United Precast Concrete Abu Dhabi (L.L.C.) v SCLAD Construction Ltd
| Jurisdiction | Ireland |
| Judge | Ms. Justice Stewart |
| Judgment Date | 10 November 2017 |
| Neutral Citation | [2017] IEHC 671 |
| Docket Number | [2016 No. 282 COS] |
| Court | High Court |
| Date | 10 November 2017 |
IN THE MATTER OF SCLAD CONSTRUCTION LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2014
[2017] IEHC 671
[2016 No. 282 COS]
THE HIGH COURT
CHANCERY
Company – The Companies Act 2014 – Winding up of company – Invoking Arbitration Clause
Facts: The petitioner sought an order for putting the respondent company into liquidation pursuant to s.569 (1)(d) of the Companies Act 2014. The parties entered into agreements in relation to their construction business and a dispute arose when the respondent company had failed to pay the outstanding amount to the petitioner company.
Ms. Justice Stewart granted an order for the winding up of the respondent company. The Court held that the granting of the said order would not be in the adverse interest of the creditors. The Court objected to the contention by the respondent company that the agreements entered into by its director were not valid as he has no authority to do so. The Court noted that the bona fide acceptance of ostensible authority was sufficient to maintain the validity of an agreement. The Court also stated that the objections of the respondent company pertaining to invocation of jurisdiction and arbitration clauses were not maintainable.
The petition currently before the Court is dated 19th July, 2016, and seeks to have the respondent company put into liquidation, pursuant to s. 569(1)(d) and (e) of the Companies Act 2014, which respectively relate to an inability to pay debts and just & equitable grounds. With regard to the inability to pay debts, the petition engages s. 570(a) and (d), which respectively relate to neglect of a demand for payment and contingent/prospective liabilities. The petitioner also seeks a declaration that the respondent company's Centre of Main Interest is in this jurisdiction, that the EC Insolvency Regulation applies and that these proceedings are ‘the main proceedings’ within the meaning of Art. 3.1 of the Regulation. SCLAD was incorporated in this jurisdiction on 27th August, 1999. Its registered office is located in Kilcock, Co. Kildare, and its objects relate primarily to the construction business.
On or about 13th September and 14th October, 2010, the parties entered into five sub-contract agreements covering the manufacture, supply and installation of precast concrete elements for a school construction programme in Abu Dhabi. These agreements were fully performed by the petitioner and the parties entered into a Final Account Agreement on or about 10th April, 2012, in which SCLAD agreed to pay the petitioner a sum of 9.8 million Emirati dirhams (hereon referred to as AED). Of that sum, AED 1,857,335.28 remains outstanding. On 6th August, 2015, the petitioner issued a letter of demand in respect of this sum and warned SCLAD that a petition would be issued seeking to wind it up if the debt was not paid in 21 days. Correspondence ensued between the parties regarding the existence of legal proceedings before the courts in Abu Dhabi related to the non-payment of debts held by SCLAD. The respondent advised the petitioner to engage with the Abu Dhabi proceedings and directed it to contact an employee of SCLAD at its Abu Dhabi Office (A series of enquiries made by the petitioner revealed that this person no longer works for SCLAD and, according to the former General Manager, the Abu Dhabi Office is completely vacant). A meeting took place between the parties' representatives on 9th November, 2015, at which the respondent stated that it was unable to pays its debts as they fell due, that it has ceased operations in Abu Dhabi and that it had no plans to re-commence trading. It also stated that a sum of money had been lodged with the courts in Adu Dhabi, which was being used to pay off creditors. By letter dated 4th January, 2016, solicitors for the petitioner set out the events of the meeting and demanded repayment of the debt, in the absence of which they would proceed with a petition.
Correspondence continued over the following months, including a further letter of demand dated 7th March, 2016. During that correspondence, the respondent made a number of statements, including that SCLAD Abu Dhabi is a stand-alone independent company with an identity within Abu Dhabi separate to that of the respondent. On that basis, it was alleged that SCLAD Construction Limited (i.e. the respondent) did not owe any sum to the petitioner. A Membership Certificate has been put before the Court confirming SCLAD's corporate standing in Abu Dhabi as a branch of a company incorporated in Ireland. The respondent also included documents intended to substantiate its claim that proceedings were in being against SCLAD Abu Dhabi in the Abu Dhabi courts. A translation of this document, paid for by the petitioner, revealed that it did relate to 2012 proceedings against SCLAD. However, it made no reference to ongoing proceedings or any monies held by the courts for SCLAD's creditors. The petitioner refers the Court to SCLAD's Abridged Financial Statements, as filed in the CRO on 2nd February, 2015, which state that SCLAD is unable to pay its debts as they fall due. It avers that SCLAD has not disputed that the debt is due and owing. The contents of the petition, as set out above, are reflected in the grounding affidavit of Matthew Palmer, General Manager of the Petitioner, dated 19th July, 2016.
