A High Court judge has said the former liquidator of a solvent investment firm should repay some €861,484 to its liquidation account, representing the vast bulk of sums he paid to himself and his own company in fees and costs out of the liquidated firm’s accounts.

Ms Justice Nuala Butler said Gary Lennon was guilty of misfeasance in relation to the affairs of Chempro Investment Ltd, she will make a declaration to that effect and will also order that he repay €861,484.

Between 2012 and 2019, some €871,017 in fees and costs was paid by Mr Lennon to himself or Lennon Corporate Recovery, a company owned and operated by him.

Assets

The €861,484 represents the sum remaining after the original €9,533 estimate of the costs of the liquidation is deducted.

When the members voluntary liquidation of Chempro began in 2012 and Mr Lennon was appointed liquidator, the company was solvent with assets of €1.3 million, debts of €30,000 and its directors estimated the costs of the liquidation at €9,533, the judge noted.

When Mr Lennon was removed, on consent, as liquidator by High Court order in November 2019 and replaced as liquidator by Eamon Richardson, there was some €50,000 left in Chempro’s account.

Mr Richardson applied to the High Court, under the Companies Act 2014, to have Mr Lennon declared guilty of misfeasance and directing he repay €871,017 to the company’s account.

Mr Lennon denied misfeasance, argued the liquidation was rendered complex for reasons including actions of the majority shareholder and maintained he could justify the fees.

In a recently published judgment, Ms Justice Butler noted that, in 2012, a Belize based company, Malko Investments SA, and an Italian-based company, Istifid SpA, held 33 and 67 respectively of the 100 issued shares in Chempro.

The legal title to Istifid’s shares was transferred to its parent company, Unione Fiduciary SpA, which held the shares for the benefit of a woman and her two sons.

Unione and the beneficial owners applied in 2019 to remove Mr Lennon as liquidator, alleging, inter alia, he had failed to make a distribution to the members and had filed no accounts in the Companies Registration Office in breach of his statutory obligations.

Withdrawal

It seemed the beneficial owners only became aware, as a result of their application, of the withdrawals made by Mr Lennon from the company’s accounts, the judge said.

Mr Lennon had filed affidavits setting out difficulties which he said arose due to differences between Italian trust law and Irish company law and in respect of which he alleged he was misled by Istifid.

He confirmed the company’s creditors were fully paid within a year, said a distribution of some €410,851 was made to Malko in respect of its 33 shares in October 2012 and he had not convened meetings for reasons including his belief Istifiid would not attend.

Mr Richardson’s complaints included the payment to Malko was in breach of the liquidator’s duty that any distribution to members should be on an equal basis, Mr Lennon made no distribution in relation to Unione shares and paid himself and his company very large fees.

The judge said, while she accepted the difficulties raised by Mr Lennon might increase the costs of the liquidation, he was not justified in stalling the liquidation indefinitely once it proved impossible for him to resolve the issue with Istifid’s solicitors.

There was a duty on him to move the matter on, including by seeking directions from the court, and his argument this issue vastly increased the costs was “unjustifiable”

She was not required to consider his argument he was entitled to the fees and could justify them because he had not applied, as was required, for court sanction for the fees which would have required him to give a detailed breakdown of them.

It was “virtually impossible” to see how these fees would ever be justified for a liquidation of this nature. Some €500,000 was paid between 2013 and 2017 when dealing solely with the issue of whether a distribution should be made to Istifid or the beneficial owners of its shares and, “not actually doing either of those things”, she noted.

It remains open to Mr Lennon to formally apply to the High Court for his fees and Mr Richardson could argue whether such fees were properly recoverable, she added.