Revenue Commissioners v Fitzpatrick

JudgeMs. Justice Murphy
Judgment Date21 July 2015
Neutral Citation[2015] IEHC 477
Docket Number[2014 No.391 COS]
CourtHigh Court
Date21 July 2015

[2015] IEHC 477


Murphy J.

[2014 No.391 COS]



Company – The Companies Act, 1963 – Voluntary liquidation – Remuneration of liquidator – Removal of liquidator – Good cause

Facts: The applicant being the preferential creditors of the company in voluntary liquidation, for which the respondent had been appointed as voluntary liquidator, sought an order that the respondent should refrain from further proceedings with a legal action in the name of said company. The applicant also sought an order for removal of the liquidator for the cause shown pursuant to s. 277 of the Companies Act, 1963. The applicant contended that the respondent had acted unlawfully by getting his remuneration fixed by the creditors at the first instance instead of the Committee of Inspection as envisaged under s. 269 of the said Act of 1963. The applicant contended that there existed several causes justifying the removal of the liquidator.

Ms. Justice Murphy granted an order for the removal of the liquidator. The Court held that it enjoyed a supervisory role in voluntary liquidations under s. 280 of the Act of 1963. The Court was of the view that the applicant had to show a good cause for the removal of the liquidator, which would not be limited to claiming misconduct or personal unfitness but extended to show due cause that was to be measured by reference to real and honest interests of the liquidation. The Court found that in the subject case, the liquidator had acted arbitrarily and dishonestly without consultation with the Committee of Inspection since the beginning. The Court held that the liquidator had acted contrary to the interests of the creditors by not completing the transaction of sale of single asset of the company and set his remuneration at an exorbitant rate, which was totally unjustified. The Court further noticed that the fact that the failure of the liquidator in producing an estimate of accounts showing the work done by him in order to escape assessment by the Committee of Inspection would lean the balance in favour of the applicant that the liquidator had not discharged his function efficiently and appropriately in the interest of the company and thus, the removal of the liquidator under s. 277 of the Act of 1963 would be an appropriate remedy.

Judgment of Ms. Justice Murphy delivered the 21st day of July, 2015

This is an application by the Revenue Commissioners, in their capacity as preferential creditors of Ballyrider Limited (in voluntary liquidation) for various directions from the Court in respect of the liquidation. They seek directions pursuant to s. 280 of the Companies Act, 1963 that the respondent, who is the voluntary liquidator of Ballyrider Limited, refrain from further proceeding with a legal action in the name of Ballyrider Limited; that certain costs, charges, expenses and remuneration were not properly incurred in the liquidation within the meaning of s. 281 of the 1963 Act and either in the alternative or in addition to those reliefs they seek the removal of the respondent as voluntary liquidator for cause shown pursuant to s. 277 of the 1963 Act.


Ballyrider Limited (in voluntary liquidation) (‘the Company’) is a limited liability company whose business included the ownership of the Hazel Hotel in Monasterevin, Co. Kildare. On 19th November, 2010 it was resolved that the company be wound up by voluntary liquidation. The respondent was appointed voluntary liquidator by a creditors' meeting held the same day and a Committee of Inspection was appointed pursuant to s. 168(1) of the Companies Act 1963. The Hazel Hotel was the Company's main asset and was the subject of a charge in favour of Allied Irish Bank pursuant to which AIB were owed €237,346, at the date of the liquidation on 19th November, 2010, according to the Company's statement of affairs.


On 11th May, 2011, the respondent held an auction to sell the Hazel Hotel at which a sale was agreed for a price of €630,000. A deposit of €34,000 was provided by the purchaser, a Mr. Phibbs, and the sale was to close by 8th July, 2011. However, Mr. Phibbs had difficulty raising the balance of the funds and it appears that on or about 3rd June, 2011 the respondent through his solicitor sought counsel's opinion on proceeding against Mr. Phibbs, and that advice was apparently received around 8th June, 2011.


On 15th May, 2011, the liquidator submitted a report to the Office of the Director of Corporate Enforcement, as was then required under section 56(1) of the Company Law Enforcement Act 2001.


