Factual and Procedural Background
This judgment concerns the treatment of tax liabilities incurred by Company A during the examinership process and the consequences of a breach of an undertaking to file and pay current tax returns. On 28th June 2017, Company A presented a petition pursuant to Part 10 of the Companies Act 2014, resulting in the appointment of Appellant as examiner on an interim basis on 11th July 2017. On 5th September 2017, due to the examiner's inability to secure funding for a scheme of arrangement, the court lifted protection and ordered winding up of the Company, appointing Appellant as liquidator.
Later that day, counsel for Revenue appeared ex parte and informed the court that Company A had failed to file and pay the P30 tax return for July 2017, breaching an undertaking given at the petition hearing. Revenue applied for an order that the unpaid tax be treated as a cost or expense in the examinership, which the court granted. The liquidator subsequently applied to set aside that part of the order deeming the tax liability to be an examinership expense.
Legal Issues Presented
- Whether the court has jurisdiction to make an order deeming unpaid tax liabilities to be expenses properly incurred in the examinership process absent certification by the examiner.
- The legal consequences of a breach of an undertaking given by a company to pay current tax liabilities during examinership.
- The propriety and timing of the ex parte order made on 5th September 2017 treating the unpaid tax as an examinership expense.
- The scope and nature of undertakings given in examinership proceedings, including to whom such undertakings are given and their enforceability.
Arguments of the Parties
Liquidator's Arguments
- The court lacked jurisdiction under the Companies Act 2014 or inherent jurisdiction to make the order treating the tax liability as an examinership expense.
- The order was made ex parte without notice to the liquidator, and the application was made too late as the examinership had ended and liquidation commenced.
- Revenue should have informed the court earlier on the day of the hearing about the failure to file and pay the tax return.
- The examiner did not breach the undertaking, which was given by the company, not the examiner personally.
Revenue's Arguments
- The breach of the undertaking to pay current tax liabilities justified treating the unpaid tax as a priority expense in the examinership.
- The order was a proper exercise of the court’s jurisdiction to enforce undertakings given to the court.
- The failure to pay taxes prejudiced the survival of the company as a going concern and thus the liability was capable of certification under s. 529 of the Companies Act 2014.
- The order was appropriate as a sanction against the liquidator for failing to return to the court promptly upon becoming aware of the breach.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Re Edenpark Construction Limited [1994] 3 IR 126 |
Certification of liabilities as examinership expenses confers extraordinary priority. |
Used to explain the statutory scheme and the requirement that liabilities be certified by the examiner to gain priority status. |
| Biba Ltd. v. Stratford Investments Ltd [1972] 3 All. E.R. 1041 |
An undertaking given to the court is solemn and binding, equivalent to a court order for enforcement purposes. |
Supported the analysis that the undertaking given in examinership proceedings carries special legal weight. |
| Bank of Ireland Mortgage Bank v. Coleman [2009] 3 IR 699 |
Undertakings given by officers of the court have compensatory and disciplinary consequences. |
Reinforced the solemnity of undertakings in the context of examinership and court proceedings. |
| Re Camden Street Investments Ltd. [2014] IEHC 86 |
An examiner is an officer of the court with duties of honesty, reasonableness, and candour towards the court. |
Supported the conclusion that the examiner did not breach duties or lack candour in this case. |
| Re Don Bluth Entertainment Limited |
The court has a supervisory role to review an examiner’s certification of liabilities as examinership expenses. |
Used to establish that the examiner’s certification is subject to court review but the court itself lacks power to certify or deem liabilities as examinership expenses. |
| Re Clare Textiles Limited [1993] 2 IR 213 |
The court’s discretion to review examiner’s certification of liabilities. |
Supported the supervisory function of the court over examiner’s certifications. |
| Re Cavan Christies Glass Limited [1998] 3 IR 591 |
Revenue’s neutrality on an examinership petition can be interpreted as a sign of hope for the company’s survival. |
Referenced to illustrate the significance of undertakings to Revenue in examinership proceedings. |
| Missford Limited t/a Residents Members Club [2010] IEHC (unreported) |
Exercise of court’s discretionary jurisdiction in appointing examiners. |
Referenced as part of the legal context for considering undertakings and court discretion. |
| Re Star Elm Frames Limited [2013] IESC 57 |
Discretionary jurisdiction of the court in examinership and undertakings. |
Used to support the legal framework for undertakings and court discretion. |
| Re Gallium [2009] 2 ILRM 11 |
Consideration of undertakings and court’s discretionary powers in examinership. |
Part of the judicial context for undertakings and their enforcement. |
Court's Reasoning and Analysis
The court began by examining the circumstances of the ex parte order made on 5th September 2017, noting the late appearance of Revenue counsel and the absence of the examiner's counsel. The court found no lack of good faith or candour by either party, concluding that the examiner had acted professionally and transparently, and that the failure to file and pay the July 2017 P30 tax return was a breach by the Company, not the examiner.
The court analysed the nature and purpose of the undertaking given by the Company to pay current tax liabilities during examinership, concluding that the undertaking was given to the court rather than directly to Revenue. Such an undertaking is solemn and binding, carrying the force of a court order and intended to support the company's survival as a going concern during protection.
However, the court emphasised that the undertaking does not alter the statutory priority of Revenue debts nor guarantee payment. Breach of the undertaking may allow the court to enforce compliance or express displeasure, but cannot change statutory priorities or supplant the examiner's certification role.
The court then considered the statutory scheme under the Companies Act 2014, particularly sections 529 and 554, which provide that only liabilities certified in writing by the examiner at the time they are incurred may be treated as examinership expenses with priority status. The court found no statutory or inherent jurisdiction to make an order deeming liabilities to be examinership expenses absent such certification.
Furthermore, the court held that the application by Revenue was made too late, after the examinership had ended and liquidation had commenced, at which point the statutory priorities had crystallised and could not be displaced by court order.
Accordingly, the court concluded that the ex parte order treating the unpaid tax as an examinership expense was made without jurisdiction and must be set aside.
Holding and Implications
The court SET ASIDE the part of the order dated 5th September 2017 that deemed the amount of tax due on the July 2017 P30 return to be a cost or expense in the examinership.
The direct effect of this decision is that the unpaid tax liability does not enjoy the elevated priority status of examinership expenses and remains subject to the normal priority regime applicable in liquidation. The judgment clarifies that only the examiner may certify liabilities as examinership expenses under the Companies Act 2014, and the court has no inherent jurisdiction to impose such status unilaterally. No new precedent altering the statutory scheme was established beyond affirming the limits of the court’s jurisdiction regarding such orders.