Dáil Éireann debate -
Tuesday, 28 Aug 1990

Vol. 401 No. 8

Companies (Amendment) Bill, 1990: Report and Final Stages.

Mr. J. Bruton

I move amendment No. 1:

In page 6, subsection (2), line 49 and in page 7, lines 1 to 8, to delete paragraph (f).

This amendment concerns the rather unusual provision in section 5 of this Bill, where, for the period of an examinership, the guarantees given by third parties in respect of moneys loaned to the company shall be put on ice. Putting third party guarantees on ice is not necessary for the saving of a company. Only the debts owed by the company must be put on ice in order to protect the company. Moneys owed by third parties on foot of guarantees given to the company are a separate matter and there is no need to put them on ice at all to protect the company. Clearly, given that such guarantees are likely to be given to the company in most cases by directors of the company in respect of payment of loans borrowed by the company, given that it is these directors of the company who are likely to petition for protection under this legislation, also given that it is these directors who will select the person who is to be the examiner and propose his name to the court for approval, if they are the ones who are making the petition for protection, it seems to be quite odd, if they have given a guarantee in respect of repayment of a loan, that the very fact that a petition had been granted in regard to protecting the company should also provide protection in regard to guarantees undertaken by individual directors of the company or indeed any other third party who may have given a guarantee to a company. There is no need from the point of view of protecting the company to also protect any individuals against being pursued in respect of guarantees that they owe.

One of the inherent characteristics of a successful banking system and one of the reasons companies can get finance is that it is possible to have guarantees by individuals to back up lending to companies. The Irish banks have tended to overuse that facility, and I have proposed in the Special Committee on the Companies Bill that guarantees should be capable of being required only in respect of a proportion of the total amount lent by a financial institution to a company. That is something that would apply in the future if it were passed. In this case, however, what we have is a situation where money was lent to a company in the past on the basis of a guarantee given in the past and the bank decided that that guarantee was sufficient to justify lending the money. Now new legislation will be introduced literally overnight which will have retrospective effect in so far as it will suspend the operation of any such guarantees for the full duration of the examination of the company's affairs. As part of the scheme of settlement of the company's affairs, it is open to the court to decide to set aside those guarantees, because under section 17, following a hearing made under the section, the court may make such orders as it deems fit which could include any matter which is related to it, and given that paragraph (f) of section 5 — guarantees given by individuals — is one of the matters which is the subject of a stopping order——

Mr. Cowen

Read the part before it. That is crazy.

Mr. J. Bruton

——by virtue of the appointment of an examiner, it is not unreasonable to expect that the court might well feel that it was within its remit to make an order in regard to that matter just as it might well be the case that the examiner would consider that it would be appropriate for him to make proposals in regard to that matter because the legislature had included in the ambit of protection not just the company but also any individual who had guaranteed the company's debts. I do not believe that would be right and there should not be any doubt about the matter. There is no need for the purposes of protecting the company to provide protection also in regard to individuals who may have guaranteed individual debts to the company whether to banks or, as Deputy Mervyn Taylor mentioned realistically, to individual suppliers to the company. For that reason paragraph (f) of section 5 (2) should be removed and that is the purpose of this amendment.

Mr. McGahon

In supporting this amendment may I refer to the Goodman case today very briefly on a point of information. What legal advice has the Minister received regarding Goodman International's legal case against the Government which arose as a result of the withdrawal of export credit insurance? Will the Government be at risk of further and potentially much larger claims for damages if, as a result of the Minister's stance, the Goodman Group are forced into closure. If it is subsequently held that the Minister's refusal to pay this claim precipitated the closure of the Goodman Group of companies, by how much would the State be at risk if damages range as high as £1 billion? May I have that information, please?

An Leas-Cheann Comhairle

If it is relevant to the amendment before us.

Mr. McGahon

Surely it is relevant to the purpose for which we are all assembled here today.

An Leas-Cheann Comhairle

That could be correct but on the other hand the Deputy appreciates that, in respect of debate as it is ordered here, every contribution must be relevant to the specific amendment before us. Maybe at a later time when it will be proposed that the Bill do now pass the Deputy——

Mr. J. Bruton

This amendment relates to third party guarantees. Our export credit could be construed as a form of third party guarantee.

An Leas-Cheann Comhairle

In the matter of Deputy Bruton's interpretation of that construction, Deputy McGahon has made his point.

Mr. McGahon

I wish to make one further point. In the above circumstances is it not prudent——

An Leas-Cheann Comhairle

I hope the Deputy is not taking it that I am encouraging him.

Mr. McGahon

This is an extraordinary day. It is the first time in 14 years we have been recalled.

An Leas-Cheann Comhairle

You will accept that things that are extraordinary do not change Standing Orders.

Mr. McGahon

Is it prudent to expose the Government to this type of risk or, indeed, place our livestock industry in jeopardy in this way? Could not the funds claimed by Goodman be placed in a special fund which would be made available to pay farmers and suppliers of goods and services, pending an immediate determination by the courts of the legal claim? This would ensure that the Government could not be held responsible for the closure of Goodman International and would assist farmers at this very crucial time. If it transpired that the Goodman claim was not valid, the Government could then stand in the shoes of the farmers for any money owed to them and seek redress from the company, its examiner or liquidator in due course? The one issue that was not addressed here today was that Larry Goodman——

An Leas-Cheann Comhairle

Even your colleague, Deputy Bruton, could not construe the propriety of that.

Mr. J. Bruton

Guarantees or payment.

Mr. Cowen

Deputy Bruton has reintroduced this amendment on Report Stage. Despite the debate which I felt was constructive on Committee Stage he has made precisely the same point on Report Stage. Deputy Bruton is seeking to suggest that on foot of section 5 (4) a court could, after the examinership is over, wipe out personal guarantees by third persons to the company concerned on foot of a petition brought to the court by interested parties set out in section 2. If Deputy Bruton honestly believes that to be possible, his knowledge of contract law astounds me. There is no point in asking the Deputy to reply on Report Stage because, as I understand it, he may not do so but perhaps somebody else from that side of the House will explain——

An Leas-Cheann Comhairle

On a point of order, Deputy Bruton, who moved the amendment, is the only one who may reply.

