Special Committee Companies Bill, 1962 debate -
Tuesday, 9 Apr 1963

SECTION 290.

Mr. J. Lynch

I move amendment No. 89 :

In subsection (5), to delete all words from " and, in the case of a contract " to the end of the subsection.

The section as a whole is taken largely from the corresponding provision in bankruptcy law and the clause which it is now proposed to delete would be appropriate in bankruptcy. In the winding up of a company, the question of trustees does not arise. The liquidator does not, except in special circumstances, have the property of the company vested in him, and there would be no point in providing that a company would be deemed to have adopted a contract already entered into by it.

Mr. Norton

Is this new ?

Mr. J. Lynch

The section is new. It was recommended by the Bankruptcy Committee. Suitable provisions already exist in the bankruptcy law.

Mr. Norton

Is it in the British and Six-County Acts ?

Mr. J. Lynch

It is, yes.

Major de Valera

Am I right in saying that it is a provision to be exercised with the leave of the court ?

Mr. J. Lynch

Only with the leave of the court.

Chairman

We are on the amendment at the moment and not on the section.

Amendment agreed to.

Mr. J. Lynch

I move amendment No. 90 :

In subsection (7), page 151, line 42, to delete " persons " and substitute " person ".

This is really only a——

Chairman

A drafting amendment?

Mr. J. Lynch

It is not even a drafting amendment; it is a corrective amendment.

Amendment agreed to.

Question proposed : " That Section 290, as amended, stand part of the Bill."

Mr. J. Lynch

This section gives the liquidator power to disclaim onerous property in the case of a company winding up. As Deputy de Valera mentioned, it can be done by the liquidator only with the leave of the court. In the event of anyone being aggrieved by such a disclaimer, for example, a person who had a continuing contract with the company, that person would be at liberty to prove for his damages in the winding up.

Major de Valera

He could go even further. He could oppose the leave being granted. He would not necessarily have notice at the start. He might be unknown to the liquidator, but he has the opportunity even at that stage, has he not ?

Mr. J. Lynch

He has, and the court would consider all aspects of the case, particularly in view of subsection (4).

Major de Valera

Under the rules of court, you cannot ask the liquidator to join him. He might be unknown to the liquidator, but, if in the course of the hearing, the interests of such a person arise, is it not common practice that the court would direct that he would be joined ?

Mr. J. Lynch

That is common practice.

Mr. Norton

If the liquidator has knowledge that this person exists and has a claim, or purports to have a claim, is there a case for saying that he should be invited to take notice of the proceedings which are being instituted ?

Major de Valera

I think the court would ensure that.

Mr. Norton

Suppose the liquidator does not bring his existence to the notice of the judge, and therefore he would not normally hear about the proceedings—I want to ask is there a case for saying that where the receiver has knowledge that such a person is hovering about, he should bring his existence to the notice of the judge, or is there some other machinery whereby he can be invited to attend, if he so wishes, when the matter is being dealt with by the judge ?

Mr. J. Lynch

Subsection (4) relates to this aspect. I think we can expect that any judge, hearing an application by the liquidator for the disclaimer of certain property, would cause notice to be served on any person who might be aggrieved by such disclaimer.

Mr. Norton

You do not think it necessary to put in a provision which would suggest that, if that person is known to exist, he should be invited, or that the liquidator should be required to bring any known potential disputants to the notice of the judge?

Mr. J. Lynch

That can be provided for specifically under Section 312. In that section we say :

Section 68 of the Courts of Justice Act, 1936 . . . shall extend to the making of rules in respect of the winding up of companies whether by the court or voluntarily.

Therefore, the Rule Making Committee will be empowered to require that notice be served on such a person where the liquidator has knowledge of him.

Mr. Norton

I am satisfied.

Major de Valera

Once it goes to the court, I think it is safe there.

Chairman

The additional provision is there anyway.

Mr. Cosgrave

There is no fear of the Rules Committee overlooking it ?

Mr. J. Lynch

The Rules Committee may not decide to make specific rules for it.

Mr. D. Costello

Does this interfere with the right of a landlord to require the liquidator to do certain things—to dispose quickly—and if the liquidator does not do so, does it give the landlord himself the right to apply to the courts ?

Mr. J. Lynch

It does not give that power to any party. Under subsection (5), the other parties can require from the liquidator a statement as to whether or not he will disclaim. The object is so that people who may be affected will have some opportunity of knowing whether they are to be inconvenienced by a disclaimer by the liquidator.

