Re Swedex Windows and Others

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 15 June 2010
• Neutral Citation: [2010] IEHC 237
• Docket Number: [No. 121 COS/2007]
• Court: High Court
• Date: 15 June 2010

Swedex Windows & Doors Ltd, In re

IN THE MATTER OF SWEDEX WINDOWS & DOORS LIMITED (IN LIQUIDATION)

APPLICANT

AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2006

[2010] IEHC 237

[No. 121 COS/2007]

THE HIGH COURT

COMPANY LAW

Liquidation

Auditor - Winding up order - Duties of auditor - Assessment of conflict of interest - Whether auditor continued to be auditor upon winding up order and appointment of official liquidator - Whether liquidator disqualified from acting upon becoming partner to such auditor - Whether conflict of interest - In Re Union Insurance [1972] 1 WLR 64; Donnelly v Gleeson (Unrep, HC, Hamilton J, 11/7/1978); In re Evanhenry Ltd (Unrep, HC, Murphy J, 15/5/1986) approved - Companies Act 1963 (No 33), ss 160, 224, 297A, 298, 300, 300A(1)(c)- Companies Act 1990 (No 33), ss 185, 193, 204 - Application granted (2007/121COS - Finlay Geoghegan J - 15/6/2010) [2010] IEHC 237

In re Swedex Windows & Doors Ltd (In Liquidation)

Facts: Mr. McAteer was appointed official liquidator of Swedex Windows & Doors Ltd. having previously been its provisional liquidator. He sought a declaration that he was not a disqualified person pursuant to s. 300 or 300A Companies Acts, 1963 as amended. The respondents to the action contended that a series of mergers of accountancy firms whereby Mr. McAteer became partner to an auditor to the Company entailed that he became disqualified for appointment as liquidator. Secondly, it was contended that he became aware of a potential claim from a banking institution against the auditors of the company. The issue arose as to whether s. 300 of the Act warranted a "present tense" construction.

Held by Finlay Geoghegan J. that the existence of this potential claim did not give rise to a conflict of interest which precluded Mr. McAteer from continuing to act as the official liquidator of the company. There was no role for an auditor of the company in the performance by the liquidator of his duties. Mr. McAteer had become a partner of the company of the impugned auditor after he had ceased to be auditor to the company. The banking institution with the potential claim had not objected to his appointment as liquidator. Mr. McAteer was not disqualified by s. 300A from acting as official liquidator of Swedex Windows & Doors and was entitled to continue to act as official liquidator thereof.

Reporter: E.F.

COMPANIES ACT 1963 S300

COMPANIES ACT 1963 S300A

COMPANIES ACT 1963 S297A

COMPANIES ACT 1963 S298

COMPANIES ACT 1990 S204

COMPANIES ACT 1963 S300A(1)(C)

COMPANIES ACT 1963 S300A(3)

COMPANIES ACT 1963 S160(1)

COMPANIES ACT 1963 S160(2)

COMPANIES ACT 1963 S160(9)

COMPANIES ACT 1963 S300A(1)

COMPANIES ACT 1990 S185

COMPANIES ACT 1963 S160(5)

COMPANIES ACT 1990 S193(1)

UNION ACCIDENT INSURANCE CO LTD, IN RE 1972 1 WLR 640 1972 1 AER 1105

COMPANIES ACT 1963 S224

DONNELLY v GLEESON & ORS UNREP HAMILTON 11.07.78 1978/8

EVANHENRY LTD, IN RE UNREP MURPHY 15.5.1986 1986/2/653

Ms. Justice Finlay Geoghegan

1 Mr. Michael McAteer, chartered accountant, was appointed official liquidator of Swedex Windows & Doors Ltd. (in liquidation) ("the Company") by the High Court on 16^th April, 2007, having previously been appointed provisional liquidator on 23^rd March, 2007.

2 In the current motion, Mr. McAteer seeks a declaration that he "being a person not disqualified by sections 300 or 300A of the Companies Acts1963 (as amended) is entitled to continue to act as liquidator of the Company.

