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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Tadgh O'Connell Heating & Plumbing Ltd -v- Barry Galvin [2012] IEHC 521 (04 December 2012) URL: http://www.bailii.org/ie/cases/IEHC/2012/H521.html Cite as: [2012] IEHC 521 |
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Judgment Title: Tadgh O'Connell Heating & Plumbing Ltd -v- Barry Galvin Neutral Citation: [2012] IEHC 521 High Court Record Number: 2012 606 COS Date of Delivery: 04/12/2012 Court: High Court Composition of Court: Judgment by: Gilligan J. Status of Judgment: Approved |
Neutral Citation Number: [2012] IEHC 521 THE HIGH COURT [2012 No. 606 COS] IN THE MATTER OF THE COMPANIES ACT 1963-2009 AND IN THE MATTER OF TADGH O’CONAILL HEATING & PLUMBING LIMITED (IN VOLUNTARY LIQUIDATION) AND IN THE MATTER OF SECTION 244(A) OF THE COMPANIES ACT 1963 AS INSERTED BY SECTION 125 OF THE COMPANYS ACT 1990, AND IN THE MATTER OF SECTION 280 OF THE COMPANIES ACT 1963 AND IN THE MATTER OF SECTION 282B OF THE COMPANIES ACTS 1963 ANTHONY J. FITZPATRICK AS LIQUIDATOR OF TADGH O’CONAILL HEATING & PLUMBING LIMITED (IN VOLUNTARY LIQUIDATION) APPLLICANT AND
BARRY GALVIN PRACTISING IN THE STYLE AND TITLE OF BARRY GALVIN & COMPANY SOLICITORS RESPONDENT JUDGMENT of Mr. Justice Gilligan delivered on the 4th day of December, 2012 Background 2. The applicant did attempt to retain the respondent as solicitor to collect the outstanding debts on his behalf as liquidator of the Company, but the respondent declined to accept this proposal due to a perceived conflict of interest. The respondent solicitor was prepared to hand over the files to a newly appointed solicitor on the basis of the usual undertaking as to prior costs but the applicant would not agree to this course of action. 3. By letter dated 12th October, 2012, the applicant requested the return of the files held by the respondent Solicitors in the matters for which the latter had been acting for the Company prior to the commencement of the voluntary liquidation. Invoices for work carried out by the respondent Solicitors were also requested and it was stated that these would be admitted within the liquidation in the normal course, as an unsecured creditor. A further letter dated 31st October, 2012, from the applicant to the respondent Solicitors emphasised the claim for the return of the files in question and noted that legal redress would be sought should that return not be realised by 5pm on that date. This request was not complied with, the respondent raising an issue as to a solicitors lien over the files. 4. By Notice of Motion dated 5th November, 2012, the applicant sought an order pursuant to s. 244A of the Companies Act 1963 as inserted by s. 125 of the Company Law Amendment Act 1990, directing Mr. Barry Galvin, principal of the respondent Solicitors, to deliver the books, accounts, records, ledger cards, invoices and other papers of like nature relating to accounts or trade of the Company to the applicant. The applicant also sought a declaration that neither Mr. Galvin nor the firm under whose style and title he practises are entitled to a Solicitor’s lien over any of the documents. Directions were also sought under s. 280 of the Companies Act 1963, as to whether it is appropriate to apply to court for leave to examine Mr. Galvin pursuant to s. 282B of the Companies Act 1963, in relation to any further books and records of the Company which Mr Galvin may have in his possession or power belonging to the Company. 5. The applicant avers that these proceedings were issued in order to ensure that the collection of several outstanding balances owed to the Company is progressed as well as to ensure that a s. 56 Report is submitted when required. The applicant expressed concern that, should this not happen, the debts would become statute barred or the debtors themselves may enter liquidation. The applicant also denied the existence of a Solicitor’s lien over the documents, as claimed by the respondent. At the hearing of this issue it became clear that submissions were required on two net issues. Firstly, the existence or not of a Solicitors lien, in favour of the respondent, over the files related to the debt collection proceedings and secondly, the entitlement of the respondent to an undertaking by the applicant as to the reimbursement of its pre-liquidation costs and outlays from any costs recovered in respect of the respondent’s costs and outlay from any third party in proceedings in being which were realised through the continuance of the debt collection proceedings by a different solicitor acting on behalf of the Company in liquidation. Relevant Statutory Provisions
(a) where a mortgage, charge or pledge has been created by the deposit of any such document or paper with a person, the production of the document or paper to the liquidator or provisional liquidator by the person shall be without prejudice to the person's rights under the mortgage, charge or pledge (other than any right to possession of the document or paper), (b) where by virtue of this section a liquidator or provisional liquidator has possession of any document or papers of a receiver or that a receiver is entitled to examine, the liquidator or provisional liquidator shall, unless the court otherwise orders, make the document or papers available for inspection by the receiver at all reasonable times.”
