Re Tuskar Resources Plc

• Jurisdiction: Ireland
• Court: High Court
• Judgment Date: 26 February 2001
• Docket Number: [2001 No. 41 Cos.]
• Date: 26 February 2001

High Court

[2001 No. 41 Cos.]

Re Tuskar Resources plc.

In the matter the Companies Acts, 1963 to 1999 and in the matter of Tuskar Resources plc

Cases mentioned in this report:-

In re Atlantic Magnetics Ltd. (in receivership) [1993] 2 I.R. 561.

Re Wogans (Drogheda) Ltd. (Unreported, High Court, Costello J., 9th February, 1993).

Company law - Examiner - Appointment - Subsidiary - Whether reasonable prospect of survival - Whether court could appoint as examiner the person who gave independent accountant's report - Whether court should refuse to hear petition for failure to exercise utmost good faith - Whether necessary to detail evidence grounding opinions in independent accountant's report - Whether petitioner was "going concern" - Whether petitioner's subsidiary was "related company" - Whether proposal to continue petitioner's undertaking proposed to facilitate survival or introduce new undertaking to petitioner - Companies (Amendment) Act, 1990 (No. 27), ss. 2, 3(3), 3(3A), 4 and 4A - Companies (Amendment) (No. 2) Act, 1999 (No. 30), ss. 7, 12, and 13.

Petition.

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

By petition presented on the 2nd February, 2001, the petitioner petitioned for, inter alia, an order pursuant to s. 2 of the Companies (Amendment) Act, 1990, as amended by s. 5 of the Companies (Amendment) No. 2) Act, 1999, appointing Jason Sheehy as interim examiner and / or as examiner of the company.

On the 2nd February, 2001, the High Court (McCracken J.) made interim orders appointing Jason Sheehy as interim examiner until the 19th February, 2001, for the purpose of examining the state of the company's affairs and performing such duties in relation to the company as required by the provisions of the Companies (Amendment) Act, 1990, and the Companies (Amendment) (No. 2) Act, 1999, and ordered that notice of the presentation of the petition, the date of hearing of same and the appointment of the interim examiner be advertised not less than one week before the hearing on the 19th February, 2001, and that notice of same be served upon Allied Energy Limited, Cavendish and Green Sea.

The petition was heard by the High Court (McCracken J.) on the 19th, 20th and 21st February, 2001.

The sole activity of Tuskar Resources plc. ("the petitioner") was in Nigeria and this was conducted through a subsidiary ("the subsidiary").

G.S. obtained a world-wide mareva injunction against the petitioner in the United Kingdom and petitioned for the winding up of the petitioner on the grounds that G.S. was owed $11,000,000.00 in respect of services provided by it.

The petitioner disputed the amount due but did not deny that there was a large sum of money owing.

The petitioner presented a petition for the appointment of an interim examiner or examiner and the High Court (McCracken J.) granted the petition for the appointment of an interim examiner. The winding up petition was adjourned pending the hearing of the petition for the appointment of an examiner.

The subsequent application for the appointment of an examiner was opposed by G.S.

R.T.C. offered to assist the petitioner and proposed a reverse take-over in which its activities would be incorporated into the petitioner, it would take a minimum of 51% of the share holding in the petitioner, would make sufficient funds available to the petitioner to pay its creditors more money than would be available in a winding up, and would make sufficient working capital available to the company to meet its ongoing needs.

Held by the High Court (McCracken J.), in refusing to appoint an examiner, 1, that, under s. 2(2) of the Companies (Amendment) Act, 1990, as amended, the court must be satisfied on the evidence before it that there was a reasonable prospect of survival of the company before it appointed an examiner.

In re Atlantic Magnetics Ltd. (in receivership) [1993] 2 I.R. 561 considered.

2. That, if the court was to be "satisfied" of a reasonable prospect of survival, it must be satisfied on the evidence before it, which was in the first instance, the evidence of the petitioner, and this was tantamount to saying that there was an onus of proof of the petitioner at the initial stage to satisfy the court that there was a reasonable prospect of survival.

3. That the court was not statutorily restricted from appointing as examiner the person who gave the independent accountant's report at the time of the petition for the appointment of an examiner.

Re Wogans (Drogheda) Ltd. (Unreported, High Court, Costello J., 9th February, 1993) considered.

4. That the court had a wide discretion under s. 4A of the Companies (Amendment) Act, 1990, to refuse to hear a petition if it appeared that, in the preparation of the petition or the independent accountant's report, or in the presentation of the petition, the petitioner or independent accountant failed to disclose information which was peculiar to the exercise by the court of its powers under the Act or had in any other way failed to exercise utmost good faith and over-optimism was not sufficient to show bad faith.

5. That the necessary contents of the independent accountant's report, as provided for in s. 3(3) of the Companies (Amendment) Act, 1990, only required an opinion as to whether the company, and the whole or any part of its undertaking, would have a reasonable prospect of survival as a going concern and a statement of the conditions which he considered were essential to ensure such survival and it did not require him to set out in detail the evidence which led him to that opinion.

6. That, because the petitioner's only undertaking was the holding of shares in its subsidiary, the petitioner was not a "going concern".

7. That the definition of a "related company", in s. 4(5) of the Companies Act, 1963, did not include a company registered outside the State because s. 4(5) stated the circumstances in which "a company is related to another company" and "company" was defined in the Companies Act, 1963, as one formed and registered under that Act or an existing one.

8. That the proposals put forward to continue the undertaking of the petitioner had nothing to do with the survival of the petitioner but proposed to introduce a new undertaking to the petitioner and this was outside the purposes of the Act.

Obiter dictum: Even if the court could appoint the same examiner to the petitioner and the subsidiary, there was no sufficient evidence before the court to show a reasonable prospect of survival of the subsidiary in terms of s. 12 of the Companies (Amendment) (No. 2) Act, 1999, and the court would not appoint an examiner.

Cur. adv. vult.

McCracken J. 26th February, 2001

This is a petition by Tuskar Resources plc. ("the company") for the appointment of an examiner pursuant to s. 2 of the Companies (Amendment) Act, 1990, as amended. The petition is being opposed by Green Sea A/S ("Green Sea"), which has presented a petition to wind up the company. The winding up petition has been adjourned pending the hearing of this petition.

Facts

The company is a public limited company with a paid up capital of U.S.$27,573,076, and has some 17,414 shareholders, and the shares have been listed on the Exploration Securities Market of the Irish Stock Exchange. Allied Energy Limited ("A.E.L.") holds approximately 46% of the issued share capital in the company. The company currently has three directors, one of whom is a Mr. Sunil...