Airscape Ltd v Powertech Logisitics Ltd and Others

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 05 February 2007
• Neutral Citation: [2007] IEHC 43
• Court: High Court
• Docket Number: [2006 No. 214 COS]
• Date: 05 February 2007

Airscape Ltd v Powertech Logistics Ltd

IN THE MATTER OF SECTION 371 OF THE COMPANIES ACT, 1963

AND IN THE MATTER OF THE COMPANIES ACTS, 1963 TO 2005

AND IN THE MATTER OF SECTIONS 204, 205, 297A OF THE

COMPANIES ACT, 1990

AND IN THE MATTER OF SECTIONS 243 AND 245 OF THE

COMPANIES ACT, 1963

AND IN THE MATTER OF POWERTECH LOGISTICS LIMITED

BETWEEN/

AIRSCAPE LIMITED

APPLICANT

AND

POWERTECH LOGISTICS LIMITED, MATTHEW O'REILLY AND DAVID McKEE

RESPONDENTS

[2007] IEHC 43

No. 214 COS/2006

THE HIGH COURT

COMPANY LAW

Insolvency

Unsatisfied judgment - Outstanding statutory annual returns - Enforcement of court order - Whether sequestration against property of directors appropriate - Whether order would be coercive or penal in nature - Failure to serve order with necessary penal endorsement - Whether order wilfully disobeyed - Insufficiency of assets - Examination of persons summoned on oath - Discretionary power - Manner in which respondent company operated - Whether examination would result in benefit - Rules of the Superior Courts 1986 (SI 15/1986), O 1, r 8 and O 42, r 32 - Companies Act 1963 (No 33), ss 245 and 371(1) - Companies Act 1990 (No 33), s 251 - s 251 applied other relief refused (2006/214COS - Laffoy J - 5/2/2007) [2007] IEHC 43

In re Powertech Logistics Ltd: Airscape Ltd v Powertech Logistics Ltd

Facts: The applicant had an unsatisfied judgment against the respondent and sought inter alia an order directing the respondent to make good its default set out in a statutory notice, to have s. 251 of the Companies Act 1990 applied to the respondent, to require the respondent to provide information pursuant to s. 245 Companies Act 1963 and sought an order enforcing sequestration and/ or attachment and committal.

Held by Laffoy J., that insufficient evidence existed to warrant a finding of wilful disobedience for sequestration. The onus on a creditor of a company seeking an order under s. 245 and s. 251 was to demonstrate the benefit accruing to him from the order. The applicant was not entitled to an order pursuant to s. 245 of the Act of 1963.

Reporter: E.F.

COMPANIES ACT 1963 S371

COMPANIES ACT 1990 S204

COMPANIES ACT 1990 S205

COMPANIES ACT 1963 S297A

COMPANIES ACT 1963 S243

COMPANIES ACT 1963 S245

COMPANIES ACT 1963 S371(1)

COMPANIES ACT 1990 S251(2)

COMPANIES ACT 1990 S251(1)

COMPANIES ACT 1963 S245(2)

COMPANIES ACT 1963 S245(3)

COMPANIES ACT 1963 S245(4)

COMPANIES ACT 1990 S160

RSC O.44 r6

RSC O.42 r32

ROSS CO LTD v SWAN 1981 ILRM 416

LARKINS & ORS v NATIONAL UNION OF MINEWORKERS & BANK OF IRELAND FINANCE LTD 1985 IR 671 1985/8/2410

RSC O.41 r8

PRIOR v JOHNSTON 27 ILTR 108

RSC O.42 r26

NATIONAL IRISH BANK LTD v GRAHAM 1994 1 IR 215 1994/5/1506

EMBASSY ART PRODUCTS LTD, IN RE 1988 BCLC 1 1987 3 BCC 292

COMET FOOD MACHINERY CO LTD, IN RE 1999 1 IR 485 1999 1 ILRM 475 2004/8/1839

1 Judgment of Miss Justice Laffoy delivered on 5th February, 2007

The motions before the court

2 On 14th June, 2006 the applicant issued a motion returnable for 26th June, 2006 (the first motion) seeking an order pursuant to s. 371(1) of the Companies Act, 1963 (the Act of 1963) directing the first respondent to make good its default as set out in a statutory notice dated 10th May, 2006 pursuant to s. 371 within such time as the court should direct. The statutory notice was addressed to the second respondent and the third respondent, the directors of the first respondent, and also to the first respondent. It called on the notice parties to make good two defaults as follows:

3 (a) by "producing copies of the Register of Members, the Register of Directors and the Register of Directors and Secretaries interests in shares in" the first respondent within fourteen days after service of the notice, and

4 (b) by submitting all outstanding statutory annual returns and audited financial statements to the Companies Registration Office, in particular, in respect of the years 2002, 2003, 2004, 2005 and 2006 immediately.

