Tower Trade Finance (Ireland) Ltd

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Ms Justice Costello,Noonan J,Meenan J
• Judgment Date: 17 February 2025
• Neutral Citation: [2025] IECA 37
• Docket Number: [2024 No. 239]

In the Matter of Tower Trade Finance (Ireland) Formerly in Examinership Under Part Ten of the Companies Act 2014

and

In the Matter of Deal Partners Logistics Ltd Formerly in Examinership Under Part Ten of the Companies Act 2014

[2025] IECA 37

The President

Noonan J

Meenan J

[2024 No. 239]

COURT OF APPEAL

CIVIL

[approved]

Examinership – Remuneration – Sanction – Appellant seeking order sanctioning examinership costs – Whether sanctioning examinership costs would be prejudicial to the creditors of the companies

Facts: The appellant, Mr McDonald, on 17 February 2023, was appointed examiner to two related companies, Tower Trade Finance (Ireland) Ltd and Deal Partner Logistics Ltd. He acted as examiner for the companies between February and May 2023. Proposed schemes of arrangement were not approved by the creditors and the companies entered into liquidation. The examiner was appointed liquidator. The examiner applied for orders approving the remuneration and costs of the examinership and approving payment out of the assets of the companies. The High Court refused to sanction any examinership costs on the grounds that: (i) the directors had represented to the court at the hearing of the petition that funds would be provided to cover the costs of the examinership; (ii) the examiner and his solicitor had not accurately described this to the court on their application for costs; and (iii) sanctioning the examiner’s costs would be prejudicial to the creditors of the companies. The examiner appealed to the Court of Appeal. He accepted that on an appeal against a costs order, he must show that the High Court’s order was “outside the range of judgment calls which were open” to it (Ryan v Dengrove [2022] IECA 155 and O v Minister for Justice & Equality [2021] IECA 293). He asserted eight ways in which the High Court erred, such that the order satisfied that test.

Held by Costello P that neither the failure of the examiner to pursue the directors in relation to the representations of their counsel to the court at the hearing of the petition nor the conduct of the application for the costs and remuneration of the examinership warranted the refusal to award any sum for the costs and remuneration. Costello P held that the conduct giving rise to concern fell considerably below that in Re Wogan’s of Drogheda (No. 3) and was “outside the range of judgment calls which were open” to the High Court to make on the application. Furthermore, in the interests of fair procedures, Costello P held that had the High Court been perturbed that the conduct in advancing the application for costs and fees without referring to the submissions for counsel for the petitioners, and thereafter the failure to file a corrective affidavit, was of such concern, the High Court ought to have invited the examiner to address those concerns; the failure to afford the solicitor and the examiner an opportunity to address the concerns of the High Court resulted in an unfair hearing and would itself justify allowing the appeal in the circumstances. Costello P held that the High Court erred in holding that the examiner could seek to recover the costs of the examinership from the companies’ directors based upon the submission of their counsel to the court at the hearing of the petition; there was no possible legal basis for the examiner to personally bring a claim against the directors to secure the payment of his fees.

Costello P believed it was appropriate to set aside the order of the High Court and to make the order sought in the notice of motion sanctioning the examiner’s remuneration costs and expenses and directing payment out of the companies’ assets.

Appeal allowed.

JUDGMENT ( Ex tempore) of Ms Justice Costello delivered on the 17 ^th day of February 2025

1 On the 17 February 2023, Mr Declan McDonald (“the Examiner”) was appointed examiner to two related companies, Tower Trade Finance (Ireland) Ltd and Deal Partner Logistics Ltd (“the companies”). He acted as Examiner for the two companies between February and May 2023. Proposed schemes of arrangement were not approved by the creditors and the companies entered into liquidation. The Examiner was appointed Liquidator.

2 The Examiner applied for orders approving the remuneration and costs of the examinership and approving payment out of the assets of the companies. The members of the Committee of Inspection of the companies were put on notice of the application. Three members of the committee consented to the application and one member did not respond. They did not attend the application in the High Court.

