Re U.S. Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Roderick Murphy
• Judgment Date: 29 November 2012
• Neutral Citation: [2012] IEHC 600
• Court: High Court
• Date: 29 November 2012

[2012] IEHC 600

THE HIGH COURT

[No. 336 COS/2012]

US Ltd, In re

IN THE MATTER OF U.S. LTD AND

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

EEC REG 1346/2000 ART 2

COMPANIES ACT 1963 S214

EEC REG 1346/2000 ART 3(1)

TAXES CONSOLIDATION ACT 1997 S933(3)(A)

TAXES CONSOLIDATION ACT 1997 S933(3)(B)

TAXES CONSOLIDATION ACT 1997 S933(3)(C)

TAXES CONSOLIDATION ACT 1997 S933(3)(D)

RSC O.122

TAXES CONSOLIDATION ACT 1997 S932

TAXES CONSOLIDATION ACT 1997 S933

TAXES CONSOLIDATION ACT 1997 S865

TAXES CONSOLIDATION ACT 1997 S865(1)(B)

TAXES CONSOLIDATION ACT 1997 S865(4)(B)

TAXES CONSOLIDATION ACT 1997 S865(5)

TAXES CONSOLIDATION ACT 1997 S933(7)(A)

TAXES CONSOLIDATION ACT 1997 S531

TAXES CONSOLIDATION ACT 1997 S531(11)

TAXES CONSOLIDATION ACT 1997 S531(11)(A)

STONEGAGE SECURITIES v GREGORY 1980 CH 576

MANN v GOLDSTEIN 1968 1 WLR 1091

SILVERHOLD LTD, IN RE UNREP LAFFOY 12.4.2010 2010/47/11824 2010 IEHC 111

TAXES CONSOLIDATION ACT 1997 S951

TAXES CONSOLIDATION ACT 1997 S951(1)(B)

TAXES CONSOLIDATION ACT 1997 S1086

TAXES CONSOLIDATION ACT 1997 S865(4)

INCOME TAX (RELEVANT CONTRACTS) REGS SI 71/2000

TAXES CONSOLIDATION ACT 1997 S531

COMPANIES ACT 1963 S214(A)

COMPANIES ACT 1990 S123

COMPANIES ACT 1990 S123(B)

COMPANIES ACT 1963 S214(C)

WMG (TOUGHENING) LIMITED (NO.2), IN RE 2003 1 IR 389

CLAYBRIDGE SHIPPING CO SA, IN RE 1997 1 BCLC 572

SEAWIND TACKERS CORP v BAYOIL SA 1999 1 AER 374

Company Law - Demand for payment - Corporation tax - Debt disputed bona fide - Winding up order - Companies Act 1963 - Abuse of power

Facts: This matter concerned a petition seeking the winding up of U.S Ltd (‘the Company’) by the petitioner, Gerard Harrahil, Collector General for the Minister of Finance. It was claimed that the Company was indebted to the Minister in respect of unpaid corporation tax, PAYE/PRSI and interest totalling €321,180.36. A letter of demand was issued on the 24th of March 2013 but only €1,339.65 was received thereafter, leaving a balance of €319,840.71. The winding up petition was subsequently served on the 26 ^th June 2012 on the basis the Company was unable to pay its debts.

It was averred by V.H. and S.G., the directors of the company (‘the Directors’) that the Company was not indebted to the Minister at all, and in fact a tax credit of €369,954 was due to them for motor expenses, unclaimed costs and interest on penalties which were due back to the company and which had been lawfully and validly claimed. They further claimed that the balance claimed by the petitioner was so high because they had refused to pay the proper amount of tax since 2008. They stated that the petitioner had coerced the Company into abandoning the credit by refusing to issue a C2 certificate until they agreed to do so, something that was mandatory in order to run the business. Since 2009, the Company had disputed there was a settlement reached with the petitioner, instead claiming the petitioner misused his power.

In response, the petitioner claimed that the Company had for several years prior to 2009, failed to pay the proper amount of tax due to the point that by the end of 2007, €1,949,800 was due in tax, interest and penalties. The petitioner stated that the Company agreed to the tax settlement in 2009 when faced with such a figure, and that they were not coerced in anyway. It was further stated that the petitioner was legally entitled to withdraw the C2 certificate at any stage the Company was in debt, but had refrained from doing so to give it an opportunity to settle its debts. It was further denied that the Company had disputed the level of tax owed since 2008, claiming that notice of the right to appeal the tax assessment had been issued to the Company then, but no appeal was forthcoming.

