Re Heatsolve Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Hogan |
| Judgment Date | 09 September 2013 |
| Neutral Citation | [2013] IEHC 399 |
| Court | High Court |
| Date | 09 September 2013 |
[2013] IEHC 399
THE HIGH COURT
AND
COMPANIES ACT 1963 S214
COMPANIES ACT 1963 S214(A)
COMPANIES ACT 1963 S213(E)
COMPANIES ACT 1963 S213
COMPANIES ACT 1963 S216(1)
GENPORT LTD, IN RE UNREP MCCRACKEN 21.11.1996 1997/3/1050 1996 IEHC 34
LA PLAGNE LTD, IN RE 2012 1 ILRM 203 2011/31/8503 2011 IEHC 91
BURREN SPRINGS LTD, IN RE UNREP LAFFOY 19.12.2011 2011/6/1480 2011 IEHC 480
BULA LTD, IN RE 1990 1 IR 440
COMPANIES (AMDT) ACT 1990 S2
COMPANIES (AMDT) ACT 1990 S3(3A)
GALLIUM LTD (T/A FIRST EQUITY GROUP), IN RE 2009 2 ILRM 11 2009/22/5449 2009 IESC 8
Company Law – Statutory demand - Debt - Taxation - VAT - Winding up order - Going concern - Examinership - Estoppel - Companies Act 1963 - Improper motive - Oppressive behaviour
Facts: This matter concerned a petition seeking the winding up of Heatsolve Ltd (‘the Company’). The Company was a small manufacturing business that had experienced financial difficulties in the preceding few years. As a result of this situation, a debt of €149,134.59 owed to the Revenue Commissioners accumulated which was comprised of arrears of various taxes, including VAT and employee PRSI contributions. The Revenue Commissioners subsequently sent a statutory demand to the Company for this amount, but the Company was only able to reduce the debt to €84,295.75. A winding up petition was subsequently brought.
Under section 213(e) of the Companies Act 1963 (‘the ‘1963 Act’), ‘a company may be wound up by the Court if . . . the company is unable to pay its debts’. It was undisputed that the Company was unable to pay the outstanding debt at the time of the proceedings. However, the Company argued that the Court”s power to order the winding up of a company was discretionary and that the Court should refuse to make such an order as it would soon have a new income stream that would enable it to pay off the outstanding debt. It was estimated that full repayment would be made within 18 months. It was suggested that the petition should be adjourned to allow this income stream to be realised. It was alternatively argued that the Revenue Commissioners should be estopped from bringing the petition because of their acceptance of the sum that was advanced following the statutory demand.
Held by Hogan J that in regards to the estoppel argument, it was clear from email correspondence between the Revenue Commissioners and the Company, which was sent prior to the Company making a substantial payment to reduce the debt, that if the payment was made, the Revenue Commissioners would consider accepting a deferred payment schedule. Because the Revenue Commissioners had only promised to consider the proposal, it was held that the Company could not argue that the Revenue Commissioners were estopped from bringing the winding up petition.
In regards to the argument that the Court should use its discretion to refuse to order the winding up of the Company, it was held that whilst such a discretionary power undoubtedly existed, case law such as Re La Plagne Ltd. [2011] IEHC 91 demonstrated that such discretion should only be used sparingly. It was also pointed out that a creditor was generally regarded as having an entitlement to seek and to obtain a winding-up order as of right when a debt remained unpaid. It was held that the discretion to refuse would typically be used in situations where it was necessary to restrain an oppressive petition or a petition which had been brought pursuant to an improper motive.
On consideration of the facts of the present case, it was held that it was not appropriate to refuse the winding up petition because there was no doubt that the Company was in debt to the Revenue Commissioners and unable to make full and immediate repayment. It was further held that the behaviour of the Revenue Commissioners in bringing the petition could not be described as oppressive or based on an improper motive; they were in fact fully entitled to seek the winding up of the Company. It was noted that if the Court accepted the Company”s suggestion to adjourn the matter to allow the new income stream to be realised, this would amount to a form of protection akin to that offered in the examinership process. An examinership application for such protection was said to be preferable to asking for such protection in defending a winding up petition because in an examinership application, the company would have to provide a report from an independent accountant as to its financial outlook. Such a report was not available to the court here.
