Tadgh O'Connell Heating & Plumbing Ltd v Barry Galvin

• Jurisdiction: Ireland
• Judge: Mr. Justice Gilligan
• Judgment Date: 04 December 2012
• Neutral Citation: [2012] IEHC 521
• Court: High Court
• Docket Number: [No. 606 COS/2012]
• Date: 04 December 2012

[2012] IEHC 521

THE HIGH COURT

[No. 606 COS/2012]

Tadgh O'Conaill Heating & Plumbing Ltd (in voluntary liquidation) v Galvin t/a Barry Galvin & Co Solicitors

IN THE MATTER OF THE COMPANIES ACT 1963 -2009

AND IN THE MATTER OF TADGH O'CONAILL HEATING & PLUMBING LIMITED (IN VOLUNTARY LIQUIDATION) AND IN THE MATTER OF SECTION 244(A) OF THE COMPANIES ACT 1963 AS INSERTED BY SECTION 125 OF THE COMPANYS ACT 1990, AND IN THE MATTER OF SECTION 280 OF THE COMPANIES ACT 1963 AND IN THE MATTER OF SECTION 282B OF THE COMPANIES ACTS 1963

ANTHONY J. FITZPATRICK AS LIQUIDATOR OF TADGH O'CONAILL HEATING & PLUMBING LIMITED (IN VOLUNTARY LIQUIDATION)

APPLLICANT

AND

BARRY GALVIN PRACTISING IN THE STYLE AND TITLE OF BARRY GALVIN & COMPANY SOLICITORS

RESPONDENT

COMPANIES ACT 1963 S244A

COMPANIES ACT 1990 S125

COMPANIES ACT 1963 S280

COMPANIES ACT 1963 S282B

COMPANY LAW ENFORCEMENT ACT 2001 S56

COMPANIES ACT 1963 S281

COMPANIES ACT 1963 S244A(A)

COMPANIES ACT 1963 S244A(B)

COMPUSTORE LIMITED (IN VOLUNTARY LIQUIDATION), IN RE 2007 3 IR 556 2006/11/2211 2006 IEHC 52

GALDAN PROPERTIES LTD (IN LIQUIDATION), IN RE 1988 IR 213 1988 ILRM 559 1988/2/274

HALVANON INSURANCE CO LTD v CENTRAL REINSURANCE CORP 1988 1 WLR 1122 1988 3 AER 857

LEGAL PRACTITIONERS (IRL) ACT 1876 S3

LISMORE BUILDINGS LTD (IN RECEIVERSHIP) v BANK OF IRELAND FINANCE LTD & ORS (NO 2) 2000 2 IR 316 1999/16/4763

COMPANY LAW

Liquidation

Insolvent liquidation - Solicitor - Legal fees and outlay - Priority - Undertaking - Lien - Proceedings brought by company prior to liquidation - Whether solicitor under duty to return case files - Whether solicitor has lien over costs recovered in proceedings continued by liquidator - In re Galdan Properties Ltd (In Liq) [1988] IR 213, Re Compustore Ltd (in liquidation) [2006] IEHC 52, [2007] 3 IR 556 and Halvanon Co. Ltd v Central Reinsurance Corpn [1988] 1 WLR 1122 considered; Lismore Buildings Ltd v Bank of Ireland Finance Ltd (No 2) [2000] 2 IR 316 distinguished - Legal Practitioners (Ireland) Act 1876 (39 & 40 Vict, c 44), s 3 - Companies Act 1963 (No 33), ss 244A and 281 - Respondent granted undertaking (2012/606Cos - Gilligan J - 4/12/2012) [2012] IEHC 521

Re Tadgh Ó Conaill Heating: Fitzpatrick v Galvin

Facts: The applicant was the liquidator assigned to Tadgh O'Conaill Heating & Plumbing Limited (the "Company") on the 12th July 2011. The respondent was Barry C. Galvin & Son Solicitors who had acted for the Company in a debt collection capacity immediately before the applicant was assigned. It was their claim that they were owed €50,000 for the work they had completed.

The applicant initially approached the respondent to work on their behalf when the liquidation process began but the latter declined due to a possible conflict of interest. The respondent agreed to hand the files they held to a different solicitor on the usual condition of an undertaking as to prior costs but the applicant refused. On the 12th October 2012, the applicant wrote to the respondent requesting the files be returned as well as sending any outstanding invoices advising they would be dealt with in due course as an unsecured creditor. The respondent did not comply and following a further request, a notice of motion was brought by the applicant on the 5th November 2012 seeking an order pursuant to s. 244A of the Companies Act 1963 as inserted by s. 125 of the Company Law Amendment Act 1990 which would require the respondent to return the files that they had. The applicant also sought declaration as to whether the respondent held a solicitor's lien over the books, something the applicant rejected. The respondent on the other hand sought an undertaking from the applicant that they would be entitled to their costs if debt collection was successful against any company they'd previously been involved with.

