Myles Kirby v Joseph Martin Dowling and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Gilligan
• Judgment Date: 09 November 2016
• Neutral Citation: [2016] IEHC 801
• Docket Number: [2016 No. 186 COS]
• Court: High Court
• Date: 09 November 2016

[2016] IEHC 801

THE HIGH COURT

Gilligan

[2016 No. 186 COS]

BETWEEN

MYLES KIRBY

APPLICANT

AND

JOSEPH MARTIN DOWLING, MARGARET BERNADETTE DOWLING

AND

JB TECHNOLOGIES LIMITED

RESPONDENT

JUDGMENT of Mr. Justice Gilligan delivered on the 9 ^th day of November, 2016.

1 The applicant in these proceedings is the liquidator of CUPlus Technologies Limited (In Voluntary Liquidation), having been so appointed at a creditors” meeting on the 14 ^th of April, 2014. The applicant obtained interim relief from this Court on the 1 ^st of July, 2016, as against the first and second named respondents pursuant to s. 798 of the Companies Act, 2014, ordering the first and second named respondents not to remove their assets from the State or to reduce their assets within or outside the State below €1,225,000.00 pending the resolution of the substantive motion. This was ordered on the basis of the grounding affidavit of the applicant, dated the 30 ^th of June, 2016, in which it was contended that the first and second named respondents had demonstrated an intention to dispose of the assets of the Company with a view to putting them beyond the reach of the applicant. The interim order was given a return date of Thursday the 7 ^th of July, 2016, at which point the respondents challenged the reliefs as sought on an interlocutory basis.

2 The respondents further seek the vacation of the interim order as made by this Court on the 1 ^st of July, 2016.

3 The first and second named respondents were directors and shareholders of CUPlus Technologies Limited (In Voluntary Liquidation) at the date of the commencement of its winding up.

4 The third named respondent, JB Technologies Ltd, is a limited liability company registered within the State with its registered address at Curragha, Ashbourne, County Meath. The first and second named respondents are both currently directors of the third named respondent company and jointly own 100% of its share capital.

5 By originating notice of motion herein dated the 19 ^th of May, 2016, Lavelle Solicitors acting on behalf of the applicant liquidator issued proceedings bearing record number 2016/186/COS (‘the Substantive Proceedings’) against the respondents seeking various reliefs inter alia declarations pursuant to s. 297A 1(a) and (b) of the Companies Act 1963 and/or s. 610 Companies Act 2014, and an order pursuant to s. 298(2) of the Companies Act, 1963, and/or s. 613 of the Companies Act 2014.

6 By letter dated the 14 ^th of June, 2016, Lavelle Solicitors wrote to the solicitors for the respondents advising them that the applicant would be pursuing an order under s. 798 of the 2014 Act, and referring to allegations in relation to the doctoring of invoices, misappropriation of company monies, and backdating of documents in a deliberate attempt to put assets beyond the reach of the company's creditors and beyond the reach of the applicant. The letter offered, in an effort to avoid unnecessary cost, to accept an undertaking from the respondents that they would not dispose of any assets under their control until the final determination of the proceedings. The respondents declined to give the undertaking as sought by letter dated the 16 ^th of June, 2016.

7 As outlined, interim relief was granted to the applicant by this Court on the 1 ^st of July, 2016. The interim application was adjourned for inter partes hearing to the 7 ^th of July, 2016, on which occasion counsel and solicitor appeared on behalf of the respondents, seeking to have the interim order set aside. Counsel for the applicant resisted this application and further applied to have the interim order affirmed pending the resolution of the substantive motion.

Submissions on behalf of the applicant:

8 Counsel on behalf of the applicant, Mr. Meehan, submits that the first and second named respondents are directors of the Company and therefore the locus standi requirements of subs. (1) and (3) of s. 798 of the Companies Act 2014 are satisfied. The applicant's locus standi qua liquidator is accepted by the respondents.

9 It is submitted that pursuant to s. 798 Mr. Kirby must also demonstrate firstly that he has a “qualifying claim” within the meaning of subs. (4) and, secondly, that there are grounds for believing that the respondents may remove or dispose of their assets with a view to evading their obligations and frustrating an order of the Court. Once these two criteria are met, the Court may make the order.

