Downtul Ltd [(in Liquidation)] v Companies Act

• Jurisdiction: Ireland
• Court: High Court
• Judge: Ms Justice Nessa Cahill
• Judgment Date: 24 June 2025
• Neutral Citation: [2025] IEHC 358
• Docket Number: Record no. 2023/184 COS

In the Matter of Downtul Limited (In Liquidation)

and

In the Matter of the Companies Act 2014

and

In the Matter of Section 819 of the Companies Act 2014

Between:

Patrick O'Connell

Applicant

and

Ciaran Butler and Colum Butler

Respondents

[2025] IEHC 358

Record no. 2023/184 COS

THE HIGH COURT

Declaration of restriction – Want of responsibility – Companies Act 2014 s. 819 – Applicant seeking a declaration of restriction – Whether the respondents acted responsibly with regard to the conduct of the affairs of the company

Facts: The respondents, Messrs Butler, were directors of Downtul Ltd (Downtul), which was placed in voluntary liquidation. The applicant, Mr O’Connell (the Liquidator), applied to the High Court seeking an order under s. 819(1) of the Companies Act 2014 declaring that the respondents “shall not, for a period of 5 years, be appointed or act in any way, directly or indirectly, as a director or secretary of a company, or be concerned in or take part in the formation or promotion of a company, unless the company meets the requirements set out in subsection (3)”. It was common case that Downtul’s sole transaction was a lease that was entered with Stephen Court Ltd (the Landlord). The lease related to the ground floor of a building at Stephen Court, St Stephen’s Green in Dublin city centre (the Property). The grounds for the application related to the management of Downtul in relation to that lease and its engagement with the Landlord. There were alleged failures with regard to books and records, revenue filings and the financial statements of Downtul. In addition to a want of responsibility, it was alleged that the respondents failed to act honestly.

Held by Cahill J that while Downtul bore the liability and burden of and under the Lease, a separate related company, Atercin Liffey Unlimited Company (Atercin), occupied and traded from the Property and earned revenue from that trade; the result of the arrangements was that Downtul did not occupy or use the Property and had no income, or means to generate income, to discharge the liabilities arising under the Lease, including rent. She found that there was no evidence of any enforceable mechanism for Downtul to recover monies from Atercin to meet its liabilities. She held that in allowing the Company to enter and maintain those arrangements, and in failing to ensure an enforceable mechanism by which Downtul could obtain the funds necessary to discharge its liabilities as they fell due or otherwise protect its position, the respondents failed to demonstrate responsible conduct with regard to the interests of Downtul as a separate legal entity. She found that the fact that the financial statements made no reference to the Lease or to the receipt of monies from Atercin to pay the rent and other charges associated with the Property underlined the lack of transparency in relation to the affairs of Downtul and the absence of any clarity as to Downtul’s assets and liabilities or the basis of the assertion of solvency. She held that the failure to keep proper accounting records, the omission of material disclosures from the financial statements and the failure to minute a single board meeting since 2017 were also - independently of her primary findings of irresponsibility - separate grounds on which she was not satisfied that the respondents acted responsibly.

Cahill J was not satisfied that the respondents acted responsibly with regard to the conduct of the affairs of Downtul. Consequently, she was mandated by s. 819(2) to make the declaration of restriction sought by the Liquidator.

Application granted.

JUDGMENT of Ms Justice Nessa Cahill delivered on 24 June 2025

Table of Contents

INTRODUCTION	3
A. SUMMARY OF FACTS	6
The Group	6
The Company	6
The Respondents	6
The Lease	6
Rent suspension	8
Events from July 2020 onwards	8
B. PRELIMINARY MATTERS	11
(a) The nature of a restriction application	11
(b) Rules of Procedure	12
(c) Role of an applicant	13
(d) Onus on Directors	14
(e) Test of Responsibility	14
(f) Reasonable person	19
(g) Dishonesty	19
(h) Role of the Court	21
(i) Consideration of other companies	21
(j) Summary	24
C. EXPERT EVIDENCE	24
(a) Relevant Rules	24
(b) Irish cases	25
(c) English cases	29
(d) Summary of legal principles	31
(e) Expert evidence in applications for restriction	32
(f) Expert evidence in this Application	33
(g) Evidence of Mr Wallace	35
D. GROUNDS OF RESTRICTION	44
(a) Corporate structure, inter-company transactions	45
(b) Accounting records, financial statements	50
(c) Corporate governance	63
(d) Relationship with the Landlord	67
(e) Allegation of Dishonesty	71
(f) Revenue matters	74
E. MISCELLANEOUS TOPICS	78
(a) Date of insolvency	78
(b) Cooperation with the Liquidator	80
(c) Participation of the Second Respondent	81
(d) Criticisms of the First Respondent's evidence	81
F. CONCLUSIONS	82

