CTO Greenclean Environmental Solutions Limited -v- Companies Acts, [2017] IEHC 246 (2017)

Docket Number:2011 735 COS
Party Name:CTO Greenclean Environmental Solutions Limited, Companies Acts
 
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THE HIGH COURT [2011 No. 735 COS]IN THE MATTER OF CTO GREENCLEAN ENVIRONMENTAL SOLUTIONS LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACTS 1963-2010

AND IN THE MATTER OF AN APPLICATION BY LOUIS J. O’REGAN LIMITED UNDER SECTION 139 OF THE COMPANIES ACT 1990 AND SECTION 98 OF THE COMPANIES ACT 1963

BETWEEN

LOUIS J. O’REGAN LIMITED (AS PETITIONER AND A CREDITOR OF CTO GREENCLEAN ENVIRONMENTAL SOLUTIONS LIMITED (IN LIQUIDATION))APPLICANTAND

STEPHEN GRIFFIN AND DAVID RONAN AND ARK LIFE TRUSTEES LIMITED AND ARK LIFE NOMINEES LIMITED AND ARK LIFE ASSURANCE COMPANY LIMITEDRESPONDENTS

Judgment on Application of the Official Liquidator of CTO Greenclean Environmental Solutions Limited (in liquidation)

Judgment of Mr. Justice Robert Haughton delivered on the 26th day of April, 2017

  1. By Notice of Motion dated the 14th of September, 2016, Mr. Myles Kirby, official liquidator of CTO Greenclean Environmental Solutions Limited (in liquidation) (“the Official Liquidator” and “the Company” respectively) seeks the following orders:-

    “1. An order pursuant to Order 15, rule 13 of the Rules of the Superior Court or otherwise, joining the Official Liquidator as a co-applicant in the within proceedings;

  2. In addition, an order prohibiting the first and second named respondents from taking any steps to dissipate or utilise the monies which are the subject matter of the within proceedings, as referred to in the notice of motion dated 18th December, 2014 and specified in the affidavit of Myles Kirby sworn on 12th September, 2016, pending the determination of the proceedings or further order of this honourable court.”

  3. The proceedings to which the Official Liquidator seeks to be joined as a co-applicant were brought by Notice of Motion issued on 18th December, 2014 on behalf of Louis J. O’Regan Limited against the respondents and each of them in essence requiring payment by the first and second named respondents (“Mr. Griffin” and “Mr. Ronan” respectively) of sums totalling €2,664,333.00 which it is claimed were unlawfully or improperly paid by the Company to them at a time when they were directors of the Company. It is claimed that between the 11th February, 2008 and 26th May, 2008 sums totalling €2,064,33.00 were paid to Mr. Griffin, and that €600,000.00 was paid to Mr. Ronan on 5th January, 2009.

  4. It is claimed that these monies were paid improperly and in breach of s. 139(1)(b) of the Companies Act 1990, and that “the effect of such disposal was to perpetrate a fraud on the company, its creditors or members” and that such monies should be paid to Louis J. O’Regan Limited. A claim under s.139(1) can be brought “… on the application of a liquidator, creditor or contributory of a company which is being wound up …”. Alternative claims are made pursuant to s.286 of the Companies Act 1963 asserting that these payments were fraudulent preferences, and pursuant to s.298 of the Companies Act 1963 (as amended) that Mr. Griffin and Mr. Ronan were guilty of misfeasance or breach of duty, and that the monies should be repaid to Louis J. O’Regan Limited or the Company.

    First Issue – Application for Joinder of the Official Liquidator

    Order 15 rule 13

  5. This application is made pursuant to O. 15, r. 13 of the Rules of the Superior Courts 1986, which provides:-

    “No cause or matter shall be defeated by reason of the misjoinder or non-joinder of parties, and the Court may in every cause or matter deal with the matter in controversy so far as regards the rights and interests of the parties actually before it. The Court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the Court to be just, order that the names of any parties improperly joined, whether as plaintiffs or as defendants, be struck out and that the names of any parties, whether plaintiffs or defendants, who ought to have been joined, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter, be added. No person shall be added as a plaintiff suing without a next friend, or as the next friend of a plaintiff under any disability, without his own consent in writing thereto. Every party whose name is so added as defendant shall be served with a summons or notice in manner hereinafter mentioned, or in such other manner as the Court may direct, and the proceeding as against such party shall be deemed to have begun only on the making of the order adding such party.”

