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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Honniball v Cunningham [2006] IEHC 326 (27 October 2006)
URL: http://www.bailii.org/ie/cases/IEHC/2006/H326.html
Cite as: [2006] IEHC 326
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Judgment Title: Honniball v Cunningham Composition of Court: Laffoy J. Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation Number [2006] 326 THE HIGH COURT 2001 No. 7654 P BETWEEN/CLIFFORD HONNIBALL PLAINTIFF AND BRIAN CUNNINGHAM DEFENDANT AND BPI PROPERTY COMPANY LIMITED AND BY ORDER OF THE COURT BPI PROPERTY COMPANY LIMITED NOTICE PARTY Judgment of Miss Justice Laffoy delivered on 27th October, 2006.Background in outline The plaintiff is a judgment creditor of the defendant in the sum of €850,000 and costs, when taxed and ascertained, on foot of an order dated 1st May, 2003 made in this Court by Ó Caoimh J. in the substantive proceedings. The plaintiff has averred in an affidavit sworn on 3rd October, 2006 that the defendant is the sole member of BPI Property Company Limited (the Company), a limited liability company registered in the State, and that he owns the sole issued share in the Company. That averment was made by reference to the particulars filed in the Companies Registration Office on behalf of the Company. The averment has not been contradicted by the defendant, who, in an affidavit sworn on 13th October, 2006, has attested to the accuracy of matters averred to in an affidavit sworn by his solicitor, Peter Dempsey, on the same day. In para. 21 of his affidavit Mr. Dempsey averred as follows:
(1) An application was made pursuant to O. 46, r. 1 of the Rules of the Superior Courts, 1986 (the Rules) for an order charging the defendant’s share in the Company. In accordance with O. 46, r. 1 that application was made ex parte. The order made by the court on this application was that, pursuant to s. 23 of 3 & 4 Vict., c. 105, the sum of €920,833.74 (representing the judgment debt and the agreed costs) together with interest thereon stood charged on the defendant’s share in the Company. It was also ordered, on the application of the plaintiff, that the Company be joined as a notice party to the proceedings. (2) An application was made ex parte for an order appointing a receiver by way of equitable execution over such distribution as might be made in respect of the share held by the defendant in the Company or, in the alternative, over the proceeds of that share. On foot of that application the court ordered that Frank Murray, solicitor, be appointed receiver by way of equitable execution. The plaintiff’s motion for the appointment of a receiver was made returnable for 6th October, 2006. The order also provided that all parties should be at liberty to apply. On this application the defendant seeks to have both the charging order and the appointment of the receiver discharged. The charging order In considering the nature of the jurisdiction of the court to make an order charging stocks and shares, the starting point is O. 46, r. 1 of the Rules which provides:
The corresponding rule of the 1905 Rules (O. XLVI, r. 1) provided as follows:
Section 23 of the Act of 1840, insofar as it is relevant for the present purposes, provides as follows:
Section 132 of the Act of 1853, empowers the court to make an order of attachment in similar circumstances to the circumstances in which a charging order may be made under s. 24 and provides as follows:
In the specimen order set out at Form No. 7 in Schedule B to the Act of 1853, it is Government stock, not stock or shares in a public company, which is used to illustrate the form of the order, so that no assistance is to be derived from that form in determining the meaning of the expression “public company” in the section. Counsel for the defendant submitted that the court had no power to make a charging order under s. 23 of the Act of 1840 because the Company is not a public company but rather is a private company limited by shares. He submitted that the term “public company” in s. 23 and in s. 132 of the Act of 1853 has a distinct meaning and it is to be distinguished from a private company. The concept of a private company did not exist when either the Act of 1840 or the Act of 1853 was passed. It was introduced in the Companies Act, 1907 and continued by the Companies (Consolidation) Act, 1908 (the Act of 1908) and the Companies Act, 1963 (the Act of 1963). The definition of “private company” for the purposes of the Companies code is now to be found in s. 33(1) of the Act of 1963. That definition, which varies only slightly from the definition introduced in 1907, defines the expression as meaning a company which by its articles: (a) restricts the right to transfer its shares, (b) with specified exceptions, limits the number of its members to 50, and (c) prohibits any invitation to the public to subscribe