Director of Corporate Enforcement v McDonnell

JurisdictionIreland
JudgeFinlay Geoghegan J
Judgment Date15 March 2005
Neutral Citation[2005] IEHC 85
Docket Number[2004 No. 427 COS]
CourtHigh Court
Date15 March 2005

[2005] IEHC 85

THE HIGH COURT

[Record No. 427COS/2004]
[Record No. 428COS/2004]
[Record No. 455COS/2004]
DIRECTOR OF CORPORATE ENFORCEMENT v MCDONNELL & ORS
IN THE MATTER OF CLAWHAMMER LIMITED AND IN THE MATTER OF SECTION 160 OF THE

BETWEEN

THE DIRECTOR OF CORPORATE ENFORCEMENT
APPLICANT

AND

MARITA McDONNELL AND FRANCIS ENDICOTT
RESPONDENTS
IN THE MATTER OF SHINRONE FOOD MARKET LIMITED AND IN THE MATTER OF SECTION 160
OF THE COMPANIES ACT, 1990

BETWEEN

THE DIRECTOR OF CORPORATE ENFORCEMENT
APPLICANT

AND

ANDREW HOCTOR AND DEIRDRE HOCTOR
RESPONDENT
IN THE MATTER OF CAUTIOUS TRADING LIMITED AND IN THE MATTER OF SECTION 160 OF THE

BETWEEN

THE DIRECTOR OF CORPORATE ENFORCEMENT
APPLICANT

AND

MARTIN FORRISTAL AND LINDA FORRISTAL
RESPONDENTS

COMPANIES ACT 1990 S160(2)(h)

COMPANY LAW ENFORCEMENT ACT 2001 S42(b)

COMPANY LAW ENFORCEMENT ACT 2001 S42

COMPANY LAW ENFORCEMENT ACT 2001 (COMMENCEMENT) (NO 5)

ORDER 2002 SI 53/2002

COMPANIES ACT 1990 S160(3)(a)

COMPANIES ACT 1990 S160(6)(a)

COMPANIES ACT 1990 S160(9)(a)

COMPANIES ACT 1990 S150COMPANIES ACT 1990 S160(8)

COMPANIES (AMDT) ACT 1982 S12

COMPANIES (AMDT) ACT 1982 S12(3)

COMPANIES ACT 1963 S370(4)

COMPANY LAW ENFORCEMENT ACT 2001 S62

COMPANY LAW ENFORCEMENT ACT 2001 S110(a)

COMPANIES (AUDITING & ACCOUNTING) ACT 2003 S52

COMPANIES (AMDT)(NO 2) ACT 1999 S52(2)

COMPANY LAW ENFORCEMENT ACT 2001 S110(a)(1)(d)

COMPANY LAW ENFORCEMENT ACT 2001 S110(a)(3)

COMPANIES ACT 1990 S160(2)

COMPANIES ACT 1990 S160

COMPANIES ACT 1990 S152

COMPANIES ACT 1990 S150(1)

COMPANIES ACT 1990 S150(3)

COMPANIES ACT 1990 S155

COMPANIES ACT 1990 S159

COMPANIES ACT 1990 PART VII

COMPANIES ACT 1990 S160(1)

COMPANIES ACT 1990 S162

NORSE SECURITY LTD, IN RE UNREP LAFFOY 15.11.2004 (EX-TEMPORE)COMPANIES ACT 1990 S160(9)(b)

RSC O.99

COMPANY LAW

Directors

Disqualification - Appropriate length of disqualification order - Necessary proofs for successful application - Criteria by which the court should exercise jurisdiction conferred on it - Whether restriction order should be applied instead of disqualification order - Whether and in what circumstances court should grant respondent director relief from disqualification order - Companies Act 1990 (No 27), s 60 - Company Law Enforcement Act 2001 (No 28), s 42 - Disqualification orders granted

1

Judgment of Finlay Geoghegan J. delivered on 15th day of March 2005 .

2

This judgment is given in three separate applications brought by the Director of Corporate Enforcement ("the Director") for the disqualification of the respondents pursuant to s. 160(2)(h) of the Companies Act, 1990 (as inserted by s. 42(b) of the Company Law Enforcement Act, 2001). The applications are amongst the first such applications (I was informed of one earlier application) and I reserved judgment in each for the purpose of considering certain of the issues raised on behalf of the Director and on behalf of certain of the respondents. It appears appropriate to give one judgment dealing with the general principles and the individual applications.

Applicable statutory scheme
3

Section 160(2) (h) of the Act of 1990 provides as follows:

4

(2) Where the court is satisfied in any proceedings or as a result of an application under this section that -

5

(h) a person was a director of a company at the time of the sending, after the commencement of section 42 of the Company Law Enforcement Act, 2001, of a letter under subsection (1) of section 12 of the Companies (Amendment) Act 1982, to the company and the name of which, following the taking of the other steps under that section consequent on the sending of that letter, was struck off the register under subsection (3) of that section...

