Conroy v Corneill

• Jurisdiction: Ireland
• Judge: MR. JUSTICR T.C. SMYTH
• Judgment Date: 07 October 2003
• Neutral Citation: 2003 WJSC-HC 1979
• Docket Number: No. 217 ct.6/1995,[1995 No. 217 Cos]
• Court: High Court
• Date: 07 October 2003

2003 WJSC-HC 1979

THE HIGH COURT

No. 217 ct.6/1995

CONROY v. CORNEILL

DUBLIN

IN THE MATTER OF RAYHILL PROPERTY COMPANY LIMITED (IN LIQUIDATION) AND

IN THE MATTER OF THE COMPANIES ACT, 1963 to 1990

Between/

BRIAN CONROY

Applicant

MARY CORNEILL AND JOHN CORNEILL

Respondents

Citations:

COMPANIES ACT 1990 S12

COMPANIES ACT 1963 S204

COMPANIES ACT 1963 S150

COMPANIES ACT 1990 S202

COMPANIES ACT 1990 S202(1)

COMPANIES ACT 1990 S202(4)

COMPANIES ACT 1990 S202(10)

COMPANIES ACT 1990 S204(1)

COMPANIES ACT 1990 S204(4)

COMPANIES ACT 1990 S204(4)(B)

MALOC CONSTRUCTION LTD (IN LIQUIDATION) V CHADWICK & ORS 1986 3 NZCLC 99

R V BENNETT & ANOR 1985 2 NZCLC 96–034

MANNING V CORY 1974 WAR 60

MEHIGAN V DUIGNAN 1997 1 IR 40

ASHCLAD LTD (IN LIQUIDATION) & FORREST V HARRINGTON & ANOR UNREP GEOGHEGAN 5.4.2000 2000/1/145

COMPANIES ACT 1990 S202(1)(A)

COMPANIES ACT 1990 S202(1)(B)

COMPANIES ACT 1990 S202(1)(C)

COMPANIES ACT 1990 S202(1)(D)

COMPANIES ACT 1990 S202(2)

COMPANIES ACT 1990 S202(3)(A)

COMPANIES ACT 1990 S202(3)(B)

Synopsis:

COMPANY LAW

Directors

Personal liability for company's debts - Companies Act, 1963 section 204 (1995/217Ct6 - Smyth J - 7/10/2003)

Conroy v Corneill - [2003] 3 IR 588

The plaintiff was the liquidator of a company. By notice of motion he sought a declaration that the respondent directors were personally liable for the debts of the company pursuant to s. 204 of the Companies Act 1963.

Held by Smyth J. in declaring the respondents personally liable to the company in the sum of €€03,334 that the liabilities of the company were substantially and most adversely affected by the manner in which the business of the company was conducted by the respondent.

1 JUDGEMENT OF MR. JUSTICR T.C. SMYTH DELIVERED ON TUESDAY, THE 7TH DAY OF OCTOBER 2003

2 MR. JUSTICE T.C. SMYTH DELIVERED HIS JUDGMENT, AS FOLLOWS, ON TUESDAY, 7TH OCTOBER 2003

3 The company named in the title hereof, together with Home Affairs Limited and Hilltop Catering Limited, was involved in the ownership and operation of Clonmannon Retirement Village. The Plaintiff was appointed Liquidator of all three companies on 16th October 1995, on foot of an order made under Section 12 of the Companies Act 1990: that followed from an investigation by the Department of Enterprise and Employment into the affairs of all three companies operating Clonmannon Retirement Village. On 10th November 1995, the Liquidator made a Preliminary Report to the Court in respect of all three companies and a fulsome Interim Report in respect of all companies dated 20th December 1999 was presented to the Court. Since 1995, there have been several orders and judgments and directions referable to the liquidations.

4 A Notice of Motion by the Liquidator dated 25th June 1997 (inter alia) sought the following relief:-

"(F) A declaration that the Respondents and each of them be made personally liable for the debts of the company pursuant to Section 204 of the Companies Act 1963."

5 The first issue in dispute is as to whether Mr. Corneill ceased to be a director in March 1994 (as he contended) or until the date of the winding up (as contended for by the Liquidator).

6 I am satisfied and find as a fact that at all material times Mr. Corneill was a director of the company as contended for by the Liquidator. In his points of Defence in these proceedings Mr. Corneill acknowledges his appointment as of 23rd November 1992. There are a number of elements in the evidence, despite protestations to the contrary in his oral evidence, that show that far from being a nominal director in the company and being primarily concerned about the other two companies and acting as an agent for Mrs. Mary Corneill, his mother, either under her alleged directions or power of attorney, he was not only central to the management of the company but effectively directorially involved in the conduct of its business

7 In August 1992, a current account was opened in the Abbey Street, Wicklow branch of AIB in the names of Mr. Corneill and his mother, entitled Clonmannon Village Management Current Account. On 18th November 1992, Mr. Corneill was written to by Messrs Amorys,solicitors, concerning the company, wherein it is stated:

"It seems from our discussions that this company is also insolvent and needs to raise money immediately to restore its liquidity."

