Cahill v Grimes

JurisdictionIreland
JudgeMr Justice Francis D Murphy
Judgment Date01 March 2002
Neutral Citation[2002] IESC 12
CourtSupreme Court
Docket Number[S.C. No. 212 of 2001]
Date01 March 2002

[2002] IESC 12

THE SUPREME COURT

Murphy J

Murray J

McGuinness J

212/01
CAHILL (OFFICIAL LIQUIDATOR) v. GRIMES
IN THE MATTER OF CB READYMIX LIMITED IN LIQUIDATION
IN THE MATTER OF THE COMPANIES ACTS 1963– 1999
IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 160 OF
THE COMPANIES ACT 1990

BETWEEN:

EDMUND P CAHILL OFFICIAL LIQUIDATOR
APPLICANT/RESPONDENT

AND

DR MICHAEL GRIMES
RESPONDENT/APPELLANT

Citations:

COMPANIES ACT 1990 S160

COMPANIES ACT 1990 S160(2)

COMPANIES ACT 1990 S160(2)(a)

COMPANIES ACT 1990 S160(2)(b)

COMPANIES ACT 1990 S160(2)(d)

COMPANIES ACT 1990 S160(7)

COMPANIES ACT 1990 S160(8)

COMPANIES ACT 1990 S159

COMPANIES ACT 1990 S159(a)

LO-LINE MOTORS LTD, RE 1988 BCLC 689 2 AER 692

COMPANIES ACT 1985 (UK) S300

NEWCASTLE TIMBER LTD & ABWOOD LRD, IN RE 2001 4 IR 586

LA MOSELLE CLOTHING V SOUALHI 1998 2 ILRM 345

SQUASH (IRL) LTD, RE UNREP MCGUINNESS 8.2.2001

BUSINESS COMMUNICATIONS LTD V BAXTER UNREP MURPHY 21.7.1995 1995/6/1869

COMPANIES ACT 1963 S311(8)

Synopsis:

COMPANY LAW

Duty of liquidators

Liquidation - Duty of care -- Nature of revenue debt - Failure by liquidator to maintain records of company - Whether disqualification order should issue - Companies Act , 1990 sections 159, 160 (212/2001 - Supreme Court - 01/03/2002) - [2002] 1 IR 372

Cahill v Grimes

Facts: The applicant brought a motion pursuant to section 160 of the Companies Act, 1990 seeking to have the respondent disqualified from acting as a liquidator. Mr. Justice Smyth was satisfied that the respondent failed to act in an impartial manner, destroyed the books and records of the company and failed to act in the interests of the creditors of the company and, in particular, of the Revenue. The respondent was unfit to be concerned with the management of a company. The respondent would be disqualified for seven years from being concerned in the management of a company as liquidator, receiver or examiner. In addition conditions were imposed on the respondent in relation to acting as an auditor, director or secretary of a company. The respondent appealed against the judgment.

Held by the Supreme Court (Murphy J delivering judgment; Murray J and McGuinness J agreeing) in dismissing the appeal. The respondent had destroyed the documents in question in order to deprive the official liquidator of access to them. The respondent had showed a completely mistaken view as to the duties of a liquidator. Whilst it was accepted that the respondent had not acted maliciously the decision to permit the destruction of the books and records was a very serious wrong. The High Court was entitled to disqualify the respondent from filling certain offices and to impose other stipulated conditions.

1

Judgment Of Mr Justice Francis D Murphy Delivered The 1st Day Of March, 2002 [nem diss]

2

By order dated the 20th July, 2001, made pursuant to a judgment delivered by him on the same date, Mr Justice Thomas Smyth disqualified the respondent (Dr Grimes) from being concerned in the management of a company as a liquidator, receiver or examiner for a period of seven years from the 20th day of July, 2001, and imposed conditions limiting the right of Dr Grimes to act as auditor, director or secretary of any company during the same period. It is from that judgment and order, which was made pursuant to s.160 of the Companies Act 1990, that Dr Grimes appeals to this Court.

