Re Hunting Lodges Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Carroll
• Judgment Date: 01 January 1985
• Neutral Citation: [1984] IEHC 3
• Docket Number: No. 3864P/1983
• Court: High Court
• Date: 01 January 1985

HUNTING LODGES (IN LIQUIDATION), In Re

IN THE MATTER OF HUNTING LODGES LIMITED (INLIQUIDATION)

and

IN THE MATTER OF THE COMPANIES ACTS 1963TO 1982

[1984] IEHC 3

No. 3864P/1983

THE HIGH COURT

Subject Headings:

WINDING UP: business of company

1 JUDGMENT of Miss Justice Carrolldelivered the 1st day of June, 1984

2 The liquidator of Hunting Lodges Limited ("the company") has applied to the Court for a declaration under section 297 of the Companies Act 1963that Charles Roger Porrit, Joan Porrit, Humphrey O'Connor and Plage Services Limited should be personally responsible without limit of liability for the debts of the company.

3 The background to the matter is as follows.

4 The company was incorporated on the 2nd December 1966. The nominal share capital is £20,000 and the issued share capital £12,000. Of this £9,000 are held by Charles Roger Porrit and £3,000 by his wife Joan Porrit. The directors are, and were at all relevant times,Charles Roger Porrit and Joan Porrit. The secretary of the company is Charles Roger Porrit having been appointed on the resignation in October 1981 of Owen Cusack who remained on as book-keeper. Messrs Coffey, Gubbins and Company were appointed auditors of the company in 1974, Mr. Gubbins being the partner who had dealings with Mr. Porrit.

5 Mr. Gubbins said he had very little contact between the years 1976 and 1981 with Mr. Porrit. During those years Mr. Gubbins entered appeals against assessments to tax but no accounts were prepared.

6 A fire took place in the Bunratty Castle Hotel owned by the company in August 1980. A substantial amount of the records of the company were destroyed. The accounts ultimately prepared by Mr. Gubbins for the four year period ending the 30th November 1980 are reconstructed accounts prepared without the benefit of records.

7 In 1981 the company owed the Revenue over £300,000 in PAYE, VAT, PRSI and to a lesser extent Corporation tax. The Revenue commenced investigations into the affairs of the company in October 1981. There were discussions in December 1981 between the Revenue officials andMr. Gubbins on behalf of the company. After Mr. Gubbins had negotiated additional credit for the company, Mr. Porrit agreed in February 1982 to pay instalments of arrears of tax by nine post-dated cheques between the 25th January 1982 and the 25th September 1982.

8 The Revenue then threatened proceedings by letter dated the 16th November 1982 as current taxes were not being paid.

9 Also in November 1982 the hotel premises were sold, the auctioneer being Mr. Kearney of Rooney Auctioneers Limited. At that stage the company had a trading loss of £209,000.

10 There was contact around this time between Mr. Kearney and Mr. O'Connor as a possible purchaser for the licensed premises owned by the company known as Durty Nellie's. Nothing came of it at this stage, although Mr. O'Connor was, in fact, the ultimate purchaser.

11 On the 7th November 1982 Mr. Kearney was asked by Mr. Gubbins to value Durty Nellie's for bank purposes. He was told everything was in order. In connection with the valuation Mr. Gubbins wrote on the 23rd November 1982 to tell him that the turnover was £1.2 million and later by letter of the 7th December that the turnover was £1.248million.

12 Meanwhile, on the 2nd December 1982 the matter of arrears of tax owed by the company was referred to the Revenue Solicitor. The amounts involvedwere:-

PAYE and PRSI + interest	£99,605.65
VAT + interest	£ 115.513.39
Total	£215,119.04

13 Mr. Gubbins on behalf of the company had a meeting in early December 1982 with Mr. Thomas Meagher of the Revenue, who told him that they would take a serious view if there was any attempt to dispose of assets without paying the Revenue.

14 On the 5th January 1983 Mr. Kearney furnished his valuation of Durty Nellie's at £750,000 to Mr. Gubbins.

15 The proceeds of sale of the hotel amounting to £100,000 were received and also the insurance paid as a result of the fire amounting to £50,000. Taking these figures into account, this meant that there was an extraordinary loss of £223,905 (net) to thecompany.

16 It was planned to commence work on the accounts to the end of November 1982 in January 1983. Mr. Gubbins said certain work was done but information was not available and his staff were moved elsewhere. Work on the accounts was not resumed until March or April1983.

17 On the 31st January 1983 a summons was issued by the Revenue claiming£217,625.67 in respect of arrears of PAYE, PRSI and VAT plusinterest.

18 At the end of February or beginning of March, Mr. Kearney met Mr. O'Connor again and Mr. O'Connor expressed an interest in buying Durty Nellie's. Mr. Kearney put him in touch with Mr. Porrit and they met in Mr. Kearney's office in March. Mr. Kearney was aware that Mr. Porrit wanted £200,000 as money on the side and that both parties wanted confidentiality. Mr. Kearney said that Mr. Porrit and Mr. O'Connor took charge of the discussion. £550,000 was the starting price. Mr. O'Connor wanted £30,000 off for stamp duty and this wasconceded.

