The Liquidation of Irish Shipping Limited

On the night of 15th December, 1983, the Chairman of the company, William O'Neill, together with the General Manager, J. Niall McGovern, were summoned to Leinster House for a meeting with the Minister for Finance, Alan Dukes, and the Minister for Communications, Jim Mitchell. Both Ministers were accompanied by senior Officials from their respective Departments. The meeting was held at 10.45 p.m. and the Minister for Finance apologised for the late hour but said he felt it was necessary to convey to Irish Shipping Limited the decision taken by Cabinet that day. He told the Chairman that the Government had decided that no further money would be put into the company and that the company was not to sell off any assets nor create any charges on the assets.

The Chairman replied that this was tantamount to putting the company into liquidation. However, the Minister replied that he had no further comment to make and did not wish to add anything to the decision he had just conveyed to the Chairman. When asked by the Chairman if the decision implied that the Government was prepared to walk away from the unsecured creditors of Irish Shipping Limited in the event of a liquidation, the Minister replied that he did not wish to add anything to the Government's decision.

The company carried on and efforts were made to renegotiate the charter agreements with the Hong Kong-based shipowners. It was acknowledged by the Hong Kong broker, Michael Drayton, of Anglo-Eastern Shipping Co. Ltd., who had negotiated the original charters on behalf of the Hong Kong owners, that a reduction of 25% on the charter hire had been achieved in the renegotiations. The deal also included the outright purchase by Irish Shipping Limited of two of the chartered vessels, the Slaney Venture and the Celtic Venture. He admitted that the purchase price of U.S.$42 million for the two ships was in excess of their market value but that the extra amount was to cover the cancellation of the charter agreements in respect of the two vessels. Despite the warning given by the Minister for Finance on the night of 15th December, 1983, the Government provided guarantees amounting to £12,510,008 in respect of the two ships. Payments for that amount were made by the Exchequer on 24th December, 1984, as stated in the Report of the Comptroller and Auditor General for 1984.

Subsequent to the appointment of a provisional liquidator on 14th November, 1984, much controversy was aroused because of the Irish Shipping negotiators' decision to book into the very expensive Mandarin Hotel in Hong Kong. This was done despite the advice given by local agents that booking into such luxurious accommodation would not convey the impression of a company in serious financial difficulty.

It was probably unwise also that Derry O'Neill, who was centrally involved in the original chartering deal, should be one of the four negotiators sent to seek revised terms. The other three men who travelled to renegotiate were J. N. McGovern, General Manager, Irish Shipping Limited; Ronan Nolan, an Accountant from Deloitte Touche, the company's Auditors and J. O'Dwyer from Arthur Cox & Co., Solicitors.

In August, 1984, the company Chairman, W. A. O'Neill, was asked by the Minister for Communications, Jim Mitchell, to tender his resignation and it was clear that the Government was intent on using the limited liability status of Irish Shipping Limited to avoid the responsibility of State ownership. This was widely regarded as a most humiliating stance for any sovereign government to take in order to avoid its obligations.

With the enforced resignation of W. A. O'Neill in August, 1984, Chairmanship of the company was taken over by Frank Belton, a Government appointee. Mr. Belton was an accountant and also a Director of B + I Line. He was instructed to carry out a detailed investigation into the company's affairs and to report his findings to the Government in office at that time, the Fine Gael/Labour coalition with Garret Fitzgerald as Taoiseach. Frank Belton duly presented his report to the Government but details of that report were never published.

Ironically, the pre-tax profits of the company for the financial years 1980, 1981 and 1982 were the highest recorded profits in the company's history and ended fifteen years of successive annual profits in 1982. Pre-tax profits for the three years from 1980 to 1982 were £3.508 million, £4.214 million and £5.477 million respectively ending with the highest ever recorded profit in 1982. However, a pre-tax loss of £12.242 million in 1983 was followed by a pre-tax loss of £31.876 million in 1984.

The Chairman's Statement to the Annual General Meeting for 1984 comments on the losses as follows :-

" Had our fleet been confined to owned vessels, the company would in any event be suffering from severe losses but the magnitude of these losses has been compounded by the chartered vessels."

Given the extent of the losses incurred by the company in 1983 and 1984, it was inevitable that the Government would consider the option of liquidation. In doing so it might be reasonably expected that the relative costs of rescue and liquidation would be carefully examined before a final decision was made. It would also be reasonable to consider the consequences which could be expected to follow from taking either course of action.

In normal circumstances a national Government would also consider the international reaction to the perceived evasion of the State's responsibilities to the creditors of a wholly State-owned enterprise. The failure of the Minister for Finance, Alan Dukes, to reply to the direct question from Irish Shipping Chairman, W. A. O'Neill, at their meeting on the night of 15th December, 1983, can only be interpreted as confirmation that “the Government was prepared to walk away from the unsecured creditors of Irish Shipping Limited ” Of course the unsecured creditors included the company's employees. It is also clear that none of the points outlined were seriously considered by the Government and subsequent statements by Ministers and civil servants confirm the view that there was an urgency to wind up the company which was not entirely motivated by objective reasoning.