Re La Plagne Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 17 January 2011
• Neutral Citation: [2011] IEHC 91
• Court: High Court
• Date: 17 January 2011

[2011] IEHC 91

THE HIGH COURT

[No. 667 COS/2010]

La Plagne Ltd, In Re

IN THE MATTER OF LA PLAGNE LIMITED

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 - 2009

COMPANIES ACT 1990 S202

COMPANIES ACT 1963 S60

COMPANIES ACT 1963 S215

COMPANIES ACT 1963 S215(C)

FITNESS CENTRE (SOUTH EAST) LTD, IN RE 1986 BCLC 518 1986 2 BCC 99535

SUGAR HUT BRENTWOOD LTD & ORS v NORCROSS UNREP 12.9.2008 2008 EWHC 2634 (CH)

SASS, EX PARTE NATIONAL PROVINCIAL BANK OF ENGLAND LTD, IN RE 1896 2 QB 12

RICA GOLD WASHING CO LTD, IN RE 1879 11 CH D 36

OTHERY CONSTRUCTION LTD, IN RE 1966 1 WLR 69 1966 1 AER 145

EXPANDED PLUGS LTD, IN RE 1966 1 WLR 514 1966 1 AER 877

CHESTERFIELD CATERING CO LTD, IN RE 1977 CH 373 1976 3 WLR 879 1976 3 AER 294

CVC/OPPORTUNITY EQUITY PARTNERS LTD & ANOR v ALMEIDA 2002 UKPC 16 2002 BCC 684 2002 2 BCLC 108 2002 5 LRC 632 2002 AER (D) 348 (MAR)

COMPANIES ACT 1963 S205

MACCANN & COURTNEY COMPANIES ACTS 1963-2006 2008ED 433

IRISH TOURIST PROMOTIONS LTD, IN RE UNREP KELLY 22.4.1974 1966-75/I-J/2347

COMPANIES ACT 1963 S213(F)

COMPANIES ACT 1963 S205(3)

MACCANN & COURTNEY COMPANIES ACTS 1963-2006 2008ED 419

COMPANIES ACT 1963 S208

COMPANIES ACT 1963 S216(1)

COMPANIES ACT 1963 S213(E)

COMPANIES ACT 1963 S216

COMPANIES ACT 1963 S214

COMPANY LAW

Winding up

Compulsory winding up - Petition by 50% shareholder - Standing - Reliance on subsidiaries for financial support - Security for costs - Prima facie case - Court's discretion to refuse to wind up - Whether company insolvent - Whether company unable to pay debts as they fall due - Whether petitioner had standing as creditor or contributory - Whether reality to subsidiaries continuing to support company - Whether any liability on petitioner in respect of company - Whether contingent creditor of company - Whether prima facie case - Whether tangible interest in liquidation - Re Fitness Centre (South East) Ltd [1986] BCLC 518; Sugar Hut Brentwood Ltd v Norcross [2008] EWHC 2634, [2008] All ER (D) 69 (Sep); Re Sass [1896] 2 QB 12; In re Rica Gold Washing Company (1879) 11 Ch D 36; Re Othery Construction Ltd [1966] 1 All ER 145; Re Expanded Plugs Ltd [1966] 1 All ER 877; Re Chesterfield Catering Co Ltd [1976] 3 All ER 294 and CVC/Opportunity Equity Partners Ltd v Almeida [2002] 5 LRC 632 considered - Re Irish Tourist Promotions Ltd (Unrep, Kenny, 22/04/1974) distinguished - Companies Act 1963 (No 33), ss 60, 202, 203, 205, 213(e), 213(f), 214, 215 and 216(1) - Petition dismissed (2010/667COS - Laffoy J - 17/01/2011) [2011] IEHC 91

In re La Plagne Ltd

Facts: The proceedings were initiative by a petition presented by a shareholder of a company, Mr. Fraher, for an order that the company be wound up pursuant to the provisions of the Companies' Acts 1963 to 2jk003. The petition was resisted by the other fifty percent shareholder. The basis invoked for the winding up was that the company was insolvent and unable to meet its liabilities. It was contended that the petitioner did not have standing to seek the compulsory winding up as a contingent or prospective creditor or as a contributory and that in any event, the company was not insolvent. A loan to AIB was due for an amount in excess of Eur 2,117,413. The three retail subsidiaries of the company were trading.

Held by Laffoy J. that there would be an order dismissing the petition. It would be unjust to allow Mr. Fraher to "pull the plug" on the basis of an alleged insolvency of the company which had contrived contrary to an agreement. There was an alternative remedy which he could pursue which gave the Court a lot more options than making a compulsory winding up order. Mr. Fraher did not have sufficient interest to maintain the petition as a contingent creditor. The Court had residual doubts as to whether Mr. Fraher had standing as the owner of full paid-up shares to maintain a petition solely on the grounds that the company was unable to pay its debts.

Reporter: E.F.