5 An order was made on foot of that motion on 10th July, 2006. It ordered the respondents within the period of twelve weeks from the date thereof to submit all outstanding statutory returns as required to be filed in the Companies Office pursuant to the provisions of the Companies Acts, 1963– 2005 and it particularised the years 2002, 2003, 2004, 2005 and 2006. The order recited that it was made in the presence of counsel for the third respondent and with the consent of the first and second respondents. The order only related to default referred to at (b) in the immediately preceding paragraph hereof, not that at (a), presumably because the grounding affidavit only addressed non-compliance with the notice in relation to that default.

6 On 5th July, 2006, before the court made an order on foot of the first motion, the applicant issued another motion which was returnable for 10th July, 2006 (the second motion), in which the applicant sought the following reliefs:

7 2 (a) an order to have the provisions of s. 251(2) of the Companies Act, 1990 (the Act of 1990) applied to the first respondent pursuant to s. 251(1);

8 3 (b) an order pursuant to s. 245(1) and 245(2) of the Act of 1963 requiring the second respondent and the third respondent, directors of the first respondent, to attend before the court to give information in relation to the promotion, formation, trade, dealings, affairs and property of the respondent and ancillary orders pursuant to sub-ss. (3) and (4) of s. 245;

9 4 (c) an order pursuant to s. 243 of the Act of 1963 providing for inspection of the accounting books and accounting records of the first respondent including certain particularised records;

10 5 (d) an order pursuant to s. 297A of the Act of 1990 against the second respondent and the third respondent declaring them personally liable as directors of the first respondent in respect of debts not paid by the first respondent to the applicant;

11 6 (e) an order pursuant to s. 204 of the Act of 1990 against the second respondent and the third respondent declaring them personally liable as directors of the first respondent in respect of the failure to maintain proper books and records; and

12 7 (f) an order pursuant to s. 160 of the Act of 1990 that the second respondent and the third respondent be disqualified from acting as a director and in certain other roles in relation to a company.

13 The factual circumstances in which the applicant sought the relief granted in the order of 10th July, 2006 and seeks the relief sought in the second motion are that the applicant has an unsatisfied judgment for €289,548.94 together with costs against the first respondent which it obtained in this Court on 30th May, 2005. An appeal to the Supreme Court against that order was struck out for want of prosecution on 3rd November, 2006. The debt represents the licence fee payable by the first respondent to the applicant in respect of the use of a warehouse or storage facility during the months of November and December, 2001 and January and February, 2002 under a licence agreement made around November, 2001. The first respondent used the warehouse for storage in connection with its distribution business. It is common case that the first respondent is insolvent. The reason given by the second and third respondents for its insolvency is the loss without notice of its contract with its sole customer, a soft drinks manufacturer. On the evidence before the court there is a conflict as to when the first respondent ceased trading. In response to the s. 371 notice, in a letter dated 15th May, 2006 stated to be written on behalf of both the second and third respondents, but signed only by the second respondent, it was stated that the company ceased trading on 31st December, 2001. However, in an affidavit sworn by him on 27th November, 2006 in response to the second motion, the third respondent has averred that the directors believed that there was no need to cease trading in 2002 and that it was later that it was decided to cease "renting the premises" from the applicant and to cease trading.

14 On 9th October, 2006, which on my reckoning was just over a week after the expiry of the twelve weeks allowed in the order of 10th July, 2006, the applicant issued a motion returnable for 16th October, 2006 (the third motion) invoking O. 44, r. 6 and O. 42, r. 32 of the Rules of the Superior Courts, 1986 (the Rules). The relief sought on the third motion was as follows:

15 (i) an order pursuant to O. 42, r. 32 of the Rules enforcing sequestration against the property of the first respondent, the property of the second respondent and the third respondent, if any such property exists, and an order of attachment against the second respondent and the third respondent; and

16 (ii) in the alternative, an order pursuant to O. 44, r. 6 of the Rules seeking attachment and committal to prison of the second respondent and the third respondent on account of their failure to comply with the order of 10th July, 2006.

17 The second and third motions were adjourned from time to time in the Chancery 2 List and came on for hearing on 29th January, 2007. In this judgment I propose dealing with each of those motions separately, although I think it is logical to deal with the third motion first.

18 It is common case that since the third motion was issued annual returns for the years 2002 to 2006 inclusive in respect of the first respondent have been filed in the Companies Registration Office. The Companies Office search exhibited discloses that the returns in respect of 2002, 2003 and 2004 were received in the Companies Registration Office on 6th November, 2006. The annual returns in respect of 2005 and 2006 were subsequently lodged. It is not clear on the evidence precisely when that occurred,...