Re Permanent Formwork Systems Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 23 May 2007
• Neutral Citation: [2007] IEHC 268
• Court: High Court
• Docket Number: No. 161 COS/2007
• Date: 23 May 2007

PERMANENT FORMWORK SYSTEMS LTD, IN RE

IN THE MATTER OF PERMANENT FORMWORK SYSTEMS LIMITED

AND

IN THE MATTER OF THE COMPANIES ACTS, 1963 TO 2006

[2007] IEHC 268

No. 161 COS/2007

THE HIGH COURT

COMPANY LAW

Winding up

Liquidation - Petition - Debt disputed - Inevitability of winding up - Whether voluntary liquidation should proceed - Views of majority of creditors - Independence of liquidator - Whether necessity for independent investigation - Apprising court of issue of solvency - Cost and duration of court supervised winding up - Supervisory jurisdiction of Director of Corporate Enforcement - Re Swain Ltd [1965] 1 WLR 909; Re Gilt Construction Ltd [1994] 2 ILRM 456; Re Naiad Ltd (Unrep, HC,13/2/1995) and Re Zirceram Ltd [2000] 1 BCLC 751 considered - Companies Act 1963 (No 33), s 214 - Petition dismissed (2007/161COS - Laffoy J - 23/5/207) [2007] IEHC 268Re Permanent Formwork Systems Ltd

The petitioner petitioned for the company to be wound up. The only real issue which arose was whether the Court should make an order for the winding up of the company or whether the creditors’ voluntary liquidation should be allowed to proceed.

Held by Laffoy J. in dismissing the petition that it was in the interests of the general body of creditors that the liquidation of the company be effected as cheaply and as expeditiously as possible. A winding up under the supervision of the Court would be more costly and would be of longer duration than a creditors’ voluntary winding up.

Reporter: R.W.

COMPANIES ACT 1963 S214

COMPANIES ACT 1963 S266

COMPANIES ACT 1963 S233

RSC O.74 r128

J D SWAIN LTD, IN RE 1965 1 WLR 909

GILT CONSTRUCTION LTD, IN RE 1994 2 ILRM 456

NAIAD LTD, IN RE UNREP MCCRACKEN 13.2.1995 1995/4/1234

COURTNEY LAW OF PRIVATE COMPANIES 2ED 2002 PARA 25.104

ZIRCERAM LTD, RE 2000 1 BCLC 751

Miss Justice Laffoy

1 The history of this petition of Vincent Callan for an order that Permanent Formwork Systems Limited (the Company) be wound up is as follows:

2 · On 17th April, 2007 the petition was presented and it was made returnable for 30th April, 2007. The petition was preceded by a statutory notice pursuant to s. 214 of the Companies Act,1963, as amended, which was served on 1st March, 2007. The notice was not complied with.

3 · The petition was duly advertised in two national daily newspapers on 21st April, 2007 and subsequently in Iris Oifiguil.

4 · On the first return date, 30th April, 2007, the petition was adjourned. On the same day an affidavit in response to the petition on behalf of the Company was sworn by Michael Tracey, a director of the Company. Mr. Tracey disputed that the debt alleged to be due by the Company to the petitioner was due. However, his affidavit contained no averment whatsoever as to whether the Company was solvent or otherwise.

5 · On 9th May, 2007 a notice pursuant to s. 266 of the Act of 1963, as amended, giving notice of a meeting of creditors on 22nd May, 2007 was published by the Company in a national daily newspaper.

6 · When this petition came on for hearing on 21st May, 2007, the court was informed that on that morning the members of the Company had passed a resolution to wind up the Company as a creditors' voluntary winding up and had nominated Mr. Hughes to be liquidator.

7 On the hearing of the petition, counsel for the Company submitted that the petition should be dismissed on two grounds: first, that the debt was disputed and that the Company's position was that, in fact, there was no debt due by the Company to the petitioner; and, secondly, that in accordance with the jurisprudence of the court, the voluntary liquidation, which it was submitted is cheaper and more expeditious than a court winding up, should be allowed to proceed. The views of four creditors, who were represented by the same firm of solicitors and the same counsel, were heard. Two of the creditors, an Austrian company and an Austrian resident individual, who claim to be owed €4,205,000 between them by the Company, are admittedly connected with the Company. The two other creditors are Irish-based companies who claim to be owed €178,319 between them. Counsel for the petitioner submitted that the Austrian-based creditors are not independent and he implied that the Irish-based creditors are not independent either, suggesting some form of contrivance in the manner that they came to be represented by the same firm of solicitors. I have formed no view on that suggestion.

8 It is well settled that, if a company in good faith and on substantial grounds disputes liability in respect of the alleged debt on which a petition to wind up a company is founded, the petition will be dismissed.

9 In this case the petitioner, who was a former director, managing director, company secretary, and shareholder in the Company claims that he is owed €157,000 by the Company. He also claims interest, although the basis, if any, on which he is entitled to interest is not clear. The Company's position as to its indebtedness to the petitioner was set out in the letter of 12th January, 2007 from Mr. Tracey, the current Managing Director of the Company. From that letter it is clear that it is admitted that at that date the Company owed the petitioner €157,000. However, in that letter the Company adopted the position that it was entitled to deduct two sums from that sum, leaving a balance due of €7,098.59. A cheque for that amount in favour of the petitioner was enclosed. It is not clear whether that cheque was negotiated, but I assume it was not.

10 The first sum which the Company contends it is entitled to deduct from the amount due to the petitioner is the sum of €98,240.67, details of which were given in a letter of 5th October, 2006 from Mr. Tracey, on behalf of the Company, to the petitioner. The sum in question is Mr. Tracey's assessment of the balance due by Offsite Construction and Design Limited (OSCD), a company which I understand is controlled by the petitioner and which was retained on a contract basis to do work for the Company both before and after the petitioner's involvement with the Company was severed in mid-2006. The figure of €98,240.67 was apparently arrived at as a result of a review or audit of invoices presented, prices charged and work done by OSCD pursuant to its contractual arrangement with the Company and payments made to OSCD by the Company.

11 The second sum, €51,660.74, according to the letter dated 12th January, 2007, represents withdrawals made by a third party, who was the General Manager of the Company during the petitioner's incumbency, which, it was asserted in the letter, were authorised by the petitioner. Mr. Tracey has exhibited an email from the third party to him dated 17th July, 2006 in which the third party stated that he got permission from the petitioner, the then managing director, to withdraw the monies. However, in that email the third party stated that, as he had previously stated, the repayment of the monies in question, which I understand to mean by him, was not in dispute.

12 So the position is that the Company purports to set off against the sum of €157,000 admittedly due by the Company to the petitioner two amounts which the Company claims are due to it by third parties, OSCD and the former General Manager. Mr. Tracey in his affidavit, which to a considerable extent is hearsay, transmogrifies those amounts into an amount allegedly due by the petitioner to the Company on foot of a claim (which would be a claim for unliquidated damages) for alleged breach of the fiduciary duties owed by the petitioner, as a director, to the Company. No proceedings for damages for breach of fiduciary duty have been initiated by the Company against the petitioner, nor, as far as I can ascertain, were any such proceedings threatened. On the basis of the...