Director of Corporate Enforcement v Barry Seymour

• Jurisdiction: Ireland
• Judge: Macken J.
• Judgment Date: 06 December 2011
• Neutral Citation: [2011] IESC 45
• Court: Supreme Court
• Docket Number: [S.C. No. 161 of 2007]
• Date: 06 December 2011

Director of Corporate Enforcement v Seymour

Between:

THE DIRECTOR OF CORPORATE ENFORCEMENT

Respondent/Applicant

-and-

BARRY SEYMOUR

Appellant/Respondent

[2011] IESC 45

Denham C.J.

Macken J.

Finnegan J.

[S. C. No. 161 of 2007]

THE SUPREME COURT

COMPANY LAW

Directors

Disqualification - Purpose of disqualification - Protection of public against future conduct - Punishment for past conduct - Deterrence - Necessary proofs for successful application - Inspectors' report - Opinion of inspectors - Whether negligence or incompetence sufficient to justify disqualification - Whether chief executive of bank having ultimate responsibility sufficient to ground disqualification - Whether opinion on affidavit not in inspectors' report capable of justifying disqualification - In re Lo-Line Ltd [1988] Ch 477; Director of Corporate Enforcement v Byrne [2008] IEHC 149, (Unrep, Murphy J, 26/5/2008), [2009] IESC 57, [2010] 1 IR 222; Re: Kentford Securities Ltd: Dir Of Corp Enforcement v McCann [2007] IEHC 1, (Unrep, Peart J, 23/1/2007), [2010] IESC 59, [2011] 1 IR 585 and Re: Wood Products Ltd: Dir of Corp Enforcement v McGowan [2008] IESC 28, [2008] 4 IR 598 followed - Re Ansbacher: Director of Corporate Enforcement v Collery [2006] IEHC 67, [2007] 1 IR 580; Re Barings plc: Secretary of State for Trade and Industry v Baker (No 5) [1999] 1 BCLC 433; [1998] All ER (D) 659; Cahill v Grimes [2002] 1 IR 372; City Equitable Fire Insurance Co, In re [1925] Ch 407; Director of Corporate Enforcement v Seymour [2007] IEHC 102, (Unrep, Murphy J, 20/3/2007); La Moselle Clothing Ltd v Soualhi [1998] 2 ILRM 345; Re Newcastle Timber Ltd (in liquidation) [2001] 4 IR 586; Re NIB Ltd: Director of Corporate Enforcement v D'Arcy [2005] IEHC 333, [2006] 2 IR 163; In re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164 and Re Squash (Ireland) Ltd [2001] 3 IR 35 considered - Companies Act 1990 (No 33), ss 22 and 160(2) - Disqualification order quashed; restriction order substituted (161/2007 - SC - 6/12/2011) [2011] IESC 45

Director of Corporate Enforcement v Seymour

COMPANY LAW

Directors

Disqualification - Purpose of disqualification - Protection of public against future conduct - Punishment for past conduct - Deterrence - Necessary proofs for successful application - Inspectors' report - Opinion of inspectors - Whether negligence or incompetence sufficient to justify disqualification - Whether chief executive of bank having ultimate responsibility sufficient to ground disqualification - Whether opinion on affidavit not in inspectors' report capable of justifying disqualification - Re Ansbacher: Director of Corporate Enforcement v Collery [2006] IEHC 67, [2007] 1 IR 580;Re Barings plc: Secretary of State for Trade and Industry v Baker (No 5) [1999] 1 BCLC 433; Cahill v Grimes [2002] 1 IR 372; City Equitable Fire Insurance Co, In re [1925] Ch 407; Director of Corporate Enforcement v Byrne [2008] IEHC 149, (Unrep, Murphy J, 26/5/2008) (HC); [2009] IESC 57, [2010] 1 IR 222; (SC); Director of Corporate Enforcement v Seymour [2007] IEHC 102, (Unrep, Murphy J, 20/3/2007); Re: Kentford Securities Ltd: Dir Of Corp Enforcement v McCann [2007] IEHC 1, (Unrep, Peart J, 23/1/2007) (HC); [2010] IESC 59, [2011] 1 IR 585 (SC); La Moselle Clothing Ltd v Soualhi [1998] 2 ILRM 345; In re Lo-Line Ltd [1988] Ch 477; Re Newcastle Timber Ltd (in liquidation) [2001] 4 IR 586; Re NIB Ltd: Director of Corporate Enforcement v D'Arcy [2005] IEHC 333, [2006] 2 IR 163; In re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164; Re Squash (Ireland) Ltd [2001] 3 IR 35 and Re: Wood Products Ltd: Dir of Corp Enforcement v McGowan [2008] IESC 28, [2008] 4 IR 598 considered - Companies Act 1990 (No 33), ss 22 and 160(2) - Appeal allowed; restriction order substituted for disqualification order (161/2007 - SC - 6/12/2011) [2011] IESC 45

Director of Corporate Enforcement v Seymour

Facts: On the 20 ^th March 2007, the appellant was disqualified from being involved in a company as a director for nine years following an investigation by inspectors into the affairs of the National Irish Bank ('NIB') and later the National Irish Bank Financial Services Limited ('NIBFS') from 1988 onwards, both of which were subsidiaries of the National Bank of Australia at the relevant time. The report found that both bodies had been involved in inappropriate practices with responsibility for such actions lying with senior management. The appellant was found to have been a director from 1994 to 1996. As a result, the respondent sought a declaration from the court pursuant to s. 160 of the Companies Act 1990, as amended (the '1990 Act') that the appellant be disqualified from acting as a director, auditor, or other receiver, officer, or examiner; and from being directly or indirectly involved in the formation of management of a company for a period of time the court considered appropriate. Following the High Court ordering disqualification for nine years, an appeal was sought.