10 The substantive proceedings as instituted on the 19 ^th of May, 2016, constitute a ‘qualifying claim’ within the meaning of s. 798(4) of the 2014 Act, it is submitted, as they are ‘a substantive civil cause of action and a right to seek a declaration of personal liability or to claim damages’ against the respondents arising under the 2014 Act. It is submitted that the respondents at the hearing of this matter on the 7 ^th of July, 2016, did not contest that Mr. Kirby has a qualifying claim.

11 This application is grounded upon the second affidavit of Myles Kirby, as sworn on the 30 ^th of June, 2016. Mr. Kirby's first affidavit sworn on the 19 ^th of May, 2016, is the grounding affidavit in the substantive proceedings. The respondents have not filed a replying affidavit in the within motion, however they have indicated that they will be filing a replying affidavit in reply to the substantive affidavit which will set out a full defence to the claims advanced by the applicant in both the substantive and interim affidavits.

12 Mr. Kirby's affidavit sets out the background and trading history of the Company, which was incorporated on the 28 ^th of September, 2010. The net assets of the Company were €290,737.00 at the end of 2012 but this figure collapsed to a deficit of €231,034.00 on the 30 ^th of June, 2013, a deficit of €853,882.00 on the 30 ^th of September, 2013, and a deficit of €2,286,480.00 at the date of the statement of affairs, the 10 ^th of February, 2014. The employees were left with unpaid debts of €268,581.00 and Revenue was owed €369,677.00. The employee liabilities were paid by the Department of Social Protections meaning the State incurred a direct loss of €638,258.00.

13 Mr. Kirby sets out four specific allegations of fraudulent intent in his second affidavit. He alleges that these acts were carried out by the respondents in late 2013 and 2014, when the company was defaulting on payments to its trade creditors, to the Revenue, and in December, 2013, and January, 2014, to its employees. It is submitted by counsel for the applicant, Mr. Meehan, that the respondents” intent at that time to put company assets beyond the reach of the liquidator can be used to infer an intention now to put their personal assets beyond the reach of the liquidator.

14 The first specific allegation of fraudulent intent is that the first named respondent issued 3 invoices on Company headed paper with the Company's registered address and its registration and VAT number. These invoices instructed the Company debtor, Eurobank Ergasis S.A. to make payment to an account of the third respondent. These invoices were allegedly doctored to make Eurobank pay debts owed to the Company to the third respondent. The second of these invoices was issued after the respondents had decided to put the Company into liquidation and the third invoice was issued after the liquidator had been appointed.

15 The second specific allegation of fraudulent intent is an attempted misappropriation of Company funds, namely €241,054.00, to JB Technologies.

16 The third specific allegation of fraudulent intent is that the respondents transferred intellectual property assets of the Company to the third respondent to put those assets beyond the reach of the liquidator.

17 The fourth specific allegation of fraudulent intent is that the respondents transferred €1,203,000.00 from the Company to CUPlus UK from June, 2013. Mr. Kirby avers that the respondents have demonstrated an intention to dispose of the assets of the Company with a view to putting them beyond the reach of the liquidator.

18 In view of these allegations the applicant submits there are grounds to believe that the respondents may remove or dispose of their assets with a view to evading their obligations to the liquidation and to the Court.

19 While the applicant accepts that the orders sought are discretionary in nature having regard to the wording of s. 798 of the 2014 Act, counsel submits that the balance of convenience favours the granting of the Mareva injunction in this particular application.

Submissions on behalf of the respondents

20 In the course of the interlocutory application, counsel for the respondents, Mr. McCarthy, submitted that the Court ought to set aside the interim order on the following basis:

i) Failure to satisfy the necessary proofs required by s. 798 of the 2014 Act;

ii) A lack of candour on the part of the applicant in making the interim application;

iii) Delay in the bringing of the application, which ought to tilt the balance of the Court's discretion against affirming the interim order;

iv) The lack of urgency in the application, together with no evidence of a recent, material change in the respondents” circumstances that could be interpreted as creating urgency in the application;

v) The failure of the applicant to comply with his statutory obligation to take in and maintain the books and records of the Company, thus prejudicing the respondents, and in particular, the first and second named respondents, in their defence of both the substantive and interlocutory applications.

21 In relation to whether the applicant has a ‘qualifying claim’ against the respondents, counsel for the respondents submits that it falls to the applicant, not to institute proceedings prior to bringing the application, but simply to satisfy the Court that he has demonstrated the existence of requisite facts giving rise to a cause of action against the...