Mr. Cowen

Can Deputy Bruton explain to me how he can confer section 17 (3) powers on the examiner on the basis of the report being brought forward by the examiner at the hearing in the court after he has made his findings. I do not know how an intelligent man can suggest that there is even the remotest possibility that any judge has the power to wipe out what is a contractual debt owed to an individual when the examinership is over.

Mr. J. Bruton

The wording is open to that construction.

Mr. Cowen

The wording is not open to the construction that Deputy Bruton ascribes to it because the powers of section 17 (3) must be seen in the context of the powers of section 17.

Mr. Cowen

One cannot seek to come in here, speculate, throw contract law out the door in so doing and expect to present a credible case. If a contractual debt is owed and is suspended during the period of examinership, when the examinership comes to an end, the contractual debt reverts to where it was in the first place. To suggest that a court has the power to supersede that is to give to a judge of the High Court powers he simply cannot have because they are not issues which are before him. What is before him is the examiner's report on whether he should wind-up, appoint a receiver or make other ancillary orders relevant to the report he is presenting before the judge. No other order can be made. Having listened to Deputy John Bruton advance detailed, constructive and helpful suggestions on Committee Stage of the main Bill — the Special Committee which I chaired over a number of months when we spent long days and nights on it — I find astounding for him to come up with a suggestion like that as being a possible construction of the legislation.

Dr. G. FitzGerald

In the early debate on Committee Stage when this was being discussed the Minister's reaction was such that I thought there might be an amendment forthcoming from him on this section. He seemed to take some of the points being made then. One of the points he made himself seemed to me, in logic, to require at least an amendment to the section, whatever about acceptance of our amendment, because he related subsection (f) to subsection (c) and said they were part of the same process. Those were not the exact words he used, but he contended that they were related to each other. In fact subsection (c) is about attachment, sequestration and so on against the property or effects of the company whereas subsection (f) relates to attachment, sequestration against the property or effects of the person. So he is right; the two seem to relate to the same thing, the company and the person and, in each case, to attachment, sequestration, distress or execution. The point was also made that subsection (c) is governed by the phrase "except with the consent of the examiner". But those words are omitted from subsection (f) which appears to me to be difficult to explain. Certainly it does not enhance the Minister's argument in relation to it as far as I understood it. In replying perhaps the Minister could clarify that. I had thought there would have been an amendment from him on this section, at least dealing with that point. It seemed to me he was willing to consider some of the points being made. I am surprised we have not got anything from him on this section.

The points made here are important. It is not an easy Bill to understand. I think I have followed most of the points made so far but I really do not understand the purpose of the inclusion of this subsection. I can imagine possible reasons for it but normally I would expect the Minister to give us those reasons. In his reply, the Minister has failed totally to justify the subsection although it may well be that there is a case for it. I am in some difficulty in that, first, I have not heard an explanation of why it is here. The Minister justified it without explaining it on grounds that seemed to require, in logic, the addition of the words "except with the consent of the examiner". He seemed willing to come back with something but has not.

In replying I wonder if the Minister could explain rather better than he has so far just what this subsection is doing here. On the face of it it seems to be an inappropriate protection for an individual in a Bill designed to protect a company, to keep it going, viable, for the time being until it is possible to establish whether it, or parts of it, is capable of surviving. So far no reason has been given as to why this is extended to persons who are liable to pay on foot of a guarantee or otherwise. The Minister really owes it to the House in this case to do what has been done elsewhere, but not in this instance, that is to explain rather better than he has, the purpose of this subsection, to justify its inclusion and the omission of the provision "except with the consent of the examiner" which seems required by virtue of the analogy he drew between this subsection and subsection (c).

Mr. Taylor

Deputy Garret FitzGerald has quite correctly made the point regarding the difference in the wording between subsections (c) and (f). To draw the argument on to its logical conclusion one comes to the ridiculous possible position in which, in an appropriate case, the examiner might be giving his consent to attachment, sequestration or distress against the company whereas a guarantor would retain the exemption granted to him under the provisions of subsection (f). That surely would be an absurd position to be reached——

Dr. G. FitzGerald

An appalling position.

Mr. Taylor

——one that could not possibly have been intended. Deputy FitzGerald also raised a question as to why this clause had been included in the first place. In fairness, the Minister did give an explanation on Committee Stage as to why it had been inserted — a very logical, cogent reason for having that clause there to cover what might be called the garnishee-type position so that the inter-relationships of the company itself vis-à-vis its debtors or creditors would not be interfered with during the course of the examinership. That is perfectly logical and understandable. But the section goes somewhat wider than that and there is no saver for the guarantee position. The Minister did not address himself to that specific point when it was debated on Committee Stage. I am interested to hear from the Minister in particular: does he accept that the wording of this section is sufficiently wide to cover the guarantee as well as the garnishee case? It seems to me quite clearly that it does. I strongly suspect that, in the parliamentary draftsman's office, that was not the intention. It would be contrary to all logic if it had been the intention, having regard to the fact that, as I said on Committee Stage, in a receivership or liquidation — which is the ultimate position so far as a company is concerned — the liability of a personal guarantor remained totally unaffected throughout either by the receivership or the liquidation. That is a separate matter as between the guarantor and the person who supplied the goods or whatever.

I would be interested to hear whether the Minister accepts that subsection (f) is sufficiently wide as it stands to include a guarantor and, if so, why he has not brought forward a saver or exception to exclude the guarantee position from his coverage of the garnishee-type position which he gave, in which I fully support him and agree is absolutely necessary, logical and appropriate.

I must say I do not agree with Deputy John Bruton's interpretation of section 17 (3). I would agree with the comments of Deputy Cowen in that regard. I do not think it is in any way acceptable to say that the provisions of section 17 (3) give the court the kind of discretion to do literally anything it wants arising out of an examinership. That would not be so; there would be the confines of the Act and so on; that would be a limited position. Deputy Cowen made the point that to say otherwise would throw the ordinary law of contract out the window. He is quite right in that regard. May I say this to Deputy Cowen: if we leave this as it is, with this guarantee position, that is throwing contract law out the window. It is never in the contemplation of a person who gives a guarantee or one who needs to get such guarantee, seeks it and is given it, that some entirely extraneous matter of the company going into receivership, liquidation or examinership will affect an outside contract. Consequently, that would be throwing contract law out the window. There is no justification or basis that I can see for so doing.

Dr. G. FitzGerald

Retrospectively.

