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We’re coming in! Don’t shoot!

The credit crunch is causing an increase in company liquidations. The Office of Director of Corporate Enforcement has noted, in its latest Press release, the occurrence of 40 company insolvencies in April 2008 compared with 30 per month in late 2007.

Insolvency is the condition of being unable to pay debts as they fall due (“the cash flow testâ€?). This condition can hold even though the company assets exceed its liabilities. (The assets may be “lumpyâ€?, like land or buildings, leaving the company cash-poor).

Liquidations may be voluntary or compulsory (under court management following petition to the court). Voluntary liquidations may be a members’ liquidation or a creditors’ liquidation. The former implies solvency, the latter implies insolvency.

It is often in the interests of the directors that an insolvent company be liquidated. Not to do so can result in acts of reckless trading or fraudulent trading leading to successful applications for restriction or disqualification of the directors under Sections 150 and 160 of the Companies Act 1990. The directors of an insolvent company have a duty to act in the interests of the company’s creditors. This will, at a minimum imply that no further credit be taken and that the assets of the company not be reduced pending the decision to call a creditor’s meeting to seek a resolution to wind up the company.

There can be struggles between the directors and creditors or a creditor. In Hayes Homes Limited [2004] IEHC the Revenue Commissioners were the principal debtor. They applied to court for an order to compulsorily wind up the company. The directors had convened a meeting of creditors and declined to recognize the proxy of the Revenue representative at the meeting. The successful application to court was, effectively, for the purpose of displacing the liquidator appointed at the creditors’ meeting with one appointed by the court.

The High Court took an opposite point of view in Permanent Formwork Systems Limited [2007] IEHC Here, the creditors meeting appointed a liquidator on the very morning of the hearing of the petition in the High Court. The petition had been presented before the directors took steps to call the creditors’ meeting. The court dismissed the petition, taking the view that the “creditorsâ€? liquidator was independent and that process would be cheaper than the court directed liquidation.

The stress and pressure of events leading to a liquidation can be extreme. In Compuserve Limited [2005] IEHC a prominent firm of solicitors was consulted by the directors immediately before the liquidation. The solicitors were pleading they fell within the provisions of Section 281 of the Companies Act 1963:-

All costs, charges and expenses properly incurred in the winding up, including the remuneration of the liquidator, shall be payable out of the assets of the company in priority to all other claims.�

The solicitors failed to get payment before the liquidation and lodged a claim asserting a right to be paid out of the costs of the liquidation. The court declined to order this. Their fees had been incurred before the liquidation not “..incurred in the winding up..â€?

An issue similar to this featured in USIT World plc [2003] IEHC. The court recorded;

A sum of €250,000 was transferred to the companies’ solicitors, Reddy, Charlton & McKnight, from subsidiaries of Usit World which were debtors of Usit Limited, and that this was done in the certain knowledge that a winding up petition was imminent, and where the effect was to deprive the company of this sum. This sum was transferred one day before the appointment of the provisional liquidator. That firm of solicitors had acted for the Usit Group. The liquidator states that when asked about this, Mr Colleary has stated that these solicitors had asked for an advance of fees in relation to all the work done in relation to the work being done regarding the Solgun deal (this was the transaction by which the company was bought by STA). Mr Colleary had stated to him that the money was sought from all the subsidiaries but that payment was actually made by the subsidiaries in Portugal, Spain and Belgium, directly into the account of Reddy Charlton McKnight. The reason given for this method of payment is given by Mr Colleary in a memo to the liquidator, that the Group had no access to money in Ireland because of the issue that had arisen with National Irish Bank and it was unable to write a cheque in Ireland. The liquidator is of the view that this payment had the effect of depriving Usit Limited of €250,000 of receivables in a context where the directors must have known that a winding up petition was imminent. The liquidator has also made reference to a further payment to that form of solicitors of €70,000 in January 2002 and has not discovered where that money came from.”

The liquidator suggested to the court that this payment was a preferential payment. The court stated;

His [Mr. Colleary] concerns, and rightly so, are for the creditors. However, large and all as this payment to the solicitors is, it is small relative to the scale of the company’s enterprise and to the overall losses to creditors. That is relevant to the extent that one can consider an imaginary situation where the payment was not made, and form a judgment as to whether in such a scenario any meaningful difference for the better would have accrued to any one creditor if the payment was not made. This answer is in my view obvious. I do not consider this payment to have been irresponsible in the light of what has been averred to, and the extent of the problems looming ahead for all concerned.”

The Ritz Hotel

The default position in court proceedings is that the parties appear and speak for themselves. Nobody currently claims that this is a preferred option. In fact, it is avoided by the courts when possible. See HERE.

Ireland has neglected to make proper provision for the representation of litigants in court proceedings, as recorded HERE.

