Second company examiner petition dismissed as abuse of process due to withheld evidence and lack of special circumstances.

THE SUPREME COURT

378/2009

Murray C.J.

Denham J.

Fennelly J.

IN THE MATTER OF VANTIVE HOLDINGS

IN THE MATTER OF VILLEER DEVELOPMENTS

IN THE MATTER OF PEYTOR DEVELOPMENTS

IN THE MATTER OF CARRAGH ENTERPRISES LIMITED

IN THE MATTER OF PARLEZ INTERNATIONAL LIMITED

IN THE MATTER OF MORSTON INVESTMENTS LIMITED AND IN THE MATTER OF ROYCETON

AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

JUDGMENT of Murray C.J. delivered on the 14th day of October 2009

On the 14th August 2009 Vantive Holdings and the above related companies presented, ex parte, a petition to the High

Court seeking an order pursuant to s. 2 of the Companies (Amendment) Acts 1990 as amended, for the appointment of an

examiner in respect of the petitioner, Vantive Holdings, and the related companies. At that stage de Valera J., adjourned

the application, inter alia, because it was the second petition of that nature in relation to the petitioner and the related

companies (with the exception of Royceton which was not included as one of the related companies in the first petition,

but nothing turns on that). ACC Bank plc intervened in the proceedings and indicated its intention to oppose the second

petition being heard, in substance on the ground that the presentation of the second petition and the application for the

appointment of an examiner arising therefrom constituted an abuse of process of the Court.

The issue as to whether the petitioner should be permitted to proceed on foot of the second petition for the appointment

of an examiner was heard and determined in the High Court by Cooke J. The learned trial judge gave his decision on 21st

August 2009 allowing the petition to proceed and rejecting the objections raised on behalf of ACC Bank plc. On the 24th

day of August 2009 he delivered his judgment setting out the reasons for his decision.

This is an appeal by ACC Bank plc against the decision and order of Cooke J., on that question. One of the issues decided

by Cooke J., was that the Act of 1990 did not, as such, prohibit the Court from entertaining and hearing a second petition

by the same petitioner. While the appellants appealed against the decision on that issue it was not pursued at the hearing

of the appeal, and in my view, correctly so. In my view the learned trial judge was correct in concluding “…that the Act

of 1990 does not preclude the presentation of a second petition by the company although … it would clearly require the

intervention of some special circumstance or explanation”. I do not think the learned trial judge was referring to any mere

explanation but an explanation which established some special or exceptional circumstances, which, having regard to all

the facts of the case and the interests involved justified the presentation of a second petition by the same petitioner

notwithstanding that an earlier petition had been unsuccessful. One cannot define what those special or exceptional

circumstances might be, though the learned trial judge gave one possible example, since a decision on the justification for

such second application will, as indicated, fall to be considered in the particular circumstances of the case.

Background Facts

The genesis of these proceedings and the earlier related proceedings is the fact that the petitioner company and the

related companies are insolvent. This is essentially due to the collapse of the property market in Ireland, particularly in

Dublin, in the context of an economic recession in this country, accentuated by a banking crisis and also a virtually

worldwide recession.

The first petition of the petitioner for the appointment of an examiner pursuant to s. 2 of the Act of 1990 was presented

to the High Court on 17th July 2009. Its timing was prompted by certain legal steps which the appellants, ACC Bank plc,

had indicated it was proposing to take arising from the indebtedness of the group of companies to it. The facts and

circumstances concerning the insolvency of the Zoe Group, as the petitioner and related companies have been referred

to, are set out in the judgment of this Court, which I delivered on the 11th August 2009, which dismissed the appeal of

the petitioner against the refusal of its first application for the appointment of an examiner, and in the judgment of Cooke

J., delivered in this particular matter. Those judgments as well as that of Kelly J., giving his decision to refuse the first

application made to the High Court, also set out the inter-relationships which exist between the related companies

themselves and their relationship with the petitioning companies. I do not think it is necessary to set out again all those

matters for the purposes of the present appeal.

Following upon the dismissal by this Court on 11th August 2009 of the petitioner’s appeal against the refusal of the High

Court to appoint an examiner on foot of its first petition the same petitioner presented a second petition for the same

purpose pursuant to s. 2 of the Act of 1990 to the High Court on 14th August 2009.

