White Cedar Developments Ltd v Cordil Construction Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 07 December 2012
• Neutral Citation: [2012] IEHC 525
• Docket Number: [No. 11239 P./2012]
• Court: High Court
• Date: 07 December 2012

[2012] IEHC 525

THE HIGH COURT

[No. 11239 P./2012]

White Cedar Developments Ltd v Cordil Construction Ltd (in receivership)

BETWEEN

WHITE CEDAR DEVELOPMENTS LIMITED

PLAINTIFF

AND

CORDIL CONSTRUCTION LIMITED (IN RECEIVERSHIP)

DEFENDANT

COMPANIES ACT 1963 S214

COMPANIES ACT 1963 S213

TRUCK & MACHINERY SALES LTD v MARUBENI KOMATSU LTD 1996 1 IR 12 1996/8/2532

WMG (TOUGHENING) LTD, IN RE; BRADY v WMG (TOUGHENING) LTD (NO 2) 2003 1 IR 389 2003/49/12045

EMERALD PORTABLE BUILDINGS SYSTEMS LTD, IN RE UNREP CLARKE 3.8.2005 2005/23/4792 2005 IEHC 301

BAYOIL SA, IN RE 1999 1 WLR 147 1999 1 AER 374 1998 BCC 988

CAMPUS OIL LTD & ORS v MIN FOR INDUSTRY & ORS (NO 2) 1983 IR 88 1984 ILRM 45

COMPANY LAW

Winding up

Interlocutory injunction - Defendant creditor seeking winding up of company for failing to discharge debt - Plaintiff company seeking to restrain defendant - Claim that no debt due to defendant when demand served - Building agreement - Service of s 214 demand premature - Indebtedness not demonstrated to court - Whether defendant entitled to seek winding up of company - Whether debt due and owing - Whether indebtedness demonstrated to court - Whether plaintiff entitled to injunction restraining defendant - Companies Act 1963 (No 33) ss 213 and 214 - Truck and Machinery Sales Ltd v Marubeni Komatsu Ltd [1996] 1 IR 12; Re WMG Toughening Ltd (No 2) [2003] 1 IR 389 and Campus Oil Ltd v Minister for Industry and Energy (No 2) [1983] IR 88 applied - Emerald Portable Building Systems Ltd [2005] IEHC 301, (Unrep, Clarke J, 3/8/2005) and Re Bayoil SA [1999] 1 WLR 147 considered - Relief granted (2012/11239P - Laffoy J - 7/12/2012) [2012] IEHC 525

White Cedar Developments Ltd v Cordil Construction Ltd

Facts: The plaintiff and defendant had entered into a contract with the plaintiff, as employer, and the defendant, as contractor. The contract was in respect of works relating to the design and construction of a new retail and commercial centre. A dispute arose as to sums that were allegedly owed under the contract and the dispute was referred by the defendant for conciliation in accordance with the building agreement. Subsequently the defendant was placed into receivership. The plaintiff notified the defendant and the receivers of the termination of the agreement. The Conciliator recommended that the plaintiff pay the defendant a sum of money. Proceedings to wind up the plaintiff were threatened in the event of the amount claimed not being discharged. In the present application the plaintiff sought an interlocutory injunction to restrain the defendant from bringing a petition pursuant to s. 213 of the Companies Act of 1963 to wind up the plaintiff.

Held by Laffoy J in granting the order sought: On the basis of the evidence presented the court was satisfied that the building agreement was properly terminated on the basis of the defendant's default. Neither party had given notice of dissatisfaction regarding the recommendation by the Conciliator and it was conclusive and binding on all parties. However given that the plaintiff had terminated the defendant's obligation to complete the works, the defendant was only entitled to the termination value which would have to factor in the recommendation of the Conciliator. The plaintiff had disputed the debt in question in a very convincing manner. As it had not yet been determined that the plaintiff was indebted to the defendant, the service of the s. 214 demand was premature. There would be an order to restrain from proceeding with the petition to wind up the plaintiff.

Ms. Justice Laffoy

1 The contractual relationship between the plaintiff and the defendant which is at the core of these proceedings is based on a so called "Design and Build Contract" dated the 11^th December, 2009 (the Building Agreement) made between the plaintiff, as employer, and the defendant, as contractor. The Building Agreement was entered into to regulate the execution and completion by the defendant "of the Works" as defined therein, which related to the design and construction of a new retail and commercial centre together with associated infrastructure site works and drainage works at Pairc an Clochar, Oranmore, Co. Galway, and the terms on which the plaintiff would pay the defendant the contract sum in respect of the Works, which was €17,414,911, excluding VAT.