3 The application raises an issue as to the proper construction of S. 300A of the Companies Act1963 (as amended) and the effect a winding up order and appointment of an official liquidator on the appointment of an auditor which does not appear to have been the subject of judicial decision. The application is on notice, inter alia, to Ralph and Charlotte Gervais who are respondents to an application (presently in the Commercial List) brought by Mr. McAteer, as official liquidator, pursuant to sections 297A and 298 of the Companies Act 1963 (as amended) and s. 204 of the Companies Act 1990, seeking to make them personally liable for all or part of the debts and liabilities of the Company and other related reliefs. Mrs. Gervais was a director of the Company at the date of winding up and has sworn an affidavit in opposition to the application of Mr. McAteer on behalf of herself and her husband. The Commercial Court proceedings are set down for hearing in October 2010.

4 The present application is brought for two reasons. The first (in importance, but not in point of time) was a letter written by the solicitors for Mr. and Mrs. Gervais on 19^th April, 2010, contending that by reason of a series of mergers of accountancy firms to which I refer below, that Mr. McAteer became a partner of an auditor to the Company in November 2008, and thereby became disqualified for appointment as liquidator, pursuant to s. 300A(1)(c) of the Companies Act of 1963, and is required to vacate his office, pursuant to s. 300A(3) of the Companies Act of 1963. Secondly, Mr. McAteer became aware of a potential claim from Bank of Scotland (Ireland) limited against RSM Robson Rhodes, who acted as auditors of the Company, arising out of work done in relation to the Company and in respect of which Grant Thornton advised their insurers of the possibility of a claim in relation to "a predecessor firm" as so described by Mr. McAteer in his affidavit of 27^th November, 2009.

5 The factual basis of the contention that Mr. McAteer is now disqualified by reason of s. 300A of the Companies Act of 1963 is not in dispute on the affidavits of Mr. McAteer and Mr. O'Grady of Matheson Ormsby Prentice, his solicitors, and Mrs. Gervais. The following relevant facts appear to be undisputed.

6 RSM Robson Rhodes ("RSM") acted as auditors to the Company from 2002 to the commencement of the winding up. Mr. Colin Feely, a partner of RSM, acted as the audit engagement partner for the Company. In addition, Mr. Ian Burns, who was also a partner in RSM, provided general business advisory and corporate finance services to the Company during the period 2001 to May 2007. Mr. Burns resigned from his position in RSM on 31^st May, 2007.

7 In July 2007, two English limited partnerships, RSM Robson Rhodes LLP and Grant Thornton UK LLP merged. This is not directly relevant but is the cause of the fact that in July 2007, a number of the Irish partners of RSM Robson Rhodes LLP joined Grant Thornton in Ireland, which is described as "an independent Irish firm which is part of the international Grant Thornton network". RSM Robson Rhodes LLP was not the auditor to the Company. The appointed auditor appears to have been an Irish firm, RSM Robson Rhodes chartered accountants.

8 Colin Feely joined Grant Thornton as a partner in or about July 2007. Ian Burns did not join Grant Thornton as he had retired as a partner of RSM on 31^st May, 2007.

9 On 1^st November, 2008, a number of the partners in Foster McAteer, including Mr. McAteer, the official liquidator herein, joined the partnership of Grant Thornton. As of 1^st November, 2008, Mr. McAteer became a partner of Colin Feely in the partnership of Grant Thornton.

10 Section 160(1) (2)and (9) of the Companies Act1963 (as amended) provides:

2 "(1) Subject to subsection (2), every company shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that until the conclusion of the next annual general meeting.

(2) Subject to subsection (3), at any annual general meeting a retiring auditor, however appointed, shall be re-appointed without any resolution being passed unless -

(b) a resolution has been passed at that meeting appointing somebody instead of him or providing expressly that he shall not be re-appointed, or

(c) he has given the company notice in writing of his unwillingness to be re-appointed.

(9) The appointment of a firm by its firm name to be the auditors of a company shall be deemed to be an appointment of those persons who shall from time to time during the currency of the appointment be the partners in that firm as from time to time constituted and who are qualified to be auditors of that company."

(a) he is not qualified for re-appointment; or

…

11 On the facts before me, whilst it is not expressly stated that Mr. Colin Feely, who acted as the audit engagement partner for the Company, was a person who himself would be qualified to act as auditor of a company, I am so presuming, for the purposes of this judgment. I assume he would not have been appointed as the audit engagement partner unless he was so qualified. Upon that assumption, as a partner of RSM he was one of the persons deemed to be appointed as auditor to the Company,...