Mr. Taylor

Yes. Play has been made here of the question of banks and so on. As I have said, one would not feel very much sympathy with banks if they were all the section was to be in aid of. On thinking about this further, it occurred to me that there could well arise circumstances in which, far from the bank being the institution that would exploit this provision, the bank could be the body that would be saved by this.

It occurred to me that, far from the bank exploiting this, they could be saved by it because a very big company, if it was necessary to do so, could have arranged for their own bank to give a guarantee, that the bank were the guarantor to an outside trader who was supplying goods or services to that big public or private company. In a sense this is not relevant to the central issue involved and I cannot see why it would be necessary to put in that clause in the case of a guarantor. When guarantors sign guarantees they go into the transaction with their eyes open and it could be crucially important to the person who sought the guarantee. I instanced the case of a small beef supplier who might be worried about getting his money before he supplied the beef and would insist on getting a guarantor from the processors' bank or personal directors and to whom four months delay would be crucial.

I do not accept Deputy Cowen's point that it does not really affect the person as the money is in suspension for four months. Four months can be a very long time in a business transaction and in what happens to a company even when the examiner is in. Being deprived of money for four months could well be crucial to a small supplier. In some cases it could mean the ruination of his business and could be the reason for insisting on getting a guarantee before agreeing to supply the beef. The Minister did not have an opportunity to clarify this on Committee Stage and perhaps he will do so now to assist the House.

Minister for Industry and Commerce (Mr. O'Malley)

I cannot deal with the matter now as I wish to raise a point of order. Unfortunately, due to the speed at which all this is happening, it was impossible for my staff to draft an amendment which we agreed should be considered and put forward in relation to section 4. It only became available after Report Stage had begun as there was no interval at the end of the division. Report Stage began in respect of an amendment to section 5 and we were not able to put down the amendment to section 4. It is not possible for me or others to run off amendments as they come into our heads; we must have them checked and approved by the Office of the Attorney General.

I have an amendment in relation to a point made by Deputy O'Dea and others on section 4 (3) dealing with related companies and where the period of protection of the related company was expressed to be contemporaneous with the period of protection of the original company, the protected company, even though the order in respect of the related company would have been made subsequent to the order in relation to the original protected company. We were trying to cover the point that it could not be backdated to the date of the protection order on the first company because there might have been an active sequestration or execution in respect of the related company subsequent to the date of the protection order on the original company but prior to the date of the order in respect of the related company. We can overcome that problem by inserting in line 39 after the word "period" and before the word "during" the words "begining on the date of the making of an order under this section and continuing for the period during which". I should add that "during which" is not in the amendment; it is to make it readable.

Mr. J. Bruton

Do we need to recommit section 4 to do this?

An Leas-Cheann Comhairle

The Chair would prefer if we could dispose of the amendment which we were discussing as, strictly speaking, one amendment only may be before the House.

Mr. O'Malley

This is an interlude.

An Leas-Cheann Comhairle

The Minister cannot create an interlude as it could lead to many problems later on. Could we dispose of amendment No. 1. Then the Minister, with the agreement of the House, may formally move the amendment to which he referred?

Mr. J. Bruton

We will be happy to facilitate the Minister.

An Leas-Cheann Comhairle

We would then have the advantage of having the text of the amendment, which would be circulated. Is Deputy Bruton proceeding with amendment No. 1?

Mr. J. Bruton

I am not finished, I am waiting for the Minister to say whether he accepts it.

An Leas-Cheann Comhairle

We cannot have two amendments before the House simultaneously.

Mr. J. Bruton

The Minister interrupted. We will be delighted to take this matter whenever it suits him. It now appears that the best time will be when we have disposed of this business. Perhaps the Minister will revert to the amendment?

An Leas-Cheann Comhairle

We will circulate a copy of the Minister's amendment.

Mr. O'Malley

My second point of order relates to essentially a parliamentary question which Deputy McGahon asked me and which you allowed——

Mr. McGahon

Has the Minister considered the consequences of losing the case and what it would cost the State?

Mr. O'Malley

Every defendant has to consider the consequences of losing a case but the defendant, as the Deputy will appreciate, did not bring the case so there is nothing I can do about it. What does the Deputy think I should do?

Mr. McGahon

Have the Government considered the consequences of losing this case and possibly precipitating the collapse of the Goodman Group of companies? For how much will the Government be liable and where will they get the money to pay for it?

Mr. O'Malley

Is the Deputy saying that if we lose the case it will cause the collapse of the Goodman Group of companies?

Mr. Taylor

This may well turn out to be irrelevant because I have a strange feeling that the examiner, when appointed, will abandon this case very quickly.

Mr. McGahon

That is only a guess. Have the Government fully considered the implications which could arise as a result of losing this case and the consequent claim by Goodman International for damages?

Mr. O'Malley

There is always a possibility that the defendant will lose and will, therefore, be liable for damages. I am advised by the Attorney General and others that the prospects of our losing are remote, particularly as it relates to insurance on policies which were issued for Irish beef.

An Leas-Cheann Comhairle

The Chair will allow the Minister to adjudicate as to whether the question posed by Deputy McGahon is relevant to the amendment we are discussing but, if not, the Minister should not feel obliged to reply.

Mr. J. Bruton

It concerns guarantees by third parties.

Mr. McGahon

It is relevant to the reason we are here today.

An Leas-Cheann Comhairle

Not on this amendment——

Mr. J. Bruton

The Minister has not answered the question.

(Interruptions.)

An Leas-Cheann Comhairle

I would throw a lifebuoy to Deputy McGahon but I do not think that would necessarily make it relevant to——

Mr. Rabbitte

It is not Deputy McGahon who needs the lifebuoy.

Mr. McGahon

I would prefer if you threw "life girls" to me instead of "life boys".

An Leas-Cheann Comhairle

The Minister on amendment No. 1.

Mr. O'Malley

I wonder if Deputy McGahon has considered the consequences of the State winning the case?

Mr. McGahon

I have.

Mr. O'Malley

Would the Deputy care to express a view on the propriety or otherwise of a policy in which declarations are made that only beef with its origins in the Republic of Ireland would be covered and where very large quantities of beef whose origins were other than the Republic of Ireland were included in the shipments which purported to be covered by the policy? What does the Deputy think I should have done in those circumstances other than what I did?

