Re Merchant Banking Ltd

• Jurisdiction: Ireland
• Judge: McCARTHY J.
• Judgment Date: 01 January 1987
• Neutral Citation: 1986 WJSC-SC 1224
• Court: Supreme Court
• Docket Number: (241/85)
• Date: 01 January 1987

1986 WJSC-SC 1224

THE SUPREME COURT

Finlay C.J.

Hederman J.

McCarthy J.

(241/85)

In re MERCHANT BANKING LTD

MERCHANT BANKING LIMITED (IN LIQUIDATION) IN THE MATTER OF THE COMPANIES ACTS 1963 -1983

Citations:

CENTRAL BANK ACT 1971

COMPANIES ACT 1862 S167

COMPANIES ACT 1963 S228

COMPANIES ACT 1963 S299(1)

COMPANIES ACT 1963 S299(2)

COMPANIES ACT 1963 S299(3)

IRISH PHARMACEUTICAL UNION V EMPLOYMENT APPEALS TRIBUNAL (EAT) 1984 ILRM 36

KEANE COMPANY LAW PARA 34.47

LONDON & GLOBE FINANCE CORPORATION LTD, IN RE 1903 1 CH 728

MERCHANT BANKING, IN RE UNREP COSTELLO 29.04.85 1985/6/1403

RSC 0.74 r47

RSC O.74 r1

Synopsis:

WINDING UP

Liquidator

Remuneration - Assessment - Report of Examiner - Report containing approval of sum claimed by official liquidator for specified work - Report of Examiner furnished to court for approval - Matter in judge's list on 11th March but adjourned to enable judge to consider report - Matter re-entered in judge's list on 29th April when judge delivered written judgment disallowing liquidator's claim to sum approved by Examiner - Propriety of sum claimed not being an issue between the parties either at inquiry held by Examiner or when matter was before the court briefly on 11th March - Liquidator not given opportunity to make submissions in support of claim - Lack of fair procedures - Specified work being work undertaken in acquiring information about possible criminal offences by officers of company and in preparing detailed written statement on that subject for consideration by the court - Held that the liquidator was entitled to remuneration for the specified work in such sum, not exceeding the sum approved by the Examiner, as should be assessed by the High Court when the matter was remitted to that court - Order of the High Court (29/4/85) set aside - Rules of the Superior Courts, 1962, order 74, r.47 - Companies Act, 1963, ss.228, 229 - (241/85 - Supreme Court - 30/6/86) - [1987] ILRM 260

|In re Merchant Banking Ltd.|

NATURAL JUSTICE

Fair procedures

Judgment - Delivery - Decision on point not in issue - No opportunity to make submissions on point - Judgment disallowing claim made by official liquidator - Claim approved by Examiner after inquiry - Claim not disputed either at inquiry or at consideration by court of Examiner's report - Matter remitted to High Court for determination of claim - (241/85 - Supreme Court - 30/6/86) - [1987] ILRM 260

|In re Merchant Banking Ltd.|

JUDGMENT

Delivery

Fair procedures - Point not in issue - No opportunity to make submissions on point - Claim of official liquidator - Claim approved by Examiner after inquiry - Examiner's report submitted to High Court - Judgment of High Court disallowing claim - Claim not disputed either at inquiry or at hearing in High Court - Matter remitted to High Court for determination of liquidator's claim - (241/85 - Supreme Court - 30/6/86) - [1987] ILRM 260

|In re Merchant Banking Ltd.|

1 JUDGMENT delivered on the 30th day of June 1986 by McCARTHY J. (NEM. DISS.)

2 The Companies Act 1963 1 provides in s. 228 that

"the following provisions relating to liquidators shall have effect on a winding-up order being made - ... (d) a person appointed liquidator shall receive such salary or remuneration by way of percentage or otherwise as the court may direct ..."

3 O. 74 of the Rules of the Superior Courts (substituted by r. 1 of the Rules of the Superior Courts (No. 1), 1966 2 provides by r. 47 -

"An Official Liquidator shall be allowed in his accounts or otherwise paid such salary or remuneration as the Court may from time to time direct and in fixing such salary or remuneration the Court shall have regard to any necessary employment of accountants, assistants or clerks by him. Such salary or remuneration may be fixed either at the time of his appointment or at any time thereafter. Every

allowance of such salary or remuneration, unless made at the time of his appointment or upon passing an account, may be made upon application for that purpose by the Official Liquidator on notice to such persons (if any) and shall be supported by such evidence as the Court shall require. The Court may from time to time allow such sum (if any) as the Court shall think fit to the Official Liquidator on account of the salary or remuneration to be thereafter allowed. The Court may direct that an inquiry be held by the Examiner as to the salary or remuneration of the Official Liquidator and that the Examiner do report thereon to the Court."

