Re Aluminium Fabricators Ltd

JurisdictionIreland
JudgeO'Hanlon J.
Judgment Date01 January 1984
Neutral Citation1983 WJSC-HC 1759
Docket NumberNo. 4898p./1981
CourtHigh Court
Date01 January 1984

1983 WJSC-HC 1759

THE HIGH COURT

No. 4898p./1981
In Re. ALUMINIUM FABRICATORS LTD
IN THE MATTER OF ALUMINIUM FABRICATORSLIMITED
AND IN THE MATTER OF THE COMPANIES ACTS, 1963TO 1982.

Words & Phrases: Other proceedings

Subject Headings:

COMPANY: evidence

EVIDENCE: admissibility

WINDING UP: debts

WORDS & PHRASES: "Other proceedings"

1

Judgment delivered by O'Hanlon J., the 29th April, 1983.

2

The Liquidator in the course of the proceedings to wind up the Company, Aluminium Fabricators Limited, has brought an application under Secs. 297 and 298 of the Companies Act, 196, seeking to impose personal responsibility on former directors of the company, without limitation of liability, for debts and liabilities of the company, and to compel payment by them of moneys or restoration of property of the company, as the court thinks just.

3

In the present application under the said Sections of the Act, the Liquidator claims to be entitled to use in evidence against the said persons, the transcript of evidence on oath taken from them in the course of their examination pursuant to an Order made by the Court in these winding-up proceedings, under the provisions of Sec. 245 of the Companies Act, 196.

4

Counsel for the directors have contended that the transcript of such evidence is not admissible in evidence in relation to the application brought under the provisions of Secs. 297 and 298 of the Act, and they rely, in particular on the provisions of Sec. 245 (4) of the Act, which reads as follows:-

"(4) A person who is examined under this section shall not be entitled to refuse to answer any question put to him on the ground that his answer might incriminate him but none of the answers of such person shall be admissible in evidence against him in any other proceedings, civil or criminal, except in the case of any criminal proceedings for perjury in respect of any such answer."

5

It is submitted on behalf of the directors that the words "inany other proceedings" include such proceedings as have now been brought by the Liquidator under the provisions of Secs. 297 and 298 of the Act.

6

The provisions of sub-sec. (4) of Sec. 245 of the Act, (representing almost the only material change in the corresponding provisions of Sec. 174 of The Companies (Consolidation) Act, 1908), preclude the use of the transcript of evidence taken under Sec. 245 of the Act "in any otherproceedings" and thereby inferentially appear to me to recognise that it is legitimate and permissible to use it in someproceedings. What are these proceedings in which it is permissible to admit the answers of the person who has been examined under Sec. 245 of the Act in evidence against him? The entire of Part VI (ii) of the Act, including Sec. 245 applies to winding up by the Court, and many of the remaining provisions of Part VI, including Secs. 297 and 298 apply equally to winding up by the court and to Voluntary Winding Up.

7

I am of opinion that the proceedings in which it is permissible to admit in evidence the answers given by persons examined under Sec. 245 of the Act are the proceedings for the winding up of the company by the Court, in the course of which the liquidator has successfully applied to the Court for the exercise of the powers vested in it under Sec. 245 of theAct.

8

I do not regard the provisions of Sec. 245 as creating a new and separate set of proceedings, for the purpose of which the answers of the person examined are to be admissible against him in evidence. The Section does not state for what purpose the answers may be used or provide that anything is to happen in consequence of the examination,whether the answers given by him have been satisfactory or unsatisfactory, and whether or not they disclose a pattern of fraud or other irregularities in relation to the promotion, formation, trade, dealings, affairs or property of the company.

9

In my opinion, the examination under Sec. 245 merely forms part of the winding up proceedings, and the answers given in the course of such examination may be used for the purposes of any application to the Court in the course of such proceedings, but not in any other proceedings, civil or criminal save in the case of criminal proceedings for perjury, as provided expressly by sub-sec. (4) of the Section.

10

In the preliminary matter which has arisen for determination in relation to the present application to the Court under Secs. 297 and 298 of the Act, I hold that the Liquidator is entitled to have admitted in evidence against the two Directors concerned, the answers given by them in the course of their examination under the provisions of Sec. 245 of theAct.

