Mares Associates Ltd v Companies Act

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 23 February 2006
• Neutral Citation: [2006] IEHC 73
• Court: High Court
• Date: 23 February 2006

[2006] IEHC 73

THE HIGH COURT

No. 239 COS/2005

MARES ASSOCIATES LTD, IN RE

IN THE MATTER OF MARES ASSOCIATES LIMITED

AND

IN THE MATTER OF THE COMPANIES ACTS, 1963– 2003

COMPANIES ACT 1963 S214

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

COMPANY LAW

Liquidation

Petition - Insolvency - Bona fide dispute - Re WMG (Toughening) Ltd [2003] 1 IR 389 followed - Companies Act 1963 (No 33), s 214 - Petition dismissed - (2005/239COS - Laffoy J - 23/2/2006) [2006] IEHC 73 In re Mares Associates Ltd

Facts: a Chinese company petitioned the High Court to have Mares Associates Ltd. wound up on the basis that it was a creditor to it and that the company was unable to pay its debt when due and owing. The company resisted the application on the basis that the petition had been presented in the context of an existing dispute and litigation between the petitioner and the company and was an attempt to pre-empt a determination on the issues in dispute under the contract between them. In that context, the company had previously instituted proceedings against the petitioner in an Italian court under the contract in question.

Held by Miss Justice Laffoy in dismissing the petition that a winding up petition was not a legitimate means of seeking to enforce payment of a debt which was bona fide disputed. The company had established on substantial grounds, due to the fact that it had initiated proceedings against the petitioner before the demand for payment of the disputed debt had been served, that there was a bona fide dispute in existence between it and the petitioner in relation to the debt upon which the petition had been brought.

Reporter: P.C.

1 Judgment of Miss Justice Laffoy delivered on 23rd February, 2006

2 This is a petition by Haier Electrical Appliances Company Limited (the Petitioner), a company registered in the Peoples” Republic of China, as a creditor, to wind up Mares Associates Limited (the Company), a company which was incorporated in the State in July, 1991.

3 The basis on which the Petitioner claims that the Company is indebted to it is set out in the petition as follows:

"The Company is indebted to your Petitioner in the sum of €1,973,721 pursuant to the terms of an Agreement dated 15th August, 2003 between [the Petitioner], Haier Europe Holdings BV, Haier Europe Trading Srl, the Company and Mr. Frans Jamry, and the terms of a Guarantee Letter dated 29th August, 2003 issued by the Company and Mr. Frans Jamry to [the Petitioner] whereby a pre-payment of €2 million was made by [the Petitioner] to the Company by way of Advance Amount. Under the terms of that Guarantee the Company were to repay the Advance Amount by way of deduction from its commission payments and the entire of the Advance Amount was to be fully discharged by no later than 15th August, 2008. The said Guarantee Letter also sets out the terms on which the Advance Amount would become immediately due and payable by the Company and this included the sale, transfer or disposal of assets by the Company, or any subsidiary of the Company other than in circumstances where [the Petitioner] had given its prior consent. In breach of the terms of this Guarantee Letter, Mares (GB) Limited, a subsidiary of the Company, by Agreement dated 22nd July, 2004 sold its assets to OEM Domestic Appliances Limited and Mr. Brian Johnson. As a result, the sum of €1,973,721 is now due and payable, being the balance of the Advance Amount after all fair and true credits have been allowed."

4 The petition then sets out the text of a demand served by the Petitioner, acting through its solicitors, on the Company on 3rd May, 2005 under s. 214 of the Companies Act, 1963 (the Act of 1963), and asserts that more than three weeks had passed since the demand but that the Company had neglected to pay or satisfy the debt in whole or in part, that the Company was insolvent and unable to pay its debts, and that, in the circumstances, it is just and equitable that the Company should be wound up.

5 The petition was verified by an affidavit of Genyong Qiu, the Secretary of the Petitioner, who merely averred that such statements in the petition as relate to the acts and deeds of the Petitioner are true and...