An ongoing event in Dublin is of interest in this context. The event is a civil action. The families of the victims of the Omagh bombing by the IRA are suing defendants they say perpetrated the bombing. Under new EU provisions the court has decamped from Belfast to Dublin. While in Dublin it is presided over by a District Court judge. The judge of the Belfast High Court is sitting alongside the Dublin District Court judge (and is taking a lively and central part in the proceedings, sensibly enough).

No less than six senior barristers (Queen;s counsel and Senior counsel) were ranged up before the two judges. (In addition there was usually a junior barrister for each senior and at least one solicitor for each senior.)

Much of the cost of this hearing is being paid for by legal aid under the law of Northern Ireland, from the UK Treasury ultimately.

That, although happening in Dublin, is foreign to Dublin or anywhere in the State.

It is inconceivable, impossible really, for such litigation to occur without the involvement of lawyers. The absence of funding for such a case in Ireland ensures the denial of justice without the embarrassment of a positive refusal by the Irish Executive (the Government), or the judiciary, of funding.

Family day at the Dail

There is no excuse for a grown adult to contemplate going to Dail Eireann during family day, or worse still, going there.

To do so is to play the fool.

The Dail is firmly under the thumb of the Government, whereas our Constitution envisages that it should be the reverse. The principle purpose of a Constitution is to rein in the Executive.

Representative democracy and the separate of powers are designed for, inter alia, the same purpose.

To be offered a tour of the Dail building when the functions of the Dail have been fully drained away, in substance, is to be treated like a fool. To take it is to endorse the situation, to clothe a scandal with validity.

No effort is afoot to change this situation of loss of power and function by Dail Eireann.

Not only does the Dail have little real control over the Bills and Acts passing through and emerging from the legislative process, it has next to no control over secondary legislation (Statutory Instruments) implementing the Acts. As the Ombudsman noted;

A particular area of concern is the huge amount of secondary legislation arising directly at national level or as a result of European Union membership. Most of this legislation is not subject to any parliamentary scrutiny and can give rise to the so-called democratic deficit. The Ombudsman could perhaps be of service to the Oireachtas in drawing attention to the not infrequent instances where delegated legislation seems to go further than intended by the primary legislation. In this context, I have noted the recommendation of the Constitution Review Group that consideration should be given to an amendment to Article 15.2.1 of the Constitution so that the Oireachtas should have the power to authorise by law the delegation of power to either the Government or a Minister to legislate using the mechanism of a statutory instrument. I have suggested to the All Party Oireachtas Committee on the Constitution that the Ombudsman should be granted specific powers in cases where delegated legislation could have an adverse effect.”

What the Ombudsman was warning against is that law was being made in “not infrequent instancesâ€?, which had not emanated from the Dail at all.

That’s why no one should go to the Family days.

Secret

Why did it not happen sooner? The UK Government will publish statistics on mortality in National Health Service hospitals.

Are we to think governments disbelieve knowledge revealed by statistics? Well, we should not.

Here in Ireland we have a deep resistance in our government to the disclosure of information. When will we follow the lead of the UK government? The Irish public pays for the HSE and is, in principle, entitled to know something as important as the level of death in our various hospitals. Indeed, there are many other statistical items of information that the public ought to know, like the incidence of nosocomial (health care-institution related) infections or disease associated with our different hospitals.

What is staggering is that the reason the public needs to know such things is to ensure that the HSE management effectively deals with the problems that would be revealed generally. I say generally, because it must be a certainty that the knowledge is already known to the HSE and the Department of Health and Children. It is, in short, already revealed; revealed to some, but not to the public. This is what must be changed.

Damages

In O’Connor v O’Driscoll [2004] IEHC the Plaintiff was a bank executive who was injured in a road traffic accident (“RTAâ€?). The court made the following finding;

The case is highly unusual. The physical injuries sustained by the plaintiff were soft tissue damage to his neck and low back as well as some relatively minor damage to three upper teeth on the left side. The plaintiff in addition to these physical injuries also underwent a severe psychological reaction to the accident. Within a few weeks of the accident he developed a very serious Post-Traumatic Stress Disorder. He has also suffered from a major depressive illness and his condition has been complicated by generalised anxiety disorder.�

The court awarded compensation of €579,225 which sum included €100,000 for pain and suffering to date and €50,000 into the future.

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In Hackett v Calla Associates Ltd [2004] IEHC the court found that the Plaintiff had suffered the loss of the sight of his eye with associated scarring ;

The medical reports describe it as a very severe injury to the right eye, including a full thickness laceration of the right upper eyelid and a severe blunt trauma to the globe of the right eye which caused a dislocation of the lens and displacement of the vitreous gel from the posterior part of the eye into the ante chamber, when it was struck by a blunt object. The most recent report when describing the plaintiff’s visual acuity in the right eye states “Perception of light only (totally blind)”.

