Carl Dillon v Enda Whelan, Christina Whelan, Brian Whelan, Edwin Ryan, Thomas McConway and John McKeogh
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 19 May 2021 |
| Neutral Citation | [2021] IEHC 364 |
| Docket Number | 2010 No. 651 COS |
| Court | High Court |
| Date | 19 May 2021 |
In the Matter of Whelan Limestone Quarries Limited (In Liquidation) and Related Companies
and
In the Matter of Whelans Limestone Quarries (Contracts) Limited
and
In the Matter of the Companies Act 1963
and
In the Matter of Section 150 of the Companies Act 1990
and
Section 56 of the Company Law Enforcement Act 2001
[2021] IEHC 364
2010 No. 651 COS
THE HIGH COURT
Declaration of restriction – Conduct – Companies Act 1990 s. 150 – Applicant seeking a declaration of restriction against the sixth respondent – Whether the sixth respondent discharged the onus of establishing that he had acted honestly and responsibly in relation to the affairs of the companies
Facts: The applicant, Mr Dillon, was the liquidator of five companies in the “Whelans Limestone” Group, namely Whelan Group (Ennis) Ltd, Shannon Explosives Ltd, Whelans Limestone Quarries Ltd, Whelans Limestone Quarries (Carrigtwohill) Ltd and Whelan Limestone Quarries (Contracts) Ltd. On 5 December, 2011, an order was made pursuant to s. 141 of the Companies Act 1990 that the companies in the Group be wound up together as if they were one company. That order contained a “carve out” in respect of any intended applications for restriction orders pursuant to s. 150 of the 1990 Act, having regard to the fact that some of the companies had different boards of directors. On 24 February, 2015, the applicant issued applications pursuant to s. 150 against six named directors of companies in the Group. Declarations of restriction had already been made against the first, third, fourth and fifth respondents, Mr E Whelan, Mr B Whelan, Mr Ryan and Mr McConway. The second respondent, Ms Whelan, was deceased. The applicant applied to the High Court in the matter of Whelan Limestone Quarries Ltd and Whelan Limestone Quarries (Contracts) Ltd for a declaration against the sixth respondent, Mr McKeogh.
Held by Quinn J that the high point of the applicant’s concerns, in this case, was a series of conclusions regarding the collective roles and responsibilities of all the directors. Quinn J noted that nowhere did the applicant go any further than stating that he “can only conclude” that the respondents collectively failed to act honestly and responsibly. Quinn J noted that, in relation to the most serious of the applicant’s concerns, regarding the management of the debtors ledger, he stated that he “finds it very hard to accept that anyone in an executive role within Contracts was not aware of it”. Quinn J noted that the applicant did not engage with the very specific evidence adduced by the sixth respondent. Quinn J accepted the sixth respondent’s evidence that he was excluded from a role in relation to this issue and as to the manner in which he was treated by the shareholders and proprietary directors. Quinn J also accepted that the ultimate outturn for creditors could not be fairly said to be attributable to the sixth respondent’s conduct. Quinn J was satisfied that the sixth respondent acted honestly and responsibly in relation to the affairs of the companies.
Quinn J refused the reliefs sought.
Reliefs refused.
JUDGMENT of Mr. Justice Quinn delivered on the 19th day of May, 2021
The applicant is the liquidator of five companies in the “Whelans Limestone” Group, namely Whelan Group (Ennis) Limited, Shannon Explosives Limited, Whelans Limestone Quarries Limited, Whelans Limestone Quarries (Carrigtwohill) Limited and Whelan Limestone Quarries (Contracts) Limited.
On 5 December, 2011, an order was made pursuant to s. 141 of the Companies Act 1990 that the companies in the Group be wound up together as if they were one company. That order contained a “carve out” in respect of any intended applications for restriction orders pursuant to s. 150 of the Companies Act 1990, having regard to the fact that some of the companies had different boards of directors.
Section 150 of the Companies Act, 1990, provides: –
“150.—(1) The court shall, unless it is satisfied as to any of the matters specified in subsection (2), declare that a person to whom this Chapter applies shall not, for a period of five years, be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless it meets the requirements set out in subsection (3) [as to allotted share capital]; and, in subsequent provisions of this Part, the expression “a person to whom section 150 applies” shall be construed as a reference to a person in respect of whom such a declaration has been made.
