WFS Forestry Ireland Ltd v Companies Act 2014
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 19 July 2022 |
| Neutral Citation | [2022] IEHC 512 |
| Court | High Court |
| Docket Number | [Record No. 2022/8 COS] |
and
[2022] IEHC 512
[Record No. 2022/8 COS]
THE HIGH COURT
Company – Inspector – Appointment – Applicant seeking the appointment of an inspector – Whether matters of sufficient substance arose which would warrant the appointment of an inspector
Facts: The applicant, Mr Kearney, was a creditor of WFS Forestry Ireland Ltd (the Company). The Company was said to be engaged in the business of growing and supplying Christmas trees and solicited retail investments to fund the business. The applicant and at least seventeen others claimed that investments they made in the Company, structured variously as loans and other advances, were not repaid when due. He made a series of allegations in relation to the assets and activities of the Company and its sole shareholder and director, Mr Hands, and claimed that the circumstances outlined in his evidence were suggestive of the Company having been formed for the purpose of engaging in a fraudulent scheme involving the soliciting of loans and other investments to fund fictitious forestry projects and to defraud creditors. The allegations were denied. The applicant applied to the High Court pursuant to s. 747 of the Companies Act 2014 for the appointment of an inspector to investigate the affairs of the Company. Mr Hands opposed the appointment of an inspector. The court was required to consider whether matters of sufficient substance as regards potential breaches of company and other laws arose which would warrant the appointment of an inspector.
Held by Quinn J that there was evidence of engagement with investors and transactions which warranted investigation by an inspector appointed pursuant to s. 747. He found that those matters included such questions as the following: (a) the manner in which loans and advances made to the Company have been applied; (b) whether the crops of Christmas trees referred to in the brochures, websites and other communications leading to investments exist, either at the locations represented in the Company’s communications or elsewhere; (c) whether the Company held a valid interest in the lands referred to in the Crop Purchase Agreements and loan agreements and the various Certificates issued by the Company to investors; and (d) the status of the loan capital investments said to be sourced by the Company from Optirevenus or others. He concluded that this was an appropriate case in which to exercise the discretion to appoint an inspector.
Quinn J, by reference to paras. 1 and 2 of the notice of motion, made the following orders: (1) an order pursuant to O. 74(B), Rule 3 of the Rules of the Superior Courts and s. 747 appointing Mr DeLacey of Century House, Harold’s Cross Road, Dublin 6W inspector of the Company to investigate the affairs of the Company; (2) an order pursuant to s. 747 directing the inspector of the Company to enquire into and to report on the affairs of the Company, including (i) whether the affairs of the Company are being or have been conducted with intent to defraud its creditors, (ii) whether the affairs of the company are being or have been conducted for a fraudulent or unlawful purpose, (iii) whether the affairs of the company are being or have been conducted in a manner that is unfairly prejudicial to some or all of its creditors and (iv) whether the company was formed for a fraudulent or unlawful purpose. Drawing by analogy from s. 748, Quinn J considered it appropriate that the inspector enquire into and report as to whether the affairs of the Company were being or had been conducted in an unlawful manner. Quinn J held that there would be an order in terms of para. 3 of the notice of motion, namely an order pursuant to s. 758 of the Act directing the inspector to prepare a written report to the court on the matters aforesaid. Quinn J granted to the inspector liberty to apply for further and other orders and/or directions as may be required prior to the conclusion of the proceedings.
Application granted.
JUDGMENT of Mr. Justice Quinn delivered on the 19th day of July 2022
. Part 13 of the Companies Act 2014 governs the regime for statutory investigation of the affairs of a company.
. Chapter 3 of that Part provides for the appointment of an inspector by the Director of Corporate Enforcement. Investigations under Chapter 3 are concerned only with matters relating to share dealings and ownership of interests in a company.
. Chapter 2 provides for the appointment of an inspector to perform a wider investigation into the affairs of a company. Such appointments are made by the court, either on the application of the Director of Corporate Enforcement (S. 748) or of other parties, including the Company, certain members, a director or a creditor (s.747).
