WFS Forestry Ireland Ltd v Companies Act 2014
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 18 May 2023 |
| Neutral Citation | [2023] IEHC 258 |
| Docket Number | Record No. 2022 8 COS |
| Court | High Court |
and
[2023] IEHC 258
Record No. 2022 8 COS
THE HIGH COURT
Company – Winding up – Directions – Court determining whether an order should be made for the winding up of the company – Whether further directions should be ordered
Facts: WFS Forestry Ireland Limited (the Company) was held out by its promoter to be engaged in the business of growing and supplying Christmas trees. It solicited retail investments to fund that business. On 26 July 2022, the High Court appointed Mr DeLacey as Inspector pursuant to s. 747 of the Companies Act 2014 and ordered that he enquire into and report on the affairs of the Company. The Inspector reported to the court that he had ascertained that the Company’s raison d’etre was to defraud investors. He found that the Company received at least €7.1 million from investors and was unable to repay those amounts. He found that crops of Christmas trees referred to in the Company’s communications with investors either did not exist or existed on lands in which the Company had no interest. The Inspector made an interim report to the court and on Quinn J’s direction the matter came back before the court, on notice to interested parties, for the purpose of determining whether an order should be made pursuant to s. 760 (2) of the Act for the winding up of the Company.
Held by Quinn J that he accepted the Inspector’s observation that a winding up of the Company was appropriate, were a person willing to act as liquidator. Quinn J noted that no interested party, including the parties who had previously taken that position, had nominated a liquidator. For that reason, he concluded that no order should be made for the winding up of the Company.
Quinn J held that, before making a decision as to whether to make directions which would limit the actions to be pursued by the Inspector, which was one of the possibilities posited, although not bluntly advocated, by the Minister for Justice, the court would need to receive a second interim report. Quinn J held that this could be a concise report, referring to the information in his affidavit of 27 April 2023, but most critically it should address the questions Quinn J had identified regarding future progress. The Inspector said that in order for him to make a proper final report he would need to pursue the matters already identified by him as requiring further processes, including potentially a full determination of the issues raised by Google Group (Google) and which presented obstacles to the access the Inspector sought to books and records of the Company. Quinn J noted that the “pleadings” in relation to the Google matter were not closed and the detail of the legal and other questions in issue had not been opened to the court. Quinn J held that if directions were to be made touching on how this issue were to be progressed or limiting the performance of the Inspector’s functions, the court would need an informative exposition of the following: (a) the issues remaining to be resolved between the Inspector and Google concerning the access sought by the Inspector, and the differences of position between the parties; (b) the extent to which exhausting this process would make the difference between a final report which would be so qualified as to undermine its purpose and a final report which would achieve the statutory purpose of the Inspector’s appointment; (c) the process required to resolve those issues and the likely cost; and (d) any other matters the Inspector considered relevant to the question of proportionality. Quinn J held that this information was necessary not only in relation to the Google matter, but also in relation to the potential applications or proceedings in foreign courts.
Winding up of company not ordered.
Judgment of Mr. Justice Quinn delivered on the 18 th day of May 2023
. WFS Forestry Ireland Limited (“the Company”) was held out by its promoter to be engaged in the business of growing and supplying Christmas trees. It solicited retail investments to fund that business.
. On 26 July 2022, this Court appointed Mr. Declan DeLacey as Inspector pursuant to s. 747 of the Companies Act 2014 and ordered that he enquire into and report on the affairs of the Company.
. The Inspector has reported to the court that he has ascertained that the Company's raison d'etre was to defraud investors. He found that the Company received at least €7.1 million from investors and is unable to repay these amounts. He has found that crops of Christmas trees referred to in the Company's communications with investors either did not exist or existed on lands in which the Company had no interest.
. The Inspector has made an interim report to the court and on my direction the matter has come back before this Court, on notice to interested parties, for the purpose of determining whether an order should be made pursuant to s. 760 (2) of the Act for the winding up of the Company.
. I have concluded that it is not appropriate, at this time, to make an order for the winding up of the Company. No person who has consented to act as liquidator has been nominated for appointment. The question of whether to make a winding up order in that circumstance, has raised a number of novel questions concerning the operation of Part 13 of the Act.
. This judgment is concerned principally with the question of whether to make a winding up order. In the course of the evidence introduced and the submissions made, matters affecting the future course of the investigation were also addressed. Of necessity therefore, in the course of this judgment I describe also a number of those matters, and at the conclusion I make some required observations and an interim direction regarding the future of the investigation.
. These proceedings commenced with an application by an originating notice of motion issued on 20 January 2022 by Mr. John Kearney, one of the investors, seeking the appointment of an inspector pursuant to s. 747. This was the first application to come before this Court for such an appointment on the application of a creditor pursuant to s. 747, and no such application was ever made pursuant to the predecessor of the section, namely s. 7 of the Companies Act 1990.
. The application was opposed by the Company and its sole director and shareholder, Mr. Craig Hands.
. On 19 July 2022, this Court delivered its judgment, giving reasons for the decision to appoint the inspector ( [2022] IEHC 512) (“the First Judgment”).
. At the hearing of Mr. Kearney's application, I heard submissions on behalf of the applicant Mr. Kearney, and from Mr. Hands on behalf of the Company, and in his capacity as the Company's sole director and shareholder.
. I also heard submissions from the Corporate Enforcement Authority (“the Authority”), being a required notice party on such an application pursuant to s. 747 (5) of the Act.
. I had also directed that notice of the application be served on the Minister for Justice. This was done because s. 762 of the Act provides that the expenses of and incidental to an investigation must be defrayed in the first instance by the Minister.
. Section 762 (2) provides that the court may direct repayment to the Minister of all or part of the expenses by a body corporate dealt with in the report or the applicant for the appointment. Nonetheless, the burden of discharging the costs of an investigation falls in the first instance on the Minister pursuant to the section, and indirectly of course, on the taxpayer.
. Neither the Minister or the Authority opposed the application for the appointment of an inspector. However, each of them submitted that since there was before the court overwhelming evidence of insolvency, a winding up order would be the more appropriate remedy.
. Section 760 provides that the court may make certain orders, including an order of its own motion for the winding up of the subject company, after considering a report made under s. 758 of the Act. Because this jurisdiction only arises after a report has been made by the Inspector, it was clear that however appropriate a winding up may appear on the evidence, on the application for the appointment of an inspector, the court has no jurisdiction to order a winding up. No petition for a winding up had been presented either by any creditor or by the Authority, which has standing to present such a petition on the “just and equitable” grounds conferred by s. 761 of the Act or on “public interest” grounds under s. 571(4).
. In the judgment, I considered the criteria for the appointment of an inspector and the case law by reference to applications for such appointments under s. 747, the similar jurisdiction arising under s. 748, and the predecessor provisions of these two sections, namely ss. 7 and 8 of the Companies Act 1990.
. Having considered also the affidavits exchanged on the application and the submissions of all interested parties, including the Company's opposition, I determined that the conditions for an appointment had been satisfied and I exercised the discretion to appoint the Inspector.
. By the order made on 26 July 2022, I ordered that the Inspector inquire into and 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.
(iv) Whether the Company was formed for a fraudulent or unlawful purpose.
(v) Whether the affairs of the Company are being or have been conducted in an unlawful...
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