Kilcurrane Business Centre Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Butler
• Judgment Date: 10 November 2021
• Neutral Citation: [2021] IEHC 701
• Court: High Court
• Docket Number: [2020 No. 377 COS.]

In the Matter of Kilcurrane Business Centre Limited

and

In the Matter of the Companies Act, 2014, as Amended

[2021] IEHC 701

[2020 No. 377 COS.]

THE HIGH COURT

Petition – Wind up – Company – Petitioner seeking to wind up company – Whether the company was unable to pay its debts

Facts: The petitioner, Mr Offereins, on 24th November, 2020, presented a petition to wind up Kilcurrane Business Centre Ltd (the company) under s. 569 of the Companies Act 2014. The basis for the petition was twofold, namely that the company was unable to pay its debts (s. 569(1)(d)) and that it was just and equitable that the company should be wound up (s. 569(1)(e)). As regards the former, on 14th February, 2020, a formal statutory demand under s. 570(a) of the 2014 Act was made of the company by the petitioner’s solicitor seeking payment of the sum of €195,490 allegedly due by the company to the petitioner. As the amount in question was not paid nor secured to the satisfaction of the petitioner within 21 days (nor since), under s. 570, the company was deemed to be unable to pay its debts. On affidavit, the company disputed liability for the alleged indebtedness on two grounds: firstly, it asserted that the amount claimed was a personal liability accepted by the petitioner rather than a loan by him to the company; secondly, it appeared that the company purported to transfer its liability to the petitioner to its parent company in the Netherlands where it was set off against a larger amount allegedly owed by the petitioner to that Dutch company. The legal argument made on behalf of the company was different. It was contended that it was not sufficient for the petitioner to simply allege that money was owed to him by the company; he must establish that the money allegedly owed was due at the time of the claim and the company contended that the petitioner had failed to do this.

Held by the High Court (Butler J) that the petitioner had established that there was a debt owing to him by the company which, despite a formal statutory demand, the company had not repaid; under s. 570, the company was deemed to be insolvent in those circumstances. Butler J acknowledged that the company was in possession of an asset which exceeded the value of the debt owed to the petitioner and that, in other circumstances, this might be sufficient to refuse the petition on the grounds that the petitioner should simply seek to recover the debt in normal course. However, in the circumstances of this case, she did not think that such an approach was warranted, partly because the company was not a trading company and its total indebtedness significantly exceeded the value of its only asset, and partly because she had found that the defence put forward by the company had not been advanced on a bona fide basis. Therefore, she held that the petitioner had established a basis for the grant of an order winding up the company under s. 569(1)(d).

Butler J allowed the petition and made an order winding up the company on both grounds advanced by the petitioner.

Petition allowed.

JUDGMENT of Ms. Justice Butler delivered on the 10th day of November, 2021

Introduction

1 On 24th November, 2020, Henk Offereins (the petitioner) presented a petition to wind up Kilcurrane Business Centre Ltd (the company) under s. 569 of the Companies Act, 2014. The basis for the petition is twofold, namely that the company is unable to pay its debts (s. 569(1)(d)) and that it is just and equitable that the company should be wound up (s. 569(1)(e)). As regards the former, on 14th February, 2020, a formal statutory demand under s. 570(a) of the 2014 Act was made of the company by the petitioner's solicitor seeking payment of the sum of €195,490 allegedly due by the company to the petitioner. As the amount in question was not paid nor secured to the satisfaction of the petitioner within 21 days (nor since), under s. 570, the company is deemed to be unable to pay its debts.

2 On affidavit, the company disputes liability for the alleged indebtedness on two grounds. Firstly, it asserts that the amount claimed was a personal liability accepted by the petitioner rather than a loan by him to the company. Secondly, it appears that the company purported to transfer its liability to the petitioner to its parent company in the Netherlands where it was set off against a larger amount allegedly owed by the petitioner to that Dutch company. The legal argument made on behalf of the company is different again. It is contended that it is not sufficient for the petitioner to simply allege that money was owed to him by the company. He must establish that the money allegedly owed was due at the time of the claim and the company contends that the petitioner has failed to do this.