The court awarded compensation of €100,000

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In Higgins v Smith [2004] IEHC the Plaintiff was injured in an RTA. She was found to have the following injuries;
Multiple abrasions to her face; Fracture of the shaft of her right humerus with radial nerve palsy; Fracture of the left femur; Contusion and bruising to the right leg; Bruising over the right breast.

The court awarded her €130,000 for pain and suffering to date and €25,000 into the future. The actual award was for €147,250 following a reduction for contributory negligence.

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In Curley v Dublin City Council [2004] IESC the Supreme Court affirmed the award of €350,461.72. by the High Court for compensation for personal injury loss and damage. Of that sum €75,000.00 represented general damages for pain and suffering.

Public works contracts

Public procurement contracts are very important. See HERE. They are usually complex and involve the expenditure of substantial sums of public money. They are regulated by EU law, the object of which was stated by Advocate General Jacobs as:

[the]…main purpose of regulating the award of public contracts in general is to ensure that public funds are spent honestly and efficiently, on the basis of a serious assessment and without any kind of favouritism or quid pro quo whether financial or political.â€?

This quote is from SIAC Construction Ltd. v Mayo County Council [2002] 3 IR 148. SIAC was one of many persons who tendered for the provision of a new sewerage system for the town of Ballinrobe. Its tender, on price, was the lowest. Mayo county Council awarded the contract to the next highest tenderer. In the judgment of the County Council’s engineer, SIAC’s tender would, in due course, be discovered not to be the cheapest.

SIAC took issue with the making of this judgment. The case was fought in the High Court. SIAC lost there. It appealed to the Supreme Court which remitted a question to the European Court of Justice (“ECJâ€?). The ECJ found the County Council procedure to be unobjectionable, saying;

…when tenders are being assessed, the award criteria must be applied objectively and uniformly to all tenderers. Recourse by an adjudicating authority to the opinion of an expert for the evaluation of a factual matter that will be known precisely only in the future is in principle capable of guaranteeing compliance with that condition.â€?

The Supreme Court (Fennelly J.) noted the difference between the basis for ordinary judicial review and public procurement review saying;

I do not think, however, that the test of manifest error is to be equated with the test adopted by the learned trial judge, namely that, in order to qualify for quashing, a decision must “plainly and unambiguously fly in the face of fundamental reason and common sense.â€? It cannot be ignored that the Advocate General thought the test should be “rather less extreme.â€? Such a formulation of the test would run the risk of not offering what the Remedies Directive clearly mandates, namely a judicial remedy which will be effective in the protection of the interests of disappointed tenderers. It is significant, I think, that Member States are required to make available, where appropriate and necessary, measures of interim relief ( i.e., potentially halting the public procurement procedure) and damages.â€?

Mayo County Council had stipulated that the tenders would be assessed on the basis of what was the most economically advantageous contract. The contract was “a measure and value contractâ€?. This meant that the contractor was free to do the work and get paid for the work on the basis of work done. Effectively, any tender was an estimate of what the work would cost.

Consequently, Fennelly J. concluded;

It is the fact that the out-turn is uncertain that is decisive. I think that the County Council acted within its margin of discretion. I do not think it exercised that discretion in an unfettered way. It followed objective and objectively verified criteria.�

Stop thief!

The existence of absolute privilege (in the Oireachtas and the courts) is generally known. The existence of qualified privilege is less well known. There is a qualified privilege for words spoken, without malice, to protect property or detect crime. The leading UK textbook on Defamation, “Gatley on Libel and Slanderâ€? states:

Though there is no common interest involved, the Courts have long held that statements are privileged if made bona fide for the purpose of detecting and bringing to punishment a suspected criminal, or of recovering stolen goods. Thus, a person who suspects another of a particular theft may, with a view to inquiry, tax that individual with the theft, and although the suspicion turns out to be erroneous, the law gives no redress to the party accused.”

Consequentially, in the High Court case of McCormack v Olsthoorn [2004] IEHC the Defendant, wrongly believing the Plaintiff had stolen a plant from him, publicly challenged him to that effect. The court ruled that the statement was made on an occasion of qualified privilege and found for the Defendant on that issue. (The Defendant lost on the issues of assault and false imprisonment).

[McCormack v Olsthoorn MAY REST ON ITS PARTICULAR FACTS. ARGUABLY, THE DEFENDANT COULD HAVE DEALT WITH THE MATTER A LITTLE DIFFERENTLY. WAS IT UNAVOIDABLE OF HIM TO SAY WHAT HE SAID, IN PUBLIC?]

A Laughing Stock

We in Ireland are very unfashionable. We are the laughing stock of Europe because we use pencils to vote, the laughing stock of Europe because we might reject the Lisbon treaty and our Financial Regulation is a laughing stock.

Now, we risk being the laughing stock of Australia (and the UK in due course) because none of our lawyers have sold shares in themselves.