1 Judgment of Miss Justice Laffoy delivered on the 17th day of January, 2011.

1. The proceedings

2 2 1.1 These proceedings were initiated by a petition presented on 26 ^th November, 2010 by John Fraher (Mr. Fraher), who is a fifty per cent shareholder of La Plagne Ltd. (the company), for an order that the company be wound up by the Court under the provisions of the Companies Acts 1963 to 2009. The petition has been resisted by the other fifty per cent shareholder of the company, John F. Ronan (Mr. Ronan).

3 3 1.2 In the petition Mr. Fraher is described as a contingent and/or prospective creditor of the company and as a contributory of the company. The only basis on which he contends that the company should be wound up, as set out in the petition, is that the company "is insolvent having an excess of liabilities over assets and is unable to meet its liabilities as they fall due for payment".

4 4 1.3 The grounds on which Mr. Ronan contends that a winding up order should not be made, in outline, are that Mr. Fraher does not have standing to seek the compulsory winding up of the company either as a contingent or prospective creditor or as a contributory and that, in any event, that the company is not insolvent.

5 5 1.4 The evidence on the substantive issues on which the petition was heard on 20 ^th and 21 ^st December, 2010 comprised:

6 (a) the verifying affidavit sworn by Mr. Fraher on 1 ^st December, 2010 and the exhibits referred to therein;

7 (b) the replying affidavit sworn by Mr. Ronan on 17 ^th December, 2010 and the exhibits referred to therein;

8 (c) an affidavit sworn by Gerard O'Mahoney, a partner in the firm of Deloitte and Touche, Chartered Accountants, who are financial advisers to Mr. Ronan, on 17 ^th December, 2010 and the exhibits referred to therein; and

9 (d) an affidavit of Kevin Nolan, Certified Public Accountant, of the firm of Westboro Partners, who are business and financial advisers to Mr. Fraher, sworn on 20 ^th December, 2010 and the exhibits referred to therein.

10 6 1.5 The formalities in relation to the proposed winding up, for example, vouching the advertising of the petition, the consent of the proposed official liquidator, an affidavit of his suitability and suchlike were also before the Court. I am satisfied that the formal proofs are in order.

2. The company

11 2 2.1 The company was incorporated on 4 ^th May, 2004. Its primary object is to "invest, manage, acquire, hold property, debentures, debenture stock, commodities, preference and ordinary stocks and shares of any class or description" and to "act as an investment, holding company and anything ancillary to holding companies". Accordingly, the company is a holding company which has never traded. Its authorised share capital is €1 million divided into 1 million shares at €1 each. Only two shares have been issued, one of which is owned by Mr. Fraher and the other by Mr. Ronan. Mr. Ronan is the secretary of the company and Mr. Fraher and Mr. Ronan are its only directors. Their relationship has deteriorated in recent times. These are the third proceedings indirectly or directly connected to the company in which they have been involved and which had been before this Court. The first was a petition by Mr. Fraher to wind up one of the company's subsidiaries, Peleton Developments Ltd. (Peleton Developments). That petition was not opposed by Mr. Ronan. A winding up order was made on 18 ^th October, 2010 (Record No. 2010/497 COS). The second was an application by Mr. Ronan against the company, three of its subsidiaries and Mr. Fraher for an order pursuant to s. 202 of the Companies Act 1990 (Record No. 2010/561 COS). Those proceedings were struck out by order of the Court made on 12 ^th November, 2010.

12 3 2.2 The company's only assets are its shareholdings in its subsidiary companies. There are five subsidiaries, namely:

(a) Peleton Developments.

13 This company is a wholly owned subsidiary of the company. Prior to its liquidation, it was involved in construction and development. A measure of the extent of the breakdown of the relationship of Mr. Fraher and Mr. Ronan is that each has filed a separate statement of affairs in the winding up of Peleton Developments Ltd. According to Mr. Fraher there is deficiency of in excess of €1.679m in that company, whereas Mr. Ronan puts the deficiency at €0.681m. Both recognise that the company is an unsecured creditor in the sum of €36,394 of Peleton Developments. However, they diverge on the amount of the unsecured debt of one of the other subsidiaries of the company, P. & S. Kavanagh (Thomastown) Ltd. (Thomastown), Mr. Ronan putting that debt at in excess of €1.194m and Mr. Fraher putting it at in excess of €1.491m. Because of the divergence between Mr. Fraher and Mr. Ronan as to the affairs of Peleton Developments and the state of the evidence before the Court on this petition, in my view, it would be pure speculation to make any assumption as to the dividend, if any, payable to the company or to Thomastown out of the assets of Peleton Developments. In the context of the issues now before the Court, in my view, it would serve no useful purpose to consider the detail of the position of Peleton Developments further, while noting Mr. Fraher's contention that the insolvency of Peleton Developments impairs the ability of Thomastown to support the company.

(b) Clerihan Developments Ltd. (Clerihan).

14 This company, which is involved in property development, is also a wholly owned subsidiary of the company. Although no steps have been taken to wind up Clerihan, it is common case that it is not in a position to discharge the debt it owes to its associated company, Peleton Developments, which, although there is no consensus between Mr. Fraher and Mr. Ronan as to its amount, is in excess of €200,000. Therefore, it is reasonable to infer that...