8 The letter went on to make reference to:-

9 i "(I) Minutes of Directors Meeting dealing with your appointment to the Board of Rayhill and the need for a rights issue.

10 (ii) Companies Office .Form B10 - to be signed by you and your mother."

11 The letter also deals with certain implications of arrangements concerning Mrs. Mary Corneill's investment in the company and more particularly the granting to Mr. Corneill of a power of attorney to give him full authority to deal with his mother's shareholding and to put in place a contract between the company and Hilltop Catering Limited. The letter concludes with a request for a payment on account, but leaving to Mr. Corneill the nomination as to which entity the invoice should be made out.

12 In anticipation of a meeting of residents of the retirement village in March 1994, Mr. Corneill informed the residents that he had decided that his "position as functional Administrator" had become untenable and:-

"Assuming a satisfactory outcome to this meeting, I have decided therefore to withdraw from daily management and will concentrate greater effort on the promotion of Clonmannon Village as the ideal Retirement Centre is intended to be."

13 There was no reference to resigning any directorship, and I am satisfied and find as a fact that Mr. Corneill did appreciate the distinction between a role as a manager of a business and that of a director. In April 1994, AIB (45/46 Tower Road, Clondalkin, Dublin 2 branch) agreed to restructure the facilities of the company to provide additional working capital to it and that in the period of two months from the date of the letter the account of Hilltop Catering was to be cleared.

14 By August 1994, there was a serious conflict between the residents of the retirement home "and management". Mrs. Corneill announced that she would seek the assistance of an arbitrator to mediate in the dispute. It was Mr. Corneill who went to see or meet the intended arbitrator. Again, the centrality of his role in the affairs of the company is reflected in his mother's request to Mr. Hanley, the accountant to the companies:-

"Will you please liaise with John re method of payment re your account."

15 In the course of the hearing, there was produced a form of letter of reference dated 27th March 1995, from Collier Littler, solicitors, which (inter alia) stated:-

"... notwithstanding the fact that Mrs. Corneill had previously granted to her son a power of attorney to enable him to handle her affairs, the purpose of that appointment was solely to enable him to act on her behalf in connection with any court proceedings and was not to enable him to deal in any way with any property or other assets, including share certificates in the name of Mrs. Corneill, or to deal with any assets relating to any company in which Mrs. Corneill was a director."

16 No explanation as to how or why this letter issued or to whom, was given to the Court — I refrain from drawing any adverse view of the Respondent notwithstanding my belief that he may have been able to assist the Court in this regard. A letter of 25th April 1995, from AIB (Commercial Banking, Bank Centre, P.O. Box 452, Ballsbridge, Dublin branch) sanctioned a loan of £130,000 to the company on certain conditions. Notwithstanding that the security is to be provided principally by Mrs. Corneill, the letter is addressed to the directors. A resolution was passed at a meeting of the directors of the company on 3rd May 1995, a copy of the minutes of which is signed by Mrs. Corneill. While this document was not signed by the secretary of the company, Mr. Corneill was the secretary and director, as appears from the form B10 signed by him on 23rd November 1992.

17 By letter dated 11th October 1995, Messrs Haughton McCarroll, solicitors, wrote to the secretary of the company seeking payment of a bill of costs, which is addressed to John Corneill and the company, and complaining that a stop had been put on the cheque for the interim payment of costs in relation to other matters. On 12th October 1995, Messrs. Amorys, solicitors, demanded payment by the following day of promissory note dated 27th April 1994 in the sum of £48,400.

18 When the Petition first came before the High Court on 16th October 1995, there was no appearance on behalf of the company. Mr. Corneill, recorded in the Order of the Court, as a director of the company, was ordered with 28 days of 16th October 1995 to make out and file a Statement of Affairs; no appeal was taken by Mr. Corneill against that order.

19 The Liquidator wrote to Mr. Corneill on 25th October 1995, but received no reply, nor did he receive any of the several books and records of the company. This is a matter of considerable importance, because, as recorded in the Cosgrove Report dated 9th March 1995, prepared on foot of the Departmental investigation (earlier referred to), and admitted in evidence by Mr. Corneill, it states that he did not know where the books and registers were. Yet, I find the fact to be on the evidence of the Liquidator, in paragraph (10) of his affidavit sworn on 10th January 2001, confirmed by his oral evidence and not shaken in cross-examination or supplanted by evidence of Mr. Corneill, that at a meeting on 16th July 1997 Mr. Corneill stated to the Liquidator that he had taken the records of the company to England and that he would not hand them over to the Liquidator and would only make them available in return for a payment of£5,000. The Liquidator's contemporaneous note of these...