(Just to mention the topic is to expose us to derision.)

Have the lawyers not sold themselves already?�

These reactions are unfair because they are based on unfair comparisons. Consider Slater & Gordon the Australian law firm.

Despite the wording of their (its?) website their principal business is litigation for the recovery of compensation for personal injury. This is a form of business that the Government and the Minister for Enterprise Trade and Employment in particular, have attempted to curtail at considerable loss to victims of personal injury as seen HERE and HERE and HERE.

The business that the government favours is the business of insurance. (Almost invariably the direction of the defence in personal injury litigation is given by an insurance company, in the name of the defendant.)

So, Slater & Gordon’s business model would not appeal to the investors in the Irish Stock Exchange.

So, what business model would work here in Ireland? Undoubtedly it will be the business model ultimately adopted in England and Wales. However, as noted HERE, there are growing potential and actual differences between the two jurisdictions which will probably ensure that our legal behemoths down the Liffey will not make it to the market.

Ambulance Chasing: a corporal work of mercy?

There is need for a new charity to be established in Ireland. It will seek out people suffering personal injury. It will advise that the injured person (“the victimâ€?) should immediately consult a solicitor to determine whether there is a cause of action arising from the incident in which the victim was injured.

The need for this charity arises from the terms of Section 8 of the Civil Liability and Courts Act 2004.

8.—(1) Where a plaintiff in a personal injuries action fails, without reasonable cause, to serve a notice in writing, before the expiration of 2 months from the date of the cause of action, or as soon as practicable thereafter, on the wrongdoer or alleged wrongdoer stating the nature of the wrong alleged to have been committed by him or her, the court hearing the action may—

(a) draw such inferences from the failure as appear proper, and

(b) where the interests of justice so require—

(i) make no order as to the payment of costs to the plaintiff, or

(ii) deduct such amount from the costs that would, but for this section, be payable to the plaintiff as it considers appropriate.

(2) In this section “date of the cause of actionâ€? means—

(a) the date of accrual of the cause of action, or

(b) the date of knowledge, as respects the cause of action concerned, of the person against whom the wrong was committed or alleged to have been committed,

whichever occurs later.

Very few people are aware of the Section. It is draconian. It places an onus on a victim of negligence or other wrongdoing to write the required letter to the wrongdoer at a time when most such victims are struggling with the practical consequences of their injury and, often, are still in hospital.

If the letter mistakenly describes “the nature of the wrongâ€? (what does that mean?) then the victim has failed to comply with the Section. This is a reason for the need for the services of a solicitor to deal with the requirement.

Everybody is presumed to know of the Section. Not to know of it is not “reasonable causeâ€?. To know it (which is the presumption) and not to write the letter leads to the inference that the victim wished to gain advantage at the expense of the wrongdoer. (It is hard to know what other inference might be drawn. To draw an inference is to follow a mental process that is independent of the actual intention of the victim.)

A failure to write the letter may result in a penalty (possibly a substantial one) being inflicted on the victim. Ordinarily, a successful litigant in a personal injury action is awarded the costs of bringing the action. The Section permits that some or all of the victim’s costs be denied him/her. This is a very heavy penalty. Even in the circumstances of the exercise of a judicial discretion it is hard to see how the Section will avoid being exercised in, objectively, a capricious way.

All’s fair in love and war

The title to this post is incorrect. The concept of war crime shows this. I have written elsewhere that legal proceedings are not a search for truth. Nevertheless, in legal proceedings, as in war, there are limits to restrain the parties.

The Supreme Court marked its disapproval of failures by lawyers for the Defendant in Philp v Ryan and Bon Secours [2004] IESC. The court found that the 1st Defendant had altered his clinical notes. As altered, they appeared to show that the Plaintiff was to have a PSA test in 6 weeks. In fact no provision was made for such a test. The Plaintiff, who was suffering from prostate cancer, was misdiagnosed by the 1st Defendant. Eight months later the Plaintiff discovered the misdiagnosis and issued proceedings pleading that his life expectancy was reduced due to the Defendants’ negligence.

The 1st Defendant misled his lawyers and medical advisors. Consequently the Defendants’ defence was to the effect that the Plaintiff was responsible for the loss of eight months treatment and not the 1st Defendant.

Almost on the eve of the proceedings commencing, the 1st Defendant informed his lawyers what he had done. They did not correct the wrong impression and understanding of the Plaintiff’s lawyers as to the defence the Defendants intended to mount. The lawyers for the 1st Defendant continued to represent, in the manner in which the defence was presented, that the Plaintiff had been advised to have a PSA test and had failed to do so. The Supreme Court found that there was at least a suspicion that there was a deliberate attempt to keep the true facts from the [High] court.

Consequently the Court awarded aggravated damages to the Plaintiff, increasing the High Court award from €45,000 to €100,000.

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