19 On the 16th March Mr. Gubbins wrote to Mr. Porrit setting out the gross turnover for the previous year at £1,461,132. This letter was for the information of Mr. O'Connor and his advisers. There was a proviso to the letter as follows:

"The foregoing has been extracted from the records of the company and has not been audited fully".

20 On the 11th April 1983 a deal was made at £520,000.

21 Mr. Sheehy (solicitor for Mr. Porrit) of Messrs Connolly, Sellors and Geraghty was phoned on that date both by Mr. Kearney and by Mr. Hayes (the solicitor for Mr. O'Connor), confirmed later by Mr. Porrit, to say that the premises were sold at £520,000. Mr. Sheehy told Mr. Porrit about the difficulty concerning planning permission which had been discussed previously, i.e. that there was no planning permission for any extensions.

22 On the 18th April 1983 Mr. Sheehy, who was not aware of any title difficulties, sent the title deeds and the map of the property to Mr. Hayes. He went to inspect the premises and discovered that there was no title on paper to approximately a 30 foot strip at the rear.

23 On the 20th April 1983 Mr. Sheehy was told by Mr. Porrit that the price was further reduced to ???query???£480,000 on the basis of the reduction in area and because there was a question of the purchaser being liable in respect of payments to staff.

24 Mr. Sheehy went to Mr. Hayes' office on that date and wrote out a contract with the 1st May as the closing date. He intendedit to be a draft contract without binding effect which would ultimately be typed out. It was needed as Mr. O'Connor was going to see his bankers on that day. The draft contract was sent to the City of Dublin Bank and a copy to the Investment Bank of Ireland.

25 On the 21st April 1983 a meeting took place between the Revenue officials (Mr. Mangan and Miss Ryan) and Mr. Gubbins and Mr. Porrit. While Mr. Porrit talked of trading out of his difficulties or getting a large injection of capital, Mr. Gubbins said (confirmed by Mr. Mangan) that the company was then hopelessly insolvent. The draft accounts for the year ending the 30th November 1983 were not finalised at that stage. Another meeting in a month's time was planned, the date to be agreed later. Mr. Mangan said he would advise the Collector General to liquidate the company if firm proposals were not made within a week of the next meeting.

26 On the 22nd April Mr. Gubbins furnished a second letter concerning turnover to Mr. Porrit similar to the first letter but from which the proviso was omitted. The explanation of the omission given by Mr. Gubbins was that the field– work on the accounts was done at thatstage.

27 Mr. Hayes as solicitor for Mr. O'Connor was in contact with Mr. Lane, the solicitor for the City of Dublin Bank who were considering the title. On behalf of Mr. O'Connor he furnished additional security to the bank at their request. Mr. Lane returned the contract and Mr. Hayes, on his own initiative, added clauses 10 and 11 concerning staff. The contract was signed by Mr. O'Connor on the 15th or 16th May 1983.

28 On the 16th May £48,000 was withdrawn by Mr. O'Connor from his bank account. He obtained a bank draft payable to Messrs Holmes, O'Malley and Sexton (Mr. Hayes' firm).

29 On the 17th May the contract was sent by Mr. Hayes to Mr. Sheehy with the Bank draft as deposit and with the closing date altered to the 20th May, together with requisitions on title.

30 Concurrently with these events, on the 9th May 1983 the Revenue sent a 21 day notice requiring payment of the debt of £579,482.74 and threatening to liquidate if the debt was unpaid.

31 On the 18th May 1983 the bank facility letter to Mr. O'Connor issued. A problem arose concerning VAT. The purchaser, Mr. O'Connor, was not registered for VAT and therefore would be liable to VAT onthe purchase. To get over the problem, Plage Services Limited, a shelf company owned by Mr. Gubbins' firm, was supplied by him to Mr. O'Leary of Messrs G.M. Power and Company, Mr. O'Connor's auditors. This was a company incorporated on the 21st October 1980 with the issued share capital of £2. Subsequently a return of directors dated the 27th May 1983 and filed on the 9th June 1983 showed the directors to be Humphrey O'Connor and Pauline O'Connor.

32 On the 18th May 1983 the replies to the requisitions were furnished. Prior to them being sent out, there was a meeting in Mr. Sheehy's office between Mr. Sheehy, Mr. Porrit and Mr. Murphy, another solicitor in the firm, to go through the replies to the requisitions. Mr. Murphy was asked to take over the closing of the sale as Mr. Sheehy's holidays were planned for the time of closing.

33 Mr. Sheehy told Mr. Porrit it was necessary to have a resolution of the directors to approve the sale. He went through the replies with Mr. Porrit. On the 19th May 1983...