The second petition is not founded simply on new circumstances, new material or evidence which has arisen or become

available subsequent to the decision of this Court or indeed that of the High Court dismissing the first petition.

Rather it is based substantially on factual material, expert opinion and evidence which was either available to the

petitioner or obtainable by it at the time of the High Court hearing on the merits of the petition.

Among the matters fundamental to the petitioner’s application on foot of the first petition was a three year business plan

drawn up in December 2008 by the petitioner and related companies. On foot of this business plan it was claimed the

group could trade out of its current difficulties and continue as a going concern.

This business plan was not placed before the High Court or the Supreme Court in the first petition but was produced for

the second petition .

A Statement of Affairs was presented to the Court in the first petition and this Court, in its judgment noted “Firstly, and

most crucially, no valuations had been exhibited” even though certain valuations did exist and were directly related to

that Statement. The Court also noted that there was a failure, for the purposes of that first application, to evaluate or

address in any reasoned or analytical manner future developments of the property market in Dublin although this was done

for the purposes of the second petition.

Moreover, this Court in its judgment in relation to the first petition pointed to manifest deficiencies in the report of the

independent accountant which the petitioner was required to present by statute.

In that regard the judgment of the Court noted that the independent accountant stated that he based his opinion that

the companies had a reasonable prospect of survival on “the companies’ trading projections” contained in Appendix 5 to

his report. The Court went on to state “It is to be noted that the accountant expresses no view about the

reasonableness of the projections in Appendix 5 or about the assumptions upon which they are based. He restricts himself

to saying that he has discussed these matters with the management of the companies. Consequently, the Court does not

have the benefit of any opinion from the accountant bearing on the viability of the projections.”

For the purposes of the second petition the petitioner has sought to address those deficiencies in the report of the

independent accountant in the first petition by relying on a new report of a new independent accountant. I see no reason

why this could not have been done for the purposes of the first petition had the petitioner chosen to do so.

Evidence crucial to the first petition, and so described by the Court, namely the business plan and the property valuations

were then actually in the possession of the petitioner but not presented to the Court.

At paragraph 81 of the Affidavit of Mr. John Pope grounding the second petition it was stated “In the light of the terms of

the judgment of the Supreme Court, it has been decided to present this petition and to produce in support of it material

which seeks to address the lacunae identified in that judgment. Certain of this material was available prior to the

presentation of the petition which was previously dismissed but it was not presented before the Court notwithstanding

advice that it should have been so presented. Certain other material was not available at the time at which the petition

was presented but it has now been made available to the petitioner and will be adduced before the Court in support of

the application. In addition the petitioner has commissioned a new report from an independent accountant pursuant to s.

3(3B) of the Companies (Amendment) Act 1990 and will rely upon it to address many of the concerns identified by the

Supreme Court.” In the next paragraph it was stated “The petitioner accepts that some of this material ought to have

been presented before the Court in support of the prior petition and that errors were made in failing to so adduce the

material in evidence”.

Accordingly, it is quite clear that not only was crucial evidence, such as the business plan of 2008 and associated

property valuations not presented to the Court on the first petition but it was consciously and deliberately withheld from

the Court for strategic reasons in the face of legal advice to the effect that such evidence was material and should be

presented.

In addition there is the fact, referred to above, that the petitioner now relies on evidence which could have been

obtained for the purposes of the first petition namely property valuations updated from those made for the purposes of

the 2008 business plan and an extended objective analysis of the plan itself and its underlying assumptions by the

independent accountant.

The learned trial judge correctly observed that there was no bad faith on the part of the petitioner in this regard there

being no attempt to conceal the existence of such evidence. Nonetheless, there was a conscious and deliberate strategic

decision, taken in the teeth legal advice, to withhold from the Court in the first application evidence in its possession

which was crucially material to the merits of that application. The petitioner must bear the responsibility of whatever

consequences flow from that.

