UD1314/2012

EMPLOYMENT APPEALS TRIBUNAL

CLAIM(S) OF:                                                                                               CASE NO.

Michael Baldwin        -claimant

                                                                                                                        UD1314/2012

against

Ace Compaction Systems Limited (In Liquidation)   -respondent

under

UNFAIR DISMISSALS ACTS, 1977 TO 2007

I certify that the Tribunal

(Division of Tribunal)

Chairman:   Mr N. Russell

Members:     Mr J. Horan

                    Mr J. Flannery

heard this claim at Wexford on 27th May 2014 and 16^th September 2014

Representation:

Claimant:        Mr. Neil J Breheny, Neil J Breheny & Co, Solicitors,

4 Canada Street, Waterford

Respondent:    The directors of the company were present on the first day of hearing.

Summary:

The claim before the Tribunal was one of constructive dismissal. The claimant is a qualified accountant. He outlined his career history to the Tribunal and gave evidence to the Tribunal on the first day of hearing that the directors of the company wanted to set up a company manufacturing waste compactors and he advised them on this. The respondent company opened in March 2003 and the claimant was asked to join the company one month later. The claimant worked as Financial Controller. A second company was also set up manufacturing environmental compactor systems and this was a separately owned company. The claimant owned one share and one of the directors owned the other share. The second company bought machines from the first company and therefore the first company was owned €150,000 for a period of time and this put a lot of pressure on the respondent company. The claimant suggested to the owners of the respondent company that the second company be liquidated and the assets sold for cash. Up until 2006 the respondent company had grown very fast and was profitable but with the economic downturn in 2008, the company declined swiftly. The company’s overdraft represented 70% of invoices. The claimant outlined the process of invoice discounting to the Tribunal in which working capital is raised against invoices.

The respondent company suffered a loss of €261,000 in 2009. By March 2010 the claimant became aware of the year end figures and the quarterly accounts figures for early 2010. As a director of the respondent company, the claimant was personally liable if the company was insolvent but continued to trade recklessly. The company had run out of working capital and the claimant believed that steps were being taken to drain extra funds from the company. At this time the claimant continued to hold one share in the second company. The claimant suggested liquidating the second company to one of the directors (D). D spoke to the other director (M) and reverted to the claimant. He told the claimant that if he allowed them to take over the shares in the second company they would inject money into the second company which could pay money to the respondent company. The paperwork in relation to his was submitted in December 2009 and the second company paid the respondent company €120,000.

The claimant also held 20% of the shares of the respondent company. There was an arrangement in place that for every machine sold by Mr. C (an employee of the second company) commission of €3,000 was paid to the second company from the respondent company. A decision was taken to double this amount without a board meeting taking place on the matter. The claimant was informed of this change in December 2010. The claimant raised this issue in an email.

In addition the claimant noticed that there were advice notes missing. While it was expected that one or two might be missing there were far more missing for 2009. The claimant raised a query in relation to his but it remained unresolved as he did not receive a response. The claimant sent an email to Director D on 17 July 2010 he which he raised the fact that a number of company cheques had “bounced.” In addition he also raised in the email that he had discovered that invoices were sent to the bank where goods had not yet been delivered. While they were genuine offers the claimant sent an email stating that invoices should not be submitted until the goods were delivered. The claimant did not receive a response.

A board meeting was held on 20 July 2010. The claimant submitted that it was now time to put the respondent company into liquidation. It was agreed to defer this matter until the shareholders meeting. The shareholders meeting was also held on 20 July 2010 and the minutes of this meeting were opened to the Tribunal. Again the claimant reiterated his position that the company should be put into voluntary liquidation. When he was finished giving his report, Director D asked if the discussion could be postponed for two days.

The claimant was in work on 21 July 2010 when Director D told him that there was an emergency board meeting in the Director M’s office. A third director was also present. The claimant was informed that he was being suspended for one month and was being removed as director. The claimant was not informed of the reason for the suspension and he immediately contacted his solicitor. The claimant also wrote a letter to a bank notifying them that he had been removed as director.

The claimant received a letter from the respondent company stating he had been requested to step aside as financial controller and that “you are aware that we had lost confidence in your ability to produce timely or accurate figures in respect of the company and we are concerned….” The claimant stated that he had not previously been addressed about any issue regarding his work performance and he replied to this effect.

The claimant sought to open without prejudice correspondence which had ensued between his solicitor and the company. The directors stated they had no objection to the correspondence being opened to the Tribunal.

The claimant returned to work after the period of suspension on 23 August 2010. Director D told him that he should not be there and suspended him again. The claimant received a letter from the company’s solicitor dated 23 August 2010 stating that he was suspended from his role as financial director pending an external investigation which was ongoing but not complete due to a lack of management accounts. The claimant responded on 13 September 2010 to outright deny the contents of the company’s letter. The claimant received no further contact regarding a return to work or regarding a dismissal. He subsequently received a letter dated 4 October 2010 from the company’s solicitor stating that if he resigned the company was willing to endeavour to remove him from the guarantees. Further interparty correspondence ensued.

While the claimant was suspended he could still access the company bank accounts and he was aware on 20 July that there were no completed machines for selling yet an invoice in excess of €200,000 was submitted to a bank. The claimant still had personal guarantees at this stage so he wrote to the bank on 7 February 2011 in light of a letter from the bank in December 2010. In addition the claimant also wrote to the auditors by letter dated 1 April 2011 asking them to investigate an issue in the course of their audit for year end 31 December 2010.

In July 2011 the claimant received a letter from the company stating that a board meeting would take place on 14 July 2011 with the objective to hold and Extraordinary General Meeting of the members of the company with a view to removing the claimant as a director of the company. Once removed as a director the claimant did not believe that he would return to the company but at no stage was the claimant informed that his position as Financial Controller was terminated. It was confirmed to the claimant by the tax office that he remained listed as an employee of the respondent company for 2011. The claimant submitted his claim to the Tribunal in August 2012. The claimant gave evidence of loss.

NP, a minority shareholder gave evidence that there were no issues brought to his attention regarding the performance of the claimant as financial controller. He stated that there was no “real” conclusion from the shareholders meeting on 20 July 2010. It was a concern to him that the respondent company seemed to be “going down the tubes” so quickly. He has had not communication with the company since that date.

Determination

On the second day of the hearing there was an attendance by the Liquidator for the respondent company. He did not seek to oppose the claim but wished to inform the Tribunal that he had given the Directors of the respondent company permission to attend and give evidence on behalf of the company if they so wished.   While two Directors had attended on the first day of the hearing, there was no attendance by the Directors on the return date.

It is the Tribunal’s finding that the claimant was unfairly dismissed when he raised the issue of “reckless trading” and, further, sought to challenge certain questionable practices within the respondent company. It seems to the Tribunal that, in attempting to ensure proper legal and financial compliance within the company, the claimant was ousted for not being a team player and under a completely fabricated and spurious charge that the claimant had failed in his role as Financial Controller to the extent that he had placed the future of the company in jeopardy.

The Tribunal finds that the claim under the Unfair Dismissal Acts, 1977 to 2007 succeeds and  awards the claimant the sum of €40,000 in compensation.

Sealed with the Seal of the

Employment Appeals Tribunal

This   ________________________

(Sgd.) ________________________

     (CHAIRMAN)