Mr. McGahon

I understand the Goodman Group accept that some of the cattle were sourced outside the State. I am asking the Minister to address the consequences that could arise in a claim for damages against the State if, as Mr. Goodman expects, he wins the case.

An Leas-Cheann Comhairle

I ask the Deputy and the Minister to bear with me. We must deal solely with what is in the amendment before us. As I see it, winning or losing the case is not pertinent to amendment No. 1.

Mr. Cowen

On a point of order, would it be in order to point out the very strict sub judice rule which applies to all Members of the House? Perhaps it would be best if everyone refrained from making any statement on matters which are the subject of court hearings.

Mr. McGahon

Enough was said this morning.

Dr. G. FitzGerald

I do not think the Minister deserved that reprimand.

Mr. Cowen

I was not reprimanding the Minister; I was making that point to all Members of the House. In view of the contributions made this morning by some Members on the far side of the House, they might have done well to remember that before they made their Second Stage speeches.

Mr. D. Ahern

Hear, hear.

Mr. Ferris

Is that supposed to mean we should shut up? Is the Deputy suggesting that this House should say nothing?

Mr. D. Ahern

There were no facts.

Mr. O'Malley

I am mystified as to how I am supposed to respond to these kinds of questions or allegations. I thought they were not in order——

Mr. Cowen

Deputies did not give any facts——

Mr. Ferris

The problem with the Deputy is that he does not like to hear the truth.

Mr. McGahon

The same allegations were made——

Mr. Ferris

The Deputy was fairly good at making them before——

An Leas-Cheann Comhairle

Would Deputy Ferris please restrain himself. Pointing to left and right does not help the humour of the House. The Minister without any further interruption.

Mr. J. Bruton

Perhaps the Minister would address himself to the substance of the amendment.

(Interruptions.)

Mr. O'Malley

There are a lot of distractions. Deputy Bruton's amendment seems to be in exactly the same terms as his amendment on Committee Stage which I think was defeated or withdrawn.

Mr. J. Bruton

It was not reached.

Mr. O'Malley

It was argued at some length and it was decided to withdraw it.

Mr. J. Bruton

The time limit supervened. Perhaps the Minister would deal with the amendment now. He has followed every hare he could see on the field and perhaps he will now bring his attention to bear on this modest amendment.

Mr. O'Malley

Did I invent Deputy McGahon?

Mr. Ferris

That would not be possible.

Mr. Taylor

The Minister went down an unusual road.

Mr. O'Malley

I have checked with the Attorney General's and parliamentary draftsman's offices about this amendment. The advice I have received from the parliamentary draftsman's office is that, where one is freezing the money in regard to a company, which is the intention under this legislation, and the freezing is for a limited period, it is desirable to retain section 5 (2) (f) in order not to create an impossibly confused situation which would otherwise arise. If it was open for some creditors to move against guarantors the situation would be changing all the time and the indebtedness of the company to certain people would change in the course of the period of protection. That would be undesirable and would make it very difficult for the examiner to cope with because, at some stage during the period of protection, the guarantors would become creditors or prospective creditors. It was felt on consideration that this would be impossible because it would cause enormous confusion, which I can well accept.

I thought I gave a very full explanation of my view in relation to this matter on Committee Stage. I think Deputy Taylor took my point and he agreed that in so far as this relates to garnishees it makes absolute sense and is perfectly acceptable. I am glad Deputy Taylor has reiterated that now. I would point out to the Deputy that it covers guarantees as well as garnishees. If it is appropriate in respect of a garnishee equally it must be appropriate in respect of a guarantee——

Mr. Taylor

Not at all.

Mr. O'Malley

——otherwise I could see all kinds of subterfuges being used to circumvent it. I would remind Deputies that it has been a cause of complaint in this House and in the Special Committee that banks were seeking too many personal guarantees from the proprietors of small and medium size companies at a very expensive rate. They had to pledge their houses and so on in order to give security to the bank for the borrowings of the companies they owned or ran.

If it is going to be possible to sue a guarantor in respect of a company's debts while the company is under protection it will mean that every lender to a company, almost without exception, will want a personal guarantee because he will be able to get at the managing director, chairman or whoever. Section 5 (2) which relates to suing, sequestration and so on, will not apply to the guarantor but will apply to the main debt. If Deputy Taylor agrees it is in appropriate that it should be possible or allowed to circumvent this prohibition on sequestration through garnishee, I think he will agree on reflection that the principle is exactly the same——

Mr. Taylor

No, it is quite different.

Mr. O'Malley

——and that it would have undesirable consequences if every lender were going to insist on personal guarantees so that he could get at the guarantor, which is what he could do if we took out paragraph (f).

Mr. Taylor

That is not possible in a liquidation.

Mr. O'Malley

On reflection and on the advice of the Attorney General I am not prepared to accept the amendment. I am not being obstructive in any way in this debate. I have accepted six major amendments together with three or four others of less consequence. I do not recall for quite a while anyone being so helpful during Committee and Report Stage debates. I am not prepared to accept this amendment because I do not believe it makes sense. Deputy Taylor goes with me at least 50 per cent of the way. If he reflects on it, I think he will agree that what is right in respect of the garnishee is equally valid in respect of the guarantee.

Dr. G. FitzGerald

Will the Minister advert to the omission of the words "except with the consent of the examiner"? Why have those words been omitted?

Mr. O'Malley

For this reason, and it is obvious——

An Leas-Cheann Comhairle

Deputy FitzGerald, we are governed here by very strict rules. Each Deputy can make one contribution. The only person entitled to make a second contribution is the mover of the amendment.

Dr. G. FitzGerald

I just remind the Minister he wants to say something.

Mr. O'Malley

Can I add a postscript to my original contribution, Sir?

An Leas-Cheann Comhairle

Strictly speaking, no, but because of the situation that has been obtaining where we have allowed others to transgress the rules——

Mr. O'Malley

To put Deputy FitzGerald out of his agony, paragraph (c) relates to attachment, sequestration, distress or execution against the property or effects of the company. Paragraph (f) relates to attachment, sequestration, distress or execution against the property or effects of another person. Since the examiner only deals with the company's assets it is obvious that he can consent only in respect of the company's assets. The examiner cannot purport to consent or not consent in respect of the assets of somebody else altogether. He has jurisdiction only in relation to the assets of the company to which he was appointed examiner by the court.

