUNTARY LIQUIDATION) AND

IN THE MATTER OF THE COMPANIES ACTS1963– 2001 AND

IN THE MATTER OF THE PETITION OF LIAM J. IRWIN COLLECTOR GENERAL AND OFFICER OF THE REVENUE COMMISSION

Citations:

COMPANIES ACTS 1963–2001 S214

COMPANIES ACT 1963 S267(3)

RSC O.74 r71

PALMER MARINE SURVEYS LTD, IN RE 1986 1 WLR 573 1986 BCLC 106

FALCON R J DEVELOPMENT, IN RE 1987 BCLC 437

RSC O.74 r82

COMPANIES ACT 1963 S280

GILT CONSTRUCTION LTD, IN RE 1994 2 ILRM 456

EUROCHICK (IRL) LTD, IN RE UNREP MCCRACKEN 23.3.1998 1998/18/6863

NAIAD LTD, IN RE UNREP MCCRACKEN 13.2.1995 1995/4/1234

RSC O.74 r67

RSC O.74 r56

COMPANIES ACT 1963 S266

RSC O.74 r82(1)

MAGNUS CONSULTANTS LTD, IN RE 1995 1 BCLC 203

MCH SERVICES LTD, IN RE 1987 BCLC 535

COMPANIES ACT 1963 S297

Abstract:

Winding up - Company law Insolvency of company - Petition by creditor to replace voluntary liquidation with compulsory winding up - Creditor’s meeting - Proxy appointed by creditor to vote on resolution to appoint liquidator - Whether proxy entitled to vote on resolution at creditor’s meeting to appoint liquidator when instrument of proxy not lodged with company prior to meeting - Whether chairman of creditor’s meeting entitled to refuse proxy vote - Whether court should exercise discretion to replace voluntary winding up with a winding up under direction of court - Rules of the Superior Courts 1986, Order 74, rules 71 and 82(1) - Companies Act 1963, section 267(3).

Facts: the petitioner, who was a creditor to the company to the extent of € 264,456, which represented in excess of 90% of the total indebtedness of the company, sought an order that Hayes Homes Ltd. be compulsorily wound up or in the alternative an order setting aside a nomination of Tony Fitzpatrick to act as liquidator. At a meeting of the members of the company, it was resolved that it be wound up voluntarily and Mr. Fitzpatrick was appointed liquidator. At a subsequent creditor’s meeting the petitioner’s proxy was prevented from voting to appoint his nominee as liquidator pursuant to section 267(3) of the Companies Act 1963 on the basis that the Chairman of the meeting, a director of the company, took the view that Order 74, rule 82(1) of the Rules of the Superior Courts 1986 prevented him from allowing the proxy to so vote on the grounds that the creditor’s instrument of proxy had not been lodged with the company in time. The petitioner rejected the chairman’s interpretation of his functions and the Order 74 of the Rules of the Superior Courts 1986. In the alternative, the petitioner petitioned the court to exercise its inherent discretion to replace the voluntary liquidation with a compulsory winding up order. The petitioner undertook to discharge the costs of the voluntary liquidation to date and all future expenses if the court was disposed to direct a compulsory winding up.

Held by O’Neill J in granting the relief claimed in the petition that compliance with Order 74, rule 82(1) of the Rules of the Superior Courts 1986 was required before a creditor’s proxy was entitled to participate in a vote on a resolution to appoint a liquidator notwithstanding that the debt was either proven or admitted. Accordingly, the chairman of the creditor’s meeting had been correct to exclude the petitioner’s proxy from voting on the resolution to appoint a liquidator. However, the clear entitlement and intent of the petitioner to have appointed his nominee and the fact that the petitioner would objectively had a strong sense of suspicion and grievance, arising from the fact that the petitioner was the only party to whom any substantial debt was owed and also the fact that the only realisable asset appeared to have been transferred to an associated company without any recompense, were factors to which considerable weight had to be attached when deciding to exercise the court’s discretion in favour of ordering a compulsory winding up.

Reporter: P.C.

JUDGMENT of

O'Neill J.

1 delivered on the 8th day of July, 2004.

2 The petitioner in his petition seeks an order that Hayes Homes Limited (herein after referred to as the company) be compulsorily wound up by the court under the provisions of the Companies Act, or in the alternative an order setting aside a nomination of Tony Fitzpatrick to act as liquidator.