to any of its shares or debentures. In the Companies code a definition of “public company” is now to be found in the Companies (Amendment) Act, 1983 (the Act of 1983), where that expression is defined as meaning a company which is not a private company. Counsel for the defendant submitted that the fact that s. 23 should be limited to public companies is consonant with the fact that a charging order is intended to restrain trade in a readily tradeable commodity, which shares in a public company are but shares in a private company are not. If that submission is based on the premise that all public companies are listed companies, then it is based on a false premise. The meaning of the expression “any public company in England (whether incorporated or not)”, which was contained in the statutory provision which applied in England and corresponded to s. 23 of the Act of 1840 (1&2 Vict. c. 110, section 14), was considered in MacIntyre v. Connell 1 Sim. N.S. 225, in which judgment was delivered by Cranworth V-C on 1st March, 1851. At issue there was whether the Union Bank of London came within the expression. The Union Bank of London had been established by deed of settlement in 1839, so it was not incorporated. Having identified two classes of companies not incorporated to which the provision he was considering might have referred (certain banking companies which existed under a statute of George IV and a subsequent extension of that statute passed in 1833 and companies associated for trading or other purposes having letters of patent granted by the Crown), Lord Cranworth had no difficulty in deciding that the words “public company not incorporated” would be applied properly to the second class, because the names of the members and of the officers who were to sue and be sued on behalf of the company, the objects of the society and many other particulars relating to it were required to be enrolled and thereby made public. Lord Cranworth stated that he could see no real distinction between that company and a banking company acting under the statute of George IV as extended. But he went on to say (at p. 92):
Apart from Northern Bank v. Cooney referred to earlier, in which it was held that “Government stock, funds or annuities” in s. 132 of the Act of 1853 must, after 1922, be read as if restricted in application to stock, funds or annuities of the Irish Government, it would appear that since 1922 there have been only two other reported decisions in which an order of attachment or a charging order over shares in a company was sought by a judgment creditor. Neither is of any assistance in resolving the issue as to the proper construction of “public company” in s. 23. In the earliest, National Land Bank Limited v. O’Dea (1926) 60 I.L.T.R. 55, it was held that a charging order might be made under O. XLVI charging stock of a limited company registered in England and carrying on business in Saorstát Éireann. Part of the reasoning which supported that decision would appear to have been the effect of s. 274 of the Act of 1908, which stipulated certain formalities which were to be complied with by a company incorporated outside the jurisdiction establishing a place of business within the jurisdiction, provisions which were replaced in 1963 by Part XI of the Act of 1963. However, the stock in issue there was stock in Arthur Guinness, Son & Co. Ltd., which I surmise was a public company listed on the London Stock Exchange in 1926. The later decision, Munster and Leinster Bank v. O’Shea [1934] L.J. Ir. 2, concerned Irish Government stock. Therefore, unless there has been some change in the law since 1851, I see no reason for not following the decision of Lord Cranworth and construing the Act of 1840 on the basis of that what Parliament intended by the epithet “public” before “company” in s. 23 was to capture a company which had the attributes of publicity identified by Lord Cranworth. A private company limited by shares incorporated under the Act of 1963 unquestionably has such attributes of publicity. That leads to the question whether provisions of s. 5 or s. 6 of the Interpretation Act, 2005 affect the construction of s. 23. Section 5 requires that where a provision is obscure or ambiguous, or where a literal interpretation would be absurd or would fail to reflect the plain intention of Parliament, the provision shall be given a construction that reflects the plain intention of Parliament where that intention can be ascertained from the Act as a whole. As regards s. 23, Lord Cranworth teased out the meaning of the corresponding provision in the statute which applied in England just slightly more than a decade after it was enacted. It seems to me that a court should be reluctant, a century and a half later, to come to a different conclusion as to what the plain intention of Parliament was. Therefore, in my view, s. 5 is of no assistance. Section 6 provides as follows:
It is interesting to note that there is a definition of “company” in O. 46 of the Rules in the context of the procedure provided for in rules 5 to 13 inclusive for applying for a notice to restrain a transfer of stock. For the purposes of rules 5 to 13, the expression “company” is defined in rule 5 as meaning “any body corporate (including a company, public or private) incorporated or having a register within the jurisdiction”. The corresponding provision of the 1905 Rules defined the expression as “including the Governor and Company of the Bank of Ireland and any other public company, whether incorporated or not”. The commentary in Wylie indicates that rules 5 to 13 of O. XLVI of the 1905 Rules superseded ss. 171 to 174 of the Chancery (Ireland) Act, 1867, that s. 171 only extended to Government stock transferable at the Bank of Ireland, and that the 1905 Rules extended the new procedure to any public company. The issue which arises here is the construction of the expression “public company” in the Act of 1840. In my view, the evolution of the definition of “company” in r. 5 of O. 46, which has a totally different provenance, is not relevant to that issue. On the basis of the analysis of the relevant rules and statutory provisions, I am satisfied that the Company is a public company within the meaning of s. 23 of the Act of 1840. Aside from the contention that the court did not have power to make the charging order because the Company is not a public company within the meaning of the Act of 1840, which I have rejected, the defendant supported its application for discharge of the charging order on the basis that – (a) the application should not have been made ex parte, and (b) the plaintiff showed a lack of candour in making the application. The Rules mandate that an application under O. 46, r. 1 be made by motion ex parte. The defendant questioned the constitutional propriety of the rule having regard to the decision of the Supreme Court in Haughey v. Moriarty [1999] 3 IR 1. While, as I have indicated earlier, there is an inconsistency between the rule and the statute to which it is intended to give effect and the form of order made by the court on 3rd October, 2006 is deficient in not having mentioned a time within which the defendant could challenge it, I do not accept that a rule of court which allows a judgment creditor to pursue against a judgment debtor the type of remedy provided for in s. 23 of the Act of 1840 without giving notice to the judgment debtor is constitutionally infirm provided it contains a mechanism for the judgment debtor being heard without undue delay, as is the case under r. 1 and as occurred in this case notwithstanding the deficiency in the order. The introductory words of s. 24 of the Act of 1840 clearly indicate the legislative purpose in providing for an ex parte application in the first instance: to prevent the judgment debtor, as the saying goes, stealing a march on the judgment creditor by disposing of the shares. I consider that the plaintiff acted properly, and in compliance with r. 1, in bringing the application by motion ex parte. It is well settled that a heavy duty of candour rests upon a person making an application to court ex parte. The principle of disclosure was considered recently in this jurisdiction by Clarke J. in two different contexts: in the context of an application to discharge a Mareva injunction in Bambrick v. Cobley (2005) IEHC 43; and in the context of an application to discharge an order made under s. 2 of the Proceeds of Crime Act, 1996 in F. McK. v. D.C. & Ors. (2006) IEHC 185. In relation to the criteria to be applied by the court in the exercise of its discretion to discharge an interim order on the ground of material non-disclosure, Clarke J. stated in the earlier case, and reiterated in the later case as follows:
2. The extent to which it may be said that the plaintiff is culpable in respect of a failure to disclose. A deliberate misleading of the court is likely to weigh more heavily in favour of the discretion being exercised against the continuance of an injunction than an innocent omission. There are obviously intermediate cases where the court may not be satisfied that there was a deliberate attempt to mislead but that the plaintiff was, nonetheless, significantly culpable in failing to disclose. 3. The overall circumstances of the case which led to the application in the first place.” As to the test of materiality, having reviewed the authorities both in this jurisdiction and in the United Kingdom, Clarke J. stated as follows:
The defendant’s allegation of lack of candour is founded on the fact that in his affidavit in support of the ex parte application, the plaintiff did not make comprehensive disclosure of the various means to which he had previously resorted to secure payment of the judgment debt. The defendant placed significance on this non-disclosure on the basis that the settlement between the parties expressly contemplates enforcement of the settlement as being against a specified premises and not by enforcement processes generally. In order to determine whether that foundation stands up it is necessary to consider the order of Ó Caoimh J., which was put before the court on 3rd October, 2006. The order of 1st March, 2003 ordered and adjudged that the plaintiff recover against the defendant the sum of €850,000 and the costs of the proceedings when taxed and ascertained. It went on to order that execution and registration of the judgment be stayed on three conditions which were set out, namely: (1) that the defendant discharge the debt by the following instalments – €50,000 on 1st August, 2003, €200,000 on 1st November, 2003, €250,000 on 1st July, 2004, €200,000 on 1st May, 2005 and the costs within one month of agreement or taxation; (2) that the defendant create a mortgage over certain premises in favour of the plaintiff as security for the payment of the instalments within four weeks of the date of the order; and (3) that the defendant agree not to create any charge, lien or encumbrance over those premises or otherwise deal with the same prior to the creation of the mortgage referred to at paragraph (2). It was further ordered that the settlement signed by the respective parties be received and filed as part of the order and that all further proceedings be stayed save as might be necessary to execute on foot of the settlement. Liberty to apply was also provided for. The settlement signed by the parties, which is part of the order, is wholly consistent with the order itself. As a matter of construction of both the settlement and the order, I am satisfied that the plaintiff is not precluded from pursuing any process of execution provided by law, in the event of the conditions of the stay on execution not being complied with and a judgment being entered. That is what has happened. Moreover, he may pursue two or more execution processes cumulatively until the debt is discharged. The evidence contained in the plaintiff’s grounding affidavit which was before the court on 3rd October, 2006 was that, with the exception of the sum of €50,000 paid in August, 2003, none of the amounts agreed to be paid by the defendant (including the costs which were agreed at €120,833.74 in February, 2004) was paid. An order of fieri facias ( fi. fa.) had been sent to the sheriff. No goods had been seized by the sheriff, but the fi. fa. was still with the sheriff. An order of this Court (Murphy J.) directing the examination of the defendant as to his assets and monies due to him is subject to appeal to the Supreme Court. The plaintiff also averred that “the defendant has not created a charge over” the premises referred to in the settlement and the order. The primary allegation of non-disclosure made by the defendant against the plaintiff is the failure of the plaintiff to disclose that he had registered his judgment as a mortgage against the premises referred to in the order on 17th February, 2004. It was suggested by the defendant that this failure somehow renders the plaintiff’s averment that “the defendant has not created a charge” over the premises untruthful. That is not correct. The defendant did not, within the four week period limited in the order of 1st May, 2003 or at any time, create a mortgage over the premises in question in favour of the plaintiff to secure the sums due to the plaintiff. The fact that the plaintiff has registered a judgment mortgage over the premises merely means that the plaintiff has availed of a process of execution available to him at law and is in no way inconsistent with the plaintiff’s truthful averment that the defendant did not create the mortgage he agreed to create. Apart from that, in my view, the failure of the plaintiff to disclose a process of execution which he has embarked on, which, in any event the plaintiff, through his counsel, asserted was inadvertent, is immaterial when, as I have found, it is open to him to pursue any process of execution available to him at law until his debt is satisfied. The existence of the judgment mortgage is of no materiality in the context of the issue whether a charging order should be made under s. 23 of the Act of 1840. The defendant has not established that the court had no power to make the charging order, nor has the defendant established any other ground on which the charging order should be discharged. As I have already stated, the defect in the order itself has not perpetrated an injustice because the defendant has been afforded the earliest opportunity to make an application for discharge of the charge. I refuse that application and I make absolute the order made on 3rd October, 2006 under s. 23 of the Act of 1840. Receiver by way of equitable execution In submitting that the appointment of a receiver by way of equitable execution