Dr. G. FitzGerald

He has——

An Leas-Cheann Comhairle

I think you did not entirely put Deputy FitzGerald out of his agony.

Mr. O'Malley

I tried to.

An Leas-Cheann Comhairle

Deputy Bruton to conclude.

Mr. J. Bruton

It is unfortunate that we are dealing with this matter under such pressure of time. In the normal course of events, in the gap between Committee Stage and Report Stage, one would have had an opportunity to check, for example, whether there is protection extended to guarantee guarantors of debts as well as to the company themselves under the equivalent British legislation. I would be interested to know if that is a common provision to have in company protection legislation. The case the Minister made against the amendment was basically in two parts. The first part was that if you allowed guarantors to be pursued that would create, if the pursuit was successful, a new debt on the part of the company to the guarantor who had to pay up and there would be uncertainty, therefore, as to the amount of the debts of the company. The amount of the debts of the company would be changing, so to speak, during the course of the examinership and the Minister felt that would create an unnecessary uncertainty. That is a valid point.

However, it would be wrong to say it is a sufficient reason necessarily for removing the property right which is owned by somebody when they have been given a guarantee. In this regard the value of the assets of the company will be changing all the time throughout the examinership anyway. The value of what the company own may be going up or going down depending on movements in the market. You are dealing with a moving target at all times anyway, so presumably any scheme or arrangement that would be entered into would be entered into with regard to percentages of assets rather than terms of absolute sums of money. Therefore, if it transpired that there were more debts owing by the company than was originally thought as a result of guarantees being called in, that would mean the percentages applying would apply to a smaller amount of money than was originally thought. It would, therefore, be quite practical. There would not be the practical difficulty the Minister has suggested in this regard at all.

Deputy Taylor made a clear distinction, which he is well qualified to do, better qualified than I am, between the two species of guarantee that might arise one of which, a garnishee, he felt should be excluded and the other which he felt should not be excluded.

Mr. Taylor

A garnishee is not a guarantee.

Mr. J. Bruton

I do not want to speak about the matter because I do not feel I have the knowledge required to speak authoritatively about that distinction, but I believe that what we are doing here is removing a property right of one third party as against another third party in order to protect the company. The Supreme Court has interpreted property rights quite severely. There might be a public policy justification to interfere with property rights in order to protect the company if those were property rights against the company, but I do not think there would be public policy justifications to set aside the constitutional rights of property where those property rights are enforceable not against the company being protected but against a third party. Essentially this is retrospectively reducing the value of a person's property right. I do not think the constitutional excuse that might be given for this would hold up in this case. Part of the possible application of paragraph (f) is liable to be unconstitutional on those grounds. That is a further reason for not including it, particularly not including it in rushed legislation of this kind. Article 43 of the Constitution is very clear in regard to the protection of property rights. Undoubtedly a guarantee obtained is a property right which the State can interfere with only in a very measured and justified fashion which I do not believe can be justified in this case.

Tomás Mac Giolla

The Constitution protects the common good.

An Ceann Comhairle

That concludes the debate on amendment No. 1.

Question: "That the words proposed to be deleted stand" put and declared carried.

An Ceann Comhairle

I understand there has been general agreement in respect of acceptance of an amendment in the name of the Minister referred to as amendment a1.

Mr. O'Malley

I move amendment No. a1:

In page 5, line 39, after "period" to insert "beginning on the date of the making of an order under this section and continuing for the period".

Amendment agreed to.

An Ceann Comhairle

We now come to amendment No 2 in the names of Deputies John Bruton and Seán Barrett.

Mr. S. Barrett

I move amendment No. 2:

In page 10, subsection (1), line 10, after "examiner", to insert "or at the time of presentation to it of a petition for protection of the court under this Part".

This amendment is an attempt to make it possible for the court to give to the examiner complete powers to run the company at the time of presentation to it of a petition for protection of the court under this Part. Section 9 (1) provides that where it appears to the court at any stage on application of the examiner that it is just and equitable to do so, it may make an order that all or any of the functions or powers which are vested in or exercisable by the directors shall be performable or exercisable only by the examiner. Therefore, there is provision in section 9 for the court on application to give those powers to the examiner at any stage.

The effect of our amendment would be that it would prevent the examiner having to go back to the court. In other words, we can reduce the number of court hearings. If at the very outset it is quite obvious to the court that it is just and equitable, then it can straight away give the examiner the necessary powers. We think this would be a sensible provision to include in this section of the Bill. Again, of course, it would save time and reduce expense. The advice given to us has been always that the biggest difficulty about this proposal is that you may have conflict of interests in so far as in the initial stages the examiner will not have complete control in the running of the company. It may be argued that this is a good thing. There may be certain circumstances in which the interests of the survival of the company the examiner should take over the powers vested in the directors straight away. It would be sensible to give the court such authority and avoid a further court hearing at a later date.

An Ceann Comhairle

I remind Deputis that this is Report Stage and Members may speak once only with the exception of the mover of the motion who has the right to reply.

Mr. Cowen

The problem I have about this amendment is that it goes against the principle contained in Part IX of the original Bill which we dealt with in Special Committee. The principle enunciated in the proposal to provide an examiner rather than a receiver or a liquidator was to allow an examination to take place by a person who did not automatically assume control or management of the company to which the petition applied. However, if circumstances warrant it the examiner can be given such powers under the legislation. The idea is that the examiner would provide his report within the limited specified time under the legislation while existing management continue to control the company.

Under this amendment the examiner may be given those powers at the time the petition is brought forward to the court. That would pre-empt what the examination would reveal about the company. I do not think it would be just and equitable if, on the basis of a petition brought forward by any of the prescribed members set out under the legislation, the court could give him power ex parte to assume control of the company based on information available under the petition. Where the facts show it on a prima facie basis the examiner should be given the power by the court to go in and examine the company. That is his first function. It is only after such an examination that the examiner should go back to the court and provide the evidence, under the provisions set out here, which would enable him to assume the management and control of the company.