. Many applications have been made and inspectors appointed pursuant to s.748 (and its predecessor s. 8 of the Companies Act 1990) which provides for an application by the Director of Corporate Enforcement (or previously the Minister for Enterprise and Employment). This case is the first recorded application by a creditor pursuant to section s.747, or its predecessor s. 7 of the Act of 1990.
. The applicant is a creditor of WFS Forestry Ireland Limited (“the Company”). The Company was said to be engaged in the business of growing and supplying Christmas trees and solicited retail investments to fund the business. The applicant and at least seventeen others claim that investments they made in the Company, structured variously as loans and other advances, were not repaid when due. He makes a series of allegations in relation to the assets and activities of the Company and its sole shareholder and director and claims that the circumstances outlined in his evidence are suggestive of the Company having been formed for the purpose of engaging in a fraudulent scheme involving the soliciting of loans and other investments to fund fictitious forestry projects and to defraud creditors.
. The allegations are denied and I shall return later to the affidavit evidence.
. When the application was first issued and served the Company retained solicitors (Messrs Clarkin Lynch), who filed a replying affidavit on behalf of the Company. The affidavit was sworn by Mr. Craig Hands on 8 th March, 2022.
. Mr. Hands is the sole director and shareholder of the Company. He said that he was making the affidavit on its behalf and on his own behalf.
. At the hearing of the application the Company was not represented by counsel or solicitors. Mr. Hands, on whom the application had been served, in his capacity as sole director and shareholder, represented both himself and the Company. No objection was taken by any party to this representation.
. Mr. Hands opposed the appointment of an inspector.
. Section 747(5) of the Act requires that notice of an application be given to the Director of Corporate Enforcement (‘the Director’). The Director was represented at the hearing and made extensive and helpful submissions as to the law and considerations relevant to the exercise of the court's discretion under the section. He did not oppose the appointment of an inspector.
. Conflicting affidavits were filed by the applicant and other investors on the one hand, and Mr. Hands on the other hand. The Director indicated that he did not have direct knowledge of those matters and accordingly did not wish to adduce any evidence as to the factual matters in controversy between those parties. He delivered an affidavit, sworn by a Principal Officer of his office, Ms. Sharon Sterritt, referring to certain complaints which the Director had received from investors in relation to the affairs of the Company, to which I shall return.
. At the initial mention of the matter before the court I directed that notice of the application be given also to the Minister for Justice and Equality. This was done because s.762 provides that expenses of an investigation by an inspector appointed under the section must be defrayed in the first instance by the Minister. Accordingly, the Minister has a direct, if involuntary, “pecuniary” interest in the outcome of the application.
. No affidavit evidence was adduced by or on behalf of the Minister. However, counsel for the Minister also made extensive submissions which were helpful to the court, again concerning the law and the manner in which the court should exercise its discretion. The Minister did not oppose the application.
. Section 747 provides as follows:-
“747(1) On the application of a person or persons specified in subsection (2), the court may appoint one or more competent inspectors to investigate the affairs of a company in order to enquire into matters specified by the court and to report on those matters in such manner as the court directs.
(2) The court may make the appointment on the application of any of the following persons:
(a) the company;
(b) not less than 10 members of the company;
(c) a member or members holding one-tenth or more of the paid up share capital of the company (but shares held as treasury shares shall be excluded for the purposes of this paragraph);
(d) a director of the company; or
(e) a creditor of the company.
(3) The court's power of appointment under subsection (1) is exercisable notwithstanding that the company is in the course of being wound up.
(4) The court may require the applicant or the applicants to give security for payment of the costs of the investigation.
(5) A person who intends making an application under this section shall give not less than 14 days' notice in writing of his or her intention to apply to the Director, and the Director shall be entitled to appear and be heard on the hearing of the application.”
...
To continue reading
Request your trial
-
WFS Forestry Ireland Ltd v Companies Act 2014
...Mr. Craig Hands. 9 . On 19 July 2022, this Court delivered its judgment, giving reasons for the decision to appoint the inspector ( [2022] IEHC 512) (“the First 10 . At the hearing of Mr. Kearney's application, I heard submissions on behalf of the applicant Mr. Kearney, and from Mr. Hands o......