3 The company is indebted to the petitioner in the sum of €264,456 approx. This sum was claimed in a letter of demand dated 22^ndMarch, 2004, a demand served in accordance with the provisions of s. 214 of the Companies Acts, 1963 - 2001. The company failed to pay the sum demanded. The company had engaged in the business of running a nursing home and the company ceased trading on 28^th February, 2003 with an accumulated deficit in its accounts amounting to €264,561. The debt due to the petitioner represented in excess of 90% of the total indebtedness of the company.

4 On 4^th May, 2004 at a meeting of the members of the company, it was resolved that the company be wound up voluntarily. On the same day at 4 pm in the afternoon a meeting of the creditors of the company took place at the Abbey Court Hotel Dublin Road Nenagh in the County of Tipperary.

5 The petitioner sent a proxy to that meeting, Mr. Philip Maloney and he was accompanied by Mr. Barry Forest an accountant whom the petitioner proposed to nominate as liquidator.

6 On 26^th April, 2004 the petitioner had executed a proxy form and this was posted on the same date to the registered office of the company.

7 The meeting of the creditors of the company was chaired by Austin Power who was a director and shareholder of the company. He submitted a statement of affairs to the meeting disclosing a deficit of €264,561. Of the remaining debt, apart from that due to the petitioner, a considerable portion of it was due to connected companies.

8 Thus the petitioners proxy at the creditors meeting approached the matter on the basis that the petitioner being the holder of an excess of 90% of indebtedness of the company was entitled to avail of s. 267 (3) of the Companies Act as amended which reads as follows:

"(3) if at a meeting of creditors mentioned in s. 266 (1) a resolution as to the creditors nominee or liquidator is proposed, it shall be deemed to be passed when a majority, in value only, of the creditor's present personally or by proxy and voting on the resolution have voted in favour of the resolution."

9 When the time came for the meeting to vote on a resolution to appoint the nominee of the petitioner as liquidator namely Mr. Barry Forrest, an issue arose as to whether or not the form of proxy had been properly executed or transmitted to the registered office of the company. The chairman of the meeting Mr. Austin Power was unaware of the existence of or the facts that any such proxy form had been sent to the registered office of the company. He, the chairman, than adjourned the meeting so that he could make inquiries of the landlord of the office of the registered office of the company to ascertain whether or not the proxy form had arrived in the post and having made those inquiries he informed the meeting that no such proxy form had arrived at the registered office of the company. Notwithstanding this Mr. Maloney continued to assert his right to participate in the meeting and to vote as the legitimate proxy of the petitioner, highlighting the position of the petitioner as the largest creditor and asserting that this was sufficient to secure the appointment of the petitioner's nominee.

10 This resulted in a second adjournment of the meeting to enable the chairman Mr. Power to seek legal advice from his solicitor relating to the validly of the position of the petitioner. Mr. Power telephoned his solicitor Mr. O'Connor and having outlined the position to him, was advised that, as the petitioners proxy had not been lodged in the registered office in time and had still not been lodged at the time of the meeting, that a petitioner was not entitled to vote for their nominee as liquidater, and to accept the nomination of the petitioners nominee on foot of the petitioners proxy would have led to a situation whereby the appointment of Mr. Forest as liquidator could be deemed to be invalid.

11 There then ensued considerable discussion, including an assertion by an assistant of Mr. Forest that Order 74 Rule 71 of the Rules of the Superior Court obliged the chairman of the meeting to accept the vote, noting his objection to it, and the vote being accepted subject to being deemed invalid by the High Court upon an application in that behalf been taken within fourteen days. Mr. Power clearly rejected that assertion and on the basis of the legal advice which he had obtained, and excluded Mr. Maloney from voting and as a consequence the appointment of Mr. Fitzpatrick as liquidator was confirmed.

12 In these proceedings the petitioner submits that Mr. Power was in error in excluding Mr. Maloney from voting on the grounds of the alleged non receipt in the companies registered office of the proxy form, he Mr. Maloney having brought to the meeting a duplicate of the proxy form together with a duplicate or copy of the envelope in which it was sent. It was further submitted that all that was required to entitle the petitioners represented by Mr. Maloney to participate in the vote as proxy of the petitioner was proof of the petitioners debt, which in fact was not in dispute, and was indeed listed as one of the debts of the company in the statement of affairs presented to the meeting by Mr. Power. It was further submitted that even if Mr. Power was correct in excluding Mr. Maloney from the vote, that having regard to the fact that the petitioner had a clear statutory entitlement under s. 267 (3) of the Companies Act,1963as amended, to nominate a liquidator, having...