Abuse of Process

Citizens have the right of access to the Courts so that their entitlements, rights and obligations may be determined in

accordance with due process. Due process means a right to a fair and complete hearing of the issues of law and fact in

any proceedings. The Courts have always had an inherent jurisdiction to stay or dismiss proceedings which abuse the due

process of the administration of justice where to do otherwise would seriously undermine its effectiveness or integrity. In

addition under the Rules of Court the Courts have, in civil proceedings, the power to dismiss proceedings on the grounds

that they are “frivolous”or “vexatious”. Indeed abuse of process may take many forms according to the context or the

nature of the proceedings, such as whether they are criminal or civil. In this case the Court is obviously concerned with

civil proceedings only.

In the High Court and in this Court the appellant relied on the rule of estoppel in Henderson v. Henderson [1843] 3 Hare

100, but by way of analogy. In his judgment the learned High Court judge stated “The rule in Henderson v. Henderson is

to the effect that a party to litigation must make its whole case when the matter is before the Court for adjudication and

will not afterwards be permitted to re-open the matter to advance new grounds or new arguments which could have been

advanced at the time. Save for special cases, the plea of res judicata applies not only to issues actually decided but

every point which might have been brought forward in the case.

“In its more recent application this rule is somewhat mitigated in order to avoid its rigidity by taking into

consideration circumstances that might otherwise render its imposition excessive, unfair or disproportionate.”

Viewing it through the prism of estoppel and res judicata the rule in Henderson v. Henderson strictly speaking applies to

proceedings between parties where those proceedings determine the rights or obligations between those parties. It is

intended, inter alia, to promote finality in proceedings and to protect a party from being harassed by successive actions

by another party when the issues between them either were or could have been determined with finality in the first

proceedings.

It also has to be borne in mind that the present proceedings are not ones which involve claim, defence or counter claim

determining rights or obligations owed by the petitioner to the appellant or vice versa. The learned High Court judge was

correct in making the distinction between this kind of application and proceedings inter partes. The Act of 1990 confers

on the petitioning company, as it does on other specified persons, the right to apply ex parte for the protection of the

Court in respect of the company or group of companies concerned. Others, such as the creditors of the petitioning

company, have a right to be heard so that their interests can be taken into account when the Court is exercising its

statutory jurisdiction under the Act of 1990. As already mentioned, there may in exceptional or special circumstances be

a second application. Therefore the protection of a party from being harassed by successive legal proceedings does not

arise in this context.

Nonetheless there still remains the inherent jurisdiction of the Court to protect the integrity of the due process of the

administration of justice and the finality, in principle, of a judicial decision.

Underlying the rule in Henderson v. Henderson is the policy of the need to protect the due and proper administration of

justice from an abuse of process and uphold the principle of finality in legal proceedings.

Mr. McCann, counsel for the appellant helpfully drew the attention of the Court to the statement of Bingham L.J., in

Johnson v. Gore Wood & Co [2002] 2AC 1 at 31 where he identified the rule in Henderson as being an aspect of the

doctrine of abuse of process. That statement has been cited and approved by this Court in the judgments of Hardiman J.,

in Carroll v. Ryan [2003] I.R. 309 and A.A. v. Medical Council [2003] 4 I.R. 302. That statement is as follows:

“Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action

estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there

should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is

reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the

parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may,

without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim

or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it

is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a

previous decision or some dishonesty, but where those elements are present the later proceedings will be much

more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the

court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have

been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings

necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-

based judgment which takes account of the public and private interests involved and also takes account of all the

facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing

or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As

one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to

determine whether, on given facts, abuse is to be found or not.”

In this matter the petitioner had in the course of the first petition access to the Court for the full and complete

determination of the issue, on its merits, as to whether an examiner should be appointed and be granted the continuing

protection of the Court against its creditors.

It thus had an opportunity to present to the Court all the evidence at its disposal which was material to having the

application decided in its favour. As outlined above, it deliberately chose not to do so against express legal advice. On

that basis it permitted the application to be heard and determined by the High Court and on appeal by this Court.

