[2005] IEHC 67
2005 No. 23 COS
Judgment of Miss Justice Laffoy delivered on 8th March, 2005.
The Application
This is a petition by a creditor seeking that Cedarlease Limited (the Company) be wound up by the court. It raises a novel point because the creditor petitioner is the Commissioners of Customs & Excise for the United Kingdom (the Petitioner).
Factual Background
The petition and the verifying affidavit sworn on 24th January, 2005 by Susan Deborah Neil, a senior lawyer with the Petitioner, disclose the following facts:
• The Company was incorporated in the State on 9th March, 1998 as a private company limited by shares. Its registered office is in the City of Dublin. Its principal object is to carry on business as cars, vans and other transportation vehicles rentors, hirers and lessors.
• In February, 2000 the Aberdeen Office of the Petitioner decided –
(a) to register the Company for U.K. value added tax with effect from 1st November, 1998, and
(b) to assess the Company for undeclared output tax totalling Stg.£839,404.25 in the period from 1st November, 1998 to 30th November, 1999.
• The Company requested a reconsideration of those decisions. The conclusions on the reconsideration, which issued on 5th May, 2000 from the Tax Avoidance Branch of the Strategy and International Division of the VAT Policy Directorate of the Petitioner, confirmed that the Company was registerable for VAT with effect from 1st November, 1998 and also confirmed the assessment of Stg.£839,404.25.
• On 3rd November, 2004 the Petitioner's solicitors in this jurisdiction served a demand on the Company pursuant to s. 214 of the Companies Act, 1963 (the Act of 1963) formally demanding payment to the Petitioner of a sum of Stg.£911,167.65 in respect of outstanding VAT liabilities, including late notification penalties and interest. In the demand the Company was notified that, if it failed to pay the sums claimed to be due within 21 days from the date thereof, the Company would be deemed to be unable to pay its debts in accordance with s. 214 and in such circumstances the Petitioner would issue a petition in this court for the purposes of seeking to wind up the Company.
• The Company's response to the demand, through its accountants in this jurisdiction, was that the Company was not in a position to pay the demand and further that it disputed that the sum was due. It was intimated by letter dated 15th November, 2004 that "the shareholder" of the Company had no objection to the Petitioner proceeding to put the Company into liquidation and had requested the accountants to give the Petitioner every assistance possible which it might require during the process.
• The petition was presented on 21st January, 2005 and duly advertised. No creditor or contributory of the Company appeared on the hearing of the petition other than the Petitioner.
Enforcement of Revenue Claim of a Foreign State: the Common Law
It is well settled that this court will not entertain a suit brought for the purpose of enforcing, directly or indirectly, the revenue claim of a foreign state. It was so held by Kingsmill Moore J., and affirmed by the Supreme Court, in Buchanan, Ltd. and Another v. McVey [1954] I.R. 89. That decision was approved recently in Byrne v. Conroy [1998] 3 IR 1, a case in which the meaning of "a revenue offence" in s. 50 of the Extradition Act, 1965 was at issue.
Submissions
The basis on which the Petitioner contends that the court has jurisdiction to wind up the Company, notwithstanding that the purpose of the petition is to enforce a revenue claim of the United Kingdom, is that Council Regulation (EC) No. 1346/2000 of 29th May, 2000 (the Insolvency Regulation), which came into force on 31st May, 2002, confers such jurisdiction and, being directly applicable in the State, renders the common law rule, insofar as it is inconsistent with the Insolvency Regulation, inapplicable.
The position adopted by counsel on behalf of the Company at the hearing of the petition was that, while the debt was disputed, it could not be denied that the revenue authorities in the United Kingdom had power to make the assessment. It emerged that the Company appealed the assessment following the reconsideration to the London VAT Tribunal, as it was entitled to do. However, it withdrew the appeal in December, 2000. The contention of the Company at the hearing was that the manner in which the Petitioner had proceeded was inappropriate and that the Petitioner should have availed of the method of recovering its debt provided for in the European Communities (Mutual Assistance for the Recovery of Claims relating to Certain Levies, Duties, Taxes and other Measures) Regulations, 2002 (S.I. No. 462 of 2002). That Statutory Instrument, which gives effect to Council Directive No. 76/308/EEC of 15th March, 1976, as amended, revoked an earlier Statutory Instrument, the European Communities (Value-Added Tax) (Mutual Assistance as regard the Recovery of Claims) Regulations, 1980 (S.I. No. 406 of 1980). It provides that the Collector-General shall in accordance with its provisions collect the amount of a claim specified in any request duly made in accordance with the Council Directive by a claimant (regulation 5(1)). In regulation 2 "claimant" is defined as meaning the competent authority of a Member State which makes a request for assistance concerning a claim, which is defined as a claim relating to various taxes, including value added tax, and also interest, administrative penalties and fines and costs incidental to the claim (regulation 3). Regulation 5(5) provides that for the purposes of S.I. 462 of 2002 the amount of the claim shall be regarded as a debt due to the Minister for Finance by the person against whom the claim is made by the claimant in respect of a tax or duty under the care and management of the Revenue Commissioners.
The response of counsel for the Petitioner to the contention made by counsel for the Company that the Petitioner should have pursued its claim by making a request for assistance under S.I. No. 462 of 2002 was that, while there may be a short route, availing of the jurisdiction conferred by the Insolvency Regulation, and a longer route, proceeding under S.I. 462 of 2002, by which the Petitioner may pursue its claim, both instruments must be interpreted as being mutually exclusive and the Petitioner is not precluded from availing of the shorter route.
