Declan Taite (official liquidator of Shellware Ltd) v Eoghan Breslin

• Jurisdiction: Ireland
• Judge: Mr. Justice Barrett
• Judgment Date: 23 July 2014
• Neutral Citation: [2014] IEHC 184,[2014] IEHC 364
• Court: High Court
• Date: 23 July 2014

[2014] IEHC 184

THE HIGH COURT

[No. 371 COS/2008]

Taite (official liquidator of Shellware Ltd) v Breslin

IN THE MATTER OF SHELLWARE LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACTS 1963 -2006

AND IN THE MATTER OF SECTION 150 OF THE COMPANIES ACT 1990

AND IN THE MATTER OF SECTION 56 OF THE COMPANY LAW ENFORCEMENT ACT, 2001

BETWEEN

DECLAN TAITE (OFFICIAL LIQUIDATOR OF SHELLWARE LIMITED)

APPLICANT

AND

EOGHAN BRESLIN

RESPONDENT

COMPANIES ACT 1990 S150

COMPANIES ACT 1990 S150(2)

LA MOSELLE CLOTHING LTD & ROSEGEM LTD v SOUALHI 1998 2 ILRM 345 1998/23/8886 1998 IEHC 66

KAVANAGH v DELANEY & ORS (TRALEE BEEF & LAMB LTD (IN LIQUIDATION), IN RE) 2008 3 IR 347 2008 2 ILRM 420 2008/32/6904 2008 IESC 1

SQUASH (IRL) LTD, IN RE 2001 3 IR 35 2001/23/6280 2001 IESC 200

KAVANAGH v DELANEY & ORS (TRALEE BEEF & LAMB LTD (IN LIQUIDATION), IN RE) 2005 1 ILRM 34 2004/24/5615 2004 IEHC 139

MITEK HOLDINGS LTD, IN RE; GRACE (LIQUIDATOR) v KACHKAR & MCCELLAN CARRIGAN 2010 3 IR 374 2010/36/9110 2010 IESC 31

DIGITAL CHANNEL PARTNERS LTD (IN VOLUNTARY LIQUIDATION), IN RE; KAVANAGH v CUMMINS & ORS 2004 2 ILRM 35 2004/24/5602

COMPANY LAW ENFORCEMENT ACT 2001 S56(2)

COMPANY LAW ENFORCEMENT ACT 2001 S56(1)

COMPANY LAW ENFORCEMENT ACT 2001 S56

COMPANY LAW ENFORCEMENT ACT 2001 S56(3)

COYLE v O'BRIEN & HILL & HUGHES 2003 2 IR 627 2003/10/2087

AHEARN DIRECTORS' DUTIES 2009 511

Company Law – Company Director – Liquidation – Restriction Order - s. 150 of the Companies Act 1990

Facts: This case concerned an application for a restriction order under s. 150 of the Companies Act 1990, as amended, in respect of the former director of Shellware Limited, Mr Breslin. There was also a related application for an extension of time. Section 150 of the 1990 Act states that the court must grant the declaration unless under s. 150(2) Mr Breslin can demonstrate that he acted honestly and responsibly in relation to the conduct of the affairs of the company and that no just and equitable reason existed for an order to be made. The court decided that the substantive issue to consider from a s. 150 perspective was whether Mr. Breslin acted responsibly in relation to the conduct of the affairs of Shellware. It was suggested in the course of proceedings that there were six grounds on which Mr. Breslin's behaviour could be categorised as other than responsible; a failure to maintain adequate books and records, late/non-payment of certain taxes, the steps taken when the company was in financial difficulty, the making of payments to a related company, the use of company credit cards for personal expenses, and a claimed lack of cooperation with the liquidator.

Held by Barrett J,

Taking each ground in turn Barret J held in relation to the first that Mr. Breslin may have been open to criticism but that his actions could not be categorised as irresponsible. On the second ground Barrett J said there did not appear to be any evidence before the court that would transform the late/non-payment of taxes in this case from reproachable behaviour to irresponsible behaviour. The Court said Mr. Breslin took all the steps that one would expect of a company director when it became apparent that Shellware was in financial difficulty. As Mr Breslin was a director in another Company that was Shellware”s principal debtor the fourth ground warranted the most consideration. Barrett J said that cross-directorships within closely related companies would almost certainly cause confusion and conflicts within individual boards of directors as to the best course of action to take for any one company. However, there was no evidence before the court that any director, including Mr. Breslin, behaved irresponsibly in this instance. The court found that Mr. Breslin”s use of the company credit card facilities was not irresponsible. Lastly, the court found that Mr. Breslin did substantively cooperate with the liquidator. As a result, the court declined to make an order under s. 150 of the Companies Act 1990. In addition, Barrett J granted the liquidator an extension of time because the Court had already adjudicated on the s. 150 application and no purpose would be served in denying the extension.

