Luby v Logan

• Jurisdiction: Ireland
• Judge: Mr. Justice Allen
• Judgment Date: 30 April 2019
• Neutral Citation: [2019] IEHC 260
• Docket Number: [2017 No. 421 COS.]
• Court: High Court
• Date: 30 April 2019

[2019] IEHC 260

THE HIGH COURT

Allen J.

[2017 No. 421 COS.]

IN THE MATTER OF BEAUTY HOLDINGS LIMITED

(IN VOLUNTARY LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACT 2014

BETWEEN

JIM LUBY

APPLICANT

AND

WARREN LOGAN

RESPONDENT

Company – Insolvency – Companies Act 2014 s. 819(1) – Applicant seeking an order pursuant to s. 819(1) of the Companies Act 2014 – Whether the respondent acted irresponsibly in relation to the conduct of the affairs of the company

Facts: The applicant, Mr Luby, the liquidator of a company, applied to the High Court for an order pursuant to s. 819(1) of the Companies Act 2014 that the respondent, Mr Logan, as a person to whom Part 14, Chapter 3, of the 2014 Act applies, shall not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary of a company, or be concerned in or take part in the formation or promotion of any company, unless that company meets the requirements set out in s. 819(3) of the 2014 Act.

Held by Allen J that the respondent acted irresponsibly in relation to the conduct of the affairs of the company.

Allen J held that he would make an order in the terms sought.

Order granted.

JUDGMENT of Mr. Justice Allen delivered on the 30th day of April, 2019

1 This is an application by the liquidator of a company for an order pursuant to s. 819(1) of the Companies Act, 2014 that the respondent, as a person to whom Part 14, Chapter 3, of the Companies Act, 2014 applies, shall not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary of a company, or be concerned in or take part in the formation or promotion of any company, unless that company meets the requirements set out in section 819(3) of the Companies Act, 2014.

2 I heard this case at the same time as a similar application in the case of Hairspray Wholesalers Limited (‘ Wholesalers’) (2017 No. 420COS), in which I have delivered a long judgment. The facts in both cases are very similar and the issues virtually identical and this judgment is to be read in conjunction with that in Wholesalers.

3 Beauty Holdings Limited (‘ the Company’) was incorporated on 4th July, 2006.

4 Mr. Warren Logan, the respondent, was appointed as a director at the time of incorporation and has continued in office up to the date of liquidation. The shares in Beauty are held equally by Mr. Logan and Ms. Dolores MacKenzie, his mother.

5 Beauty carried on the business of selling hair and other beauty accessories.

6 On 31st May, 2013 Beauty resolved that it should be wound up as a members' voluntary winding-up and that Mr. Gary Lennon be appointed liquidator.

7 On 30th May, 2013 the directors of the Company, Warren Logan and Biba Logan, swore a declaration of solvency, declaring that having made a full enquiry into the affairs of Beauty, they had formed the opinion that it would be able to pay its debts in full within twelve months. This was supported by a report of Robinson Stewart & Company, a firm of accountants and auditors with an address in England, who were the auditors of the Company.

8 The statement of affairs showed estimated realisable assets of €610,855, made up of €393,355 in cash, €205,000 in stock, and furniture and fittings of €12,500. The liabilities were shown as €143,781 owed to the Revenue and €535,743 for ‘ other liabilities’. The statement of affairs showed a surplus of €31,331.

9 The last annual return for Beauty was made up to 31st March, 2011 when the accounts for the year ended 30th June, 2010 were filed. The auditors declined to express any opinion of the financial statements on the basis that they had been unable to obtain adequate evidence to allow them to conduct an audit.

10 All of the employees of Beauty had been transferred on 31st March, 2013 to other companies owned and controlled by the directors.

11 On 6th May, 2014 Mr. Lennon reported to the creditor's meeting that Beauty was insolvent.

12 Shortly after his appointment Mr. Lennon was provided with a file of documents. Mr. Lennon had computed the VAT liability for the first half of 2013 at €48,314, while the declaration of solvency showed a liability of €73,450. The cash at bank was in fact €387,958, which was €5,397 less than was shown on the declaration of solvency. Mr. Lennon reported that he had never been provided with any stock records.

13 Mr. Lennon reported to the creditors' meeting that there were serious shortcomings in the Company's books and records and that he had calculated that Beauty had an outstanding VAT liability of €511,352 and had filed VAT returns accordingly. Mr. Lennon estimated that Beauty had a corporation tax liability of €286,772; so that the total Revenue liabilities were €798,124.

14 Mr. Lennon reported that no evidence had been provided in support of the ‘ other liabilities’ of €435,743 but that on 2nd May, 2014 he had been provided with a new schedule of transactions showing that the directors and Ms. McKenzie were collectively owed €312,084. Mr. Lennon was satisfied to admit a total of €120,203.12 in respect of the other liabilities.

15 Mr. Lennon reported that on 2nd May, 2014 a firm of solicitors on behalf of Henry Street Hairspray Limited had claimed to be owed €96,347.

16 Mr. Lennon reported that Beauty's stock had been distributed, without payment, to other companies under the control of the directors and that he had recovered nothing in respect of it. He reported that he had, on 17th April, 2014, formed the opinion that Beauty would not be able to pay its debts in full and that on 22nd April, 2014 he had convened the creditors' meeting.

17 Mr. Lennon collected €393,084 and disbursed €224,448, of which €158,069 plus VAT was in respect of his own fees.

18 On 6th May, 2014 Mr. James Luby was appointed liquidator.

19 On this...