9. The applicant submits that in relation to the first issue s. 244A of the Companies Acts 1963 as inserted by s. 125 of the Companies Act 1990, is sufficient authority on which to base his claim for the return of all files and documents relating to the outstanding debt collection proceedings. The applicant also notes that this is so since the saver relating to the intentional creation of a consensual security as set out in sub clauses (a) and (b) of that section does not apply in this instance. At the hearing counsel for the respondent conceded this first issue and the various files have been forwarded to the applicant. 10. The applicant submits in relation to the second issue, that Re Compustore Ltd (In Voluntary Liquidation) [2007] 3 IR 556, is good authority for the proposition that it is the resolution to wind up a company which is the benchmark for pre and post liquidation expenses and that therefore the respondent is not entitled to any undertaking in relation to work done prior to the date of that resolution but must be, in so far as those pre-liquidation costs and outlays are concerned, admitted to the liquidation as an unsecured creditor in the normal course. In that case the solicitor’s fees related to advices given with a view to the commencement of liquidation but they were nonetheless disallowed by the court. The applicant cites Laffoy J. at p. 562 of the aforementioned decision, in this regard, where the learned judge noted that, in relation to the wording of s. 281 of the Companies Act 1963:-
12. The applicant further submits that prior to the enactment of s. 244A the position in relation to a solicitor’s lien was set out in Re Galden Ltd [1988] I.R. 213 in which it was stated by McCarthy J. of the Supreme court at p. 217 that:-
14. The respondent submits that the reliance placed on Re Galden Properties Limited (in Liquidation) [1988] I.R. 213 is in fact a misinterpretation of the decision of McCarthy J. and that this case is distinguishable given that the interest held by the solicitor in that case was conditional and was expressly in the form of a trusteeship. 15. Rather the respondent submits that he is entitled to an undertaking on a number of different grounds. Firstly, due to the existence of an equitable right of priority in liquidation which arises in favour of the owner of a lien and secondly, due to the existence of a common law lien which a solicitor will hold over any costs ultimately paid by a third party in respect of the work done on behalf of the Company in liquidation before the commencement of that liquidation. 16. In relation to the first of these propositions, the respondent submits that the decision of Mc Carthy J. in Re Galden Properties suggests that a lien, if it exists survives liquidation, relying on the following dictum at pp. 216-217 in support of his point:-
21. The respondent further submits that the solicitor’s lien is not affected by s. 244A of the 1963 Act as inserted by s. 125 of the Companies Amendment Act 1990, since that section merely precludes a solicitor from withholding a file from a liquidator or from claiming any lien over the file or any other documents of the company and does not preclude the solicitor from asserting the particular lien over the costs and outlays owed from pre-liquidation work. 22. The applicant, in response to these submissions, submits that Lismore Buildings, which is relied upon by the respondent, ought to be distinguished from the case currently at issue given that the former case was a decision made in relation to a company in receivership whereas the instant case deals with a company in voluntary liquidation. These two scenarios are distinguishable as in a receivership the company is still, in effect, “alive” whereas this is not the case in a liquidation. Liquidation performs a statutory function which cannot be ignored and the liquidator owes a responsibility to the creditors of the Company due to this position, according to the applicant. Conclusion 24. The facts of Re Compustore Ltd (In Voluntary Liquidation) [2007] 3 IR 556 initially appear to be sufficiently close to those at issue in these proceedings in order to rely broadly on the general principle set out therein. The reading of s. 281 of the Companies Act 1963, adopted by Laffoy J., in that instance, as creating a “rigid temporal cut off point” at the moment of the passing of the resolution for voluntary liquidation, all expenses prior to which not being capable of coming within the s. 281 definition of “expenses properly incurred in the winding up of the company” is quite clear. The court in that case disallowed the solicitor’s fees related to advices given prior to but with a view to the commencement of liquidation. 