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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> O'Riordan v. O'Connor & Ors [2005] IEHC 96 (18 March 2005) URL: http://www.bailii.org/ie/cases/IEHC/2005/H96.html Cite as: [2005] 2 ILRM 462, [2005] 1 IR 551, [2005] IEHC 96 |
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Neutral Citation No: [2005] IEHC 96
[No: 2001/53COS]
BETWEEN
APPLICANT
RESPONDENTS
Judgement of Ms. Finlay Geoghegan dated the 18th day of March 2005.
The applicant is the Official Liquidator of Tipperary Fresh Foods Limited (In Liquidation) ("The Company") having been so appointed by order of the High Court on the 26th March, 2001. On the 26th April, 2004, the Official Liquidator issued a motion seeking declarations of restriction pursuant to s.150 of the Companies Act, 1990 in respect of the three respondents.
The first and third named respondent did not oppose the application against them. On the 11th October, 2004, a declaration of restriction was made in respect of the first and third named respondents pursuant to s.150 of the Act of 1990.
The Official Liquidator now seeks, pursuant to s.150 (4B) of the Act of 1990, (as amended) both the costs of the application and the costs incurred in investigating the matter. It is undisputed that the court has jurisdiction to make an order for the costs of the application under Order 99 of the Rules of the Superior Courts. On behalf of the respondents it is contended that the Official Liquidator is not entitled to rely on s.150 (4B) in this liquidation as the liquidation commenced before the subsection came into force. It is contended on behalf of the respondents that to permit the Official Liquidator to rely on s.150 (4B) would be to give it a retrospective application which it is contended is not warranted.
Background facts
The first named respondent was appointed a director of the Company on 18th November, 1988. The third named respondent appears to have acted as a director at latest in 2000. The Company appears to have ceased trading on the 12th March, 2000. The Company's premises were sold in July, 2000. A petition was presented for the winding up of the Company on the 9th February, 2001. The winding up order was made and the Official Liquidator appointed on the 26th March, 2001.
The Company Law Enforcement Act, 2001 was passed on the 9th July, 2001. Section 41 of the Act of 2001 which inserted subs. (4B) into s.150 of the Act of 1990 was brought into force on the 1st March, 2002 by the Company Law Enforcement Act, 2001 (Commencement) (No. 5) Order 2002. (S.I. No. 53 of 2002).
Section 56 of the Act of 2001 was applied to this liquidation with effect from 1st June, 2003 by the Company Law Enforcement Act, 2001 (Winding Up and Insolvency Provisions) (Commencement) Order 2003 (S.I. No. 217 of 2003). The Official Liquidator made his report as required by s. 56 of the Act of 2001 on the 27th November, 2003. The Official Liquidator asserts that much of the investigation for which he now seeks an order for costs was carried out for the purposes of making that report and all the relevant work was carried out after 1st March, 2002 when s.150 (4B) came into operation.
The Official Liquidator was not relieved by the Director of Corporate Enforcement of his obligation to bring an application under s.150 of the Act of 1990 against the respondents. Accordingly, pursuant to s.56 of the Act of 2001 he was obliged to bring the application and did so by motion issued on the 26th April, 2004, in the winding up proceedings which had commenced on the 9th February, 2001.
The application under s.150 of the Act of 1990 was brought after s.150 (4B) came into force but in liquidation proceedings which commenced prior to that date.
Issues
Having regard to the submissions of counsel the following appear to be the issues to be considered.
1. If the court now makes an order for the costs of investigation pursuant to s.150 (4B) of the Act of 1990 in this application is it giving to that subsection a retrospective application.
2. If so, does the presumption against retrospectivity apply to s. 150 (4B), it being a provision relating to costs.
3. If the presumption against retrospectivity does apply then is such retrospective application dictated or warranted by s.41 of the Act of 2001.
The nature of retrospective legislation was considered by the Supreme Court in Hamilton v. Hamilton [1982] I.R. 466. In his judgment O'Higgins C.J. at pp. 473 to 474 adopted the definition provided by Craies on Statute Law (7th ed., p.387) of legislation operating retrospectively where it "takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect to transactions or considerations already past."
Counsel for the Official Liquidator accepts this definition but submits that as the Official Liquidator is now only claiming the costs of investigations carried out after the commencement of s.150 (4B) of the Act of 1990 that if the Court now makes an order against the respondents in respect of the costs of investigation that s.150 (4B) would not be operating retrospectively within the meaning of the above definition.
In the application under s.150 at issue primarily is the conduct of the respondents as directors of the Company. The onus is on the directors to satisfy the court that they acted honestly and responsibly and if they fail to do so the court is bound to make the declaration of restriction. At latest on the making of the winding up order on the 26th March, 2001 the respondents became persons to whom s.150 applied and they were then at risk of facing the consequences of s.150 as then enacted by reason of their conduct as directors of the Company prior to the 26th March, 2001. Those potential consequences were a declaration of restriction and an order to pay the Official Liquidator's costs of the application under s.150 . The latter consequence was not then expressly provided for in s.150 but arose by reason of the courts' jurisdiction in relation to costs under O.99 of the Rules of the Superior Courts, 1986.
