About this case:

• Citation:
  [2022] IEHC 709
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Mark Sanfey

Delivering judgment in the case, Mr Justice Mark Sanfey applied the judgment in Re Deauville Communications Worldwide Limited and the Companies Acts 1963-1999 [2002] 2 IR 32 and held that the definition of creditor had to be given a broad interpretation. The provisions of the Companies Act 2014 was simple and included a party which had purchased a loan after the company was struck off the Register.

Background

The Applicant was Everyday Finance DAC which was the assignee of loans from AIB, which included loans relating to Derbar Developments (Westport) Limited. The loans were assigned in October 2018. The company was involuntarily struck off the Register in 2015 for failure to file annual returns.

In 2021, Everyday brought an application to restore Derbar to the Register on the basis that it owed €1.5 million on foot of the loans and Everyday wishes to enforce this debt. The application was made pursuant to section 738 of the Companies Act 2014, which provided that creditor may be granted a restoration application if 1) the striking off had disadvantaged the creditor, 2) the application was made within a period of 20 years of the date of dissolution and 3) it was just and equitable to do so.

In opposing the application, the director claimed that Everyday was not entitled or had locus standi to make the application since there was no evidence that Everyday was a creditor at the time of strike off in 2015. It was said that Everyday had to prove that it was a bona fide and established creditor before the date of strike off in order to prove that it was disadvantaged by the striking off.

It was submitted that Everyday knew or ought to have known that the company was struck off at the time which it had purchased the loans and could not therefore claim to be disadvantaged. The director also relied on Re New Timbiqui Gold Mines Limited [1961] 1 Ch. 47, in which it was held that nobody could become a creditor after the company had ceased to exist.

In response, the applicant relied on the Supreme Court decision in Re Deauville, where it was held that the word “creditor” in the legislation “should be read as extending to contingent or prospective creditors”. It was submitted that the Re Deauville judgment provided that “creditor” should be given a broad interpretation.

Further, it was said that there was no qualification under section 738 as to the class of creditors who could bring a restoration application unlike in other sections of the 2014 Act. It was submitted that an assignment of a loan was a transfer of rights from a creditor to a new party and the Re Deauville decision should be applied to find that Everyday was a creditor in the case.

The director also made submissions based on the decision in Re Allenton Properties Limited [2021] IEHC 720 relating to the requirement that it must be “just and equitable” to restore the company to the Register.

High Court

Mr Justice Sanfey began by noting that the simple wording of section 738 required that Everyday had to show that it was a creditor of the company. It was held that there were a number of difficulties with the argument that Everyday had to be a proven creditor at the time of strike off.

First, it did not appear to be a requirement based on section 738 of the 2014 Act. Second, the deponent on behalf of the Registrar of Companies was satisfied that Everyday was a creditor of the company.

Further, the court held that the Re Deauville decision clarified that the definition of creditor should be interpreted widely. The court in Re Deauville endorsed the decision in Re Harvest Lane Motor Bodies Limited [1969] 1 CH 457, where it was held that “one should look somewhat generously at the word ‘creditor’”.

The court held that, under section 734(3) of the 2014 Act, a successful restoration application resulted in the company not being deemed to have been dissolved. If the bank had not assigned the loans, there was not doubt that it could invoke section 738 of the Act to restore the company to the Register. If the bank had the right to bring the application, there was no reason why Everyday could not bring the application following the assignment, the court held.

The court did not agree with the suggestion in Timbiqui that a creditor ceases to be a creditor when a debtor company was struck off as the “debt does not disappear in a puff of smoke”.

On the issue of whether it was just and equitable to grant the restoration application, the court held that the company would be immune to enforcement against its assets through its own neglect to file returns if the application was refused. Accordingly, the justice of case clearly lay in granting the orders. In so ruling, the court acknowledged the decision in Re Allenton but held that this was decided on its own facts.

Conclusion

The court granted an order restoring the company to the Register.

In the matter of Derbar Developments (Westport) Limited [2022] IEHC 709