On 28th September, 2016, Kieran Wallace, a partner in KPMG, swore an affidavit setting out his ability to serve as liquidator for SCLAD, should the Court accede to this petition. On 4th October, 2016, Tony O'Grady, a partner in Matheson, swore an affidavit setting out his belief that Mr. Wallace has the necessary expertise to serve as liquidator in this matter. On 7th October, 2016, Thomas O'Dwyer, a partner in Beauchamps (the firm representing the Petitioner), swore an affidavit confirming that the petition had been properly advertised and served on SCLAD. Correspondence from Miceál Sammon, a director of SCLAD, was exhibited thereto, in which he acknowledged that SCLAD held a deficit of €3,422,638 and affirmed its status as a dormant company with no assets. On that basis, the petitioner was urged to withdraw its petition because it would give rise to costs that could never be recovered.
On 7th October, 2016, Miceál Sammon swore a replying affidavit. He avers that this petition should be dismissed for three reasons:
A) SCLAD has no funds outside the United Arab Emirates (UAE). A large proportion of its funds in the UAE are currently subject to court proceedings in Abu Dhabi, which stemmed from a protected dispute with one of its debtors. The petitioner should make its application in those proceedings, rather than attempting to skip ahead of other creditors and make this application.
B) SCLAD has established a Branch Office in the UAE, which is a separate legal entity operating under UAE law. The agreements giving rise to the debt relate to that Branch Office and include specific jurisdiction and arbitration clauses, which the petitioner has failed to adhere to in making this application.
C) In light of the above, the Branch Office is the proper debtor and the agreements are subject to UAE law. The Final Account Agreement (hereafter referred to as ‘the Agreement’) is invalid under UAE law, as no power of attorney was filed with it and it was executed by a person who does not appear to have been vested with the requisite power of attorney on behalf of SCLAD and the Branch Office. The circumstances in which the Agreement came to be executed by persons unknown remain unclear and it is the petitioner's duty to explain how it came to be signed and stamped.
For these reasons, Mr. Sammon avers that this petition is an abuse of process and has not been brought in good faith. Documents related to the Abu Dhabi proceedings were exhibited to Mr. Sammon's affidavit. With regard to any gaps in the paperwork submitted in these proceedings, Mr. Sammon avers that it has been difficult to gather the relevant documentation because all of SCLAD's books and records have been seized by the UAE courts. For the sake of clarity, Mr. Sammon disputes the petitioner's entitlement to collect the debt in full. He also offers an undertaking to lodge AED 1,857,335.28 with SCLAD's solicitor, should such monies become available in SCLAD's dispute with its debtor in the UAE. Those funds will then be held for two years, during which the petitioner can refer this dispute to arbitration.
Matthew Palmer swore a replying affidavit on 7th December, 2016, in which he expresses his consternation that the respondent has raised the above issues after seven years of contractual relations and months of detailed correspondence. He avers that Mr. Sammon's statements regarding recovery of the debt from the UAE court fund contradict his legal position that the agreement giving rise to that debt is invalid. He avers that a Martin Callaghan signed the agreement on behalf of SCLAD, acting in his capacity as Procurement Manager. Given that Mr. Callaghan had signed agreements on behalf of SCLAD in the past and that the Power of Attorney check box was filled in on the Agreement form, Mr. Palmer avers that it was reasonable for him to assume that Mr. Callaghan had the power to so act. He disputes the alleged need to file a Power of Attorney with the Agreement, having never come across such a requirement in his eleven years working in the UAE. With regard to the documents exhibited to Mr. Sammon's replying affidavit, which purport to evidence the ongoing Abu Dhabi proceedings, Mr Palmer notes that the document does not bear any stamp from the UAE Courts. He also exhibits a translation of the documents, which allegedly states that a...
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