25. As was noted by McCarthy J. of the Supreme Court in Re Galden Ltd [1988] I.R. 213 at p. 217: “many other creditors who have supplied services or goods to the company in liquidation are in a similar plight”. However, the position in this case is more nuanced than that arising in Re Compustore Ltd (In Voluntary Liquidation) as in that case the advice given related to and was in contemplation of the liquidation whereas in the instant case the services provided by the respondent Solicitors related to the collection of outstanding debts owed to the company and in respect of which proceedings had issued and outlay expended, and it is intended that the proceedings will continue albeit with new solicitors instructed, and are unrelated to the subsequent liquidation of the Company and on that basis Re Compustore Ltd (In Voluntary Liquidation) is not an entirely appropriate authority. 26. It is also true that the interests which must be protected and the regime at play respectively in the liquidation and receivership scenarios are clearly distinguishable. Therefore, as the applicant submits, Lismore Buildings Limited (In Receivership) v. Bank of Ireland Finance Limited & Others [2000] 2 IR 316, which dealt with a company in receivership is entirely distinguishable from the matter at issue before the court which is a creditors’ voluntary liquidation. The reliance which the respondent places on the dictum of Barrington J. to the effect that “a solicitor, whose fees and outlay have not been paid by his client, will normally have a lien on a property or fund recovered by his efforts to secure professional costs and outlay incurred by him” is therefore not well grounded given the difference in context therein and the proceedings at issue here. 27. In my view, the solicitor’s lien runs with the costs recoverable from a third party for outlays and work as done by the respondent Solicitors up to the date of the presentation of the petition to wind up the company. This is true regardless of whether that lien is of an equitable or a common law nature and therefore there is no need for this Court to distinguish between authorities which point towards the common law source for such a lien such as s. 3 of the Legal Practitioners (Ireland) Act 1876, and those which point towards an equitable source for such a right such as Re Galden Properties or Halvanon Insurance Co. v. Central Reinsurance Corporation, both of which were relied upon by Counsel for the respondents in his submissions. Costs not recoverable will be admitted in the liquidation, in the normal course, as a debt owing to an unsecured creditor. 28. The liquidator, however, is obliged to honour the respondent solicitor’s lien since, despite the fact that the respondent is clearly no longer entitled to a lien over the documents in question, he maintains an equitable or Common law lien over any costs which are recovered from a third party in any debt collection proceedings brought on behalf of the Company by the liquidator which relate directly to outlays and costs expended by him and recovered in respect of legal services provided by him and which are directly attributable to his professional work up to the date of the presentation of the petition to wind up the Company. 29. Accordingly, the respondent solicitor’s costs and outlays must rank before the secured creditors interests due to the existence of a lien, whether equitable or Common Law in nature, over any outlay and professional fees which the liquidator recovers on behalf of the Company from the debt collection proceedings, in reliance on the expertise and exertions of the respondent, with the balance of the respondent’s fees ranking as an unsecured creditor in the liquidation. 30. I do not consider in the circumstnces that it is necessary to require the liquidator to give any undertaking as the judgment herein speaks for itself.
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