Southern Mineral Oil Ltd ((in Liquidation)) v Cooney

JurisdictionIreland
JudgeBARRON J.,Keane J.,Lynch J.
Judgment Date22 July 1997
Date22 July 1997
Docket Number[S.C. No. 74 of 1995]
CourtSupreme Court

1998 WJSC-SC 12299

THE SUPREME COURT

Keane, J.

Lynch, J.

Barron, J.

74/95
SOUTHERN MINERAL OIL LTD & SILK OIL (IRELAND) LTD v. COONEY, COONEY & FLAHERTY
IN THE MATTER OF SOUTHERN MINERAL OIL LIMITED (INLIQUIDATION)
AND IN THE MATTER OF SILK OIL (IRELAND) LIMITED (INLIQUIDATION)
AND IN THE MATTER OF
THE COMPANIES ACT 1963

BETWEEN

SOUTHERN MINERAL OIL LIMITED (IN LIQUIDATION) AND SILKOIL (IRELAND) LIMITED (IN LIQUIDATION)
Applicants/Respondents

AND

PATRICK COONEY BRIDGET COONEY AND BRENDANFLAHERTY
Respondents/Appellants

Citations:

COMPANIES ACT 1963 S297

PRIMOR PLC V STOKES KENNEDY CROWLEY UNREP O'HANLON 11.2.1994 1994/6/1721

PRIMOR PLC V STOKES KENNEDY CROWLEY UNREP SUPREME 19.12.1995 1995/20/5287

HOGAN V JONES 1994 1 ILRM 512

O DOMHNAILL V MERRICK 1984 IR 15

TOAL V DUIGNAN (NO 1) 1991 ILRM 135

TOAL V DUIGNAN (NO 2) 1991 ILRM 140

FARMIZIER (PRODUCTS) LTD, IN RE 1995 2 BCLC 462

BIRKETT V JAMES 1978 2 AER 801

O'KEEFFE V FERRIS 1994 1 ILRM 425

O'KEEFFE V FERRIS 1997 3 IR 463, 1997 2 ILRM 161

COMPANIES ACT 1963 S298

RAINSFORD V LIMERICK CORP 1995 2 ILRM 561 1981/7/1121

RSC O.63 r1(8)

COMPANIES ACT 1963 S297(1)

STATUTE OF LIMITATIONS 1957 S11(1)(e)

O'BRIEN V KEOGH 1972 IR 144

BISS V LAMBETH HEALTH AUTHORITY 1978 2 AER 125

RSC O.52 r15

RSC O.74 r49

DOWD V KERRY CO COUNCIL 1970 IR 27

Synopsis:

Company

Fraudulent trading claim; limitation period; application to strike out claim; whether claim should be struck out on grounds of delay; whether delay on part of liquidator inordinate and inexcusable; whether delay an abuse of process; whether application brought within limitation period; discretion of court; possibility of fair trial; whether liquidator and revenue commissioners entitled to bring action in name of company; ss.297 & 298 Companies Act, 1963 Held: Relief refused; no delay on part of liquidator Supreme Court: Keane J., Lynch J., Barron J. - 22/07/1997

Southern Mineral Oil Ltd. v. Cooney

- [1997] 3 IR 549

1

JUDGMENT delivered the 22nd day of July, 1997by Keane J.

The Facts
2

The first named Appellant (hereafter "Mr. Cooney") is a retired solicitor and the second named Appellant (hereafter "Mrs. Cooney") is his wife. Mrs. cooney has been at all material times a director of Southern Mineral Oil Limited (hereafter sometimes referred to as "the first company"). Mr. Cooney was a shareholder at all material times in the first company, the only othershareholder being John Carey (hereafter "Mr. Carey"). They each held one share. Mr. Carey was also a director of the first company. The shareholders in the second company at all material times were Mr. Carey and the third-named Appellant (hereafter "Mr. Flaherty"). Neither Mr. Cooney nor Mrs. Cooney was a director or shareholder of the second company, but Mr. Cooney was one of the three guarantors of the second company's borrowing from the Bank of Ireland. Mr. Cooney also acted as solicitor to both companies at the materialtimes.

3

Both companies were engaged in the business of the sale and distribution of oil products in the midlands. On the 21st November 1988 the High Court, on the petition of the Revenue Commissioners, made an order for the compulsory winding up of both companies on the ground that they were insolvent and appointed Mr. Rupert McIlwee (hereafter "the liquidator") to be the official liquidator of both companies.

4

On or about the 1st June preceding the winding up, both companies had executed agreements which purported to transfer the debtors, goodwill and stock in trade of each company to a company then called Coach Work Limited and subsequently called Lubicrants United Limited (hereafter "LUL"). The consideration for this transfer was stated in each agreements to be the paymentby LUL of all bills, statements and invoices due and outstanding in respect of the stock in trade and the payment to the Revenue Commissioners of the sums owing to them by the two companies, excludinginterest.