Held by Murphy J that the evidence before the court demonstrated that in the years prior to the tax settlement, there was serial non-compliance by the Company in respect of several heads of tax and that the settlement was offered as an alternative to serving a winding up petition. There was found to be nothing improper in this course of action. It was stated that the petitioner was entitled to reject the Director”s claims for expenses as they were not properly included in any of the tax returns. Even before the court, all the Directors could put forward in their defence were phone bills and motor calculations from 2011. For the four years prior to the settlement, the Revenue Commissioners had been preparing an audit of the Company”s affairs. In that time, it was noted that the Company had an opportunity to prepare any vouching documentation in respect of its claim for a tax credit but had failed to do so.

It was further held that the claims by the Directors that they were coerced into the tax settlement of 2008 were a deliberate and late attempt to frustrate the petitioner at a late stage with no evidence put forward to support this assertion. In fact, it appeared to the court, that the petitioner and the Revenue Commissioners had dealt reasonably with the Company at all times.

Order winding up the Company made and liquidator appointed.

1 JUDGMENT of Mr. Justice Roderick Murphy delivered the 29th day of November 2012

2 1. The petition of Gerard Harrahil, Collector General, (the petitioner) as a creditor within the meaning of Article 2 of the Council Regulations (EC) No. 1346/2000 was heard on the 26 ^th October and resumed on the 7 ^th November, 2012.

3 The petition and verifying affidavit sworn on the 26 ^th June, 2012, referred to the indebtedness to the petitioner on behalf of the Minister for Finance for the benefit of the Central Fund in the sum of €319,840.71 being the balance due by the company as unpaid corporation tax, PAYE/PRSI and interest, details which had already been furnished to the company by virtue of a s. 214 letter, dated the 9 ^th March, 2012. There was a further sum due as continuing interest which was summarised as follows:-

	Tax	Interest	Total
Corporation Tax	€121,600.77	€31,534.82	€153,135.59
PAYE/PRSI	€117,063.78	€50,980.99	€168,044.77
Total	€238,664.55	€82,515.81	€321,180.36

4 Since the issue of s. 214 letter dated the 2 ^nd March, 2012 and delivered on the 9 ^th March, 2012, payment of €1,339.65 had been received from the company. Notwithstanding the fact that 21 days had expired since the service of the demand, the company had not paid the amount of €319,840.71, being the balance, nor had it compounded with the petitioner for payment of the said sum. In the circumstances the company was unable to pay its debts and it was accordingly just and equitable that the company be wound up in accordance with Article 3(1) of Council Regulations (EC) No. 1346/2000. The petitioner sought such order together with an order for the costs of the petition.

5 The petition was served on the 26 ^th June, 2012, as is evidenced by the affidavit of service of Anne Cassidy.

2. Grounding Affidavit

6 The affidavit of Joe Hughes sworn the 7 ^th July, 2012, averred to the advertising by the Office of the Revenue Solicitor in the Irish Times, and the Irish Independent on the 27 ^th June, 2012, and in Iris Oifigúil on the 29 ^th June, in which advertisements were exhibited.

7 The letter of consent of Jonathan Byrne to act as liquidator if appointed by the court and an affidavit of suitability of Owen F. O'Sullivan of PJ Walsh and Company Solicitors were filed on the 3 ^rd July, 2012.

8 The directors of the company are S.G. director and secretary and V.H. director.

3. Replying Affidavit of S.G.

9 The director S.G. denied that the company was indebted to the petitioner in the manner alleged in the petition or at all. Since 2006 the company had paid to the petitioner a sum in excess of €2 million. He said the petitioner coerced the company by refusing to issue a C2 certificate unless the company entered a so called "settlement". That settlement did not represent the valid agreement by the company and the company continued to dispute the petitioner's calculation in every year since 2008 to the date of the petition. On receipt of what he termed the "alleged" notice of the petition the company's solicitor immediately wrote to the petitioner putting in dispute the amount allegedly due and appealing the tax assessment on the basis that it arose in large part, if not totally, from a "settlement" of their client's tax affairs in January 2009. The letter stated that their client indicated to Kathleen Redmond of the Revenue that it intended to appeal because it had only settled as it needed its C2 certificate in order to continue in business. The letter said that the company was told in no uncertain terms that if it appealed the tax assessment their C2 certificate would not be issued. The director said his client was in a very vulnerable position at the time and essentially bullied into the "settlement". He said that it was a misuse of power by the Revenue Commissioners and his client was still fully intent in vindicating its position.

4. Affidavit of Sean Clarke, Chartered Accountant

10 Mr. Clarke's firm was engaged by the company to audit its tax affairs. He averred that, on his calculations, the company was not indebted to the petitioner in the manner alleged in the petition or at all. In fact he calculated that the company was entitled to off set a credit which was due to it in the sum of €369,954 (in excess of the demand of €319,840.71). He said that that sum had been validly claimed in accordance with law and there were no technical or other objections why the company should not be given credit for the said sum. A figure arose from motor expenses, unclaimed costs and interest on penalties which are due back to the company. He prepared an account of the effect of expense details not claimed. He...