Insolvency Regulation
The net issue for consideration is whether the Insolvency Regulation overrides the common law principle so that this court has jurisdiction to hear a petition by the revenue authorities of a foreign state to wind up a company incorporated in the State.
The provisions of the Insolvency Regulation which it was submitted are pertinent to a consideration of that question are the following:
• Recital (7), which records that insolvency proceedings relating to the winding-up of insolvent companies or other legal persons and analogous proceedings are excluded from the scope of the 1968 Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters. Counsel for the Petitioner made the point that the Insolvency Regulation dovetails into the Brussels Convention. Although the 1968 Brussels Convention in the intervening period since the making of the Insolvency Regulation has been replaced by Council Regulation (EC) No. 44/2001 of 22nd December, 2000, insolvency proceedings remain outside the scope of that Council Regulation, as do revenue, customs and administrative matters and social security.
• Recital 8, which provides:
"In order to achieve the aim of improving the efficiency and effectiveness of insolvency proceedings having cross-border effects, it is necessary, and appropriate, that the provisions on jurisdiction, recognition and applicable law in this area should be contained in a Community law measure which is binding and directly applicable in Member States."
• Recital (21), which, in part, provides as follows:
"Every creditor, who has his habitual residence, domicile or registered office in the Community, should have the right to lodge his claims in each of the insolvency proceedings pending in the Community relating to the debtor's assets. This should also apply to tax authorities and social insurance institutions … ."
• Article 1, which defines its scope and provides that the Insolvency Regulation, subject to exceptions provided for in Article 1.2 which are not relevant here, shall apply to collective insolvency proceedings which entail the partial or total divestment of a debtor and the appointment of a liquidator. As defined in article 2, insolvency proceedings include compulsory winding-up by the court in this jurisdiction (Annex A).
• Article 3.1, which deals with jurisdiction and provides as follows:
"The courts of the Member State within the territory of which the centre of a debtor's main interests is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary."
In this case, the registered office of the Company is in Dublin and, accordingly, it is presumed that this jurisdiction is the centre of its main interests. Therefore, under the Insolvency Regulation this court, prima facie, has jurisdiction to compulsorily wind-up the Company.
• Article 4, which deals with the law applicable and provides that the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened. Accordingly, whether grounds exist for the winding up of the Company is determined in accordance with Irish law. Moreover, if the court finds that such grounds exist and accedes to the petition, the winding up will be governed by Irish law, subject to exceptions provided for in Articles 5 to 15 inclusive, which may transpire to be relevant or not relevant.
• Article 16, which provides that any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to article 3 shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of the proceedings.
• Article 25.1, which provides that judgments handed down by a court whose judgment concerning the opening of proceedings is recognised in accordance with article 16 and which concern the course and closure of insolvency proceedings, and compositions approved by that court, shall also be recognised with no other formalities, enforcement to be effected in accordance with the relevant articles of the Brussels Convention.
• Article 26(6), which is contained in chapter II which deals with recognition and enforcement, is headed "Public policy" and provides as follows:
"Any Member State may refuse to recognise insolvency proceedings opened in another Member State or to enforce a judgment handed down in the context of such proceedings where the effects of such recognition or enforcement would be manifestly contrary to that State's public policy, in particular its fundamental principles or the constitutional rights and liberties of the individual."
Regulation 12 of the European Community (Corporate Insolvency) Regulations, 2002 (S.I. 333 of 2002), which augments the Insolvency Regulation in the case of the winding-up of companies, provides that it shall be for the High Court to determine whether insolvency proceedings or judgments should not be recognised or enforced on the grounds mentioned in article 26. A public policy issue may arise under article 26 in the context of giving recognition to, and enforcement of, the judgment of another Member State, but not in the context of the jurisdiction of this State.
• Article 39, which is contained in chapter IV which deals with the provision of information for creditors and lodgement of their claims, provides:
"Any creditor who has his habitual residence, domicile or registered office in a Member State other than the State of the opening of the proceedings, including tax authorities and social security authorities of Member States, shall have the right to lodge claims in the insolvency proceedings in writing."
Conclusions
The cross-border element on this application is the fact that the creditor petitioner is located in another Member State. It is clear beyond doubt that, if proceedings to wind up the Company which had been initiated on the petition of a third party were pending in this court, the Petitioner would be entitled to prove for its debt in the winding-up proceedings by virtue of article 39, notwithstanding that it is a tax authority of a foreign state. The effect of the common law principle would thereby be overridden.
The grounds on which this court may wind up a company and the standing of a person or body to initiate the winding-up proceedings are governed by Irish law – the Act of 1963, as amended. In the instant case it has been established that the Company has failed to comply with a demand under s. 214 of the Act of 1963, so that the Company is deemed to be unable to pay its debts. Therefore, a ground on which the Company may be wound up by the court exists (s. 213(e)). While the Insolvency Regulation does not expressly provide that a creditor located in another Member State shall have the right to initiate insolvency proceedings, in my view, as the instant case illustrates, it would defeat the purpose of the Insolvency Regulation if that were not the case.
I have come to the conclusion that the Insolvency Regulation confers jurisdiction on the court to wind up the Company on the petition of the Petitioner and that, in effect, the common law principle is rendered inapplicable by the Insolvency Regulation.
Order
There will be an order that the Company be wound up by the court.
Approved: Laffoy
8/03/05