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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> O'Reilly v. O'Connor [2005] IEHC 255 (20 July 2005) URL: http://www.bailii.org/ie/cases/IEHC/2005/H255.html Cite as: [2005] IEHC 255

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2005 IEHC 255

THE HIGH COURT

DUBLIN

2000 No 110 COS

IN THE MATTER OF INDUSTRIAL SOUND AND LIGHTING LIMITED

(IN LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACT, 1963 – 1990

BETWEEN/

PATRICK DERMOTT O'REILLY

(OFFICIAL LIQUIDATOR)

APPLICANT

AND

JOHN O'CONNOR

RESPONDENT

Note of Judgment delivered by Carroll J. delivered on 20^th July, 2005

In this notice of motion, the official liquidator, Mr. O'Reilly, seeks to obtain judgment against the respondent, Mr. O'Connor, on foot of two agreements dated 9^th May, 2001 and 10^th October, 2001.

These agreements were brought before the court, at which I was sitting, on 15^th October, 2001. The settlements were approved. The respondent did not appear, but the order stated that affidavits of service were read. There was a preliminary objection to my hearing this case as I had ruled the order, though I have no recollection of making the order, but no coherent reason was given and in particular, bias was not alleged.

As counsel for the official liquidator objected to the application and there was a long history of adjournments, also an adjournment had been refused the previous Friday and the Monday, I decided to hear the case.

The official liquidator was appointed on 10^th July, 2000 on the petition of the Revenue Commissioners. When he went to Abbeyfeale where the company was based, he was told by Mr. O'Connor that the premises which had been leased had been surrendered and he had taken the assets of the company and stored them in his attic. The business of the company was providing sound and light for discos.

Under the two agreements, the respondent agreed to pay 65% of the total debts of the company as certified by the examiner's office in instalments of £2,000 every month, commencing 30^th December, 2001. None of these instalments were paid. He also agreed to buy the assets of the company for £8,523.45. The defendant paid a portion of this, but three cheques for the balance were dishonoured.

In the agreement, in default of payment, Mr. O'Connor consented to judgment being entered against him personally for the total remaining liabilities not yet discharged by him. Both agreements provided for liberty to apply.

This is a notice of motion seeking to enter judgment for €210,136.30 and was issued returnable for 29^th November, 2003. The circumstances of entering into the first agreement were brought about when Mr. O'Connor was due to be cross-examined before the Master. The liquidator, Mr. O'Reilly, who was cross-examined on his affidavits, said Mr. O'Connor was not anxious to give evidence and wanted a settlement. There already had been negotiations.

Mr. O'Connor had said he wanted to pay all the trade creditors, but not the Revenue Commissioners. No proper books of account had been kept. There were no audited accounts, no company returns and there were improper VAT and PAYE returns.

After both agreements had been reached, Mr. O'Connor was given time to get legal advice before signing. Mr. O'Reilly said Mr. O'Connor told him he had talked to a solicitor who said, "walk away from the company, it has limited liability".

I accept Mr. O'Reilly's evidence and his evidence that Mr. O'Connor said this. It does not accord with Mr. O'Connor's affidavit where he says he was not aware he had protection under company law as the director of a company limited by shares.

Counsel on behalf of Mr. O'Connor submitted that Order 41, rule 15 applied and because Mr. O'Connor was not in court, the order of 15^th October, 2001 could not be made. Counsel for the liquidator submitted that Order 41, rule 1 prevented rule 15 applying as The Companies Act and Order 74, rule 126 authorised the application. The relevant section under the Companies Act, 1963, which was s. 231(a), gives the liquidator power to bring the application.

In my view, the appropriate order is Order 74 dealing with the winding-up of companies, which may involve ongoing applications. I therefore hold that Order 41, rule 15 does not apply.

The defendant also submitted that it was an unconscionable bargain and should be set aside in equity. The cases as cited are a long way from the circumstances of this case.

The defendant is a businessman who decided on a "phoenix" operation where he would pay the trade creditors, but not the Revenue and set up business again. The assets of the company, which he used, were only partially paid for and three outstanding cheques for the outstanding balance bounced. He made no attempt to have the agreement set aside, although the question was raised in 2003. Delay defeats equity.

In my view, there was no unconscionable bargain. The defendant did not want to be cross-examined and negotiated a settlement. The liquidator's report shows there were several questionable actions by the defendant. Personal preincorporation liability to the Revenue Commissioners of £60,000 was paid off out of company funds and a number of company transactions were processed through Mr. O'Connor's personal account.

I can well understand why he did not want to be cross-examined.

The defendant also submitted that there was no consideration for the agreement. This is not so. The forbearance not to cross-examine as well as the agreement for sale of the assets constituted consideration.

Since liberty to apply was part of the agreements approved by the court, it was not necessary for the liquidator to sue separately on the settlement. It could be done by notice of motion and the court approves of this method.

The amount claimed is in excess of the amount owing. The liquidator claimed the full amount certified by the examiner. The amount certified by the examiner's office issued on 17^th July, 2003 was €210,136.30, 65% of which is €136,588.60. The sale of the assets was the euro equivalent of €10,822.50, less the amount paid of €7,575.75, the balance due being €3,246.75 when the two figures, €136,588.60 and €3,246.75 are added together, the amount is €139,835.35.

All these figures are substantiated by the evidence. So, I will give judgment against the defendant, Mr. O'Connor, in the sum of €139,835.35.

Approved: Carroll J.