1 JUDGMENT of Mr. Justice Barrett delivered on the 1st day of April, 2014

2 1. This is an application for a restriction order under s. 150 of the Companies Act 1990, as amended, in respect of Mr. Eoghan Breslin. There is a related application for an order extending the time for the making of this application.

3 2. Mr. Breslin is a former director of Shellware Limited, a company that designed and manufactured exhibition and presentation stands and also engaged in the interior design and fit-out of public houses. The company was incorporated on 24 ^th June, 1999, commenced trading on 24 ^th June, 1999, ceased trading on 7 ^th January, 2009, and was a subject of a winding-up order by the court on 12 ^th January, 2009. The company was one of the many victims of the sudden contraction in the Irish economy that occurred in 2008. Indeed the swiftness of Shellware's decline is testament to just how quickly the nation's economy declined at that time: the company yielded its best ever financial results in the year ended June, 2007; its sources of business began to dry up in 2008; and by start-2009 an order for its winding-up had issued.

4 3. Under s. 150 of the 1990 Act, the court must grant the declaration sought in these proceedings unless satisfied that any of a variety of circumstances identified in s. 150(2) pertain, the relevant circumstances in this case being that Mr. Breslin has acted (a) honestly and (b) responsibly in relation to the conduct of the affairs of Shell ware and (c) there is no other reason why it would be just and equitable that he should be the subject of an order made under s. 150. In the course of the proceedings before the court it became apparent, and the court finds, that there is no issue as to Mr. Breslin's honesty and, apart from the issue of whether he acted responsibly in relation to the conduct of the affairs of Shellware, there is no other ground on which a s. 150 declaration should issue. Thus the only substantive issue that survives for the court to consider from a s. 150 perspective is whether Mr. Breslin acted responsibly in relation to the conduct of the affairs of Shellware.

Principles to be applied

5 4. There is, if anything, a possible surfeit of judicial guidance on the criteria that are relevant in determining a s. 150 application. An early but significant contribution was made by Shanley J. in La Moselle Clothing Limited (in liquidation) v. Soualhi [1998] 2 I.L.R.M. 345, his observations having since been described by Hardiman J. in In the Matter of Tralee Beef L & Lamb Limited [2008] 3 I.R. 347 at 358, as being, at least at that time, of "near canonical status". Shanley J. 's observations had previously been affirmed and expanded upon by the Supreme Court in Re Squash (Ireland) Ltd. [2001] 3 I.R. 35, the court holding, inter alia, that it is important, in a s. 150 application, to have regard to the entire tenure of an individual as director of a company. In his judgment in La Moselle, Shanley J. had, at 352, mentioned that the extent to which a director has or has not complied with the Companies Acts is a relevant factor when determining a s. 150 application. In the High Court decision in Kavanagh v. Delaney [2005] 1 I.L.R.M. 34 at 41, Finlay Geoghegan J. suggested that compliance by a director with the common law obligations of a director is also a relevant factor. In his above-mentioned judgment in what is now often referred to as the Tralee Beef case, Hardiman J., at 358, indicated that he did not disagree with this 'amplification' by Finlay Geoghegan J., though he was concerned that no injustice should be wrought in that case as a result of the amplification being sounded therein for the first time. In truth it is somewhat difficult to see how a director could be held to have acted responsibly where he or she has complied with the Companies Acts but is in breach of his or her common law duties, though equally it is difficult offhand to see how a director could breach his or her common law duties where he or she is not guilty of any breach of, or exposed to any penalty under, the detailed and comprehensive code established by the Companies Acts. Be that as it may, the jurisprudence appears in any event to have further evolved, with Fennelly J. signalling in Re Mitek Holdings Limited [2010] 3 I.R. 374 at 396 that it is important not to adopt a formulaic, standardised, 'tick the box' approach to determining s. 150 applications. Thus Fennelly J. emphasises "the need to identify the issues that are important in the particular case" and then continues:

"I would not be disposed to limit the matters to which regard should be had or to substitute standardised judicial criteria for the general words of the statute."

6 Section 150 enjoins the court to have regard to whether an affected person has acted "honestly" and "responsibly" and also to consider whether there is any other reason why it would be "just and equitable" that a s. 150 order should issue. All of the quoted terms bear their ordinary meaning. As mentioned above, there are no 'honesty' or 'just and equitable' grounds arising in this case. In deciding whether Mr. Breslin has acted responsibly the court may of course have regard to his obligations as director, to general commercial practice and to prior case-law but perhaps more to anchor than to determine any decision of the court as to the responsibility or otherwise of Mr. Breslin's actions.

Concerns arising

7 5. It has been suggested in the course of this application that there are essentially six grounds on which Mr. Breslin's behaviour could be categorised as...