Director of Corporate Enforcement v Stakelum

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr. Justice Brian McGovern
• Judgment Date: 31 July 2007
• Neutral Citation: [2007] IEHC 486
• Date: 31 July 2007

[2007] IEHC 486

THE HIGH COURT

[No. 81 COS/2006]

Director of Corporate Enforcement v Stakelum

IN THE MATTER OF THE COMPANIES ACTS, 1963– 1990 AND IN THE MATTER OF PART II OF THE COMPANIES ACT, 1990, AND SECTIONS 8 AND 17.

AND IN THE MATTER OF ANSBACHER (CAYMAN) LIMITED (FORMALLY GUINESS MAHON CAYMAN TRUST LIMITED, ANSBACHER LIMITED, AND CAYMAN INTERNATIONAL BANK AND TRUST COMPANY LIMITED)

BETWEEN

DIRECTOR OF CORPORATE ENFORCEMENT

APPLICANT

AND

JOHN J. (AKA JACK) STAKELUM

RESPONDENT

COMPANIES ACT 1990 S160(2)(E)

TAXES CONSOLIDATION ACT 1997 S1056

TAXES CONSOLIDATION ACT 1997 S1078(2)

CENTRAL BANK ACT 1971

CENTRAL BANK ACT 1989

CAHILL v GRIMES 2002 1 IR 372 2002/5/1025

COMPANIES ACT 1990 S160

LO-LINE ELECTRIC MOTORS LTD, IN RE 1988 CH 477 1988 3 WLR 26 1988 2 AER 692

DIRECTOR OF CORPORATE ENFORCEMENT v SEYMOUR UNREP MURPHY 20.3.2007 2007/14/2919 2007 IEHC 102

DIRECTOR OF CORPORATE ENFORCEMENT v D'ARCY 2006 2 IR 163 2005/16/3273 2005 IEHC 333

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

COMPANIES ACT 1990 S22

COUNTYGLEN PLC v CARWAY 1998 2 IR 540 1996/2/508

CHESTVALE PROPERTIES LTD v GLACKIN 1993 3 IR 35 1992 ILRM 221 1992/1/103

COMPANIES ACT 1990 S6

CONSTITUTION ART 43.2.1

COMPANIES ACT 1963 S184

WESTMID PACKING SERVICES LTD (NO 2), IN RE 1998 2 AER 124 1998 BCC 836

COMPANY LAW

Directors

Disqualification - Activity designed to conceal funds from revenue commissioners - Test for disqualification - Whether person engaged in conduct making him unfit to be concerned in management of company - Purpose of section - Whether commercial misjudgement sufficient to justify disqualification - Whether conduct displayed lack of commercial probity - Deterrent element - Whether period of disqualification must reflect gravity of offence - Cahill v Grimes [2002] 1 IR 372, Re NIB Ltd: Director of Corporate Enforcement v Seymour [2007] IEHC 102, (Unrep, HC, Murphy J, 20/3/2007), Re NIB Ltd: Director of Corporate Enforcement v D'arcy [2005] IEHC 333, [2006] 2 IR 163, Re Ansbacher: Director of Corporate Enforcement v Collery [2006] IEHC 67, [2007] 1 IR 580, Countyglen v Carway [1998] 2 IR 540, Glackin v Trustee Savings Bank [1994] 3 IR 55 and Re Westmid Packing [1998] 2 All ER 124, [1998] BCLC 646 considered - Re Lo-line Limited [1988] Ch 477, [1988] 3 WLR 26, [1988] 2 All ER 692 applied - Companies Act 1990 (No 33), ss 22 and 160(2)(e) - Disqualification order granted for period of five years (2006/81 COS - McGovern J - 31/7/2007) [2007] IEHC 486

Director of Corporate Enforcement v Stakelum

1 JUDGMENT of Mr. Justice Brian McGovern delivered on Tuesday 31st July, 2007.

2 1. This is an application brought by the Director of Corporate Enforcement ("the Director") seeking an order of disqualification pursuant to s. 160(2)(e) of the Companies Act, 1990 against the respondent.

3 2. On the 22 ^nd September, 1999 the High Court appointed Inspectors to investigate the nature and extent of the Irish business of Ansbacher (Caymen) Limited ("Ansbacher") from 1971 up to that date and to report on related matters.

4 3. The Inspectors published their report on the 24 ^th June, 2002 and the Director brings this application on foot of the report and the findings contained therein. The applicant contends that the conduct of the respondent makes him unfit to be concerned in the management of a company.

