Leech Papers Ltd v Companies Act 2014

• Jurisdiction: Ireland
• Judge: Ms. Justice Stack
• Judgment Date: 22 July 2022
• Neutral Citation: [2022] IEHC 475
• Court: High Court
• Docket Number: Record No. 2021 No. 34 COS

In the Matter of Section 212 and Section 797 of the Companies Act, 2014

And in the Matter of Leech Papers Limited

Between

Christine Coates

Applicant

and

Joseph Leech, Magdalene Leech and Leech Papers Limited

Respondents

[2022] IEHC 475

Record No. 2021 No. 34 COS

Record No. 2021 No. 141 COS

THE HIGH COURT

Winding up – Oppression – Companies Act 2014 s. 212 – Applicant seeking relief pursuant to s. 212 of the Companies Act 2014 on the grounds of oppression and disregard of the interest of the applicant as shareholder – Whether the actions of the respondents were sufficient to justify an order for the winding up of the third respondent

Facts: Proceedings came before the High Court by way of three separate motions, namely: a petition issued on 23 February, 2021 seeking relief pursuant to s. 212 of the Companies Act 2014 on the grounds of oppression and disregard of the interest of the applicant, Ms Coates, as shareholder; and a petition to wind up the third respondent, Leech Papers Ltd (the Company), presented on 24 June, 2021, which was moved primarily on just and equitable grounds. The s. 212 petition sought a variety of relief but the applicant pursued only the following relief: (a) a declaration that the affairs of the Company are being conducted or the powers of the directors are being exercised in a manner oppressive to the applicant and in disregard of her interests as a member; (b) an order pursuant to s. 212(3) of the 2014 Act cancelling the Companies Registration Office Form B10 bearing submission no. 13665005/1, filed on 31 July 2019, purporting to remove the applicant as a director and authorising the Registrar of Companies to remove the said Form B10 from the file of the Company; and (c) damages for intentional interference with the applicant’s economic interests. She also sought the usual ancillary relief of interest and costs. The main relief sought was one to wind up the Company under either s. 569(1)(f) of the 2014 Act, if the court was satisfied that the company’s affairs were being conducted or the powers of the directors were being exercised in a manner oppressive to the applicant or in disregard of her interests and that winding up would be justified, or alternatively under s. 569(1)(e) of the 2014 Act on just and equitable grounds. In seeking to have the Company wound up, the applicant submitted that it was not possible to give meaningful relief pursuant to s. 212, in circumstances where the Company appeared to have completely inadequate books and records and the applicant therefore claimed that her share could not be meaningfully valued, so that an order for the purchase of her shares would be futile as that shareholding could not be valued.

Held by Stack J that whether taken on its own or together with the filing of the erroneous Form B10, the actions of the respondents relating to the sale of the Company’s premises at Shamrock Place, North Strand, Dublin 1 (the Premises) and the distribution of the proceeds without reference to the applicant or the provision of any proper account amounted to “oppression” sufficient to justify the grant of relief to the applicant. Stack J was also satisfied that, given that the entire proceeds of sale appeared to have been dissipated, the affairs of the Company were, so far as the use of the proceeds were concerned, in disregard of the applicant’s interests as a member; this arose because a large portion of the proceeds, a sum of €400,000 which was almost 50% of the net proceeds, was used for the pension of the first respondent, Mr Leech, but the remainder could not be properly accounted for and it seemed probable that the applicant’s shareholding had been either significantly reduced in value or rendered valueless.

Stack J held that the actions of the respondents in relation to the sale of the Premises and the consequent failure to account for the proceeds were sufficient to justify an order for the winding up of the Company on just and equitable grounds or as a remedy for the oppression and disregard of the applicant’s interests such that paras. (e) and (f) of s. 569(1) both applied. Stack J therefore directed that the Company be wound up.

Relief granted.

JUDGMENT of Ms. Justice Stack delivered on the 22 ^nd day of July, 2022 .

Introduction and background

1 . The proceedings come before the court by way of three separate motions, namely,

For the reasons set out below, the motion for attachment and committal was not proceeded with.