(2) The matters referred to in subsection (1) are—
(a) that the person concerned has acted honestly and responsibly in relation to the conduct of the affairs of the company and that there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this section, or …”
On 24 February, 2015, the applicant issued applications pursuant to s. 150 against six named directors of companies in the Group.
Declarations of restriction have already been made against Enda Whelan, Edwin Ryan, Thomas McConway and Brian Whelan. Christina Whelan is deceased. This judgment relates to the application in the matter of Whelan Limestone Quarries Limited (“Quarries”) and Whelan Limestone Quarries (Contracts) Limited (“Contracts”) for a declaration against John McKeogh, the respondent.
The business of Quarries was the manufacture of quarry stone and concrete products from eight locations in Connacht and Munster supplying product to large infrastructural building companies. The business of Contracts was the laying of asphalt/tarmacadam products for local authorities on a large scale.
The applicant was appointed liquidator on 3 December, 2010. On 14 February, 2011, the applicant made initial contact with the directors of the companies. The respondent says that he replied to that letter on a timely basis. He says that the next he heard from the applicant was when he received a letter dated 15 April, 2014, in which the applicant informed the respondent that he had investigated the affairs of the companies and the conduct of the directors and that he was required to make a report to the Office of the Director of Corporate Enforcement (the “ODCE”). By this letter, the applicant identified areas of concern that had come to his attention in the course of his investigation of the affairs of the companies. The issues referred to in that letter were described under the following headings:
The applicant stated that this correspondence would be drawn to the attention of the ODCE in the context of his reporting obligations and he stated that “ I reserve the right to issue proceedings pursuant to s.160 of the Companies Act 1990 and in particular subs. 2 (d) thereof.”
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(1) Fraudulent operation of invoice discounting facility;
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(2) Liabilities / creditors;
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(3) Failure to file accounts;
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(4) Revenue debts;
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(5) Assets unaccounted for;
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(6) Failure to address insolvency.
Section 160 is the provision in the Act of 1990 for the disqualification of a person from acting as a director or otherwise being concerned in the affairs of the company in any way.
Having described the issues of concern the applicant then stated as follows:
“I have therefore concluded, pending receipt of your responses, that you are unfit to be concerned to take part in the management of the company within the meaning of s. 160 (2) (d) of the Companies Act 1990.”
On 24 April, 2014, the respondent replied requesting extensive documentation to enable him to address the substance of the applicant's letter. He stated that three years earlier he had responded to the applicant's initial letter and had heard nothing further. He said that he did not have any books or records of the companies, and that he needed copy documentation to reply. He noted that proceedings pursuant to s. 160 would have serious repercussions for him and his livelihood. He said that he would reply after receiving relevant documents, and that “ it would be more beneficial to have one comprehensive response to you, rather than dealing with it on a piecemeal basis.”
On 28 May, 2014, the applicant replied and enclosed certain documents, which were not exhibited. In relation to the allegation of “ fraudulent operation of invoice discounting facility”, he states that he enclosed the following:-
The applicant said that the respondent was aware that there was:-
“an issue of the most serious nature in respect of the reissuing of invoices. You were a party to a number of meetings and discussions with representatives of BOS and others in early November 2010. It is my understanding that an investigation by a third party on behalf of BOS revealed the extent of the duplication and this subsequently led to you resigning as Group Finance Director. From my investigations it appears that prior to your resignation you were the Group Finance Director and therefore had full responsibility for the financial affairs of the Company…”
The applicant concluded:-
“My conclusion is based on the detail in my letters (sic) of 15 April, my enclosures to this letter and the totality of my investigations as liquidator…”
Finally, the applicant invited the respondent to furnish any information so that it could be forwarded to the ODCE.
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(1) A copy of the Agreement with Bank of Scotland (Ireland) Commercial Finance Limited (“BOSI”);
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(2) A listing of invoices presented to BOSI;
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(3) An extract from the “Internal Accountant's Report prepared when the company was seeking to enter examinership”. This was a reference to a report of the Independent Accountant, BDO.
There followed a protracted exchange of correspondence regarding access to...
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