Irish Education Business and Research Ltd v Hossain

• Jurisdiction: Ireland
• Judge: Mr. Justice David Keane
• Judgment Date: 18 December 2015
• Neutral Citation: [2015] IEHC 803
• Docket Number: [2014 No. 265 COS]
• Court: High Court
• Date: 18 December 2015

IN THE MATTER OF IRISH EDUCATION BUSINESS AND RESEARCH LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF SECTIONS 229, 236, 245, 245a AND 247 OF THE COMPANIES ACT 1963 – 2013

BETWEEN

DECLAN De LACY (As liquidator of IRISH EDUCATION BUSINESS AND RESEARCH LIMITED (In Liquidation))

APPLICANT

AND

FAKIR HOSSAIN, GOLAM SHOHAN AND

MEHEDI HASAN (also known as RUSSELL HASAN)

RESPONDENTS

[2015] IEHC 803

[2014 No. 265 COS]

THE HIGH COURT

Company – The Companies Act 1963-2013 – Power and function of liquidator – Summoning of witness – Investigation into affairs of company

Facts: The applicant sought an order under s. 245 of the Companies Act 1963 against the respondents for summoning them to appear for examination on oath. The respondents asserted that the applicant did not have sufficient evidence to apply for an order under s. 245.

Mr. Justice David Keane granted an order under s. 245 of the Companies Act 1963 for each of the respondents. The Court held that the power given to the Court to order the examination of the persons was discretionary and it should be exercised for the benefit of the liquidator so that he could effectively discharge his duties under the law. The Court observed that the Court should aid the liquidator who had been tasked to discover the truth concerning the affairs of the company. The Court found about the fact that since each of the respondents was suspected to have the possession of certain property of the company, their examination became necessary for carrying out the effectual winding-up of the company. The Court took into account the difficulties faced by the liquidators in obtaining the concerned documents and sworn denial of the respondents in relation to those documents.

JUDGMENT of Mr. Justice David Keane delivered on the 18th December 2015

Introduction

1 By Order of this Court made on the 30th June 2014, Declan de Lacy was appointed as official liquidator (“the liquidator”) of Irish Education Business and Research Institute Limited (“the company”).

2 The liquidator has brought an application seeking various reliefs, principal among which is an Order against each of the three named respondents pursuant to the provisions of s. 245 of the Companies Act 1963, as amended (“the 1963 Act”), summoning each of them to appear before the Court for the purpose of examination on oath.

Background

3 For the purpose of the present application, it appears to be common case that the company, which was incorporated on the 8th August 2011 and traded under the business name Irish Business School, was engaged in the provision of educational services (in the form of an English language and business school for foreign students) from premises in Dublin.

4 The Companies Registration Office records Ms Elizabeth Clery and Mr Mark McCann as the directors of the company and Ms Clery as owner of 100% of its issued share capital.

5 The liquidator avers that, on or about the 5th June 2014, he was furnished with a statement of the company's affairs as of the 27th May 2014 (the date of the order to wind up the company), prepared and sworn by Mr McCann.

6 The liquidator avers that he met with Ms Clery and Mr McCann on the 28th May 2014. Both Ms Clery and Mr McCann completed questionnaires in the form recommended by the Insolvency Subcommittee of the Accountancy Bodies in Ireland. The liquidator had further discussions with Mr McCann and Ms Clery separately on the 1st July 2014, having received a letter from Mr McCann dated the 12th June 2014.

7 The liquidator exhibits a copy of a letter dated the 8th October 2012, recording a proposed agreement between the first named respondent Fakir Hossain (“Mr Hossain”) and Ms Clery. Although that document is expressed on its face to be a draft for discussion purposes only and “subject to contract/contract denied”, it is purportedly signed by each of those persons. That agreement provided, inter alia, that, upon completion, those persons were to execute a deed of trust, whereby Ms Clery was to remain the legal owner of the issued shares in the company but to hold them in trust for Mr Hossain, who was to become the beneficial owner of them, after which the directors of the company were to act in accordance with Mr Hossain's instructions. The liquidator also exhibits a copy of a declaration of trust, apparently executed by both Ms Clery and Mr Hossain on the 19th November 2012, which reflects the relevant terms of the agreement just described.