We have heard about the importance of personal rights and property rights in relation to other amendments but, where people have sunk their life's savings and investments into a company, we should not be prepared, based on a petition brought forward, to say that the examiner, who would be a nominee of one of the categories of persons set out in the legislation, shall assume control and management of the company forthwith. That should only be done after an examination has been carried out within a specified time. It would then be just and equitable in relation to the protection of shareholders, creditors or employees for him to assume control over whatever aspect of the company's affairs the judge decides. To do otherwise would be to go against the general thrust and principle of why the examiner was brought forward in the first place. On that basis it would be best to leave the section as it is structured whereby a second hearing would be required and substantial evidence brought forward. A proper decision could then be made.

Mr. Taylor

If the intention of this amendment it to avoid the necessity for a further court hearing to secure further powers for the examiner, the House should consider it carefully. What may prove to be a difficulty in administering this Act is the number of court appearances, applications and so on that may flow from it. Anything that might possibly control that is worthy of consideration.

A petition could be presented to appoint an examiner and whatever order the court made could be appealed to the Supreme Court but there are lengthy delays in having matters dealt with by the Supreme Court. The essence of the procedure should be speed and if there is not speed the whole exercise will be theoretically frustrated. One could envisage a situation where a petition is granted and the aggrieved company appeal the matter to the Supreme Court thereby putting the whole issue on ice for a year or more. The whole object of the exercise would be soured. I imagine that the kind of the circumstances in which, on the initial application, the court decided to vest the powers of section 9 in the examiner would be exceptional. It would have to be abundantly clear that the circumstances of the company were such that it was essential at the initial application stage, based on the proven, sworn material and evidence before it, to give the powers in order to protect the assets of the company and to secure them.

It would be strange if the court was denied the power to do that in the exceptional case where the weight of the evidence put before it on the initial application was so overwhelming. On balance it might be no harm if the courts were given that power. Courts are very cautious about granting orders of this nature and before they would accede to the application, let alone anything beyond that, they would require to be well satisfied on documentary and other evidence that the making of the order was warranted. If, at the same time, the question arose as to whether the powers provided for in section 9 were to be given there would have to be an overwhelming body of evidence that would put it beyond yea or nay that a drastic order of that nature was needed there and then.

I cannot see that it would do any harm to give that power to the courts in the reasonably secure knowledge that High Court judges would base their decisions to make such an order on the facts adduced on such an application.

Mr. D. Ahern

Most of these applications would be made by creditors of a company. Deputy Cowen has made the point that the whole idea is one of examination and it may not be possible for a creditor to be aware of the full facts. When a creditor comes into court he would come in ex parte, in other words, he would come in without notice to the company. In that event the company would not have a say as to whether the director should be put out of the company and an examiner put in his place. It would be preferable if an opportunity was given for the examiner to examine the company before he came in and make an application to have the directors put aside so that he could take over the functions of the directors. That would be relevant in most cases. It may not be relevant where the directors come into court and look for an examination. That would have to be looked at. If this amendment was accepted there would be a problem in cases where creditors come in ex-parte.

Mr. O'Malley

I agree with Deputies Cowen and Ahern. They have identified the difficulties that arise with regard to this amendment. It would be inappropriate for the court to be given power to fire the directors and appoint the examiner in place of the directors "at the time of presentation to it of a petition for the protection of the court" because, at that time, the examiner would not have been appointed.

Mr. Taylor

The court already has the power under section 3 (8).

An Ceann Comhairle

Let us hear the Minister.

Mr. S. Barrett

All the court has to do is to have regard to subsection (3).

Mr. O'Malley

Section 3 (8) does not apply on the date of presentation — that, however, is a minor technical point — it does not apply until the appointment of the examiner. How can one fire directors and hand their powers over to somebody who has not yet been appointed? The point is, as Deputy Cowen made clear, that an examiner should find out. If this is a contested matter where the application is made by, let us say, the creditors and not by the company or by the directors, they would be going in ex-parte. I think the court would not remove from office a board of directors on the say so of creditors at a time when the examiner has not gone in and carried out any examination and without hearing the directors in their own defence.

Mr. S. Barrett

Exactly. I would not ask them to do it.

Mr. O'Malley

I am afraid that is what the amendment suggests.

An Ceann Comhairle

Deputy Barrett was heard without interruption. The same courtesy must be afforded the Minister in possession.

Mr. O'Malley

One always gives a court an option. In matters of this kind one does not tell the court it has to do this, that or the other. It is given an option to decide in the circumstances. One could never decide in these circumstances to do what the amendment suggests. One would have to hear from the other people and the examiner. I think it is perfectly reasonable as it is drafted here, that it is on the application of the examiner after he has looked at the matter. He may discover, after a day or two in there, that many of the directors are a crowd of crooks and that he wants to get them out of the way and run the company himself. If that is the case, it is appropriate for him to come back and tell the court that. Let the directors come in and argue if they feel otherwise.

Mr. S. Barrett

A Cheann Comhairle——

An Ceann Comhairle

If Deputy Barrett is intervening now the Chair must take the view that he is concluding the debate on amendment No. 2.

Mr. S. Barrett

This is in reply to the points made by Fianna Fáil Deputies and the Minister, Deputy O'Malley. With respect, I think the Minister does not really understand what we are trying to achieve. Under section 3, a petition may be presented by the company or the directors of the company——

Mr. O'Malley

——or the creditors or the members.

Mr. S. Barrett

Yes. I will deal with that in a moment. Section 9 clearly states:

(1) Where it appears to the court, on the application of the examiner, that, having regard to the matters referred to in subsection (2) ... of subsection (2) (1) are— The matters to which the court is to have regard for the purpose ...

(c) that the company or its directors, have resolved that such an order should be sought, ...

There can clearly be a situation where the person who is going to court presenting a petition is a director of the company, and the directors of the company wish that the examiner whom they are nominating would immediately take over complete control of the running of the company and that is provided for in section 9. All I am attempting to do here is give the court the power to deal with all of this in one go. Basically what section 9 is saying is that we can have the examiner appointed today, the next day he can go back to court and seek the powers provided under section 9 and get them, provided the court will have regard to the conditions outlined in subsection (2).

The arguments presented by both Deputies Cowen and Ahern are not accurate. If it was the case that the creditors were presenting a petition, then obviously the court would decide, based on the circumstances, and possibly would not agree to the examiner having these powers from day one. That, however, would be the court's decision. If the directors of the company who are nominating the examiner want the examiner to have immediate control, then the whole lot can be done in the one court hearing. I do not see the problem.

