About this case:

• Citation:
  [2023] IECA 308
• Judgment:
  External link
• Court:
  Court of Appeal
• Judge:
  Mr Justice Donald Binchy

Delivering judgment for the Court of Appeal, Mr Justice Donald Binchy observed that “where a strike off has taken place because of the failure to file annual returns, and where the applicant meets the statutory requirements, then, absent special circumstances, restoration should follow”.

Background

On 13 January 2012, Lodge Gaven Limited was involuntarily struck off the Register of Companies for failing to file its annual returns. The company had loan facilities with AIB plc, secured by a mortgage over all of the undertaking of the company, its property and assets, and which were guaranteed by the first appellant director.

The interest of AIB plc in the facilities and the mortgage was subsequently transferred to Everyday Finance DAC. By notice of motion dated 18 August 2022, Everyday sought various orders including orders pursuant to s.738 of the Companies Act 2014 restoring the company to the register, and under s.740 requiring the appellant directors to bring the annual returns of the company up to date.

The grounding affidavit filed on behalf of Everyday stated that as of 3 August 2022, a sum of €2,877,901.29 was due and owing by the company, and as the applicant wished to ensure that it could validly appoint a receiver pursuant to the debenture, it needed to ensure that a notice of demand could be validly served on the company in respect of its liabilities.

The application was opposed by the appellant directors, who suggested that the application for restoration was ‘frivolous’ in circumstances where there was no need to restore the company for the purposes of ensuring that a receiver could be appointed.

The first appellant referred to proceedings issued by AIB against him pursuant to the guarantee, and to a judgment of Mr Justice Michael MacGrath sending the proceedings to plenary hearing, which stated that “on 16th October, 2013, the plaintiff demanded payment of the sum of €1,541,000 on foot of the guarantee.”

The High Court

On 12 November 2022, Ms Justice Eileen Roberts heard the application in the High Court and made orders restoring the company, requiring the directors to file all outstanding annual returns and to deliver all outstanding company statements to the Revenue Commissioners. The judge also ordered that the costs of the application should be paid by the company.

The directors appealed on grounds that the High Court judge erred in:

• concluding that Everyday had been disadvantaged within the meaning of s.738 of the 2014 Act;
• concluding that the letter of demand served on the company by AIB was of no relevance on the basis that the defendant in the proceedings before McGrath J was not the company;
• accepting submissions on the intention of Everyday to appoint a receiver, in the absence of any corresponding averment evidencing disadvantage on part of Everyday;
• concluding that the restoration of the company was necessary to protect and preserve the interests of Everyday; and
• awarding Everyday High Court costs.

The Court of Appeal

Mr Justice Binchy began his analysis by noting that the general principles as to the discretion of the court to restore a company to the register “are only engaged once the statutory criteria prescribed by section 738 of the 2014 Act have been satisfied”.

Considering whether Everyday met the first criterion of satisfying the court that it has been disadvantaged by the striking of the company from the register, the judge highlighted that Everyday did not engage with the appellants’ contentions that no such demand was required and in any event, it had already been served.

Mr Justice Binchy agreed with the appellants’ arguments, finding it “clear from the terms of the mortgage debenture” that a receiver could be appointed when the principal monies became payable, and that the principal monies became payable in the event that the company defaulted in its payments for one month or in the event of AIB plc serving a written demand on the company for payment.

The court also noted that no evidence of the company’s title to any property was tendered on behalf of Everyday, nor was there any description of any specific property in the mortgage debenture, rendering it a floating charge only. The sole reference to any property in the security documentation exhibited was a reference in a letter of sanction to lands in Co Kerry, and the court further noted that Mr Justice MacGrath made a brief reference to company expenditure on property acquisition in his judgment in the summary proceedings.

Nonetheless, Mr Justice Binchy was satisfied on balance that the company owned real property and that Everyday wished to realise this property in satisfaction of the indebtedness of the company, emphasising that “it would have been far better for the respondent to identify beyond any doubt the lands that are owned by the Company and intended to de realised by Everyday in satisfaction of the Company’s indebtedness”.

The court proceeded to consider that the mortgage deed granted a power of sale in the name of and on behalf of the company to any receiver validly appointed, stating that “the receiver cannot be an agent for a company that no longer exists. In the context of section 738(1)(a) of the 2014 Act, what all of this means is that Everyday has been disadvantaged by the striking off of the Company from the register because it is highly unlikely that it could dispose of any of the real property of the Company secured by the mortgage debenture unless and until the Company is restored to the register.”

Stating that the first criterion of s.738 was met, the court confirmed that the second requirement of making the restoration application within 20 years from the date of dissolution was satisfied and undisputed, and proceeded to consider the third requirement that it is just and equitable to make the order sought.

Having heard the various arguments of the appellants, including that restoration would not be just or equitable where it would cause them a liability of €16,860 in late filing fees, that Everyday did not disclose the summary proceedings in the course of its application and so had not come to equity with clean hands and that it was unfair to pursue the appellants twice for the same debt, Mr Justice Binchy concluded that “none of these arguments pass muster”.

Conclusion

Concluding that the statutory requirements had been met, Mr Justice Binchy dismissed the appeal against all of the orders made by the High Court judge, with the exception of the costs order insofar as she refused to order that the costs should be calculated on the Circuit Court scale.

Accordingly, the Court of Appeal varied the order to state that costs were to be adjudicated on the Circuit Court scale.

In the matter of Lodge Gaven Limited [2023] IECA 308