The appellant claimed that the order of the High Court should be set aside and the application of the respondent dismissed as a result of a number of errors of law by the trial judge. He argued that there had been a failure to apply the correct test for the purpose of deciding whether a disqualification order against the appellant was warranted, a failure to take into account the fact that no allegation of dishonesty was made against him at any stage, and a failure to take into account the purpose of disqualification orders (i.e. to protect the public from directors whose past conduct shows they are a potential danger to creditors). It was also argued that the court was wrong in law to extend the circumstances where a disqualification order would be appropriate to include situations where a director had failed to act as required or failed to realise what action should have been taken. In any event, it was also claimed that the period of disqualification for nine years was excessive.

Held by Macken J. (with Denham C.J. and Finnegan J. concurring) that the trial judge had failed to apply the correct legal test to the case of the appellant. The trial judge had made a finding that the appellant had lacked commercial probity, something he was not entitled to do as such a view required an element of dishonesty on the part of the appellant which was not alleged in the final report of the investigation. It was further held that the trial judge had, but was not entitled to, make findings from the cross-examination of the appellant in relation to his interviews before the inspectors where such material was not then found in the inspectors" report. Simply put, the court was not entitled to further examine the material before the Inspectors in order to reach conclusions that they had not.

It was further held the trial judge was not entitled to reach a conclusion he had in relation to bogus non-resident accounts. It was held that the appellant knew, or should have known, about these accounts and should have re-designated them. However, the trial judge had not stated in his judgment whether this constituted gross negligence or incompetence to a high degree, a requirement before making a disqualification order of this nature. However, it was clear that the appellant had failed to ensure that certain DIRT payments were properly returned to the Revenue Commissioners in compliance with the Finance Act 1986, which amounted to a significant failure. On that basis, it was held that a restriction order under s. 150 a period of five years instead of a disqualification order under s. 160 for would be appropriate.

Appeal allowed.

COMPANIES ACT 1990 S160(2)

COMPANIES ACT 1990 S160(2)(B)

COMPANIES ACT 1990 S160(2)(D)

COMPANIES ACT 1990 S160(2)(E)

CITY EQUITABLE FIRE INSURANCE CO LTD (NO.1), IN RE 1925 CH 407

LO-LINE ELECTRIC MOTORS LTD, IN RE 1988 CH 477

NEWCASTLE TIMBER LTD, IN RE 2001 4 IR 586

DIRECTOR OF CORPORATE ENFORCEMENT v D'ARCY 2006 2 IR 163

DIRECTOR OF CORPORATE ENFORCEMENT v COLLERY 2007 1 IR 580 2006/15/3109 2006 IEHC 67

DIRECTOR OF CORPORATE ENFORCEMENT v BYRNE 2009 2 ILRM 328

OXFORD ENGLISH DICTIONARY 2ED VOL.12

COMPANIES ACT 1990 S160

COMPANIES ACT 1990 S160(9)

COMPANY LAW ENFORCEMENT ACT 2001 S42

BARINGS, IN RE 1999 1 BCLC 433

DIRECTOR OF CORPORATE ENFORCEMENT v MCCANN 2011 1 IR 585

CAHILL v GRIMES 2002 1 IR 372

DIRECTOR OF CORPORATE ENFORCEMENT v MCGOWAN 2008 4 IR 598

COMPANIES ACT 1990 S22

1 Judgment delivered on the 6th day of December, 2011 by Macken J.

2 Judgment delivered by Macken J.

3 This is an appeal from the judgment of the High Court (Murphy J.) delivered on the 20 ^th March, 2007 and from the Order made thereon, by which the appellant was disqualified from being involved in a company in any of the ways mentioned in s. 160 (2) (b), (d) or (e) of the Companies Act 1990, as amended (the "Act of 1990"). Disqualification, pursuant to s.160(2)(e), for a period of twelve years was deemed appropriate and reduced by three years, to nine years.

Background

4 The High Court, on 30 ^th March, 1998, on the application of the Tanaiste and Minister for Enterprise, Trade and Employment, appointed two inspectors to investigate the affairs of a bank called National Irish Bank ("NIB") for the period 1988 to the date of their appointment. On 15 ^th June, 1998 the High Court, by further Order, broadened the Inspectors remit to permit them investigate the affairs of a related entity, National Irish Bank Financial Services Limited ("NIBFS"). At the time, NIB and NIBFS were subsidiaries of National Bank of Australia, and had been since 1987. By a later Order of the High Court made on 23 ^rd July, 2004, the Report of the Inspectors ("the Report") into these entities was published. I use NIB to designate both NIB and NIBFS,...