8 Another exhibit to the affidavit sworn by the liquidator for the purpose of the present application comprises copies of the questionnaires ostensibly completed by Ms Clery and Mr McCann at the liquidator's request. In those questionnaires, it is asserted that, from mid-November 2012 onwards, the directors were accustomed to act in accordance with Mr Hossain's instructions; that the company's memorandum and articles of association, minute books, register of members, register of directors etc were given to Mr Hossain ‘when he acquired the company’; that the second respondent Golam Shohan (“Mr Shohan”) was responsible for maintaining the company's accounting records and reported to Mr Hossain in that regard; and that the software used to maintain those records was a bespoke system created by Mr Hossain. Ms Clery has asserted, in the personal questionnaire ostensibly signed by her, that she was accountable to Mr Hossain in the performance of her duties as director.

9 The liquidator avers that the directors have provided him with the following additional information.

10 Mr Hossain took primary control of all decisions and the management of the company. Mr Hossain owned and controlled another company named Eden Further Education Limited (“ Eden”), now in liquidation, with which the company shared premises in Dublin city centre; a company named Chill Out Ventures Limited (“Chill Out”), which provided accommodation to the company for use by its students; and a company named Active Education Limited, trading as “Ewings”, which provided all promotional and marketing services availed of by the company in the operation of its business.

11 At the direction of Mr Hossain, responsibility for all of the company's financial controls and finances was delegated to Mr Shohan. Mr Hossain requested Mr McCann to remain on as a non-executive director and Mr McCann's accountancy firm, McCann & Co, provided payroll services, filed P30s and made payments to the Revenue, through the latter's online system, in accordance with instructions provided by Mr Shohan, who had sole custody of the company's books and records and the benefit of a mandate to the company's bank permitting him to effect electronic banking transactions on the company's behalf (a copy of which is exhibited to the liquidator's affidavit). Mr Shohan was responsible for paying all creditors and reconciling all receipts. The accounting books and records of the company were stored in Mr Shohan's office at the company's city centre premises.

12 The third named respondent Mehedi Hasan (“Mr Hasan”) founded the company with Ms Clery and was a director of it until the 1st December 2011. On the 13th June 2012, he became a director of a company named Academic Bridge Limited (“Academic Bridge”), with which Mr Shohan took up employment after his departure from the company. By direction of Mr Hussain, Mr Hasan was designated “Acting Centre Manager” for a period of approximately six months prior to the appointment of another person in that role on or about the 28th April 2014; was given responsibility for all of the company's sales and marketing activities; and was responsible for running Ewings.

13 Mr Hasan was seen removing furniture and assets from the premises of the company in Dublin city centre on the night of the 28th/29th April 2014, and the books and records of the company have not been seen since that date. On or about Friday, the 2nd May 2014 (the date upon which the school operated by the company was forced to close), all of the assets present at the company's city centre premises were removed.

14 For reasons that will become evident, I pause here to note that, for the purpose of the present application, the liquidator avers solely to the fact of his receipt of the preceding information. He does not purport, as I understand the position, to assert that it is correct, nor does he invite the Court to accept it as fact. The veracity or falsity of the information is precisely what the liquidator wishes to investigate.

15 The liquidator does aver to a number of other matters. The first is that he wrote to Chill Out on the 16th June 2014 to enquire about its relationship with the company. In response, he received correspondence signed by Mr Hossain on behalf of Chill Out, and, subsequently, a copy of a lease made on the 18th April 2013 between Chill Out, as landlord, and the company, as tenant, in respect of five identified apartments for a term of one day short of a year commencing on the 1st May 2013 at a rental of €2,000 per apartment per month. That lease appears on its face to have been signed by Mr Hossain on behalf of Chill Out, as landlord, and by Mr Shohan on behalf of the company, as tenant. Copies of 12 monthly invoices, covering the period between May 2013 and April 2014, each in the aggregate amount of €10,000, were also provided.

16 Although he has so far been unable to obtain the company's accounting books and records, the liquidator avers that he has carefully examined the company's bank statements, copies of which are exhibited to his affidavit. The liquidator points to the following transactions recorded there:

(a) Payments totalling €108,722.70, described as having been made to “Ewings” and further payments totalling €23,397.49 made to persons who have been described to him by the directors of the company as employees of “Ewings.”

(b) Payments of €112,550.00 made to...