was not appropriate in this case, counsel for the defendant relied on a passage from the judgment of Keane J., as he then was, in National Irish Bank Limited v. Graham [1994] 1 I.R. 215. A number of issues arose in that case, but the context in which the issue of the appointment of a receiver by way of equitable execution arose can be stated simply. The plaintiff bank had obtained judgment in default of appearance against the defendants, who were farmers, on 19th November, 1993 on foot of a summary summons. On the same day they sued out a fi. fa. The defendants owned a milking herd, over which the plaintiff bank had no security, although it did have security by way of chattel mortgage over the defendants’ non-milking herd. On 8th December, 1993 the plaintiff bank sought the appointment of a receiver by way of equitable execution over all of the defendants’ cattle, including the milking herd. In relation to that application, Keane J. stated as follows at p. 222:
I do not agree that the principle stated by Keane J. in National Irish Bank Limited v. Graham operates against the plaintiff in the manner suggested by the defendant. The principle, as I understand it, is that the court will not appoint a receiver by way of equitable execution over property of which the judgment debtor is the legal owner and which can be the subject of legal process. The facts in National Irish Bank Limited v. Graham illustrate that point very clearly: the defendants were the legal owners of the milking herd and there was nothing to stop the sheriff seizing the milking herd on foot of the fi. fa. The principle is that the equitable remedy is only available where the judgment debtor has only an equitable interest in property against which the judgment creditor seeks recourse. In his affidavit sworn on 3rd October, 2006, on foot of which the court made the order of that date, the plaintiff averred that there had been a recent agreement between three named individuals to sell lands, believed to be in Ballymun, to the Company, that the Company had sub-sold on to a named third party and that the sub-sale had been completed on 29th September, 2006, whereupon the Company was paid approximately €6 million, which sum was held by a named firm of solicitors, who were acting for the Company, for the benefit of the Company. What the plaintiff asked the court to do was to appoint a receiver by way of equitable execution over the proceeds of sale of the single share which the defendant owns in the Company, should the defendant have sold that share. I have already quoted para. 21of Mr. Dempsey’s affidavit in which he has averred that no distribution on foot of the existing shareholding or sale of the same is contemplated, which I take to mean that the defendant has not sold, and does not intend to sell, his existing share in the Company. Therefore, as a matter of fact, the defendant has no equitable interest in the proceeds of a share sale; rather he is the legal owner of a share which, by order of the court, was and remains, charged in favour of the plaintiff. There being no property in which the defendant enjoys merely an equitable interest, the appointment of the receiver cannot stand and is discharged. Joinder of the notice party Mr. Dempsey made the point in para. 21 of his affidavit that there was no basis for including the Company as a notice party. As I understand it there was no appearance for the notice party and the counsel and solicitor acting for the defendant were not acting for the Company on this application. The effect of a charging order is provided for in s. 24 of the Act of 1840, which I have quoted earlier. The Company, subject to being served with notice of the making of the same, is bound by the charging order. On reflection, I consider that it was not necessary to join the Company as a notice party and I discharge so much of the order of 3rd October, 2006 as so provided. The absolute order charging the defendant’s share in the Company will have to be served by the plaintiff on the Company, whereupon the Company will be bound by the charging order in the manner prescribed by law. Finally, I am unclear as to the true import of the reference in para. 21 of Mr. Dempsey’s affidavit to an agreement “to issue an additional share(s) of equal value to that presently held by Mr. Cunningham”. That may be for another day. But I want to make it clear that nothing in this judgment shall be taken as implicitly accepting that either the defendant or the Company is entitled to engineer a situation in which the value of the defendant’s existing share in the Company is diluted. Form of Order The order will vary the order made on 3rd October, 2006 by – (a) discharging the order joining the Company as a Notice Party; (b) declaring absolute the charging order made pursuant to s. 23; and (c) discharging the order appointing Mr. Murray as receiver by way of equitable execution. |