5

On the 18th August 1994 (i.e. approximately five years and nine months after the order for winding up had been made) a notice of motion was served on behalf of the first company and the second company on Mr. Cooney, Mrs. Cooney and Mr. Flaherty claiming, interalia a declaration that, in the period of six months or thereabouts preceding the commencement of the winding up of the companies, each of them was knowingly a party to the carrying on of the business of the companies with intent to defraud their creditors and for other fraudulent purposes. A declaration was further sought that each of them should be personally responsible without limitation of liability for all the debts and liabilities of each of the companies. These reliefs were sought pursuant to s.297 of the Companies Act 1963.

6

Mr. Carey died prior to the institution of these proceedings.

7

On the 7th December 1994, a notice of motion was served on the liquidator on behalf of Mr. Cooney and Mrs. Cooney seeking an order dismissing the notice of motion as against them on the ground that, having regard to the circumstances deposed to in the affidavit of Mr. Cooney grounding the application, its issuing at that stage was an abuse of the processof the court. An affidavit in reply having been filed by the liquidator, the matter came on for hearing before Murphy J. on the 24th January 1995. In a reserved judgment delivered on the 10th February 1995, he refused the application.

8

A notice of appeal on behalf of Mr. Cooney and Mrs. Cooney was served on the 2nd March 1995. In accordance with directions given by the learned trial judge, points of claim (undated) were delivered on behalf of the liquidator and points of defence delivered on behalf of Mr. Cooney and Mrs. Cooney on the 19th May 1995. Arising out of the points of claim, a notice for particulars was served on behalf of Mr. Cooney and Mrs. Cooney on the 19th May 1995 but had not been replied to when the appeal came on for hearing before this court on the 30th May last.

9

In his affidavit grounding his application, the liquidator said that, immediately upon his appointment, he endeavoured to obtain possession of the books and records of each of the companies and to establish as much information as possible concerning the business and affairs of the companies immediately proceeding the winding up. He said that the two companies had their principal of business in an office in Athlone under a short term tenancy or licence agreement. They also had a number ofdistributionlocations. The first company acted as the "purchasing" company while the second company acted as the "selling" company, although it made some purchases on its own account aswell.

10

The liquidator said that the Statement of Affairs of each of the companies stated that the company had no assets or liabilities. He also said that, at the date of the agreements of June 1st, it was known, or should have been known, to the directors of the first company that it was insolvent and that, in particular, considerable sums of money were owed by it to the Revenue Commissioners in respect of arrears of tax. He said that the Statement of Affairs confirmed that (in the case of the first company) a sum of £369,875 was owed to the Revenue Commissioners. The liquidator also said that the directors of the second company should have been similarly aware that the company wasinsolvent.

11

The liquidator, in that affidavit, also said that it was apparent from an examination of the cheques journals of the two companies that cheques continued to be issued up to and including the months of October 1988 and that, accordingly, the companies were continuing to trade after the date of the purported transfer of assets. He said that it also appeared from the companies' purchases books that they were buying goods and supplies well into the month of August 1988.

12

As to LUL, the liquidator said it was promoted by largely the same persons as were involved in the first and second companies and that it appeared that no effort had been made by LUL to pay off the debts due to the Revenue Commissioners, although certain trade creditors were paid off. LUL was wound up on 31st July 1991 and Mr. Baithin Mooney was duly appointed as Liquidator. However, no returns had been filed in the liquidation and no account given as to the manner in which the assets taken over from the first and second companies had been dealt with or disposed of.

13

The Liquidator said that it appeared that Mr. Cooney was "very much in control" of the affairs of the first and second companies and appeared also to have been concerned with the affairs of LUL. As to the delay which had occurred between the winding up and the institution of the proceedings, the liquidator said that he had not completed what he described as "complex enquiries" into the affairs of the companies until the end of the 1989 and then approached the Revenue Commissioners with a view to obtaining funds for the proceedings. However, no final decision was taken by the Revenue Commissioners to fund the proceedings until September 1990. He said that the subsequent delays in issuing proceedings were due to difficultiesexperiencedin obtaining the services of junior counsel and that the delay was accordingly beyond his control.

14

In an affidavit grounding the application the subject of the present appeal, Mr. Cooney said that neither he nor his wife took an active part in the day to day management of either the first company or the second company. The day to day management of the first was conducted by Mr. Carey and of the second by both Mr. Flaherty and Mr. Carey. The solicitors for both companies at all relevant times was the firm of Fair & Murtagh of which he was a partner until he ceased practising in or about April 1989.

15

Mr. Cooney said that, following the commencement of the liquidations, he co-operated fully with all enquiries from the liquidator and that all information sought by him was furnished....

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