Scale and complexity of company affairs a ‘good reason’ to bring Part 10A proceedings in High Court 

About this case:

• Citation:
  [2023] IEHC 641
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Michael Quinn

Delivering judgment for the High Court, Mr Justice Michael Quinn found that “it is clear from all of these provisions that the scheme of the Act is that proceedings in relation to small and micro companies pursuant to this Part should be brought in the Circuit Court unless there are good reasons for proceeding in the High Court.”

Background

On 20 October 2023, the directors of Bio Marine Ingredients Ireland Limited, a raw fish processing company, decided to appoint a process adviser pursuant to Part 10A of the Companies Act 2014, to take effect on 23 October 2023. Part 10A was inserted into the 2014 Act by the Companies (Rescue Process for Small and Micro Companies) Act 2021, to provide a framework for restructuring financially-challenged but viable small or micro companies, similar to examinership but with measures intended to limit costs.

An application for a staying all proceedings against the company pursuant to s.558N of the 2014 Act was made to the High Court, which was unopposed. The Court was satisfied that there was a reasonable prospect of survival of the company and its undertaking as a going concern, and so on 1 November 2023, a stay was granted pursuant to s.558N. 

An ex tempore judgment was given on that date in relation to the stay. The Court separately considered the question of the appropriate court in which to bring the proceedings.

The High Court

Mr Justice Quinn set out that under Part 10A, the ‘process adviser’, whose principal function is to formulate a rescue plan to ensure the survival of a company , has a duty to determine whether any proceedings under that Part should be brought in the Circuit or High Court.

Referring to s.558H(2) of the 2014 Act, the Court noted that the process advisor must have regard to the need to minimise costs by refraining from bringing High Court proceedings unless there are good reasons to do so, the need for an efficient and expeditious conclusion to any proceedings brought under Part 10A, and ‘any other relevant matter’.

Continuing that whilst the selection of a court is “entirely a matter for the process advisor”, Mr Justice Quinn highlighted the Court’s power of remittal to the Circuit Court pursuant to s.558ZAF where it considers that it would be reasonable for the proceedings be dealt with in the Circuit Court, and the power of the Court to take into account whether bringing High Court proceedings was reasonable when making a costs order.

The Court stated that “it is clear from all of these provisions that the scheme of the Act is that proceedings in relation to small and micro companies pursuant to this Part should be brought in the Circuit Court unless there are good reasons for proceeding in the High Court.”

The Court found that the process advisor of the company had duly addressed those requirements in his report pursuant to s.558D of the 2014 Act, recommending proceedings in the High Court as the company had its registered office and main place of business in Co. Monaghan, that the company received final demands from solicitors acting for creditors before issuing proceedings and that an application for a stay could become necessary, the quantum of the company’s share capital, indebtedness and deficit, and the need for efficient and expeditious case management made High Court proceedings appropriate.

Mr Justice Quinn found that only the quantum of the company’s share capital, indebtedness and deficit made High Court proceedings appropriate. The Court observed that the process adviser’s report stated that by the end of 2022, the company had accumulated losses of €30 million, and had raised finance of €40.6m since its establishment. The report further stated that the company had a series of valuable domestic and international contracts and was engaged in contractual negotiations with multinational food producers.

The Court found that by reason of the scale and complexity of those matters, there were good reasons for the proceedings being commenced in the High Court. The Court proceeded to explain that all other reasons tendered by the process adviser “were not of themselves good reasons”, as the legislation intended that the appropriate Circuit Court would be capable of managing matters such as the one before it.

Considering the submission on behalf of the company on the deadline of 49 days for the process adviser to report on the outcome of statutory meetings and to approve a rescue plan, Mr Justice Quinn emphasised that the legislation “…clearly contemplated such a timetable being within the capacity of the Circuit Court if a case warranted court intervention.”

Noting Rathmond Ireland Limited [2017] IEHC 273, a case in which the High Court had agreed to appoint an examiner but had remitted the case to the Circuit Court, Mr Justice Quinn considered that the present case differed from Rathmond in two respects – the company in Rathmond was smaller and simpler than Bio Marine Ingredients Ireland Limited, and the scheme in Part 10 relating to examinerships differs from the scheme under Part 10A in several respects. 

However, Mr Justice Quinn shared the view of the Court in Rathmond that the Circuit Court was capable of hearing and managing cases such as the one before him, and confirmed “that the Oireachtas intended that where a company is eligible as a small company the matter should proceed in the Circuit Court unless there are good reasons for doing so. The onus is on the process adviser in making his determination to consider these reasons and to record them, as he has done in this case.”

Conclusion

The Court concluded that the scale and complexity of the affairs of Bio Marine Ingredients Ireland Limited were such as to warrant proceeding in the High Court and granted a stay pursuant to s.558N, without remitting the proceedings to the Circuit Court.

In the Matter of Bio Marine Ingredients Ireland Limited and the Companies Act 2014 [2023] IEHC 641