Introduction

1 By this Application, Mr O'Connell (“ the Liquidator”) seeks an order under section 819(1) of the Companies Act 2014 (“ the Act of 2014”) declaring that the Respondents

“ shall not, for a period of 5 years, be appointed or act in any way, directly or indirectly, as a director or secretary of a company, or be concerned in or take part in the formation or promotion of a company, unless the company meets the requirements set out in subsection (3)”.

2 The essential threshold facts are that the two Respondents were directors of a company (Downtul Limited, referred to in this judgment as “ Downtul” or “ the Company”), which was placed in voluntary liquidation at a creditors meeting held on 15 November 2022.

3 The Liquidator submitted a report to the Corporate Enforcement Agency (“ the CEA”) as required by section 682 of the Act of 2014 on 15 May 2023 (“ the CEA Report”). In the CEA Report, the Liquidator did not seek to be relieved of the obligation to make this Application, but rather listed his concerns regarding the conduct of the Respondents under ten headings (appendix 7 to the Report).

4 The Liquidator concludes in that Report that “ the responses from the directors have not provided me with sufficient evidence that the directors acted honestly and responsibly with regard to their duties, responsibilities and actions as directors of the Company.”

5 At the hearing, it was common case that the Company did not trade or carry on a business and that its sole transaction was a lease that was entered with Stephen Court Limited (“ the Landlord”) on 19 December 2013 (“ the Lease”). The Lease related to the ground floor of a building at Stephen Court, St Stephen's Green in Dublin city centre from which a Starbucks café was operated (“ the Property”).

6 The grounds for the Application relate, broadly speaking, to the management of the Company in relation to this Lease and its engagement with the Landlord. There are specific alleged failures with regard to books and records, revenue filings and the financial statements of the Company. In addition to a want of responsibility, it is alleged that the Respondents failed to act honestly. In the course of the hearing, additional issues were raised, including issues based on the oral evidence given by the First Respondent.

7 The Respondents oppose the Application and every ground on which it is made although the Second Respondent did not furnish written or oral evidence (other than a confirmatory affidavit delivered before the final day of the hearing).

8 This Application has a number of relatively unusual features. The hearing itself lasted five days and included the evidence and cross-examination of the Liquidator, the First Respondent and Ms Deirdre Hayes (a director of the Landlord). Evidence was given by two expert witnesses, Mr Niall Hughes and Mr Kieran Wallace, on behalf of the Liquidator and the Respondents, respectively. This is rare for an application under section 819 (or indeed under its predecessor, section 150 of the Companies Act 1990).

9 In terms of the substance of the Application, some novel and important questions were raised, including questions about the impact of Covid on the roles and responsibilities of directors. There is also a specific assertion that the Respondents should be restricted on the ground of dishonesty, a rare assertion in an application of this nature and one for which extensive reliance is placed on the interaction between the Respondents and the Landlord.

10 Very helpful written submissions were furnished by the Liquidator and the Respondents both before the commencement of the hearing and before closing oral submissions were made. These written and oral submissions have assisted greatly in identifying and assessing the issues that fall for determination on this Application.

11 Having considered the evidence and the submissions (written and oral), I am not satisfied that the Respondents acted responsibly with regard to the conduct of the affairs of the Company. Consequently, I am mandated by section 819(2) to make the declaration of restriction sought by the Liquidator.

12 The primary ground for this finding relates to the Respondents' approach to structuring the assets and liabilities of the Company and its engagement with a related company, such that, while Downtul bore the liability and burden of and under the Lease, that separate related company (Atercin Liffey Unlimited Company, “ Atercin”) occupied and traded from the Property and earned revenue from that trade. I have seen no evidence of an agreement properly so-called, or of any consideration being given to the rights of Downtul.

13 The result of the arrangements was that Downtul did not occupy or use the leased property and had no income, or means...