The point I am trying to make here is that this amendment is designed for convenience, to avoid expense and to avoid a further court hearing. With respect, the points made by the Minister in reply to my argument are not valid because section 9 does make provision for the transfer of powers to the examiner immediately after his appointment. The only thing that matters is that it requires a further court hearing which is quite ridiculous if the directors who are presenting the petition want the examiner they are nominating to take over immediate control. Why should it not be done in the one court hearing?

For those reasons I would ask the Minister to support this amendment and ask my colleagues on this side of the House to do likewise.

Amendment put.

The Dáil divided: Tá, 71; Níl, 80.

Tá

• Ahearn, Therese.
• Allen, Bernard.
• Barrett, Seán.
• Belton, Louis J.
• Boylan, Andrew.
• Bradford, Paul.
• Browne, John (Carlow-Kilkenny).
• Bruton, John.
• Bruton, Richard.
• Byrne, Eric.
• Carey, Donal.
• Connaughton, Paul.
• Connor, John.
• Cosgrave, Michael Joe.
• Cotter, Bill.
• Crowley, Frank.
• Currie, Austin.
• D'Arcy, Michael.
• Deasy, Austin.
• Deenihan, Jimmy.
• De Rossa, Proinsias.
• Doyle, Joe.
• Dukes, Alan.
• Durkan, Bernard.
• Enright, Thomas W.
• Ferris, Michael.
• Finucane, Michael.
• FitzGerald, Garret.
• Flaherty, Mary.
• Flanagan, Charles.
• Gilmore, Eamon.
• Harte, Paddy.
• Higgins, Jim.
• Higgins, Michael D.
• Hogan, Philip.
• Howlin, Brendan.
• Kavanagh, Liam.
• Kemmy, Jim.
• Kenny, Enda.
• Lee, Pat.
• Lowry, Michael.
• McCartan, Pat.
• McCormack, Pádraic.
• McGahon, Brendan.
• McGinley, Dinny.
• Mac Giolla, Tomás.
• McGrath, Paul.
• Mitchell, Gay.
• Mitchell, Jim.
• Moynihan, Michael.
• Nealon, Ted.
• Noonan, Michael. (Limerick East).
• O'Brian, Fergus.
• O'Keeffe, Jim.
• O'Shea, Brian.
• O'Sullivan, Gerry.
• O'Sullivan, Toddy.
• Owen, Nora.
• Pattison, Séamus.
• Quinn, Ruairí.
• Rabbit, Pat.
• Ryan, Seán.
• Shatter, Alan.
• Sheehan, Patrick J.
• Sherlock, Joe.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.
• Taylor-Quinn, Madeleine
• Timmins, Godfrey.
• Yates, Ivan.

Níl

• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Aylward, Liam.
• Barrett, Michael.
• Brady, Gerard.
• Brady, Vincent.
• Brennan, Mattie.
• Brennan, Séamus.
• Briscoe, Ben.
• Browne, John (Wexford).
• Burke, Raphael P.
• Calleary, Seán.
• Callely, Ivor.
• Clohessy, Peadar.
• Collins, Gerard.
• Connolly, Ger.
• Coughlan, Mary Theresa.
• Cowen, Brian.
• Daly, Brendan.
• Davern, Noel.
• Dempesy, Noel.
• Dennehy, John.
• de Valera, Síle.
• Ellis, John.
• Fahey, John.
• Fahey, Jackie.
• Fitzpatrick, Dermot.
• Fitzgerald, Liam Joseph.
• Fitzpatrick, Dermot.
• Flood, Chris.
• Flynn, Pádraig.
• Foxe, Tom.
• Gallagher, Pat the Cope.
• Geoghegan-Quinn, Máire.
• Harney, Mary.
• Haughey, Charles J.
• Hillery, Brian.
• Hilliard, Colm.
• Hyland, Liam.
• Jacob, Joe.
• Kelly, Laurence.
• Kenneally, Brendan.
• Kirk, Séamus.
• Kitt, Michael P.
• Kitt, Tom.
• Lawlor, Liam.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leyden, Terry.
• Lyons, Denis.
• Martin, Micheál.
• McCreevy, Charlie.
• McDaid, Jim.
• McEllistrim, Tom.
• Molloy, Robert.
• Morley, P.J.
• Nolan, M.J.
• Noonan, Michael J. (Limerick West).
• O'Connell, John.
• O'Dea, Willie.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Ned.
• O'Kennedy, Michael.
• O'Leary, John.
• O'Malley, Desmond J.
• O'Rourke, Mary.
• O'Toole, Martin Joe.
• Power, Seán.
• Quill, Máirín.
• Reynolds, Gerry.
• Stafford, John.
• Treacy, Noel.
• Tunney, Jim.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Joe.
• Wilson, John P.
• Woods, Michael.
• Wyse, Pearse.

Tellers: Tá, Deputies J. Higgins and Boylan; Níl, Deputies V. Brady and Clohessy.

Amendment declared lost.

An Ceann Comhairle

Amendment No. 3 is in the name of Deputy Pat Rabbitte. Amendment No. 4, in the name of the same Deputy, is related. I suggest therefore we discuss amendments Nos. 3 and 4 together. Is that satisfactory? Agreed.

Mr. Rabbitte

I move amendment No. 3:

In page 10, subsection (2) (a), line 20, after "company" to insert "or its employees".

To some extent, although not precisely on the same point, we have been down this road already. This amendment seeks to deal with the matters to which the court must have regard when making an order on whether or not the affairs of the company should be handed over to an examiner. The section, as it stands, provides that the court must be satisfied "that the affairs of the company are being conducted, or are likely to be conducted, in a manner which is calculated or likely to prejudice the interests of the company or of its creditors", but there is no reference to the workers or the staff in that company.

An Ceann Comhairle

I am sorry, Deputy, but the conversation in the Lobby can be heard in the Chamber and constitutes disorder.

Mr. Rabbitte

On Committee Stage, the Minister took up what I described then as an ideological position on the question of trade unions' and workers' rights being enshrined expressly in the legislation. He argued then for the generic term "employees" or "workers" rather than turning it into what he described as a question of trade union recognition. I hope in this case, where there is no reference to a trade union but merely to the rights of employees, that the Minister will agree that the matter should be included. It is extraordinary that the court must have regard, in deciding, with regard to section 9 (1) whether or not the affairs of the company are likely to be conducted in a manner calculated to damage the interests of the creditors, for example, but not the interests of the employees.