5 4. The Inspectors found inter alia that there was evidence tending to show that the affairs of Ansbacher were conducted with intent to defraud the Revenue authorities and that Ansbacher may have committed a number of criminal offences namely:-

6 (a) The common law offence of conspiracy to defraud, and

7 (b) The offence of knowingly, aiding, abetting, assisting, inciting or inducing another person to maker or deliver knowingly or wilfully any incorrect return, statements or accounts in connection with their tax contrary to the provisions of the appropriate tax legislation then consolidated in Sections 1056 and 1078(2) of the Taxes Consolidation Act, 1997.

8 (c) The Inspectors also found that there was evidence tending to show that Ansbacher committed other offences such as the failure to pay corporation tax lawfully due.

9 5. The Inspectors concluded that the Respondent gave assistance to Ansbacher in the carrying out of its Irish business but that, as his detailed knowledge of this business was sparse, such assistance was not knowing assistance. They made a number of express findings against the respondent arising from the evidence considered by them namely:

10 i "(i) That Mr. Stakelum provided a deposit taking service;

11 (ii) That some of the deposits were held off-shore;

12 (iii) That Mr. Stakelum provided a withdrawal service in Ireland;

13 (iv) That Mr. Stakelum made use of a non-interest bearing account for the purposes of hiding the business in question from the Revenue authorities;

14 (v) That the service was carried out in secrecy;

15 (vi) That Mr. Stakelum was a Chartered Accountant and experienced business advisor.

16 6. The Inspectors also concluded that the Respondent, acting through Clyde Enterprises (formerly Business Enterprises), operated a current account in an AIB branch. The account did not attract interest. When the Respondent received an Irish pounds deposit from a client he lodged it into the Clyde Enterprises account where it was incorporated into a float of funds until some other client wished to withdraw money from an offshore account. The Respondent would give funds to Mr. Traynor who moved them offshore. The withdrawal would be funded out of the float. The Inspectors found that there was evidence tending to show that he provided a mechanism whereby Irish residents could withdraw their off-shore funds in Ireland and concluded that he carried out this business with intent to defraud creditors of the depositors, namely, the Revenue authorities. See chapter 20.10 and chapter 20.11 of Report.

17 7. The Inspectors concluded there was evidence tending to show that the respondent may have committed a number of criminal offences such as conspiracy to defraud, breaches of the Taxes Consolidation Act, 1997 and breaches of the Central Bank Act, 1971 and 1989 in carrying out a banking business without the requisite licence.

8. Test for Disqualification.

18 In Re: Readymix Limited (in liquidation): Cahill v. Grimes [2002] 1 I.R. 372 the appropriate test for disqualification under s. 160 of the Companies Act, 1990 was considered by the Supreme Court. Murphy J. quoted with approval the statement of Brown Wilkonson V.C. in Re: Lo-line Limited [1988] Ch 477, at pp 485–486.

"What is the proper approach to deciding whether someone is unfit to be a Director? The approach adopted in all cases to which I have been referred is broadly the same. The primary purpose of the section is not to punish the individual but to protect the public against the future conduct of companies by persons whose past records as Directors of insolvent companies have shown them to be a danger to creditors and others. Therefore, the power is not fundamentally penal. But, if the power to disqualify is exercised, disqualification does involve a substantial interference with the freedom of the individual. It follows that the rights of the individual must be fully protected. Ordinarily commercial misjudgement is in itself not sufficient to justify disqualification. In the normal case, the conduct complained of must display a lack of commercial probity, although I have no doubt that in an extreme case of gross negligence or total incompetence disqualification could be appropriate."

19 9. This case has also been cited with approval in a number of High Court decisions. In Director of Corporate Enforcement v. Seymour (Unreported, High Court, Murphy J., 20 ^th March, 2007) the judge referred to the cases of Director of Corporate Enforcement v. D'arcy [2005] I.E.H.C. 333 and Director of Corporate Enforcement v. Collery [2006] I.E.H.C. 67. He said:-

"It is clear from the decisions in D'arcy and Collery… that a failure to comply with legislation by a person who had responsibility and who could have resolved issues of non-compliance, is sufficient to justify disqualification."

20 10. Having reviewed the evidence in this case I am quite satisfied that the Inspectors were entitled to reach the conclusions they did concerning the respondent. The respondent was a Chartered Accountant with some years experience prior to setting up Business Enterprises Limited in 1975. This company offered a range of consultancy services up until 1998. The business involved giving commercial and financial advice to the respondent's clients. The respondent had worked as a Chartered Accountant with the late Mr. Desmond Traynor in the firm of Haughey Boland during the 1960's. He became a partner of that firm in 1967 and worked there until 1975. He was a close personal friend of Mr. Traynor. Among the papers which have been exhibited with the applicant's affidavit sworn on the 2 ^nd August, 2006 is a transcript of evidence taken by the Inspectors. These transcripts formed appendices to the Inspectors report. Appendix XV (121)(1)(a) is a transcript of a private examination of Mr. Jack Stakelum under oath on Wednesday 8 ^th November,...