On 14th June, 2011, Ms. Noreen Considine, the applicant's representative on the Committee of Inspection wrote to the respondent via email, to request that he call a meeting of the Committee of Inspection. The respondent replied, on 4th July, 2011, and stated that a meeting would not be beneficial pending the outcome of the sale of the property. The sale of the hotel, due to close on 8th July, 2011, had by this stage fallen through. The applicant did not press the issue at that stage.


Following re-advertisement of the premises, a new buyer was found in August 2011 for a reduced purchase price. The price on the contract is €449,000. Prior to the completion of the sale agreement, the respondent carried out certain works which he later informed the Committee of Inspection were necessary to make the hotel fit for purpose, including the repairing of the roof, heating repairs, certain bedroom repairs and dealing with certain sewerage problems. He did not notify, nor did he seek prior approval of the Committee of Inspection, for these dispersements.


A sale agreement was entered into with the second purchaser on 7th November, 2011. According to the information provided by the respondent, the majority of the Company's equipment, fixtures and fittings were included in this sale. The sale agreement was accompanied by an agreement, conditional on the main sale of the hotel, that Mr. John Kelly and Ms. Margaret Kelly, directors of the Company, would sell certain lands to the purchaser and the respondent liquidator would sell certain lands owned by the Company to Ms. Kelly for €15,000. These lands apparently formed part of Ms. Kelly. Again the Committee of Inspection was not consulted about this arrangement. There are discrepancies as to the purchase price of the hotel. While the sale agreement, of 7th November, 2011, lists the price at €449,000, the respondent later informed the Committee of Inspection, on 27th February, 2013, that the hotel had in fact been sold for €479,000, while a letter sent from the auctioneer Matt Dunne & Associates on behalf of the respondent, dated 8th September, 2011, records the purchase price as €480,000. The respondent's explanation is that while the original price agreed was €480,000, a discount of €1,000 was given in respect of damage to the boiler caused by vandals which only came to light prior to the closing of the sale. The price of €479,000, ultimately notified to the Committee of Inspection, apparently included €30,000 due to Mr. Kelly a director of the Company in respect of the sale of property owned by him to the new purchaser of the hotel.


According to the respondent in his first affidavit, the proceeds of the sale, along with the deposit of the original purchaser, Mr. Phibbs, were retained by the respondent's solicitor, Mr. Tobin, in his client bank account, less €10,000 retained by the auctioneer, giving a total sum of €503,000 From that sum, €264,556.48 was paid to the secured creditor, Allied Irish Bank. This included interest on the secured sum to the date of payment and a fee of €7,500 plus VAT which Allied Irish Bank then paid to the liquidator as a fee for the realisation of their security. A sum of €166,000 was transferred to the liquidator's account. This leaves an apparent shortfall of €72,000 at least some of which was used to discharge Mr. Tobin's legal fees. The Court has found it difficult to unravel, in the absence of the furnishing of proper accounts, what precisely was paid to Mr. Tobin. On the basis of the respondent's second affidavit, he still had around €72,000 in his account after the payments made to the bank and to the liquidation fund but according to the respondent's affidavit of 16th January, 2015, on 30th March, 2012, the respondent made a payment from the liquidation bank account to Mr. John Tobin in the amount of €24,001.90. Until such time as full detailed itemised accounts are produced by the liquidator, this matter will not be clarified. The Court notes in this regard that a report of a cost accountant prepared at the instigation of the liquidator, gives different figures in respect of the payment to Mr. Tobin than those provided by the liquidator himself.


On or about 24th January, 2012 the respondent initiated proceedings against the original purchaser, Mr. Phibbs, for non-performance of the contract for sale entered into in May 2011. The purpose of these proceedings was to seek damages of €150,000, being the difference between the original purchase price of €630,000 and the €479,000 for which the property was eventually sold. The Committee of Inspection, having yet to meet were not informed of the initiation of such proceedings.


On 1st June, 2012, Ms. Considine again emailed the respondent to request that he call a meeting of the Committee of Inspection. On 14th June, 2012, Ms. Considine again emailed the respondent to request that he call a meeting of the Committee of Inspection. According to the averments of Ms Considine, she received no response. Meanwhile, in July, 2012, Mr. John Tobin was suspended from practising as a solicitor, having a short time earlier, according to the...

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