3 There is an obvious tension between the two arguments made on affidavit on behalf of the company. The first is premised on there never having been any indebtedness on the company's part to the petitioner. The second implicitly accepts that indebtedness but is premised on it no longer existing due to the transfer and set-off involving the Dutch parent company. I say “implicitly” because, notwithstanding that acceptance of the fact that some amount is owed is inherent in the notion of a set-off, the company's deponent, Ms. Loes Klaassen-Don, strenuously maintains that no such debt ever arose. Either way, the petitioner states that he never consented to the transfer of the debt owing to him from the company to its parent and notes that this transfer only occurred after he had made a formal statutory demand under s. 570. The petitioner also takes serious issue with the representation in the company's account of the loan by him to the company and to claims now made on the company's behalf by Ms. Klaassen-Don which are inconsistent with the declarations made and documents filed by the company in the Companies Registration Office in compliance with its statutory obligations.

4 This is the context in which the court must decide whether to exercise the discretion conferred upon it by s. 569(1) of the 2014 Act and whether or not to accede to the petitioner's request to have the company wound up on the basis that it is unable to pay its debts or, alternatively, on the basis that it is just and equitable to do so or on both grounds. No issue is taken with the suitability of the persons proposed by the petitioner to be appointed as official liquidators in the event that an order if made winding up the company. Equally no issue has been taken with the formal proofs required for an application of this nature, save of course the issue as to whether the petitioner has established that the sum claimed was actually due to him at the time of the statutory demand.

Factual Background

5 As is often the case, this petition reflects the breakdown of a far more complex business relationship between the parties involving three companies, a partnership, a lease, a bank loan and a veterinary practice. The complexity is added to by the fact that the three principals are Dutch nationals and one of the companies is registered in the Netherlands. Many of the documents before the court are presented in translation from their original Dutch. Others are written in English by persons whose first language is not English. Given the overlapping strands to the relationship between the parties, this has had the potential to create additional confusion.

6 The parties first became involved in 2004 when Ms. Klaassen-Don, placed an advertisement in a Dutch veterinary medical journal on behalf of herself and her husband looking for a young vet with entrepreneurial spirit who was interested in setting up a practice for companion animals in southwest Ireland. The Klaassens had bought a farm in Kenmare some years earlier and were keen to promote animal welfare in the area. The advertisement expressly stated “(practice) accommodation and facilities will be provided”. The petitioner responded to the advertisement and the parties entered into discussions concerning the proposal which envisaged that the veterinary practice to be run by the petitioner would, as well as providing commercial services, also provide certain vaccinations, neuterings and emergency surgery for free or at a discount on a charitable basis. The petitioner and his wife moved to Ireland in 2005 and it seems that they were assisted in doing so by loans from the Dutch parent company which the petitioner states have now been repaid in full. Whilst the broad parameters of the agreement between the parties was understood, the legal expression given to that agreement has been, at best, unclear and the agreement itself has changed over time.

7 The Klaassens are the sole shareholders and directors of a Dutch company, Bibesco Beheer BV (Bibesco or the Dutch parent company), through which funding for the project was to be provided. A second company, Kilcurrane Business Centre Ltd, which is the subject of this petition, was registered in Ireland on 30th December, 2005. The company is a wholly owned subsidiary of the Dutch parent company. The petitioner was originally a director of the company along with the Klaassens but was removed from that position at an EGM of the company on 9th September, 2019. The company purchased a site at Gortamullen Business Park on Mart Road in Kenmare on which a purpose-built veterinary clinic was constructed (the property).

8 Inevitably, the construction and fit out of the premises cost more than had been budgeted for. Ms. Klaassen-Don attributes this to the petitioner insisting on the highest specification for the fit out but no detail has been provided to the court as to the actual costs involved nor the breakdown between the construction costs and the fit-out costs. In order to complete the premises, a bank loan of €150,000 repayable over fifteen years was obtained by the company in May, 2006. The purpose of the loan is stated to...