Sutton Castle Developments ltd v Companies Act [2019] IEHC 769 (13 November 2019)

IN THE MATTER OF SUTTON CASTLE DEVELOPMENTS LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF AN APPLICATION BY TERENCE HORGAN AND ANN HORGAN

UNDER SECTION 631 OF THE COMPANIES ACT 2014

TERENCE HORGAN & ANN HORGAN

SUTTON CASTLE DEVELOPMENTS LIMITED

JUDGMENT of Mr. Justice Tony O’Connor delivered on the 13th day of November, 2019

1. When this application was opened last Thursday, counsel for the applicant confined it to

seeking “directions as to any further investigation and analysis required to be performed

by” James Butler (“the liquidator”) of Sutton Castle Developments Limited (“the

company”) “in determining the circumstances of the support given by MKN Investments

Limited [“MKN”] and Sean McKeon to the company and of the withdrawal of said support

leading to the company’s winding up” pursuant to s. 631 of the Companies Act 2014

2. The applicants had purchased an apartment from the company in 2006. The company

sold the property immediately above the applicants’ apartment in 2007 which “gave rise

to considerable noise pollution and inconvenience.” Those parties proceeded to

arbitration leading to an arbitral award on 16th October, 2015, (“the arbitral award”).

3. On 25th November, 2015, a statutory demand was served on the company to recover the

arbitral award in favour of the applicants in the sum of €100,987.00, plus costs, for the

effect of the noise pollution on their home. A petition to wind up the company on behalf

of the applicants followed with newspaper notices published on 14th and 15th January,

2016. However, on the evening of 14th January, 2016, a notice of a creditors’ meeting

for 25th January was served on the solicitors for the applicants. The liquidator was duly

appointed at that creditors’ meeting which was attended by representatives for MKN.

4. The solicitors for the applicant engaged with the Office of the Director of Corporate

Enforcement (“ODCE”) and sought unsuccessfully inter alia a copy of the report of the

liquidator to the ODCE pursuant to s. 682 of the 2014 Act. Counsel for the applicants

characterised the background to the late decision to liquidate the company as “suspicious”

and correctly anticipated the labelling by the liquidator of this application as a “grudge”.

In brief, the applicants are aggrieved that they had to wait so long for the determination

of their claim which arose in 2007 and then endure somewhat exasperating efforts to

recover the arbitral award. Costs for the arbitration remain to be discharged by the

5. The principal facts behind the submission and the request for further investigation

identified by the solicitor for the applicants in his three affidavits can be summarised as

(i) The withdrawal of financial support from MKN, which had common directors with

the company, and particularly when the financial statements for the year ending in

December 2013 for those companies had each indicated the “continued financial

support” from MKN to the company. There was indeed an inter-company loan

exceeding €9,000,000 disclosed in the financial statements.

(ii) The timing of the decision by the directors to convene a creditors’ meeting when

the company had long been insolvent.

(iii) The alleged failure of the liquidator to answer some of the questions posed by the

applicants’ solicitor.

(iv) The assertion by the liquidator that the relieving of the liquidator by the ODCE in

June 2017 of the requirement to seek a restriction declaration against the directors

of the company was relevant to whether the directors of the company had acted

honestly and responsibly. Reference was made to a sentence in a letter from the

liquidator to the effect that this had determined that question with which the

applicants take issue.

6. The liquidator in his replying affidavit averred that the applicants have “been paid a

dividend of €111,882 [from the total distribution of €6 million] and there is every

likelihood of a further dividend to them from the proceeds of the remaining properties”.

He provided the solicitor for the applicants with a schedule of proceeds from other units

The applicant’s submissions

7. Counsel for the applicant submitted that:-

(i) The ex tempore judgment of McDonald J. in Re Chambury Investments Company

Ltd (in voluntary liquidation) [2018] IEHC 633 (unreported, High Court, 21st

September, 2018) recognised at para. 64 the remedy and protection afforded to

creditors by this type of application for directions under s. 631 when those creditors

may not have had their preferred liquidator appointed.