It is common case that the costs of investigation now sought would not come within the ambit of an order for costs made under O.99 of the Superior Court Rules. Hence at the date upon which the respondents became potentially liable to the consequences of s.150 the court could not have made an order that they pay to the Official Liquidator the costs of his investigating the matters raised in the s.150 application. Section 150 (4B) has now given the court such power where it makes a declaration of restriction. That appears to me to be the creation of "a new obligation" in respect to "transactions . . already past" and as such to be legislation which operates retrospectively within the meaning approved by the Supreme Court in Hamilton v. Hamilton [1982] I.R. 466. The power given to the court to make an order in respect of the costs of investigation only arises if the court decides to make a declaration of restriction which decision will primarily depend upon the respondents conduct as directors of the Company prior to the date of the making of the winding up order on the 26th March, 2001. The potential obligation to pay the cost of the investigation is imposed in respect of the respondents conduct as directors prior to commencement of winding up and by reason of the fact that the respondents became subject to s.150 on the dates of commencement of winding up of the Company.
In reaching this conclusion I have not ignored that fact that the court may on occasion consider actions of the directors after the commencement of winding up for the purpose of considering under s.150 whether there exist any other reasons for which it would be just and equitable to make the declaration of restriction. However this is a subsidiary consideration and there is no suggestion on the facts of this case that the matters being investigated by the liquidator took place after the commencement of s.150 (4B).
Accordingly I have concluded that if s.150 (4B) is now applied in this application it will be giving it a retrospective application.
Counsel for the Official Liquidator also submits that s.150 (4B) is a statute affecting costs and as such is considered to be of a procedural nature for the purpose of the rules relating to retrospective legislation.
It appears well established that the presumption against retrospective construction does not apply to enactments which affect only the practice and procedure of the courts. See Maxwell The Interpretation of Statutes (12th Ed., 1969 p.222). In re Heffernan Kearns Limited (No. 1) [1993] 3 I.R. 177 Murphy J. at p. 184 having referred to the approval in Hamilton v. Hamilton [1982] 2 I.R. 466 of the definition of retrospective legislation stated:
"The Chief Justice was thus distinguishing retrospective legislation properly so called from other statutes having a retroactive effect such as statutes dealing with the practice and procedure of the courts which enabled procedures to apply to actions arising before the operation of the statue".
The exclusion of statutes affecting only procedure and practice of the courts from the presumption against retrospective construction is explained by Maxwell op. cit at p. 222 in the following terms:
"No person has a vested right in any course of procedure, but only the right of prosecution or defence in the manner prescribed for the time being, by or for the court in which he sues, and if an Act of Parliament alters that mode of procedure, he can only proceed according to the altered mode".
In submitting that s.150 (4B) could be considered as a section which only effects the procedure and practice of the courts counsel for the Official Liquidator relies upon the following statement in Maxwell op. cit at p. 224:
"Statutes affecting costs are of a procedural nature for the purposes of the rules about retrospectivity. Section 34 of the Common Law Procedure Act 1860, which deprived a plaintiff in an action for a wrong of costs if he recovered by the verdict of a jury less than £5, unless the judge certified in this favour, was held to apply to actions begun before the Act had come into operation but tried afterwards, (Wright v. Hale [1860] 30 L.J. Ex. 40) and a similar effect was given to section 10 of the County Courts Act 1867 which dealt with orders for security for costs in county court actions (Kimbray v. Draper [1868] L.R. 3 Q.B. 160)."
I have considered the judgments referred to in the above passage. Whilst undoubtedly Wright v. Hale is authority for the proposition stated in Maxwell, in Kimbray v. Draper considerable doubt was expressed by the members of the court as to the correctness of the view formed in the earlier case. Blackburn J at p. 162 expressed the reservations in the following terms:
"The cannon of decision in Wright v. Hale is, that when the effect of an enactment is to take away a right, prima facie it does not apply to existing rights; but where it deals with procedure only, prima facie it applies to all actions pending as well as future. Whether the Court of Exchequer applied that test properly, in holding it was matter of procedure where a statute enabled a judge to deprive a plaintiff of costs in a case where but for the statute he would have been absolutely entitled to them, may be questionable; but for the decision in that case I certainly should have been inclined to think this was taking away a right. The present case, however, is far more clearly matter of procedure, as the statute only imposes on the plaintiff the alternative of giving security for costs or proceeding in the county court. This is certainly much more matter of mere procedure than was the case in Wright v. Hale, and we are bound by the principle of that case, and the rule must therefore be absolute".
I do not consider that s.150 (4B) insofar as it gives to the court a power to make an order against respondent directors that they bear "any costs incurred by the applicant in investigating the matter" is only of a procedural nature. Firstly, these are not the type of costs which appear to me to have been included in the previous principle. The costs which appear to have been included in the principle referred to in the above decisions are costs of legal proceedings. Costs incurred by the Official Liquidator in investigating the matter are not such costs. For that reason the costs of the application are separately referred to in s.150(4B). Rather, as I have stated it appears to me to potentially create a new monetary obligation in respect of transactions passed and as such benefits from the presumption against retrospectivity.