2 Sometime prior to the 7^th March, 2011, a dispute arose between the plaintiff and the defendant regarding the sums then due to the defendant under the Building Agreement. On the 7^th March, 2011, the dispute was referred by the defendant for conciliation in accordance with Clause 13.1 of the Building Agreement, which I will consider in some detail later. On the 5^th May, 2011, Mr. Ciaran Fahy (the Conciliator), who had been appointed by the Chairman of the CIArb (Irish Branch), was confirmed in that role by the plaintiff and the defendant at an initial meeting held on that day.

3 On the 26^th May, 2011, ACC Bank Plc appointed Michael McAteer and Aengus Burns of Grant Thornton (the Receivers) to be receivers of all of the assets of the defendant referred to and comprised in a number of debentures, mortgages and charges given by the defendant to ACC Bank plc. In effect, it is the Receivers who, on behalf of the defendant, have taken the steps which have led to these proceedings.

4 By letter dated the 18^th July, 2011 from the plaintiff to the defendant, the plaintiff notified the defendant and the Receivers of the termination of the obligation of the defendant to complete the Works pursuant to the terms of Clause 12.1 of the Building Agreement. A series of provisions of Building Agreement were invoked in giving such notice, including, inter alia, -

5 (a) Clause 12.1.1(11)(d), which provided that the plaintiff might terminate the defendant's obligation to complete the Works by notice to the defendant if a receiver were to take possession of/or be appointed over the defendant or any of its assets, and

6 (b) Clause 12.1.1(11)(e), which pointed to a similar outcome if the defendant should cease or threaten to cease carrying on business.

7 5. There is no issue in these proceedings as to the entitlement of the plaintiff to terminate the defendant's obligation to complete the Works, as it did by the letter of the 18^th July, 2011.

8 6. However, notwithstanding such termination, the conciliation process before the Conciliator continued. At the conclusion of the conciliation on the 28^th October, 2011, the Conciliator issued his recommendation (the Recommendation). In the Recommendation it was recited that it was agreed that the Conciliator would only deal with claims advanced by the defendant. It was further recited that initially those claims, under nine separate headings, amounted to €2,942,281.95, exclusive of VAT, but during the course of the process the claim was modified to €2,047,187 exclusive of VAT under the nine headings which were set out in tabular form in a table within the Recommendation. The outcome of the process was that the Conciliator made the following recommendation:-

"[The plaintiff] pay [the defendant] the sum of €700,649.00, exclusive of VAT, in respect of claims listed in Table No. 1 above."

9 It was pointed out in the Recommendation that the figure made no allowance for payment arising in respect of claim No. 9, which was concerned with Late Payment interest. However, no issue arises in relation to that exception, which was elaborated on by the Conciliator. Neither party gave notice of dissatisfaction with the Recommendation at any time thereafter.

10 7. After the termination of the defendant's obligation to complete the Works in accordance with the notice of the 18^th July, 2011, the plaintiff, as it was entitled to do, made alternative arrangements for completion of the Works, which are now nearing completion.

11 8. It has been disclosed on this application that the plaintiff carried out the development through funding from a "participating institution", namely, Irish Bank Resolution Corporation, as designated pursuant to the National Asset Management Agency Act 2009, (the Act of 2009). It has further been disclosed that in or about October 2010, in accordance with the provisions of the Act of 2009, the loan from Irish Bank Resolution Corporation was transferred to the National Assets Loan Management Limited (NALM) and that it is now subject to a facility agreement between the plaintiff and NALM, the latest iteration of which was dated the 18^th July, 2012. That document has been exhibited on this application. As I understand the position, the facilities provided by NALM have now expired.

12 9. As between the defendant and the plaintiff, nothing transpired after the Recommendation of the Conciliator was handed down on the 28^th October, 2011 until by letter dated the 19^th October, 2012, from the Receivers to the plaintiff the sum of €700,649 plus VAT, which the Conciliator had recommended be paid to the defendant in the Recommendation, was demanded. The letter was expressed to be a notice pursuant to s. 214 of the Companies Act 1963 (the Act of 1963). Proceedings to wind up the plaintiff were threatened in the event of the amount claimed not being discharged.

13 10. That demand gave rise to correspondence between the plaintiff's solicitors, Mason Hayes and Curran, and the defendant's solicitors, Maples and Calder, which culminated in a letter dated the 6^th November, 2012 from Mason Hayes and Curran to the effect that, as the defendant was not agreeable to withdrawing the threatened winding up petition, the plaintiff intended bringing proceedings to restrain the presentation of a petition.

14 11. The proceedings were commenced by plenary summons which issued on the 7^th November, 2012. On the 9^th November, 2012, pursuant to an ex parte application made by the plaintiff, the...