4 The effect of the statute and rules are, subject to one qualification, correctly reflected in Keane "Company Law in the Republic of Ireland" 3 at paragraph 34.47 in these terms:-

"The Court directs what remuneration the Liquidator is to receive. There is no scale of fees fixed for remuneration: the Court considers the circumstances of the particular case and determines what is fair. The Court is in no sense bound by the scales of fees fixed for accountancy work by professional institutions, although it may take such scales into account in determining what is fair remuneration if it thinks proper. In practice, the Court will

naturally seek to ensure that there is reasonable uniformity in the fixing of remuneration for accountancy work of similar types. In order to achieve this result, a practice has developed in recent times of appointing a creditor - usually the Revenue - to represent the general body of creditors in an inquiry into the Liquidator's charges before the Examiner. The procedure is not dissimilar to the taxation before a Taxing Master of a successful litigant's costs. The Examiner then submits a report on the inquiry to the Judge",

5 the author referring to the judgment of Costello J. in the instant case. I respectfully adopt this summary with the qualification or addition that the inquiry into the Liquidator's charges before the Examiner is one of amount and not of nature or kind, a qualification highlighted in the instant appeal. I would endorse the practice of appointing a creditor to monitor the inquiry into the Liquidator's charges. Ordinarily, there would be no fund out of which the expenses of such creditor could be met without reducing the amount payable to all those entitled, including such creditor; a circumstance that seems to call for reform.

6 The Official Liquidator was appointed as such on the 24th May 1982 and has made five applications for interim payment of fees, of which the present appeal concerns the fifth. The liquidation has involved wide ranging and detailed examination of the affairs both of the company in liquidation and of many sister companies involved in the Gallagher Group; large sums of money have been ordered to be paid in discharge of the liquidator's fees and the appropriate value added tax at 23 per cent. The only source of a dividend available to compensate members of the public who were depositors with Merchant Banking Limited is the statutory deposit held by the Central Bank and amounting to £61,284.64; at most this will provide a dividend of about one penny in the pound. It would seem that the preferential claim of the Revenue Commissioners will absorb all other available funds. The effect, accordingly, of any reduction in the Liquidator's remuneration would only be to augment the amount payable to the Revenue; it would be of no advantage to any other creditors.

7 For the purpose of each application for an order for the payment of fees, the Liquidator, in the grounding affidavit, exhibited a report covering the relevant period in respect of which fees were claimed on the second application (period from 16th October 1982 to 15th April 1983) the resume of the liquidation stated:-

"Previously, it had been considered appropriate to apply to the High Court under the provisions of section 245 of the Companies Act, 1963for an examination of the executive directors, Patrick Gallagher and John Cousins. However, in view of the lack of funds, it is now considered more appropriate to proceed with a report to the Court outlining where breaches of the Companies Act, 1963and of the Central Bank Act, 1971may have taken place. It is intended to seek the direction of the Court as to whether these breaches should be referred to the Director of Public Prosecutions. A considerable amount of time has been spent on the preparation of this report but it is still in its early drafting stages."

8 In the like resume in respect of the next application (16th April 1983 to 15th October 1983) it is stated under the heading of "Officers' Conduct":-

"It appears that in the conduct of the Bank's affairs, offences may have been committed by its officers. Detailed scrutiny of all major aspects of the business has been carried out and a report is in the final drafting stages. In view of the seriousness of this matter, a very large amount of time and effort has been devoted to it. It is expected that the report will be submitted to the Court this term."

9 Similarly in that dealing with the period from the 16th October 1983 to the 15th April 1984 it was stated:-

"A substantial amount of time in the six month period covered by this report has been spent on the preparation and finalisation of the Report to the Court on the conduct of the officers of the Bank. The hearing in relation to the Report took place on the 9th April 1984 and the matter was adjourned to the 7th May 1984 so that the Judge would have the time to consider in detail the contents of the Report."

"Previous reports noted that a large amount of time and effort was being devoted to the preparation of a report outlining offences which may have been committed by the officers of the Bank. As was already noted in paragraph 1, the hearing in relation to the Report took place on the 9th April 1984 and has been adjourned to the 7th May 1984."

10 On the 14th May 1984 the relevant report dated the 29th March 1984...