3

The above named CB Readymix Limited (Readymix) was incorporated on the 7th of April, 1988. The formation of the company was procured, apparently, by Cork Company Registrations an enterprise owned/or controlled by Dr Grimes. Readymix engaged in the business of quarrying and selling sand and gravel. As the learned trial Judge explained in his judgment, Readymix got into financial difficulties, in particular, in respect of returns and payments to the Revenue both in respect of PAYE and VAT. The Revenue commenced proceedings against the company by way of summary summons on the 15th of March, 1995, seeking liberty to enter final judgment in the sum of £50,510.70. When the matter was eventually listed before the Master, the Revenue became aware that the company had been struck off the Register of Companies on the 25th of September, 1995, for failure to furnish the appropriate annual returns. On the 15th January, 1996, the company, although struck off the Register, purported to pass a resolution winding up the company and appointing Dr Grimes as liquidator. On the 25th of March, 1996, Barron J ordered the restoration of Readymix to the Register and at the same time made an order restraining Dr Grimes from acting as liquidator thereof on or before the 22nd of April, 1996. It was on the 27th of March, 1996, that the Master of the High Court granted the Revenue liberty to enter final judgment against Readymix in the sum of £50,510.70. On the 18th day of April, 1996, a petition was presented for the winding up of Readymix by the Court. On the 25th April, 1996, the applicant (Mr Cahill) was appointed as provisional liquidator. On the 29th April, 1996, Mr Justice Barron ordered a stay on the appointment of Mr Cahill as provisional liquidator. On the 27th of January, 1997, Mr Justice Barron discharged the stay restraining Mr Cahill from acting as provisional liquidator and by the same order declared that the resolution purporting to wind up Readymix voluntarily and the appointment of Dr Grimes as liquidator thereof on the 15th of January, 1996, was invalid. In addition a stay was put on the order dated the 25th of March, 1996, pending an appeal to the Supreme Court. That appeal was never prosecuted. It is clear that Dr Grimes was never validly appointed as liquidator of Readymix. It is equally clear that in the relatively brief period from the 15th of January 1996 to the 25th of April 1996 he did purport to act as liquidator of Readymix and between the latter date and the 27th of January, 1997, Dr Grimes disputed the entitlement of Mr Cahill to act as provisional liquidator of the company. There is no doubt that Dr Grimes held himself out as being the liquidator of Readymix and repeatedly asserted in affidavits and other legal documents that he held that position.

4

Ultimately Mr Cahill was appointed official liquidator of the company by order of the High Court made on the 23rd day of January, 1997.

5

In the period subsequent to his appointment as provisional liquidator Mr Cahill had several meetings and communications with Dr Grimes. Whilst the communications ranged over a wide variety of topics Mr Cahill in his evidence drew attention to a particular observation made at a meeting which he had with Mr Grimes on the 2nd of May, 1996, at Grattan Court, Washington Street, Cork, when he, Mr Cahill recorded part of the conversation between them in the following terms:-

"Dr Grimes then stated that surely EFC (Mr Cahill) did not expect to get any books and records of the company. EFC inquired why and Dr Grimes stated quite categorically that the books could have an accident. EFC stated that he would have to get the books but made no further comment on this aspect."

6

Other topics discussed between the parties were the ownership of the lands and the identity of the persons who were working in the quarries which appeared to be owned by Readymix. In an affidavit grounding an application for judicial review by way of order of certiorari to quash the decision of the Revenue Commissioners to raise certain assessments on Readymix Dr Grimes did swear (at para. 70) that:-

"I have looked at the company's books and I am satisfied that no money whatever is owing to Revenue."

7

On the 16th of May, 1997, Mr Cahill wrote to two persons, namely, Anne Carey and Carol O'Sullivan who, it appeared to him, had been appointed directors of the company in place of the original directors. In a reply dated the 30th May, 1997, Ms Anne Carey explained that the company had been put into liquidation and Dr Grimes appointed liquidator thereof. She said that "all the books were handed over to him".

8

In an affidavit sworn on the 31st of July, 2001, Dr Grimes set out the position in relation to the books and records of the company in the following terms:-

9

2 "22 I contacted Mr Cahill and offered to meet him so that I could hand over the books of the company which I had in my capacity of liquidator.

10

23 Mr Cahill took legal advice and wrote back saying that on legal advice he declined to meet me.

11

24 I was then stuck with the situation wherein the court informed me that I was never liquidator. I had offered the books to the only person entitled to them and he did not want them. The Acts that I read said that only officers of the company were responsible for the books and I had never taken any hand, act or part in running or operating the company and was not even liquidator I therefore had no duty to keep them and consequently I was not going to be having them around for years so I destroyed them. I did not fall into any category covered by the Act with a duty of care. Nobody wanted them and there was no court order extant dealing with them."

12

At a meeting on the 12th October, 1996, Dr Grimes was recorded by Mr Cahill as having stated:-

"That he had the books and records of the company in his possession and he further stated that the books and records were, in his opinion, adequate."

13

In an affidavit sworn by him on the 29th of October, 1996, Dr Grimes explained the position with regard to the records as follows:-

"My understanding for this was that I was finished, not going to be consulted further and therefore had no further responsibility for any of the books of the company which I had and now I no longer needed. I checked the relevant Acts insofar as I was able and it appeared to me that since I never had been an officer of the company and never been liquidator, I had nothing to do with the...

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