Mr. D. Costello

I am wondering whether we should not write into the section a right for the landlord to apply where a liquidator is in occupation of the assets and where he may be dilatory, which is not uncommon. I am inquiring whether or not we should insert also a provision that the landlord, in such circumstances, would have a right to apply to the courts. I am talking about the landlord as having the same right as is provided in a personal interest in a contract. I am aware of instances in which the liquidator has been dilatory and where property has been allowed to run down very badly. Should we not, in such cases, give the landlord the right to apply to the courts ?

Major de Valera

I do not think so. Does not the landlord have powers of inspection—to see the property is not run down ?

Mr. D. Costello

The liquidator may endeavour to stall proceedings for a particular purpose. He may say he is looking into the affairs of a company, and it drags on and on for a considerable time. In theory, the landlord has rights, but the liquidator pinches things out, possibly not through his own fault.

Major de Valera

You would put on the liquidator a managerial duty which impinges on the principle of the Bill.

Chairman

If the liquidator decides to keep on the property as a working proposition, he is taking on a managerial status.

Major de Valera

And the landlord has the rights that any other landlord has against any tenant.

Mr. Norton

What would be the effect of what Deputy Costello is seeking ? Is he seeking to see that the landlord is excluded from the legal obligations——

Mr. D. Costello

No. I think he should have power to go to the courts and seek authority to get the liquidator to disclaim or not.

Mr. Norton

Suppose the liquidator says : " I propose running this for 12 months or two years, at the end of which time I will be able to pay 20/ - in the £" ?

Mr. D. Costello

Then he can hold on to it.

Mr. J. Lynch

The whole purpose of the section is to give the liquidator, in the interest of the creditors generally, the right to disclaim onerous property in order to bring the liquidation to an end.

Major de Valera

If the landlord has any right in respect of surrender or repudiation of the lease, he ranks as a creditor. I take it that under this section if there is a repudiation of a lease, whatever terms go with the surrender of a lease, the ordinary landlord and tenant relationship would still exist. That is under subsection (9). You are not giving the liquidator the power to throw away a lease just like that. He has the power to repudiate a lease but the ordinary law as regards the surrender of a lease will be there?

Mr. J. Lynch

Generally that is so.

Major de Valera

In other words, to take a specific case, if there is a lease for, say, 21 years, the company cannot surrender that lease unless the landlord accepts a surrender ; it can be made under fine or on the money due up to the end of the term. The same terms will apply to the liquidator, subject to an interpretation of the terms. Or maybe I am wrong.

Chairman

I do not think the landlord is in quite the same position as another creditor because he is compelled to continue trading after the liquidation while the ordinary creditor can at that stage claim under the last subsection ; but remember he is only getting a dividend on his claim, though it may be in respect of trading after the liquidation in respect of a continuing tenancy.

Mr. J. Lynch

I do not quite know whether Deputy Costello is talking about the landlord or a lessor in certain circumstances which we can all visualise. Then the landlord, in respect of any running down, might have the right of action in the courts.

Mr. D. Costello

And it might not be of much use to him at that stage. It may be said the landlord is dilatory, too, in not applying, but I think that to facilitate a situation where for one reason or another the liquidation is dragging out, where the liquidator has not decided to apply to the courts to disclaim, we might consider putting in a clause giving the landlord the right to apply to the court. The liquidator then can say : " I can hold on to the property," or alternatively : " No, I shall disclaim." I am speaking from memory, but I understand the position to be that the bankruptcy will not apply, that the landlord can submit, by notice, that the liquidator shall disclaim and that if he does not, he, the landlord, is able to apply. Subsection (6) says :

(6) The court may, on the application of any person who is, as against the liquidator, entitled to the benefit or subject to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the nonperformance of the contract, or otherwise as the court thinks just, and any damages payable under the order to any such person may be proved by him as a debt in the winding up.

That might well apply as between landlord and tenant. Certainly, as it is drafted, I do not think it is intended to so apply, but if you give such a right in an ordinary case of contract, there is a case for giving a landlord the right to apply to the court against a liquidator. I may say I have not examined the situation very well.

Mr. J. Lynch

I think Deputy Costello has a point and I shall inquire as to whether subsection (6) would cover the case of a landlord in the circumstances mentioned.

Mr. D. Costello

I might emphasise that I am speaking from personal experience. A liquidation has gone on for five years and the property has been allowed to run down to nearly complete ruin. The landlord has been making representations but he has been put off and off.

Major de Valera

I want to raise this from the liquidator's point of view. I would take the point of view that the liquidator cannot make a rational decision until he has all the information.

Mr. Costello

I think that would be a good answer if a premature application were made by the landlord.

Major de Valera

I do not know.

Mr. J. Lynch

I shall consider the point anyway and if necessary or if I think fit I shall introduce an amendment.

Question put and agreed to.