The Supreme Court has dismissed an appeal by Oliver Brady against the refusal to wind up WMG (Toughening) Ltd, holding that the company had a good-faith cross-claim on substantial grounds that exceeded the debt claimed against it.
The judgment, delivered by Mr Justice McCracken on 29 January 2003, concerned a petition based on a £138,000 debt Brady had acquired from Elgrove Ltd. The court said it could assume the assignment was valid for the legal arguments before it and recorded that Brady had paid the debt to Elgrove.
The company argued that the debt was subject to a bona fide dispute because it had a cross-claim against Brady arising from a 1998 undertaking. In a side letter connected with his purchase of shares in WMG Group Ltd, Brady and Don O’Gorman said they would put in place a sinking fund for Business Expansion Scheme investors, if the company was sufficiently profitable, and leave the existing financial arrangements in place.
The company alleged that those arrangements were breached through over-invoicing, a change to how insurance costs were shared and an improper allocation of relocation costs. The Supreme Court considered the over-invoicing allegation difficult to pursue against Brady personally, rather than against Group. But it found substantial grounds for the insurance and relocation claims, which Brady disputed. The court said the issue at this stage was whether the cross-claim was made in good faith on substantial grounds, not whether the company would ultimately win it. If successful, the claims would more than offset Brady’s debt claim.
The court also addressed arguments that two of the company’s four directors had agreed to the changed allocations and that a liquidator could pursue any claim after winding-up. It said there had been no board resolution authorising the changes, and an agreement by two directors could not bind the company. It also noted that the company’s assets were about €130,000 and litigation could consume them; a liquidator might need court directions and could face opposition from An Forbairt.
The judgment affirmed the trial judge’s decision and dismissed the petition. The appeal was therefore dismissed, leaving the company unwound neither by this petition nor by the appeal decision.