The Companies Act 1963 to 2012

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 04 October 2017
• Neutral Citation: [2017] IECA 254
• Date: 04 October 2017
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2017] IECA 254 Appeal Number: 2016 123

[2017] IECA 254

THE COURT OF APPEAL

Finlay Geoghegan J.

Ryan P.

Finlay Geoghegan J.

Whelan J.

Neutral Citation Number: [2017] IECA 254

Appeal Number: 2016 123

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2012

AND

IN THE MATTER OF SECTION 316 OF THE COMPANIES ACT 1963

AND

IN THE MATTER OF KEELGROVE PROPERTIES LIMITED (IN RECEIVERSHIP)

BETWEEN

BRIAN CUNNINGHAM

AND

KEELGROVE PROPERTIES LIMITED

APPLICANTS/APPELLANTS

AND

BANK OF SCOTLAND PLC, TOM KAVANAGH

AND

KENDLEBELL MID-WEST LIMITED

RESPONDENTS

Mortgage – Appointment of receiver – Sale by receiver – Appellants seeking to appeal against High Court order – Whether trial judge was correct in refusing the appellants’ application

Facts: The appellants, Mr Cunningham and Keelgrove Properties Ltd (the Company), appealed to the Court of Appeal against an order made by the High Court (Murphy J) on 8th February, 2016 in which she refused an application which had been brought on a notice of motion dated 21st August, 2014 seeking certain directions pursuant to s. 316 of the Companies Act 1963. The directions which were sought on the notice of motion fell under three categories: first those relating to the validity of a mortgage granted, or a purported legal mortgage granted by the Company on 31st July, 1997 to the predecessor of the first respondent, Bank of Scotland plc; the second related to the validity of the appointment of a receiver on 14th December, 2012 over certain properties of the Company; and third, those relating to a purported sale by the receiver acting as agent for the Company or, perhaps more accurately, the Company acting through its receiver, to the second respondent, Kendlebell Mid-West Ltd, and subsequent actions taken by Kendlebell to enter into possession of certain of the properties.

Held by Finlay Geoghegan J that the trial judge was correct in refusing the application of both Mr Cunningham and the Company under s. 316 of the Companies Act 1963.

Finlay Geoghegan J held that the appeal should be dismissed.

Appeal dismissed.

JUDGMENT (ex tempore) delivered on the 4th day of October, 2017 by Ms. Justice Finlay Geoghegan

1 This is an appeal brought by Mr Brian Cunningham and Keelgrove Properties Limited against an order made by the High Court (Murphy J.) on 8th February, 2016 in which she refused an application which had been brought on a notice of motion dated 21st August, 2014 seeking certain directions pursuant to s. 316 of the Companies Act 1963. I emphasise that the application was brought pursuant to s. 316 of the Companies Act 1963 and the issues which have arisen on appeal relate to the nature of the application that was brought under this statutory provision. That provision has of course been repealed and replaced by s. 438 of the Companies Act 2014 Act but this appeal relates to an application which was brought under s. 316 and therefore the Court is considering, and the entire appeal was premised on it considering, s. 316 of the 1963 Act as amended by ss. 171 and 172 of the Companies Act 1990.

2 The reasons for which the trial judge refused the application are set out in a written judgment which she delivered on 1st February, 2016 [2016] IEHC 65. The directions which were sought on the notice of motion are essentially capable of being divided into three categories: first those relating to the validity of a mortgage granted, or a purported legal mortgage granted by Keelgrove Properties Limited (to which I will refer as ‘the Company’ henceforth) on 31st July, 1997 to the predecessor of Bank of Scotland plc in these matters; the second relate to the validity of the appointment of a receiver on 14th December, 2012 over certain properties of the Company; and then, third those relating to a purported sale by the receiver acting as agent for the Company or, perhaps more accurately, the Company acting through its receiver, to the second named respondent, Kendlebell Mid-West Limited and subsequent actions taken by Kendlebell to enter into possession of certain of the properties.

3 As I have indicated, the application was brought pursuant to s. 316 and the terms of that section are central to the issues on appeal. Section 316(1) provides:

‘(1) Where a receiver of the property of a company is appointed under the powers contained in any instrument, any of the following persons may apply to the court for directions in relation to any matter in connection with the performance or otherwise by the receiver of his functions, that is to say—

(a) (i) the receiver;

(ii) an officer of the company;

(iii) a member of the company;

(iv) employees of the company, comprising at least half in number of the persons employed in a full-time capacity by the company;

(v) a creditor of the company, and

(b) (i) a liquidator;

(ii) a contributory;

and on any such application, the court may give such directions, or make such order declaring the rights of persons before the court or otherwise, as the court thinks just.

4 As appears, a company itself, in relation to which, or in relation to property of which, a receiver is appointed is not one of the listed applicants who may exercise this statutory right, and the trial judge dismissed the application of the Company on that basis, amongst others, and in my view she was correct in dismissing the application of the Company. It is not open to the Company itself to bring an application under s. 316 in respect of a receiver appointed either to it or to its property.

5 The second applicant is Mr Cunningham, and Mr Cunningham in the five affidavits he swore in the notice of motion in the High Court identifies and puts before the Court evidence which indicates that arguably he is, and was at the time of the application:

(i.) an officer of the Company in the sense of being a director of the Company;

(ii.) a member of the Company; and

(iii.) a creditor of the Company.

And therefore, on the face of the section, he is entitled to bring the application. However, his entitlement to pursue an application is subject to s. 316(1A), and that provides:

‘(1A) An application to the court under subsection (1), except an application under paragraph (a)(i) of that subsection, shall be supported by such evidence that the applicant is being unfairly prejudiced by any actual or proposed action or omission of the receiver as the court may require.’

6 Now, the exception in paragraph (a)(i) does not apply, that is the application by the receiver. Therefore the statutory requirement is that the application of Mr Cunningham be supported by such evidence that he as the applicant is being unfairly prejudiced by any actual or proposed action or omission of the receiver as the Court may require.

7 The background facts, which are not in dispute, are fully set out in the trial judge's judgment and I do not propose repeating them in this short ex tempore judgment. There are certain of the facts which become relevant to a consideration of the position of Mr Cunningham as a member, creditor and director,...