High Court of Ireland Decisions

1. The background to this Petition is somewhat unusual. The Petitioner was a Defendant in proceedings in which Philip Smith and the Company were the Plaintiffs and Hugh Tunney, Crofter Properties Limited, Gerald B. Coulter and the Petitioner were Defendants. This action arose out of a purported settlement of a dispute between the Company and Crofter Properties Limited, in which serious allegations were made, inter alia, against the Petitioner. On 24th November, 1989 Mr. Justice Murphy dismissed the action and, inter alia, awarded the Petitioner two-thirds of her costs as against both Plaintiffs. The Plaintiffs sought a stay of execution in relation to the Order for costs and Mr. Justice Murphy made an Order staying execution for a period of fourteen days from the perfection of his Order, but made no further Order in relation to a stay. The Plaintiffs appealed against the decision of Mr. Justice Murphy and further appealed by Motion to the Supreme Court for an Order staying execution in respect of the costs. This was met by various cross-appeals by the Defendants, including an appeal by the Petitioner for an Order for security for costs in relation to the appeal. On 2nd February, 1990 the Supreme Court refused both Orders, and accordingly there remains a valid Order for payment of the Plaintiffs' costs in that action when taxed and ascertained.

2. In due course the Petitioner's costs were taxed, and, following an application to the High Court for review of the taxation, ultimately a Certificate of Taxation was issued dated 30th November, 1994 certifying the sum of £52,363.88 to be due. On 17th January, 1995 the Petitioner served a demand for this sum, together with the sum of £21,037.36 for interest up to 2nd December, 1994, pursuant to Section 214 of the Companies Act, 1963. This Petition was then issued by the Petitioner and has been adjourned on a number of occasions since.

3. The proceedings which gave rise to the Order for costs were part of a long running series of disputes between the Company and Mr. Philip Smith, who is effectively the owner of the Company, on the one hand and Crofter Properties Limited and Mr. Hugh Tunney on the other hand. The Petitioner was an employee and certainly at one time a Director of Crofter Properties Limited, but the proceedings in which she was awarded her costs appear to be the only proceedings in which she has actually been named as a party.

4. The original dispute arose out of the relationship of landlord and tenant. The Company was and is the tenant of substantial premises in Morehampton Road in Dublin known as Sachs Hotel, and Crofter Properties Limited are the landlords. Crofter Properties Limited sought to forfeit the lease for various alleged breaches of covenant, and the parties purported to come to an agreement in relation to this dispute. Unfortunately, the agreement collapsed, and it was alleged by the Company and Mr. Smith that alterations had been made to the settlement document after it had been signed. This led to the proceedings in which the Order for costs was made in favour of the Petitioner. As a result of the collapse of the settlement negotiations, the original action, together with a counter claim alleging malicious prosecution, eventually came to trial before me, and I dismissed both the claim and the counter claim. However, there is a further set of proceedings in being between the parties relating to false information alleged to have been given to certain police authorities by Crofter Properties Limited which action has been part heard and adjourned to allow letters rogatory to be sought. There is also in being an action taken by the Company against the Garda Authorities for damages arising out of a raid on the hotel premises some years ago, which action has been set down for hearing with a jury, and was in fact due to be heard on 6th November, but unfortunately has had to be adjourned until February, due to no fault of the parties.

5. In the same judgment, McCarthy J. held that the section "gives to the Court a true discretion which should be exercised in a principled manner that is fair and just."

6. In the present case it has at all times been alleged by the Company that the winding-up Petition has been brought by the Petitioner on the instigation of her employer, Mr. Hugh Tunney, who had financed her litigation in the action in which the debt was incurred, and that the purpose of the application to wind-up was to prevent the Company from continuing proceedings against Crofter Properties Limited. Although the proceedings referred to in the original Affidavit filed on behalf of the Company have now concluded, there still are proceedings in being between these parties, and the Company still makes the same argument in relation to those proceedings.

7. It is not in dispute that the Petitioner is owed the debt on foot of which the Petition has been brought, in the sense that she has a judgment for that sum, which, although under appeal, has not been stayed. She therefore has a prima facie right to obtain a winding-up Order. There are, however, two matters which concern me in the exercise of my discretion.

8. Firstly, it is alleged that the Petitioner is not really bringing this Petition to secure her own debt, but is doing so for the benefit of Mr. Tunney and/or Crofer Properties Limited. It is further alleged that the real motive in bringing this Petition is not to recover the debt, but to prevent further litigation against Mr. Tunney and/or Crofter Properties Limited. Taken by itself, I do not know that that is a sufficient ulterior motive to persuade me to exercise my discretion against the Petitioner. It is not necessarily an improper motive, as Crofter Properties Limited are themselves very substantial creditors of the Company, and therefore have a perfectly proper commercial interest in preventing the Company from using its assets in litigation. It may well be in the interests of the creditors in many cases that a winding-up Order be made to prevent a highly litigious company from spending all its assets on what may be doubtful litigation.

9. In the present case, however, there is a second feature. The principal asset of the Company is its leasehold interest in its very substantial premises in Morehampton Road, and the goodwill of the hotel, restaurant and night-club business carried on therein. If a winding-up Order is made, the lease will be forfeited, which of course will be greatly to the benefit of Crofer Properties Limited, but as I understand it would leave little in the way of assets for the remaining creditors. I think it is highly significant, and it is a matter which I am entitled to take in to account under Section 309 of the Companies Act, 1963, that the Company is still trading successfully, and that four trade creditors, being the only trade creditors who have appeared on this Petition, all are opposed to granting the winding-up Order. They clearly believe that it is in their interests as ordinary creditors that the Company should continue to trade. I am also influenced by the fact that there is substantial litigation between the Company and Crofer Properties Limited which is part heard. I think it would be difficult for a liquidator to take up such an action at the stage which it has reached. Indeed a liquidator might decide not to continue the action, as he might feel that it was all rather pointless if the principal asset had gone.

10. Accordingly, while neither might in itself be decisive, in my view the combination of the ulterior, although not necessarily improper, motive and the fact that a winding-up may not be of any real benefit to ordinary creditors are sufficient to persuade me to exercise my discretion in refusing to make the winding-up Order. However, as I intimated during the hearing, I am not going to dismiss the Petition, but I will merely stay it pending the outcome of the current litigation. Either party will have liberty to re-enter the Petition on giving seven days notice to the other party.