Held by Gilligan J that at the moment a company entered the voluntary liquidation process, there was a cut off point whereby all expenses incurred prior to which cannot be considered expenses incurred in the winding up of the company pursuant to s. 281 of the Companies Act 1963. It was further held that as the current situation was a creditors' voluntary liquidation and not a receivership, the respondent's claim for a solicitor's lien over the materials was not well founded as it was a practice usually found in the latter circumstances. In this case, the solicitor would have had a lien until the presentation of the petition to wind up the Company only.

However, whilst it was obvious that the respondent no longer had a lien over the materials, there was an equitable or common law lien as to the costs and outlay which would be recovered from third party debt collection where the respondent had been originally involved in the process. The reason for this was that in completing the work on behalf of the Company, the respondent had incurred these expenses which were owed up until the point of petition to wind up the Company. The existence of a lien for that work ranked them above the secured creditors for any outlay or professional fee recovered for their work from the relevant third parties. The balance of the respondent's remuneration would then rank as an unsecured creditor in liquidation. An undertaking of the applicant was considered unnecessary.

Mr. Justice Gilligan

1 Mr Anthony J. Fitzpatrick (the applicant) was appointed liquidator of Tadgh O'Conaill Heating & Plumbing Limited (the Company) on the 12^th July, 2011, by both a Members 'Meeting and Creditors' Meeting. Barry C. Galvin & Son Solicitors (the respondent) had been acting for the Company in a number of different court proceedings, largely related to debt collection, which were instituted prior to the commencement of the voluntary liquidation and which were still in being when the Company entered into voluntary liquidation. Mr Galvin, practising under the style and title of Barry C. Galvin & Son Solicitors, avers by affidavit dated the 7^th of November, 2012, that fees in the nature of €50,000 were outstanding as of June, 2012 by the company for matters in which the respondent Solicitors had acted on its behalf, including several sets of debt collection proceedings in which the respondent has expended outlay and incurred professional fees.

2 The applicant did attempt to retain the respondent as solicitor to collect the outstanding debts on his behalf as liquidator of the Company, but the respondent declined to accept this proposal due to a perceived conflict of interest. The respondent solicitor was prepared to hand over the files to a newly appointed solicitor on the basis of the usual undertaking as to prior costs but the applicant would not agree to this course of action.

3 By letter dated 12^th October, 2012, the applicant requested the return of the files held by the respondent Solicitors in the matters for which the latter had been acting for the Company prior to the commencement of the voluntary liquidation. Invoices for work carried out by the respondent Solicitors were also requested and it was stated that these would be admitted within the liquidation in the normal course, as an unsecured creditor. A further letter dated 31^st October, 2012, from the applicant to the respondent Solicitors emphasised the claim for the return of the files in question and noted that legal redress would be sought should that return not be realised by 5pm on that date. This request was not complied with, the respondent raising an issue as to a solicitors lien over the files.

4 By Notice of Motion dated 5^th November, 2012, the applicant sought an order pursuant to s. 244A of the Companies Act 1963 as inserted by s. 125 of the Company Law Amendment Act 1990, directing Mr. Barry Galvin, principal of the respondent Solicitors, to deliver the books, accounts, records, ledger cards, invoices and other papers of like nature relating to accounts or trade of the Company to the applicant. The applicant also sought a declaration that neither Mr. Galvin nor the firm under whose style and title he practises are entitled to a Solicitor's lien over any of the documents. Directions were also sought under s. 280 of the Companies Act 1963, as to whether it is appropriate to apply to court for leave to examine Mr. Galvin pursuant to s. 282B of the Companies Act 1963, in relation to any further books and records of the Company which Mr Galvin may have in his possession or power belonging to the Company.

5 The applicant avers that these proceedings were issued in order to ensure that the collection of several outstanding balances owed to the Company is progressed as well as to ensure that a s. 56 Report is submitted when required. The applicant expressed concern that, should this not happen, the debts would become statute barred or the debtors themselves may enter liquidation. The applicant also denied the existence of a Solicitor's lien over the documents, as claimed by the respondent. At the hearing of this issue it became clear that submissions were required on two net issues. Firstly, the existence or not of a Solicitors lien, in favour of the respondent, over the files related to the debt collection proceedings and secondly, the entitlement of the respondent to an undertaking by the applicant as...