Forrest Lennon Business Support Services Ltd v Companies Act 1963-2009

JurisdictionIreland
JudgeMs. Justice Laffoy
Judgment Date24 August 2011
Neutral Citation[2011] IEHC 523
CourtHigh Court
Date24 August 2011

[2011] IEHC 523

THE HIGH COURT

[No. 176 COS/2011]
Forrest Lennon Business Support Services Ltd v Companies Act 1963-2009
IN THE MATTER OF FORREST LENNON BUSINESS SUPPORT SERVICES LIMITED

AND

IN THE MATTER OF THE COMPANIES ACT 1963 - 2009

COMPANIES ACT 1963 S214

RSC O.74 r15

COMPANIES ACT 1963 S214(A)

COMPANIES ACT 1963 S309

COURTNEY COMPANIES ACTS 1963-2009 (2010 ED)

GENPORT LTD, IN RE ?

CAMBURN PRODUCTS LTD, IN RE 1980 1 WLR 86

COMPANIES ACT 1963 S213(E)

COMPANIES ACT 1963 S214(C)

BOWES v HOPE LIFE INSURANCE & GUARANTEE CO 1865 11 HL CAS 389

COMPANIES ACT 1948 (UK) S225

COMPANIES ACT 1948 (UK) S346

COMPANIES ACT 1963 S216(1)

RODENCROFT LTD, IN RE 2004 1 WLR 1566

LA PLAGNE LTD, IN RE UNREP LAFFOY 17.1.2011 2011 IEHC 91

BULA LTD, IN RE 1990 1 IR 440

TRUCK & MACHINERY SALES LTD v MARUBENI KOMATSU LTD 1996 1 IR 12

WMG (TOUGHENING) LTD, IN RE 2003 1 IR 389

COMPANY LAW

Winding up

Petition - Creditor - Debt - Jurisdiction - Whether debt disputed by company - Whether petition abuse of process - Whether company capable of disputing petition where shareholders deadlocked - Whether court could have regard to wishes of contributories - Whether 50% shareholder entitled to dispute petition - Whether exceptional circumstances required - Whether necessary for contributory to show that company was solvent - Whether possible for court to determine legitimacy of engagement of petitioner - Whether possible for court to determine adequacy of services provided by petitioner - Whether fundamental conflict of fact - Whether response received to statutory demand - Whether disingenuous for petitioner to aver that Company did not dispute debt was due and owing - Whether debt bona fide disputed by company - Whether petitioning creditor had status of creditor and locus standi to present petition - Whether debt actually in respect of services provided to partnership between company shareholders - Bowes v Hope Life Insurance and Guarantee Company (1865) 11 HL Cas 389 distinguished - In re Rodencroft Ltd [2004] 1 WLR 1566, In re Rica Gold Washing Company (1879) 11 Ch D 36 and In re La Plagne Ltd [2011] IEHC 91 (Unrep, Laffoy J, 17/1/2011) considered - Truck and Machinery Sales Ltd v Marubeni Komatsu Ltd [1996] 1 IR 12 followed - In re Bula Ltd [1990] 1 IR 440 and In re WMG (toughening) Ltd (No 2) [2003] 1 IR 389 applied - Companies Act 1963 (No 33), ss 214 & 309 - Petition dismissed (2011/176COS - Laffoy J - 24/8/2011) [2011] IEHC 523

In re Forrest Lennon Business Support Services Ltd

1

JUDGMENT of Ms. Justice Laffoy delivered the 24th day of August 2011

1. The Petition and the Proponents
2

2 1.1 On the 15 th March, 2011, Tom Moore ("the petitioner"), who is a chartered accountant by profession, brought this petition seeking an order that Forrest Lennon Business Support Services Limited ("the Company") be wound up on the basis that it is insolvent and unable to pay its debts within the meaning of s. 214 of the Companies Act 1963 ("the Act of 1963"). The basis on which it was contended in the petition that the Company was insolvent was that the Company was indebted to the petitioner in the sum of €46,585, that on the 28 thJanuary, 2011 the petitioner served a demand under s. 214 of the Act of 1963 on the Company and that the demand was not met within three weeks. It was specifically stated in the petition that the Company had not in any way disputed that the debt is due and owing. In the verifying affidavit sworn by the petitioner on the 15 th March, 2011, it was averred that "no dispute has been raised in respect of this debt". On the basis of the evidence which I will outline later, I have come to the conclusion that that averment was untrue.

