Anthony Davidson and Andrew McTear (acting as Joint Liquidators of Kieran Looney & Company Ltd) v Kieran Joseph Looney
| Jurisdiction | England & Wales |
| Judge | Kyriakides |
| Judgment Date | 02 February 2023 |
| Neutral Citation | [2023] EWHC 197 (Ch) |
| Docket Number | Case No: CR-2020-004363 |
| Court | Chancery Division |
[2023] EWHC 197 (Ch)
Deputy ICC Judge Kyriakides
Case No: CR-2020-004363
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROEPRTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
In the Matter of Kieran Looney & Co Ltd (in Liquidation)
And in the Matter of the Insolvency Act 1986
James A Davies (instructed by Freeths LLP) for the Applicants
Kieran Joseph Looney acting in person
Hearing dates: 5, 6 and 7 July 2022
APPROVED JUDGMENT
The Application
This is an application by the liquidators of Kieran Looney & Co Ltd (“ the Company”) and/or the Company for:
1.1. a declaration that the Respondent, Kieran Joseph Looney (“ Mr Looney”) is guilty of misfeasance within the meaning of section 212 of the Insolvency Act 1986 (“ IA”) by causing the Company to make payments to himself and to third parties for his benefit totalling £2,169,604.91 (“ the Payments”) in the period from 10 May 2011 to 4 February 2014 and for an order that he pay this sum or such other sum as the court thinks fit to the Liquidators;
1.2. alternatively, a declaration that Mr Looney operated an overdrawn director's loan account (“ DLA”), that at the date of the Company's liquidation, he owed the Company the sum of £1,713,502 and for an order that he repay this sum.
Background
The Company and Mr Looney
The Company was incorporated on 9 April 2009 as a private company limited by shares. It has a share capital of £1,000 divided into 1,000 shares of £1.00 each, all of which have at all material times been held, by Mr Looney, who was its sole director.
The Company carried on business by providing consultancy and leadership coaching services to company executives. In his evidence Mr Looney explained that this had included providing services to blue chip companies, including BP and Citigroup.
Prior to the incorporation of the Company, Mr Looney had carried on business in the same field under the name of Kieran Looney Associates (“ KLA”) in partnership with Reality Coaching Limited, a company which was owned by Mr Looney and his wife. According to Mr Looney, KLA ceased trading in 2009, with its final accounts being submitted to HMRC on 22 December 2009.
On 22 February 2016 a winding-up order was made in the High Court of Justice on the petition of HM Revenue & Customs (“ HMRC”) presented to the court on 5 January 2016 (“ the Petition”). In the Petition, which was not defended by the Company, HMRC claimed that it was owed a sum total of £132,828.66 by the Company.
On 15 June 2016 Anthony Davidson and Andrew McTear were appointed by the Secretary of State as joint liquidators of the Company (“ the Liquidators”).
As at 27 November 2020, when Mr Davidson made his witness statement in these proceedings, only one proof of debt had been received in the liquidation. This was from HMRC and was for the sum of £132,504.31. I was, however, informed by Mr Looney during the course of the proceedings that he had also submitted a proof of debt for the sum of £2,131,797 shortly before the commencement of the trial and that he had not submitted one earlier, because he had not received a proof of debt form from the Liquidators, despite their having been informed that he was a creditor on 15 March 2019.
The Company's Accounts
Prior to its liquidation, the accountants engaged by the Company for the purposes of preparing its accounts were Fonseka & Co. Ltd (“ Fonseka & Co.”). The accounts prepared and filed at Companies House prior to the Company's liquidation were as follows (“ the Original Accounts”):
8.1. accounts for the period ended 30 April 2010, which were signed by Mr Looney on behalf of the board of directors on 20 December 2010 and filed at Companies House on 1 February 2011;
8.2. accounts for the period ended 30 April 2011, which were signed by Mr Looney on behalf of the board of directors on 15 December 2011 and filed at Companies House on 23 December 2011;
8.3. accounts for the period ended 30 April 2012, which were filed at Companies House on 15 February 2013;
8.4. accounts for the period ended 30 April 2013, which were filed at Companies House on 29 January 2014;
8.5. accounts for the period ended 30 April 2014, which were filed at Companies House on 6 June 2014; and
8.6. accounts for the period ended 30 April 2015, which were filed at Companies House on 10 September 2015.
Following the winding-up order, on 14 March 2016 revised accounts for the years ended 30 April 2012, 30 April 2013, 30 April 2014 and 30 April 2015 (“ the First Revised Accounts”) were filed at Companies House. These accounts were prepared by Nimal Fonseka (“ Mr Fonseka”) of Fonseka & Co. without the authority of the Liquidators and were markedly different from the Original Accounts. In his oral evidence, Mr Looney accepted that Mr Fonseka was acting as his agent at the time.
