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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Trehy v. Rutherford & Ors [2007] IEHC 455 (27 November 2007) URL: http://www.bailii.org/ie/cases/IEHC/2007/H455.html Cite as: [2007] IEHC 455 |
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Neutral Citation No: [2007] IEHC 455
THE HIGH COURT
DUBLIN
No. 2007 214 COS
IN THE MATTER OF HYDRO KLENZE LIMITED (IN LIQUIDATION)
IN THE MATTER OF THE COMPANIES ACTS
1963 - 2002 AS AMENDED
ON THE APPLICATION OF THE LIQUIDATOR,
RICHARD TREHY
APPLICANT
RICHARD TREHY
V
WILLIAM RUTHERFORD, LIAM DUFFY, BRIAN
KAVANAGH AND RAYMOND SCOTT
RESPONDENTS
EX TEMPORE JUDGMENT DELIVERED BY MR. JUSTICE SMYTH
ON TUESDAY, 27TH NOVEMBER 2007
HE HEARING COMMENCED AS FOLLOWS ON TUESDAY, 27TH NOVEMBER
MR. JUSTICE SMYTH: The circumstances that give rise to this litigation are quite simple and are set out in the affidavits and it is unnecessary for me to repeat them. Suffice it to say that I am satisfied and find as a fact the following:
(1) Mr. Rutherford was not a Director of Hydro Klenz, though through neglect, ignorance and irresponsibility he signed a Mandate Form for the bank from which a different and reasonable deduction could be made that he was a Director. It is from this carelessness and irresponsibility that these proceedings came about.
(2) Mr. Rutherford when sued summarily by the Liquidator was (a) in the position to refer to the stopped cheque and, (b) to an incompleted transaction which were a complete defence to the summary proceedings.
(3) Mr. Rutherford received €63,490 and what the company, Hydro Klenz, obtained is of very debatable worth. He was obliged by the agreement - (the benefit of which he had largely taken) to comply with the Heads of Agreement by 31st January 2004. Had Mr. Rutherford been sued for example for:
(i) unjust enrichment,
(ii) damages for breach of contract for either partial failure of consideration or breach for non performance or a variety of pleas for non performance his defences had to be, in my judgment, questionable.
(4) The intended purchase of Mr. Rutherford's business under the style or title of Water Treatment Ireland by (inter alia) the payment to him and receipt by him of cash is part of a transaction given (inter alia) the amount of cash that gives rise to legitimate concern to such an extent that in my judgment obliges the Liquidator to forthwith notify the Revenue Commissioners, if he has not already done so, in the absence of a stated payee the cheque for €31,745 should be likewise be reported upon by the Liquidator. This is particularly so given that the transactions are not recorded in the financial records of Hydro Klenz for the financial year 31st December 2002 nor do they appear in the financial statements for the year ended 31st December 2002, as approved by the Directors in April 2003.
Finally, both the arrangements of June 2002 and 16th July 2003, whatever less than perfectly legal precision may have attended them, had as their core the sale of Mr. Rutherford's Business to Hydro Klenz - this they did not obtain. The fact that I consider the tone of the correspondence from Mr. Rutherford's solicitors tendentious and evasive of the issue in dispute is irrelevant. No valuation has ever been calculated for the several matters set out particularly in paragraphs (9) and (11) of Mr. Rutherford's affidavit sworn on 10th July 2007.
(6) In the light of my considerations of section 29 of the Companies Act 1990 I am satisfied that the manner in which the transaction was agreed between the individual Directors of the company and Mr. Rutherford does indicate a situation in which the know-how, expertise and what is sometimes referred to as non-cash asset was to be effectively acquired by the Company, whether in the form of a Directorship or an employee. In my judgment, therefore, it falls within the parameters of section 29(1) of the Act of 1990 and it is within the purview of the limitations set out in subsection 2 of that section.
Section 3 of that section provides (inter alia) as follows: "An arrangement entered into by a company in contravention of this section and any transaction entered into pursuance of the arrangement (whether by the company or any other person) shall be voidable at the instance of the company unless", certain events have taken place. No restitution has taken place. An opportunity was given to address that issue. That has non been taken and accordingly, in my judgment, the contracts entered into between the individuals, albeit in the first instance, is a contract because of the events that have followed which is voidable at the option of the company. That is my ruling on the matter.
MS. MORAN: I ask for my costs, my Lord.
MR. RUTHERDALE: I don't want to start making submissions again to your Lordship but I had understood your Lordship at the outset to effectively make a finding that Mr. Rutherford had not been a Director at the material time.
MR. JUSTICE SMYTH: Yes.
MR. RUTHERDALE: Yet, despite that your findings under section 29...(INTERJECTION).
MR. JUSTICE SMYTH: Yes, because the two individuals dealt with him initially in person. It followed that notwithstanding my finding in the documentation available to the Liquidator at the time, he was apparently a Director though not necessarily someone by finding but what happened was that the company, and this is the confusion between the two individuals, the contract provided the option for a company, not the individual.
Their arrangement was quite separate. It was then taken over by the company and the company got no value for the money that was effectively adopted against the company in the liquidation.
MR. RUTHERDALE: Very good. If that is your Lordship's finding I can't oppose the application for costs but I would ask for a stay on the costs and on the order in the event of an appeal.
MR. JUSTICE SMYTH: Ms. Moran?
MS. MORAN: I am in the Court's hands in relation to that matter, my Lord.
MR. JUSTICE SMYTH: Insofar as an application is concerned, this is a case in which it seems to me the mischief that arose from this lay primarily in Mr. Rutherford's entering into this careless or irresponsible documentation. He was given an opportunity to remedy matters between the hearing and now and it seems to me, (a), costs must follow the event and the Liquidator is entitled to his costs and, (b), no stay should be put, an opportunity was given to address the matter, this wasn't taken. I see no reason to put a stay on it. The usual time, 21 days of perfection of the order, whatever that may be
but that is another day's work.
MS. MORAN: In relation to the other Section 150, Judge, I don't know when the Court wishes to...(INTERJECTION)
MR. JUSTICE SMYTH: You will have a decision this term because you have to have a decision this term.
MS. MORAN: I am in difficulties for two weeks from the 2nd December.
MR. JUSTICE SMYTH: All right, I will bear that in mind.
MS. MORAN: May it please you, Judge. I am obliged.
THE HEARING THEN CONCLUDED
Approved: Smyth J.