6

the court may, of its own motion, or as a result of the application, make a disqualification order against such a person for such period as it sees fit.

7

Section 42 of the Act of 2001 commenced on 1st March, 2002, pursuant to the Company Law Enforcement Act, 2001 (commencement) (No.5) Order 2002 (S.I. No. 53 of 2002).

8

Section 160(3A) of the Act of 1990 provides a defence to applications brought under s. 160(2) (h) of the Act of 1990. It provides:

"(3A) The court shall not make a disqualification order under paragraph (h) of subsection (2) against a person who shows to the court that the company referred to in that paragraph had no liabilities (whether actual, contingent or prospective) at the time its name was struck off the register or that any such liabilities that existed at that time were discharged before the date of the making of the application for the disqualification order."

9

Section 160(6A) of the Act of 1990 permits the Director to bring the application under s. 160(2) (h). Section 160(9A) enables the court, on an application for disqualification, in certain circumstances in the alternative to make a declaration under s. 150 of the Act of 1990 by providing:

"(9A) In considering the penalty to be imposed under this section, the court may as an alternative, where it adjudges that disqualification is not justified, make a declaration under s. 150."

10

Section 160(8) of the Act of 1990 enables a person who is subject to a disqualification order to apply to the court for relief, either in whole or in part by providing:

"(8) Any person who is subject or deemed subject to a disqualification order by virtue of this part may apply to the court for relief, either in whole or in part, from that disqualification and the court may, if it deems it just and equitable to do so, grant such relief on whatever terms and conditions it sees fit."

Necessary proofs under s. 160(2)(h)
11

Counsel for the Director submits that in order that the Director succeeds under s. 160(2)(h) it is only necessary that he prove:

12

i i. That a letter was sent to the Company, after 1 March, 2002, under s. 12 of the Companies (Amendment) Act 1982. That the Company was struck off the register pursuant to s. 12(3) of the Act of 1982 following the taking of the other required steps consequent on the sending of such letter

13

ii ii. That the Respondents were directors of the Company at the time of the sending of such letter.

14

I accept that submission. The prohibition contained in s. 160(3A) against the court making a disqualification order under s. 160(2)(h) is against "a person who shows to the court that the company...had no liabilities...". This does not oblige the Director, on an application to establish that there are no such liabilities but rather gives to a respondent the possibility of avoiding the making of a disqualification order if that person "shows to the court" meaning presumably establishes as a matter of probability that the company either had no liabilities at the time it was struck off the register or that such liabilities that existed were discharged prior to the date of the application under s. 160(2)(h).

15

In each of these applications the respondents did not dispute the entitlement of the Director to an order under s. 160(2)(h). In the case Clawhammer Limited the respondents appeared personally and swore a joint affidavit which they personally filed. In the case of Cautious Trading Limited the respondents were represented by counsel and did not offer any evidence to the Court. In the case of Shinrone Food Market Limited there was no appearance on behalf of the respondents but the Director properly put before the Court 2 letters which he had received from the first named respondent on behalf of the respondents. Whereas in the case of Shinrone Food Market Limited there is no appearance in the proceedings. The court must of course be satisfied both, that the Director has put before the court facts to support the necessary proofs on the balance of probabilities and also be satisfied as to service of the application. In Shinrone Food Market Limited there is an affidavit of personal service of this application on each of the respondents.

16

In Shinrone Food Market Limited, I am satisfied that the Director on the affidavits sworn in these proceedings has put before the court appropriate evidence to discharge the necessary proofs under s. 160(2)(h) in the following manner.

17

1. Section 12 of the Act of 1982 permits the Registrar of the Companies to send to a company, by registered post a letter stating that unless all annual returns which are outstanding are delivered to him within one month of the date of the letter, a notice will be published in Iris Oifigiúil with a view to striking the name of the company off the register.

18

2. The further steps which must be taken by the Registrar after the sending of such a letter are where either he receives an answer to the effect that the company is not carrying on business or does not within one month receive all annual returns outstanding to publish in Iris Oifigiúil a notice stating that at the expiration of one month from the date of the notice the name of the company will, unless all outstanding returns are delivered to the Registrar be struck off the register and the company dissolved.

19

Section 12(3) of the Act of 1982 permits the Registrar at the expiration of the time specified, unless cause to the contrary is shown by the company, to strike its name off the register and to publish a notice thereof in Iris Oifigiúil and on the publication in Iris Oifigiúil of the notice the company is deemed to be dissolved.

20

Each of the relevant facts have been proved by the production to the Court of two certificates issued by Ms. Anita McCarron under s. 370(4) of the Companies Act 1963 (as inserted by s. 62 of the Company Law Enforcement Act, 2001) and pursuant to s. 110(A) of the Company Law Enforcement Act, 2001 (as inserted by s. 52 of the Companies (auditing and accounting) Act,...

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