Already today I tried to explain that not always will the interests of the employees and those of the creditors or the members of the company be necessarily compatible or consistent in all cases. Unfortunately, there are many workers tonight, employed by the Goodman organisation, who will feel they have got no more than a temporary respite. Their views have not been taken into account in terms of the situation that may face them coming up to Christmas. It is imperative that the Minister acknowledges that workers have a vested interest in the future of the company in which a great many of them may have spent the greater part of their working lives. That should be taken into account in framing this legislation. I hope the Minister will acknowledge that this is a distinct and separate point from the discussions we had at the beginning of Committee Stage and that he will agree to take this amendment on board.

Mr. Spring

I rise to support Deputy Rabbitte's amendment which is very much part and parcel of the discussion we had at the earlier part of this debate on Committee Stage. It is interesting to note that the Minister, while referring to the right of workers to be considered as creditors of the company, has failed to respect of their rights. I would say to the Minister, late and all as it is, that here is an opportunity for him to show that he is concerned and that he respects the right of workers in respect of the difficulties with which they will be faced in relation to any company which may seek to avail of this legislation. The question arises as to which company and what company may want to avail of this legislation. I contend that as regards any company that seeks the protection of the courts, the workers have a distinctive interest, separate from the creditors, separate from the bankers, separate from the trade creditors, and they should be represented and heard.

It is unfortunate that this legislation is being passed in this hasty manner and that, while the rights of workers are being acknowledged in the context of others who are entitled to be represented in court and otherwise, the Minister is failing to respect and acknowledge that workers have their own distinct concerns and rights. At an earlier stage in this debate it was argued that the workers are the most vulnerable and are least inclined to go to court on an individual basis. In this instance it behoves the Minister to recognise that the employees should be afforded the same respect in law as others. I would ask the Minister at this late stage to give an acknowledgement of that, which he failed to do at the passing of Committee Stage.

Mr. S. Barrett

This amendment refers also to the section I was speaking on during the debate on the last amendment. Basically, what is being asked here is that, when the court is considering whether it should transfer management powers or complete control from the directors to the appointed examiner, the court in making its decision would have regard to the interests of various people. Deputy Rabbitte is asking also that it take into account the interests of the employees. This is a very sensible measure, because what we are asking here is that the court would decide who should take immediate control of the company.

It may be that the directors of the company are those who are presenting the petition to the court for the appointment of an examiner. It will be those same directors who will be recommending the examiner to take over control. It may be that it is in the interests of the company that straight away the company come under the immediate control of the examiner for, perhaps, reasons of bad management. It is the directors who are asking for the examiner to be appointed and they may want their nominated examiner to take over immediate control. It is a good thing to show in this legislation that there is concern about everybody involved in the company, and a vital part of the company are the employees. In order for this to succeed one must get the co-operation of the employees. If they withdraw their labour this will not work from day one. Even if it is a means of expression of concern for employees we should take into account their feelings wherever possible. For the life of me I cannot see how this amendment would in any way interfere with the running of the company after the appointment of the examiner. As I said when speaking on amendment No. 2, it could be that on day one the directors who are presenting the petition want their nominated examiner to take over complete control straightaway. From the information I have received in relation to this legislation from people who are involved in liquidations and receiverships and so on the big problem is that nobody is in absolute control from day one and that that can lead to a conflict of interest. It is always at the discretion of the court that these decisions will be taken. In certain circumstances it may be in the interests of the company that an examiner is appointed straightaway and that he is given absolute control. What Deputy Rabbitte is asking here is that the court would take into consideration the interests of the employees in making their decision. I do not see how that could affect this legislation. I support the principle of the amendment presented by Deputy Rabbitte.

Tomás Mac Giolla

This is a very important issue because the examiner will find that the employee structure is a very complicated one in the Goodman company. After all, it is about time we came back down to the plain facts that what we are talking about is Goodman International and the various companies and subsidiaries associated with it. Most of the employees are on contract. One group of contract workers have no idea what others are doing. Some are contracted to do nefarious, secret jobs such as the job which was done at the Eir-Freeze plant to which I referred in the spring of last year, when I was accused by Larry Goodman of being a fringe TD seeking cheap publicity and undermining the credibility of his company. That was supported by the Taoiseach at the time who accused me of national sabotage.

I was at District Court No. 1 last month when the company were found guilty of precisely what I said, changing labels and putting on false labels. The judge said that this was——

An Ceann Comhairle

The Deputy should have more regard to the amendment. He is straying considerably from the subject matter of the amendment before the House.

Tomás Mac Giolla

The examiner will find that some of the contract workers will have to be discharged, such as those doing that type of nefarious work. It is very important that the employees be considered by the examiner if he is taking charge of the company. He must ensure that this type of activity does not continue in the company under the direction of the current directors. That is precisely the point I want to make. It is vitally important that the employees be included in this section and that their interests be looked after by the examiner when he takes over.

Mr. O'Malley

Regarding these two amendments I have no objection, in this instance, to the words "or of its employees" being inserted. It does not make sense as it is drafted but if the word "of" is inserted after "or" it would suffice. This relates to a question where the court will consider, on the application of the examiner, whether to remove the directors from office. In all these circumstances it is reasonable to have the employees identified separately although I could argue, if I chose, that the existing phrases in the subsection "the interests of the company or of its creditors as a whole", both include the——

An Ceann Comhairle

I am sorry to interrupt the Minister but the time has come to put the question.

Mr. Howlin

He is accepting the amendment.

Mr. O'Malley

I think, Sir, that in all the circumstances, you might have let me finish what I have to say.

An Ceann Comhairle

Is the amendment accepted?

Mr. O'Malley

As amended.

An Ceann Comhairle

The Chair is merely conforming to the order of the House this morning.

As it is now 10.30 p.m. I am required to put the following question in accordance with the order of the Dáil of this day: "That the amendment set down by the Minister for Industry and Commerce to the Bill on Report Stage and not disposed of is hereby made to the Bill; that Fourth Stage is hereby completed and that the Bill is hereby passed."

Question put and declared carried.

The Dáil adjourned at 10.35 p.m. until 10.30. a.m. on Wednesday, 29 August 1990.