  6. In his grounding affidavit sworn on 12th September, 2016 the Official Liquidator records that Louis J. O’Regan Limited, an unsecured creditor of the Company presented a petition to the High Court on 20th December, 2011 seeking to have the Company wound up. By order of the High Court (Laffoy J.) made on 23rd March, 2012 Mr. Joseph Foran was appointed Official Liquidator. He resigned on 23rd May, 2013, and he was replaced by Mr. Alan Fitzpatrick as Official Liquidator by order of the High Court (Finlay Geogheghan J.) made on 17th June, 2013. By Notice of Motion dated 25th November, 2013 Louis J. O’Regan Limited sought the removal of Mr. Fitzpatrick as Official Liquidator, he subsequently agreed to resign and pursuant to an order of the High Court (Mr. Justice White) dated 22nd February, 2016, that resignation was accepted and Mr. Myles Kirby was appointed Official Liquidator.

  7. As noted above Louis J. O’Regan Limited initiated the main proceedings herein in December 2014. While it would be more usual for a liquidator to initiate such proceedings it appears that the first two liquidators of the Company decided, for whatever reason, not to initiate such proceedings against Mr. Griffin or Mr. Ronan, but Louis J. O’Regan Limited was entitled as a “creditor” to initiate such proceedings under s.139(1) of the 1990 Act.

  8. The Official Liquidator avers that having carried out a detailed investigation into the history of the Company, and based on the books and records available to him, the Company “was barely solvent on a balance sheet basis” and “…was not in a strong financial position” in July 2007 (para. 24). However in August 2007 the Company was awarded a very substantial contract to carry out certain waste clearance works at the former Irish Steel plant at Haulbowline in Co. Cork. The Company was engaged as a subcontractor by a Hammond Lane Metal Company, which had been awarded a contract worth €30 million by the Irish Government. Hammond Lane was a principal contractor and it sub-contracted the work to the Company via Eastwood Ltd. The Company then subsequently sub-contracted certain work to Louis J. O’Regan Ltd. Subsequent to this his turnover increased substantially.

  9. It appears that in February 2008 Mr. Griffin, then a director of the Company, notified the Environmental Protection Agency of environmental contamination in the Haulbowline site, and at this time it became apparent that the cost of the clean-up would be a multiple of the original estimate of €30 million as the quantity of contaminated material to be removed had substantially increased. Government concern over this led to the closing down of the site and termination of the main contract on 30th May, 2008. At para. 32 of his affidavit the Official Liquidator sets out details of five payments totalling in excess of €2 million made by the Company to Mr. Griffin between 11th February, 2008 and 26th May, 2008, and the payment of 5th January, 2009 to Mr. Ronan of €600,000.00, all of which were described in the Company books as payments into the respondents’ pensions.

  10. The last payment to Mr. Griffin of €659,000.00 was made on 26th May, 2008 some three days after a letter was written by the Chief State Solicitor on behalf of the government indicating that the work on the Haulbowline site should cease, and plant and machinery removed, that the site would be locked and secured, and one day before the letter of 30th May, 2008 terminating the main contract.

  11. The core case that the Official Liquidator wishes to pursue against the first and second named respondents is that the effect of the payments was to render the Company insolvent and to deprive its creditors of their entitlements. He expresses concern inter alia that certain of the payments were made with only one of the respondents as cheque signatory; that a payment of €416,000 made by Mr. Griffin to himself on 10 April 2008 was made at a time when the Company needed cash flow to cover other outgoings; that staff in the Company were being put on protective notice at the time of the payments; that there was no consideration of management accounts or the solvency of the Company when the payments were made; that they were made notwithstanding known substantial VAT and lease payment liabilities and a known substantial potential exposure to withholding tax and finally, that the Company was to bear 20% of the third party costs associated with the removal of the hazardous waste

  12. Although Mr. Griffin and Mr. Ronan maintained that the payments made to them by way of remuneration/pension were made by the Company bona fide, and at a time when the Company was solvent, the Official Liquidator in the evidence presented on affidavit questions whether the Company was in fact solvent having regard to all of its debts, liabilities and contingent liabilities, at the time when all or some of the payments were made, and even if it was solvent asserts that such payments were nevertheless “a fraud on the company” within the meaning of section 139.

  13. Counsel for the Official Liquidator argued that this is an appropriate case in which to join the Official Liquidator for a number of reasons:-

    (1) The liquidator can pursue the proceedings on behalf of all of the creditors of the Company and is in a better position to do so than a creditor such as Louis J. O’Regan Limited; and

    (2) The liquidator is in possession of...

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