Order winding up the Company made.
1. To what extent is this Court entitled to postpone the making of a winding up order to facilitate a company currently experiencing financial difficulties to trade its way out of these difficulties? This, in essence, is the question which arises on this application for a winding up petition which has been presented by the Revenue Commissioners. It is not in dispute that the company, Heatsolve Ltd. ("Heatsolve") owes the Revenue Commissioners €84,295.75.
2. The Revenue Commissioners had previously caused a statutory demand to be sent to the registered office of Heatsolve in accordance with s. 214 of the Companies Act 1963 ("the 1963 Act"). By that letter, the Revenue Commissioners claimed €149,134.59 by way of arrears of various taxes, including VAT and employee PRSI contributions. It is to the credit of the company that a significant sum was subsequently paid to the Revenue Commissioners, thus reducing the balance outstanding to the present sum of €84,295.75. It is, nevertheless, unarguable but that the Revenue Commissioners are entitled to the sum in question and that Heatsolve has failed to pay it. There can be equally little doubt but that the company, having failed to comply fully with the statutory demand, is insolvent for the purposes of s. 214(a). Section 213(e) of the 1963 Act provides that:
"A company may be wound up by the Court if … the company is unable to pay its debts…"
3. For the reason just stated, Heatsolve is plainly unable to pay its debts. Counsel for the company, Mr. Kelly, has nonetheless argued that the Court ought not to make an order pursuant to s. 213(e) of the 1963 Act on the basis that the jurisdiction to order the winding-up of the company is discretionary and the Court should take account of the fact that the company is likely soon to have a new income stream which will enable it over time to pay off its Revenue debt.
4. Before considering this question, it may be convenient at this juncture to say something about the underlying facts of the case. Heatsolve is small manufacturing company which was originally based in Ballina, County Mayo. Like all too many companies - not least small and medium enterprises - the company experienced acutely difficult trading conditions over the last three to four years, as a result of which it was necessary to close the Irish arm of the operation and restructure the company accordingly. The restructuring process necessitated the redundancies of the employees based in Ballina and the moving of the manufacturing to a location in the People's Republic of China. All the requisite plant and machinery associated with the manufacturing process were then sold to the new Chinese company and has been relocated there over the last year. The managing director of Heatsolve, Mr. Peter Brady, has sworn an affidavit that while there has been a short hiatus, the ability of the company to satisfy production as the manufacturing function was being relocated, nonetheless it is anticipated that a new income stream would be generated for the company within the next month or so.
5. To that end, therefore, I was invited to adjourn the Revenue's petition to enable this income stream to be realised. When I enquired in the course of argument how long it would take for the sum of €84,295 to be repaid, Mr. Kelly indicated this is likely to take the best part of some eighteen months.
6. The first argument, however, which was actually advanced by counsel for Heatsolve, Mr. Kelly, is that the Revenue Commissioners are estopped by their acceptance of a sum just short of €40,000 by way of payment by the company. This argument can be swiftly dealt with, as I fear that it simply could not succeed on the facts of this case. It is accordingly unnecessary to explore any legal issues which might possibly arise in connection with such a submission were the facts such as might otherwise lend support to any such argument.
7. It is clear from the email correspondence between the parties that, putting the matter at its absolute highest from the company's perspective, the Revenue Commissioners simply promised to consider not proceeding with the winding-up application if the company paid €40,000 towards the arrears and further agreed a deferred payment schedule. Thus, the Revenue Commissioners indicated by email dated 8 May 2013 that:
"it is only when all promised outstanding tax returns have been submitted and we have received the...
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United Precast Concrete Abu Dhabi (L.L.C.) v SCLAD Construction Ltd
...The petitioner argues that any future prospect of further debt recovery is irrelevant, given Hogan J.'s decision in Re Heatsolve Ltd [2013] IEHC 399. The respondent submits that, while Heatsolve is good law, this is more of a matter where the Court is being asked to exercise its overriding ......