3 One member of the Committee of Inspection (Mr Shanley) asked that the court's attention be drawn to his recollection that the court sanctioned the examinership subject to a commitment by the directors to contribute €150,000 to specifically be used to offset examinership costs. The Examiner's solicitor responded, setting out his own recollection, which was that the €150,000 was to be used to provide working capital as and when required and not to defray examinership costs. The court asked for a transcript of the DAR of the hearing of the petition.

4 After reviewing the transcript, while the court did not take issue with the amount of costs sought or the work done in the examinership, the court, nevertheless, refused to sanction any examinership costs on the grounds that:

The High Court judge was expressly informed that if he declined to make the order sought, the Examiner would have to bear the costs himself, and that, counsel submitted, would require impropriety or some exceptional feature for the court to take that course of action.

• (i) The directors had represented to the court at the hearing of the petition that funds would be provided to cover the costs of the examinership.

• (ii) The Examiner and his solicitor had not accurately described this to the High Court on their application for costs.

• (iii) Sanctioning the Examiner's costs would be prejudicial to the creditors of the companies.

5 The matter which caused the High Court concern and led to it refusing the application in its entirety arose as follows. The Examiner swore the affidavit grounding the application for payment of fees on 8 ^th May 2024. He made no reference to the hearing of the petition before the High Court. The application was sent to the four members of the Committee of Inspection of Tower Trade Finance Ireland Ltd for their approval. One member, Mr Kieran Shanley, emailed the Examiner's solicitor on 13 ^th June 2024, stating that he agreed to the order being made in relation to the examinership costs. He then continued:

“However, as discussed, I would like it mentioned before the court on the 24 ^th of June next that I was in attendance at the hearing on the 17 ^th of Feb 2023 and have a very clear recollection that Justice Brian O'Moore sanctioned the examinership process subject to a commitment from Mr Diggins and Buckley [the directors of the two companies] of a combined contribution of personal funds amounting to €150k to be specifically used to offset examinership costs..

Although this may not have been reflected in the courts (sic) written judgement (sic), I would like it brought to the court's attention on the day..”

6 The Examiner's solicitor, Mr Gavin Simons, swore an affidavit on 21 ^st June 2024. He averred that three members of the Committee of Inspection, including Mr Shanley, confirmed their agreement to the orders sought being made. He drew the court's attention to Mr Shanley's email, and he replied as follows:

“5. The sum of €150,000 was mentioned in Court at the hearing of the Petition but neither I nor the former Examiner believe there to have been a binding commitment from the directors to provide this sum unconditionally or that the Court relied on this sum being paid by them when appointing the Examiner. Indeed, the Court Order made on 17 February 2023, makes no mention of any such commitment or of the sum of €150,000.

6. In the former Examiner's first report to the Court, he noted as follows,

‘The directors have committed €150,000 to fund the costs and ongoing operation of the business and this would provide the entities with sufficient resources to operate during the examinership period’.

7. Therefore, I believe that it is clear that the suggestion of funding up to an amount of €150,000 was not to defray the costs of the examinership process but to provide working capital as and when required. As matters transpired, the only working capital requirement during the examinership was in the sum of €35,000, which was provided by the directors personally.”

7 A perusal of the transcript showed that this averment was incorrect. At the hearing of the petition counsel for the petitioner said:

“The next question to ask is, well, what prejudice would be wrought by the Court in appointing an Examiner? And in that regard, Judge, Mr Diggins and Mr Buckley are committed to the investment into the company of €150,000 if the examiner is appointed on day one. That is intended to cover cashflow for the year. The Court will have seen, … in the report, the cash flows… That €150,000 on the cashflows isn't used in the trading. It's available. And if it were the case that an examiner were to come in, be appointed, that €150,000 wouldn't (sic) be available in the first instance to pay or contribute towards the payment of its fees. It is a significant amount of money, showing the face [faith] of Mr Diggins and Mr Buckley in the enterprise, and one which either eliminates or considerably reduces and alleviates the financial prejudice that might be brought by an examinership. One of, yes, a failed examinership. The principal way in which the creditors in this case would be damnified would be by the imposition of a layer of legal and administrative costs which would come from them. But €150,000 would go some considerable way to the defraying...