The appointment of an examiner on foot of a petition has laudable objectives which in general terms is designed to

facilitate the survival of a company as a going concern notwithstanding its insolvency if it demonstrates that it has a

reasonable prospect of survival. Once the petition is lodged the company is entitled to the protection of the Court which

may be to the serious detriment of its creditors and that protection continues while the matter is pending before the

Court. It comes to an end once the application is refused (subject to any stay which keeps alive the petition pending an

appeal) or, if successful continue for up to 70 to 100 days. The protection of the Court could be artificially obtained if it

were possible for a petitioner, after its first petition had failed, to proceed (even though such a step was not envisaged

at the time of the first petition) with one or more successive petitions on the basis of additional evidence,

notwithstanding it had been available and deliberately withheld, at the first petition, and thus extend further the

protection of the Court from its creditors pending at least a hearing which resulted in its refusal. Again, to permit a party

to make the same application on foot of withheld evidence by way of petition, without excusing exceptional

circumstances, would undermine the principle of finality which the Courts have always considered essential to the

integrity of the administration of justice. As Hamilton C.J., observed in Ire Greendale Developments Limited (In Liquidation)

(No. 3) [2002] I.R. 514 “… the finality of proceedings both at the level of trial and possibly more particularly at the level

of ultimate appeal is of fundamental importance to the certainty of the administration of law, and should not lightly be

breached.”

In my view the bringing of the second petition on foot of crucial and material evidence which was deliberately withheld

from the Court in the course of the proceedings determining the first petition and the reliance on evidence which could

have been produced at that hearing constitutes an abuse of the process in relation to the appointment of examiners

under the Act of 1990 and prima facie is a bar to the second petition proceeding. To permit the petition to proceed,

unless there are exceptional excusing circumstances, would undermine the integrity of the proper and efficient

administration of justice and the principle of finality.

Excusing Circumstances

It remains to be considered whether the petitioner has established exceptional circumstances which would justify the

bringing of the second petition or which would render a striking out of the petition disproportionate.

One of the matters alluded to by counsel for the petitioner was the concern of the petitioner, in particular Mr. Carroll, the

principal shareholder, to protect confidential commercial information such as the business plan and property valuations.

Certainly it had been mentioned as one of the reasons for withholding evidence in the course of the earlier appeal before

this Court.

It may be inevitable that certain confidential information which a petitioner might wish to protect will become publicly

known in the course of an examinership. If an insolvent company decides that it wishes to seek the protection of the

Court from its creditors and the appointment of an examiner it must accept the consequences that flow from its decision

to avail of the advantages of that process. In any event, the Court has certain powers to give some protection to

confidential commercial information such as the hearing of part of the proceedings, where necessary, otherwise than in

public. In its second petition the petitioner indicated that it wished to avail, if the Court saw fit, of the procedure

provided for in s. 31 of the Act but would proceed with a petition in any event even it meant that the evidence and

material withheld in the first petition became public. In the circumstances concerns about confidentiality, which were not

really emphasised in the course of the present appeal, could not be considered a valid or reasonable ground for

withholding the evidence in the first petition and relying upon it in the second petition.

In the course of oral submissions at the hearing of this appeal counsel for the petitioner referred to the health and

wellbeing of Mr. Carroll and the fact that he had been hospitalised subsequent to the first petition. In summary counsel

submitted that Mr. Carroll (who, with his wife, controls the shareholding of the company), was the dominant decision

maker. He was suffering from the stress and pressures of the situation in which his hitherto very successful group of

companies were. As a result, it was submitted, his judgment on the strategy to be adopted in the first petition was

adversely affected, notwithstanding that he had legal advice which went against the strategy which he had decided to

adopt. This, it was said, was an excusing factor and that others who would be affected by the inevitable collapse of the

group in the event of a winding-up should not be prejudiced by his misjudgement in such circumstances.

It is certainly understandable, and must undoubtedly be the case, that Mr. Carroll, and indeed other directors must have

been under stress by reason of the difficulties stemming from the insolvent state of the group of companies which had

been so successful over so many years.

However, the evidence that his judgment was at the time of the bringing of the first petition significantly impaired, or

impaired at all, is, at best, tentative and conjectural.

In an Affidavit filed on behalf of the petitioner by Mr. John Pope the deponent stated:

“In the weeks prior to the original application, Mr. Carroll’s health was a concern to Mr. Torpey and myself. I believe

that Mr. Carroll’s ill health resulted in his decision making capacity being affected, particularly around the time of the

presentation of the original application and since. I believe that this led to Mr. Carroll making certain incorrect

decisions in relation to the form, content and timing of the original application. In particular, I believe that this led

to Mr. Carroll’s insistence that the business plan should not form part of the original application. Despite advice I

say that Mr. Carroll would simply not countenance the presentation of the business plan at the time.”