• (a) Proceedings/a petition issued 23 February, 2021 seeking relief pursuant to s. 212 of the Companies Act, 2014 on the grounds of oppression and disregard of the applicant's interest as shareholder;

• (b) A petition to wind up the Company presented 24 June, 2021, which is moved primarily on just and equitable grounds;

• (c) A motion for attachment and committal of the first and second respondents, issued 24 June, 2021, for failure to comply with orders of this Court (O'Regan J.) made on 10 May, 2021 and 21 June, 2021, which ordered the first and second respondents to make available to the applicant the books and records of the third respondent (“the Company”).

2 . The Section 212 Petition seeks a variety of relief but the applicant pursued only the following relief:

She also sought the usual ancillary relief of interest and costs.

• (a) declaration that the affairs of the Company are being conducted or the powers of the Directors are being exercised in a manner oppressive to the applicant and in disregard of her interests as a member,

• (b) an order pursuant to section 212(3) of the 2014 Act cancelling the Companies Registration Office Form B10 bearing submission no. 13665005/1, filed on 31 July 2019, purporting to remove the applicant as a Director and authorising the Registrar of Companies to remove the said Form B10 from the file of the Company, and

• (c) damages for intentional interference with the applicant's economic interests.

3 . I did not understand the claim for damages to have been seriously pursued and the main relief actually sought was one to wind up the company under either s. 569 (1) (f), if the court was satisfied that the company's affairs were being conducted or the powers of the directors were being exercised in a manner oppressive to the applicant or in disregard of her interests and that winding up would be justified, or alternatively under s. 569(1)(e) on just and equitable grounds.

4 . In seeking to have the Company wound up, the applicant submitted that it was not possible to give meaningful relief pursuant to s. 212 of the Companies Act, 2014, in circumstances where the Company appears to have completely inadequate books and records and the applicant therefore claims that her share cannot be meaningfully valued, so that an order for the purchase of her shares would be futile as that shareholding cannot be valued.

5 . The factual background to the proceedings is that the company is a family company and traditionally operated as a manufacturer of paper and packaging products, although in more recent years it moved into the business of secure shredding of confidential paper documents. The applicant said it was founded by her father, but the first respondent, who is the applicant's brother says that he set up the company, with his father subsequently becoming involved as a director and, when his father died on 4 July, 1988, the applicant was appointed as director on that date. Nothing turns on this save to point out that this is a family company which has traded in the same business for many decades.

6 . The applicant was an employee of the company since 1983, acting as bookkeeper. She has been a member of the company since 1999, holding 1,716 of a total of 20,661 ordinary shares of €1.00 each in the capital of the company. As such, she holds approximately 8% of the shares. The first respondent is a director of the company as well as its secretary and holds 10, 296 or 50% of the shares. The second respondent, who is the wife of the first respondent, is a director and holds 8,649 or approximately 42% of the shares. (There was some dispute between the parties as to the total number of shares and therefore the percentage shareholdings held by the members, and I have taken these figures from the 2016 Annual Accounts, but nothing turns on this in any event as the differences between the parties were so slight).

7 . The Company traded until 2016 from its premises at Shamrock Place, North Strand, Dublin 1 (“the Premises”) which were sold by the Company in 2016 and occupied thereafter by way of a sale and leaseback. The purchaser was a developer, who was initially refused planning permission on foot of a 2017 planning application, but lodged a fresh application in 2019, which was granted on 25 August, 2020.

8 . The applicant has asserted an affidavit that perhaps the developer contracted to pay an additional sum in the event that it was successful in obtaining planning permission, but this has been denied by the respondent, albeit that the conditions of sale have not been exhibited. As the notices to cross examine served by both sides were abandoned at hearing and the matter proceeded on an affidavit basis only, the applicant has therefore failed to prove this.

9 . The respondents say that the applicant absented herself from the company for several years and they put this down to certain personal difficulties which she had, and which she does not specifically deny, though she denies that these difficulties resulted in conduct which caused the breakdown in her relationship with the first and second respondents. However, the key point is that the applicant, though she has been a director for many years, does appear to have absented herself from taking any role in the general governance of the Company. The respondents complain that this application has come out of the blue in circumstances where the applicant had no interest in the...