The final question is whether, notwithstanding the presumption against retrospectivity s.41 of the Act of 2001 must be construed as applying s.150 (4B) to liquidations which had commenced prior to the coming into force of s.41 of the Act of 2001. Murphy J. in re Heffernan Kearns Limited [1993] 3 I.R. 177 determined that the proper approach to determining such an issue (in that case s. 33 of the Companies (Amendment) Act, 1990) in accordance with the decision of the Supreme Court in Hamilton v. Hamilton [1982] I.R. 466 at 186 is:
". . . section 33 must be construed on its own terms and in the context in which it appears to see if the legislature has clearly and unequivocally declared its intention that this legislation should take effect retrospectively".
The question which must now be determined by the court is whether construing s. 41 of the Act of 2001 in its own terms and in the context in which it appears the legislature has clearly and unequivocally declared its intention that this legislation should take effect retrospectively in the sense of apply at minimum to an application made after the commencement of the section but brought in a liquidation which commenced prior to the operation of the section.
Section 41 of Act of 2001 provides:-
(1) Section 150 of the Act of 1990 is amended—
(a) in subsection (3)(a)(i), by the substitution for "£100,000" of "£250,000",
(b) in subsection (3)(a)(ii), by the substitution for "£20,000" of "£50,000", and
(c) by the insertion of the following after subsection (4):
"(4A) An application for a declaration under subsection (1) may be made to the court by the Director, a liquidator or a receiver.
(4B) The court, in hearing an application for a declaration under subsection (1) from the Director, a liquidator or a receiver, may order that the directors against whom the declaration is made shall bear the costs of the application and any costs incurred by the applicant in investigating the matter.".
(2) The amendments made by paragraphs (a) and (b) of subsection (1) shall not have effect in relation to a declaration under subsection (1) of section 150 of the Act of 1990 made before the commencement of this section and, accordingly, the requirements of subsection (3) of that section 150 that shall apply in respect of a person who is the subject of such a declaration made before that commencement shall be those that applied before that commencement.
The first matter to be noted is subs. (2) which excludes the application of paragraphs (a) and (b) of subs. (1) to declarations made before the commencement of the section. There is no similar exclusion for the application of paragraph (c) to liquidations which started prior to the commencement of the section. Such exclusion was made for the application of s.150 at the time of its enactment by s.149(3) of the Act of 1990.
Next it appears to me that the only proper construction of subs.41 (1)(c) is an intention that the provisions of subs. (4B) should apply to any application brought pursuant to subs. (4A) of s.150 of the Act of 1990.
The insertion of subs. (4A) into s.150 of the Act of 1990 was the first time that there was express provision as to the persons by whom applications might be made under s.150. The Office of Director (the Director of Corporate Enforcement) was established by s.7 of the Act of 2001. The Oireachtas must be presumed to have intended that the Director be entitled to make applications under s.150 (1) pursuant to s. 150 (4A) immediately after the commencement of that subsection. Considering s.150 (4B) in the context of s.150 (4A) there is an inescapable conclusion that the Oireachtas intended subs. (4B) to apply to all applications which might have been brought pursuant to subs. (4A). If one considers the position of the Director alone inevitably it must be concluded that subs. (4B) was intended to apply to all applications brought by the Director pursuant to subs. (4A). There does not appear any basis for reaching a different conclusion in relation to applications brought by a liquidator.
Further, as was submitted by counsel for the Official Liquidator it does appear proper to consider s.41 in the context of the new scheme enacted by s.56 of the Act of 2001. That section has been treated as applying to liquidations commenced prior to the date of coming into operation of s.56. In the commencement orders it has been expressly applied to liquidations commencing on specified prior dates. It has not been suggested that it was not so intended by the Oireachtas. Section 56 came into operation as affecting the liquidation herein on the 1st June, 2003. In accordance with s.56 the Official Liquidator became obliged to make a report to the Director within six months of the 1st June, 2003 and subsequently, not having been relieved by the Director became obliged under subs. (2) to apply to the court under s.150. That application is brought inter alia pursuant to the provisions of subs.150(4A).
Accordingly, I have concluded, notwithstanding that the presumption against retrospectivity applies to s.41 of the Act of 2001 inserting s.150 (4B) to the Act of 1990 insofar as it authorises the court to make an order against respondent directors for the costs incurred by the applicant in investigating the matter that the Oireachtas has clearly and unequivocally in the terms of s.41 of the Act of 2001 declared its intention that such section should take effect retrospectively in the sense of applying to a liquidation which commenced prior to the coming into operation of s.41 of the Act of 2001.
I am aware that the final conclusion in this judgment is contrary to that reached in an ex-tempore decision given by me in the Monday motion list on 26th July, 2004 in Sarth Investments limited (in Receivership and Liquidation). The issues were considered in greater detail in the submissions in this application and I reserved my decision. Whilst I regret the inconsistency having considered the submissions made and authorities to which I was referred consider I am bound to so decide.
Approved: M. Finlay Geoghegan