He then went on to state:

“In view of Mr. Carroll’s recent hospitalisation, I now believe that I underestimated the medical position and level of

personal stress that he was under. This in my view led Mr. Carroll, at a time when he may have been overborne by

stress, to insist that certain documentation should not form part of the original application and resulted in omissions

in the previous petition.”

In support of this position counsel for the petitioner handed in to the Court two statements concerning Mr. Carroll from

medical practitioners and requested that they be kept confidential. One is from his general practitioner. Without going into

detail, although it must be said there is nothing of great consequence in it, a letter or note, dated August 18th addressed

“To Whom It May Concern” and written by the general practitioner, confirms that Mr. Carroll was, in mid July, suffering

from stress for which he was treated. There is a statement that he felt Mr. Carroll’s decision making ability was likely to

have been impaired. This in itself is a rather tentative statement without any further elaboration. Like, Mr. Pope’s view, it

was a view retrospectively expressed and there is nothing to indicate that in July Mr. Carroll went about conducting his

business affairs contrary to any medical advice or caution. The general practitioner in question went on to say that later

in the month of August, he referred Mr. Carroll for assessment and admission to hospital, which he was on August 13th.

The second letter, again addressed “To Whom It May Concern” and dated August 18th is from Mr. Carroll’s consultant

under whose care he came in hospital. The consultant simply confirms that Mr. Carroll was admitted to hospital and that

he remains under his care. Nothing further is stated and significantly no expert diagnosis is made or expert opinion of any

kind is expressed as to any incapacity or difficulty of Mr. Carroll in conducting his business affairs at the time of the

presentation of the first petition. No mention is made of the assessment for which the general practitioner said he referred

Mr. Carroll to the consultant.

As regards Mr. Pope’s stated view on Mr. Carroll’s capacity to make decisions at the time of the first petition it must be

said that it is essentially a retrospective conjecture on his part. His ‘estimation’ of the “medical position” of Mr. Carroll is,

of course, not a professional one.

If there was a real problem of the nature contended for here the proper way to address the issue was by the tendering of

a cogent medical diagnosis and reasoned medical opinion at least by way of Affidavit. The evidence relied upon was

insufficient to establish in any substantive way that Mr. Carroll was meaningfully, if at all, incapacitated in deciding on his

strategy as regards the presentation of the first petition. He had available to him, as is evident from Mr. Pope’s Affidavit,

clearly articulated legal advice and the views of fellow directors. I should add that there was no finding in the High Court

that Mr. Carroll’s capacity to conduct his business affairs was affected in the manner suggested at the time of the

presentation of the first petition. Therefore I do not think that Mr. Carroll’s health can in any sense be considered to be

an excusing factor for the deliberate strategy adopted at the first petition to withhold material evidence from the Court.

Finally there is the question as to whether notwithstanding an abuse of process of the Court there are other overriding

considerations which would require the Court to permit the second petition to go ahead. The Act places on the petitioner

who brings the petition the responsibility for the conduct and prosecution of the application. Certainly, at various stages

of the examinership process under the Act of 1990 there are other interests to be taken into account which include

creditors, employees and the wider interest of those who might benefit from the survival of the company including, for

example, contractors. But these considerations can not in themselves override the obligations placed by law on the

petitioner who is not permitted to abuse the process of the Court or undermine the integrity of the due administration of

justice. Otherwise, a petitioner could play ducks and drakes with the law and abuse the right of access to the Courts in

the knowledge that there were always other overriding considerations which would effectively absolve the petitioner from

responsibility for any abuse of process and allow a second or successive petitions to be brought.

In conclusion, the petitioner had a full and complete opportunity to present the petition and have it decided on its merits

when the first petition was brought. For the reasons explained above the bringing of a second petition for exactly the

same purpose on the basis of material evidence deliberately withheld from the Court in the first petition constitutes an

abuse of process. In the circumstances of this case I do not think there are any exceptional or excusing circumstances

explaining or justifying the bringing of a second petition nor do I consider that there are any other overriding

considerations which could lead the Court to permit the second petition to proceed.

It is for these reasons that I agreed with the decision of this Court on October 6th 2009 to allow this appeal against the

order of the High Court permitting the petition to proceed.