11

Judgment delivered by O'Hanlon J., the 13th May, 1983

12

Aluminium Fabricators Limited was incorporated in or about the year 1973. James Phelan and Andrew Barrett were the promoters of the Company, and for some years the only directors and shareholders. The Company was formed for the purpose of carrying on the business of manufacturing and fitting aluminium windows and doors. Its first Secretary was AndrewBarrett.

13

James Phelan lives in Co. Kilkenny, where he has a substantial farm near Callan. Andrew Barrett lives at Bundoran Road, Ballyshannon, Co. Donega where his wife has other business interests in which heparticipates.

14

The Company traded successfully for a number of years, but ultimately a petition to wind up the Company was presented by Alcan Windows Limited, one of the principal suppliers of materials for the purposes of the Company's business. At the date of the Petition, 6th May 1981, Alcan had obtained a judgment against the Company for £54,932–71 IR and £22–90 costs, and the entire amount of the said judgment remained unsatisfied. On Monday 25th May, 1981, Hamilton J. made an order for the winding up of the Company, and appointed William McCann Official Liquidator of theCompany.

15

In the afternoon of the same day, Dermot Fitzgerald of the Limerick Office of Craig, Gardner and Co., Chartered Accountants, attended at the factory and office premises of the Company at Garryglass Industrial Estate, Limerick, on behalf of the Liquidator, for the purpose of securing the assets of the Company, accompanied by two members of his staff. One of these - James Joyce, - was put in charge of the investigation into the affairs of the Company.

16

When they arrived they found that some trading activity was still in progress, but virtually all stock and materials were gone, and hardly any furniture remained in the office premises. Enquiries of members of the staff revealed that large quantities of materials had been removed from the factory premises between the time the Petition was presented and the making of the winding-up Order, and the same fate had befallen the greater part of the office furniture and equipment.

17

An examination of the books and records of the Company which were available for inspection by the Liquidator's agents led them to conclude that the accounting procedures of the Company had been conducted in an irregular manner and that there were very large sums of money which were unaccounted for in the Company's books of account under the headings both of Income and Expenditure. Some meetings were set up with the Directors of the Company,which were inconclusive. Finally, an application was made to the Court to direct that three of the Directors, James Phelan, Andrew Barrett, and Anne Keane, should attend Court for examination in accordance with the provisions of Sec. 245 of the Companies Act, 1963. This examination duly took place before Costello J. on the 17th November, 1981, and a transcript of the evidence thus taken was presented for signature by the said Directors and was duly signed bythem.

18

Having regard to the matters which emerged during the course of the investigation of the affairs of the Company by and on behalf of the Liquidator, and to the evidence given in the course of the hearing under Sec. 245 of the Act, a decision was then taken to move the Court to make further Orders pursuant to the provisions of Secs. 297 and 298 of the Companies Act, 1963, imposing personal liability on James Phelan, Andrew Barrett and Anne Keane (otherwise Anne Larkin) in respect of the debts and liabilities of the Company, and for repayment of money and restoration of property of the Company which they had allegedly misapplied or retained or for which they had become liable or accountable.

19

On the hearing of this application the three named Directors were again called and gave evidence. So also did Dermot Fitzgerald and James Joyce, who have already been referred to; Brenda O'Callaghan, who was formerlyareceptionist/secretary in the employment of the Company; Martin Ponsford, who spent some years in the employment of the Company as a salesman, and Wolfgang Schnittger, of the firm of Cooper Magennis and Co., whose firm were Auditors of the Company from 1979 onwards.

20

Following the taking of the said evidence, I have made the following findings of fact:-

1. Accounting Procedures of the Company
21

From the early years of the Company a double book-keeping system was utilised. When a contract had been negotiated with a customer for the installation of doors or windows, a deposit usually amounting to 25% of the entire contract price was paid over before the work commenced at all. A written contract was drawn up and signed. If the deposit were paid by cheque then the contract was given a serial number preceded by the letters "PB", standing for the names of the Directors, Phelan and Barrett. If the remainder of the contract price were eventually paid by cheque also, then the contract was retained in a file marked "PB" and the transaction could be followed through the Company's other books of account and in the lodgments to the Company's bank account.

22

If, however, the deposit were paid by cash, then the serial number on the contract was preceded by the letters "OFR",...

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