On 2 June 2018 further revised accounts for the years ended 30 April 2011, 30 April 2012, 30 April 2013 and 30 April 2014, together with accounts which purported to show the Company's financial position as at 30 April 2016, were provided by Mr Fonseka to the Liquidators (“ the Second Revised Accounts”). These accounts were significantly different from both the Original Accounts and the First Revised Accounts. In particular, the accounts for 2011 to 2014 claim that significant sums were paid out by Mr Looney on behalf of the Company and that, as a result, Mr Looney was owed: as at 30 April 2011, the sum of £1,724,585; as at 30 April 2012, the sum of £2,477,966; as at 30 April 2013, the sum of £2,122,030; and as at 30 April 2014, the sum of £1,892,280.
A breakdown of how the loan account was calculated was subsequently sent by Mr Fonseka to the Liquidators prior to Mr Looney being interviewed by them. This document (“ the Loan Schedule”) claimed that by 30 April 2015, the sum owed to Mr Looney had increased to £1,926,399, but, as a result of subsequent transactions, the final balance owed to him was, in fact, £1,094,664.
In his oral evidence, Mr Looney took full responsibility for the accounts shown to have been signed by him, namely, the Original Accounts for the years ended 30 April 2010 and 30 April 2011. He also accepted that as the other accounts had been prepared and filed by his agent, he should take full responsibility for them, although he also sought to distance himself from them and from Mr Fonseka by contending that he may not have seen, for example the Second Revised Accounts and the Loan Schedule. Despite this, he appears to have adopted Mr Fonseka's position by claiming that he is a creditor of the Company on his DLA.
The most important differences between the Original Accounts, the First Revised Accounts and the Second Revised Accounts are set out in the table below.
| 14. | Fixed Assets | Debtors | Cash at bank | Creditors | Net Assets |
| 2010 Original Accounts | £4,031 | £3,985 | £8,974 | £183,623 (DLA is £179,056) | -£167,632 |
| 2011 Original Accounts | £3,225 | £266,337 | £2,207,674 | £1,139,702 (DLA is £0) | £1,337,749 |
| Second Revised Accounts | £3,225 | £755 | £103,498 | £1,740,857 (DLA is £1,724,585) | -£1,633,379 |
| 2012 Original Accounts | £702,015, (including an addition at cost of £930,000 less depreciation) | £38,794 | £517,902 | £10,356 | £1,248,355 |
| First Revised Accounts | £2,752 | £38,794 | £17,902 | £10,356 (DLA-£0) | £49,092 |
| Second Revised Accounts | £702,015 (including an addition at cost of £930,000 less depreciation) | £38,794 | £24,955 | £2,488,322 (DLA-£2,477,966) | -£1,722,558 |
| 2013 Original Accounts | £561,612 (£935,375 less depreciation) | £222,258 (DLA- £219,902) | £745,543 | £100,334 | £1,429,070 |
| First Revised Accounts | £2,202 | £222,258 | £7,681 | £100,334 (DLA-£35,444) | £131,807 |
| Second Revised Accounts | £561,612 | £2,867 | £252,603 | £2,186,920 | -£1,369,838 |
| 2014 Original Accounts | £456,310 | £2,867 | £951,522 | £93,217 | £1,317,482 |
| First Revised Accounts | £1,762 | £2,867 | £6,807 | £93,217 (DLA-£0) | -£81,781 |
| Second Revised Accounts | £456,510 | £0 | £3,633 | £1,941,369 (DLA-£1,892,280) | -£1,481,426 |
| 2015 Original Accounts | £2,348 (including the disposal of an asset which had cost £930,000) | £334,035 | £951,205 | £41,380 | £1,246,208 |
| First Revised Accounts | £1,410 (not including any disposals) | £4,035 (DLA-£4,035) | £2,880 | £161,380 | -£153,055 |
| Second Revised Accounts (including within the 2016 accounts) | £1,410 | £0 | £6,915 | £20,350 (DLA £12,797) | -£12,055 |
| 2016 | £1,128 | £0 | £5,208 | £9,981 (DLA-9,695) | -£3,645 |
The various differences between the accounts appear to arise, inter alia, from the allocation and re-allocation of income received, and litigation expenses incurred, in relation to a contract which KLA entered into with Trafigura Beheer BV (“ Trafigura”) on 14 January 2009, pursuant to which KLA agreed to provide management training for Trafigura's senior management using the KLA Programs “Materials” (“ the Trafigura Agreement”). The background to the Trafigura Agreement and the issues that arose in respect of it are set out in three judgments: the first is the High Court...
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