An investor’s request for the appointment of a taxpayer-funded inspector into a Christmas tree business is ‘unprecedented’, the High Court has heard.
Counsel for the Office of the Director of Corporate Enforcement (ODCE) said there does not appear to have been any prior case where the plaintiff seeking to appoint an inspector at a business was anyone other than the ‘ODCE or the Minister of Justice.
By deviating from the status quo, this application for WFS Forestry Ireland Ltd “breaks new ground”, said Neil Steen SC, for the ODCE. The “overwhelming” evidence, he said, is that this company is “hopelessly insolvent” based on its balance sheet and because it is unable to pay its debts as they come due. A more appropriate approach to the situation, he said, might be the appointment of a liquidator. The ODCE did not oppose the request, but it is interested in the evolution of the law that could result from this case.
Mr Steen urged the court to be mindful of whether the issues raised are of public or private concern. The taxpayer foots the bill for an inspection, although it is possible to recoup the costs, while the company’s creditors, at least to some extent, bear the financial burden of a liquidation, he said. he declares.
The plaintiff in that case, John Kearney, and the 17 other alleged investors backing his claim, are primarily interested in seeing their money returned to them, Steen said. They invested in a limited liability company in hopes of seeing substantial returns, and there is a risk associated with that.
“The plaintiff seeks to transfer this risk from the creditors to the taxpayer,” he added.
These alleged investors in WFS Forestry, whose registered office is at Fitzwilliam Business Centre, 26/27 Pembroke Street, Dublin 2, claim it failed to deliver the returns promised as their investments matured. They claim that they were misrepresented and sold interests in forest lands that do not exist. Applications are rejected.
Mr Kearney, of Ballyroe, Tralee, Co Kerry, says it is in the public interest to have an inspector investigate whether the company’s business was conducted with the intent to defraud creditors, for a fraudulent or unlawful purpose, or in a manner that unfairly prejudices creditors.
The court heard Mr Kearney and the 17 supporters of the claim collectively claim to have invested €1.486 million in WFS Forestry through various loan agreements and crop purchase agreements, which tie their investments to growth and harvesting trees. One of these investors received €29,500 in return, but he is the only one to receive anything in return, it is claimed.
Company director Craig Hands denies any wrongdoing and says his primary goal is to see investors’ money returned. He blamed cash flow problems and transaction delays on Covid-19 and said he had no plans to liquidate his business.
Frank Beatty SC, on behalf of the plaintiff, pointed out that his client might not make any money from this exercise, but he feels it is important to find out what is going on with the increased powers of an inspector. He maintained that there was a “very real” public interest in the matter since there were allegations of fraud.
Elizabeth Corcoran, for the justice minister, who does not formally oppose the appointment, said the Companies Act 2014 gives the court wide discretion in appointing an inspector. The request is a first, and the minister worries about the wider implications its potential success could have, including her department having to pay for inspections at businesses that may be insolvent.
Ms Corcoran asked the court to consider whether it wanted to set a precedent where creditors could routinely seek the appointment of an inspector to find out what happened to their investments rather than seek a winding-up order.
She acknowledged that serious allegations had been made under oath by the plaintiff in this case “should absolutely be investigated”. The alleged fraud is a gardaí matter, she said.
Judge Michael Quinn said he would deliver his judgment at a later date.