3

3 1.2 The Company was incorporated on the 12 th January, 2007 as UHY Corporate Financial Services Limited and changed its name to its present name on the 5 th September, 2007. Its principal objects are to carry on the business of consultants and advisers in matters relating to corporate restructuring services, corporate recovery services, insolvency services and such like. In fact, the primary reason the Company was incorporated was to provide support services to an accountancy partnership, Forrest Lennon ("the partnership"), which was formed in 2007. Barry Forrest and Gary Lennon were equal partners in the partnership. They are also the sole shareholders and directors of the Company and each holds 50% of the Company's shares. The partnership was dissolved in April 2009. The debt which the petitioner contends is due by the Company to him has accrued since the dissolution of the partnership and since the Company effectively ceased trading in April 2009, in circumstances which I will outline later.

4

4 1.3 When the petition was first listed for hearing there was before the court a notice of intention to appear on the petition in the form prescribed in O. 74, r. 15 (Appendix M, Form No. 8) of the Rules of the Superior Courts 1986 ("the Rules") signed by Mr. Lennon and indicating that he intended to support the petition. There was also before the court an affidavit sworn on the 8 th April, 2011 by Mr. Forrest and filed on his behalf by his solicitors, Lavelle Coleman, seeking that the petition be dismissed on the basis that it was an abuse of the process of the court because the petitioner was aware for a considerable period of time before the issue of the s. 214 demand that the debt was disputed. Subsequently, the following affidavits were filed in the matter:

5

(a) An affidavit sworn by Mr. Lennon on the 13 th May, 2011, which was filed on his behalf by Kane Tuohy, Solicitors;

6

(b) An affidavit sworn by the petitioner on the 16 th May, 2011; and

7

(c) A supplemental affidavit sworn by Mr. Forrest on the 26 th May, 2011.

8

5 1.4 The Company per se was not represented on the hearing of the petition, because the equal shareholders, Mr. Forrest and Mr. Lennon, are effectively deadlocked. Mr. Forrest is against the petition, whereas Mr. Lennon supports it. Accordingly, the proponents on the hearing of the petition were the petitioning creditor, the petitioner, and a 50% shareholder/contributory, Mr. Lennon, on the one hand, and the other 50% shareholder/contributory, Mr. Forrest, who disputes that the debt is owed to the petitioner by the Company, on the other hand.

9

6 1.5 The formal proofs in relation to the petition, for example, of service, advertising and such like have been established to the satisfaction of the court.

2. The Factual Background
10

2 2.1 It is not in dispute that in August 2008, prior to the dissolution of the partnership, the Company engaged the services of the petitioner as auditor. The terms of a letter of engagement dated the 28 th August, 2008 from Mr. Moore to the Company were accepted by Mr. Lennon on behalf of the Company and there is no issue in relation to Mr. Lennon's authority to bind the Company on that occasion. The petitioner prepared the first audited accounts of the Company from the date of incorporation up to the 29 th February, 2008, and he was paid for that work in December 2008.

11

3 2.2 Mr. Forrest has averred that the partnership was dissolved because information was brought to his attention by an employee of the Company regarding alleged irregularities in the professional conduct of Mr. Lennon, in April 2009.. He has averred that the Company has not traded since that time. Mr. Lennon has not disputed that last averment. Mr. Forrest's position is that Mr. Lennon personally engaged the petitioner in reaction to the breakdown of the partners' professional relationship to perform the services to which the alleged debt relates and that Mr. Lennon, not the Company, is liable for the fees claimed by the petitioner in respect of those services.

12

4 2.3 It is necessary to outline what happened after April 2009, as averred to in the affidavits and reflected in the documentation, put before the court, but I consider that it would be inappropriate to record the detail of the serious allegations and counter allegations with which the affidavits are replete.

13

5 2.4 Mr Forrest accepts that the petitioner was engaged after the dissolution of the partnership "to complete the Company's accounts up to the 30 th April, 2009, and to finalise any work in progress". From the perspective of Mr. Forrest, the dispute is as to what was meant by that description. His position is that the only work he discussed with the petitioner was the finalisation of work in progress in order to complete the Company's accounts for the period ending on 30 th April, 2009, which, as far as he was concerned, was a relatively straightforward task. The petitioner's position is that he met both Mr. Forrest and Mr. Lennon on the 24 th April, 2009 at the Company's registered office, which is located at 12 Whitefriars, Peter's Row, Dublin 2, and they agreed the parameters of what he was to do, which, according to the petitioner, was to work for the Company and the partnership to wind down the Company in a professional and orderly manner.

14

6 2.5 In May 2009, the petitioner furnished a fresh letter of engagement, which was addressed to the Board of Directors of the Company and to the partners of the partnership. In the opening paragraph it was stated that the purpose of the letter was to set out the basis on which the petitioner was to act as "honest broker" to the directors of the Company and the partners in the settlement of their affairs. In the second paragraph, the petitioner recorded that it had been decided that the 30 th April, 2009 would be the date to which the accounts of the Company and the practice (presumably, meaning the partnership) would be made up to for the purpose of settling the affairs of the Company and the practice. The letter of engagement was signed by Mr. Lennon on the 22 nd...

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