(ii) The dictum of Finlay Geoghegan J. in Re Custom House Capital Ltd (in liquidation)

[2012] IEHC 382; [2012] 3 I.R. 93 which at para. 421 mentioned that the demands

on liquidators depends on the nature of the activities of the company prior to

8. Counsel urged the Court to have regard to the suspicious circumstances of support and

termination of support by MKN for the company which had common members.

The liquidator’s position

9. Counsel for the liquidator referred to Re Edennote Ltd; Tottenham Hotspur plc and others

v. Ryman and another [1996] 2 BCLC 389 where Nourse L.J. stated at p. 394 “… that the

court will only interfere with the act of a liquidator if he has done something so utterly

unreasonable and absurd that no reasonable man would have done it”.

10. The following excerpt, by way of analogy to directions sought in examinerships from in Re

Eircom Limited (unreported, High Court, Kelly J., 17th May, 2012), (cited in Re Ladbrokes

(Ireland) Ltd [2015] IEHC 381 at para. 97; [2015] 1 I.R. 243 at 272), was quoted also:-

“It would mean, it is said, that the court would, in effect, be micromanaging the

examinership and that the statute does not set up either an appeal mechanism

from decisions made by the examiner, nor a form of judicial review of the

examiner’s decisions, particularly if those decisions involve a commercial judgment

being exercised by him … that is … why invariably examiners are drawn from

insolvency practitioners, who would have an accountancy qualification and would

have considerable business experience involving insolvent entities.”

11. The liquidator in his second affidavit averred that he had attempted to keep the solicitor

for the applicants informed of decisions taken in the liquidation and had sought to address

the concerns raised by creditors at the meetings of the committee of inspection. He listed

the occasions on which the applicants or their solicitor did not attend meetings of that

committee with and without excuses and the two annual general meetings in 2017 and

2018. It was submitted that the statutory provision for committees of inspection was the

mechanism for supervising the liquidator without having to micromanage by way of

seeking directions from the court.

12. Laffoy J. in Re Marcon Developments [2010] IEHC 373 (unreported, High Court, 12th

October, 2010) and in Re Balbradagh Developments [2008] IEHC 329 (unreported, High

Court, 31st July, 2008), was concerned with whether a liquidator appointed at a creditors’

meeting should be preferred or ousted by way of a liquidator appointed through a petition

to the Court. Laffoy J. mentioned the supervisory role of the ODCE and the committee of

inspection in those judgments when determining the balance to be struck. The

application now before the Court is not concerned with appointing or replacing the

liquidator. The directions nevertheless seek to challenge the professional and commercial

decision of the liquidator not to pursue MKN, the parent of the company.

13. The liquidator at paras. 6 and 7 of his second affidavit explained that:-

“6.… the liabilities of companies in a group are those of each individual company

which incur them and there is no common group liability whereby the debts of one

member company become the automatic obligation of the combined companies in

the group. In this case the Parent Company did not give any written guarantee to

the Company to guarantee its liabilities in the event of a winding up.

7. The decision by the Parent Company not to indemnify the unsecured debts of the

Company is entirely a matter for the directors of the Parent Company, and falls

outside my remit as liquidator of the Company. My role was and remains that of

overseeing the winding up of the assets and liabilities of the Company and I do not

consider that there is any basis to pursue the Parent Company for the debts owed

by its subsidiary, the Company.”

14. The applicants have not satisfied this Court that the liquidator has acted utterly

unreasonably. The only evidence available to the Court regarding the applicants’ position

is contained in the three affidavits sworn by their solicitor. Impugning the integrity or

decision-making of a liquidator by way of seeking directions requires much more than the

description of allegedly suspicious circumstances. The applicants did not contest the

appointment of the liquidator and have not sought for him to be replaced. Lest there be

any doubt there is no evidence or suggestion that the liquidator has acted in any way

unprofessionally, without integrity or irresponsibly.

15. Moreover, the applicants through their solicitors availed of the opportunity to convey their

concerns to the ODCE and they limited their engagement with the committee of

16. The applicants, despite their sense of grievance, exasperation and suspicions have not

met the threshold required for this Court to direct further investigations and analysis by

the liquidator concerning the support given by MKN and Mr. McKeon to the company.

This applies equally to the withdrawal of the support.

Result: Applicants have not met the threshold required by this Court

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