Duignan v Carway

• Jurisdiction: Ireland
• Judge: FENNELLY J.
• Judgment Date: 31 July 2001
• Neutral Citation: [2001] IESC 74
• Date: 31 July 2001
• Court: Supreme Court
• Docket Number: [1994 No. 225 Cos.; S.C. No. 242 of 2000]

[2001] IESC 74

THE SUPREME COURT

Murray J.

Hardiman J.

Fennelly J.

No 242/00

DUIGNAN v. CARWAY & LETCANE INVESTMENTS

IN THE MATTER OF VERIT HOTEL & LEISURE (IRELAND) LIMITED (IN

RECEIVERSHIP AND LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACTS 1963– 1990

BETWEEN

VINCENT DUIGNAN

RESPONDENT/APPLICANT

AND

JOHN CARWAY STEPHEN CARWAY ELAINE CARWAY AND LETCANE INVESTMENTS

APPELLANTS/RESPONDENTS

Citations:

COMPANIES ACT 1990 S150

COMPANIES ACT 1990 S150(1)

COMPANIES ACT 1990 S149

COMPANIES ACT 1990 S150(3)

COMPANIES ACT 1990 PART VII

COMPANIES ACT 1990 S149(1)(b)

CARWAY V AG 1996 3 IR 300

PRIMOR PLC V STOKES KENNEDY CROWLEY 1996 2 IR 459

BUSINESS COMMUNICATIONS LTD V KEITH BAXTER UNREP MURPHY 21.7.1995 1995/6/1869

COMPANIES ACT 1990 S150(2)

F (S) V DPP 1999 3 IR 235

RAINSFORD V LIMERICK CORPORATION 1995 2 ILRM 561

CAPUANO V ITALY 13 EHRR 271

VERNILLO V FRANCE 13 EHRR 880

Synopsis

COMPANY LAW

Liquidation

Practice and procedure - Delay - Right to expeditious hearing - Fair procedures - Duties of directors - Restriction of directors - Statutory interpretation - Whether legislation intended to be retrospective - Whether delay in bringing proceedings inordinate and inexcusable - Whether balance of justice favoured allowing motion to proceed - Whether delay resulted in prejudice - Companies Act, 1990 section 150 (242/2000 - Supreme Court - 31/7/01)

Duignan v Carway - [2001] 4 IR 557

The applicant, acting as official liquidator, had brought a motion under section 150 of the Companies Act, 1990 seeking to have the respondents restricted from acting as directors. The motion had been issued in 1994 and had not been proceeded with. The liquidator now sought to proceed with the motion and in this regard had served a notice of intention to proceed. On behalf of the respondents a motion was brought seeking to have the liquidator's motion set aside. It was argued on behalf of the respondents that an order made under section 150 must date from the commencement of proceedings. In addition it was argued that there had been excessive and inordinate delay by the liquidator in bringing his motion. O'Donovan J held that section 150 was prospective and any restriction made thereon would date from the date of the relevant court order. The liquidator had quite properly proceeded with a damages claim against the respondents before bringing the section 150 motion. However the delay that had occurred in bringing the section 150 motion was inexcusable and inordinate. However applying the principles of Primor plc v Stokes Kennedy Crowley the balance of justice required that the liquidator's motion should proceed. The motion brought by the respondents would therefore be dismissed. The respondents appealed against the judgment. Mr. Justice Fennelly in the Supreme Court held that there was no basis for presuming that the delay in question had resulted in prejudice. The appeal would be dismissed.

1 31st day of July, 2001 by FENNELLY J. [nem diss]

2 This appeal is taken against the refusal of O'Donovan J to strike out, on the ground of delay, an application brought by a liquidator of an insolvent company, pursuant to section 150 of the Companies Act, 1990, for an order restricting the rights of its directors from acting as director or secretary or otherwise participating in the promotion of a company for a period of five years.

3 Section 150(1) in Part VII, Chapter I of the act provides as follows:

"The court shall, unless it is satisfied as to any of the matters specified in subsection (2), declare that a person to whom this Chapter applies shall not, for a period of five years, be appointed or act in anyway, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion of formation of any company unless it meets the requirements set out in subsection (3);"

4 That section applies, by virtue of section 149, to any company shown to be unable to pay its debits either at the commencement or during the course of its winding-up and to any person who was a director at the date of or within twelve months prior to the winding-up. It can be assumed, for the purposes of this appeal, that the section applies.

5 The most material potential relieving provision is that in section 150(2)(a) permits a court to decline to make a declaration if it is satisfied by a director that he "has acted honestly and responsibly in relation to the affairs of the company and that there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this section."

6 Furthermore, the severity of the restrictions mandated by the section is significantly ameliorated by section 150(3). They do not affect participation in any public company with an allotted share capital paid up in cash of £100,000. In the case of other companies, the qualifying figure is £20,000.

7 The liquidator, in the present case, (the Applicant, Respondent on the appeal) having brought the application required by the section allowed it to lie in abeyance for more than five years, before reactivating it. I will refer to him as the liquidator. Accordingly, a chronology of the relevant facts is essential to an appreciation of the present application.

8 On 10 ^th August 1994, Verits Hotels and Leisure (Ireland) Limited (the company), was ordered to be wound up and the High Court and the Applicant was appointed official liquidator.

9 On 10 ^th November 1994, the applicant wrote to each of the respondents (whom I will call the directors) stating that it appeared that the company was insolvent and that they might wish to consider their position having regard to Part VII of the act.

10 The liquidator, by Notice of Motion dated 6 ^th December 1994 returnable for 16 ^th January 1995, gave notice to each of the directors of his intention to ask the High Court to make an order pursuant to section 150. In his grounding affidavit, he certified the insolvency of the company pursuant to section 149(1)(b) of the act.

11 The application did not proceed in 1995. Two sets of legal proceedings between the parties supervened.

12 Firstly, the directors mounted a constitutional challenge to the relevant legislation and in particular the power of the liquidator to certify insolvency. This was done by means of a motion within the liquidation. In November 1995 an order was made for the trial of this issue which was heard by Carroll J on 18 ^th June 1996 and was determined by her against the directors in her Judgment dated 3 ^rd July 1996. (See Carway v Attorney General [1996] 3 I.R. 300.)

13 Secondly, the liquidator brought proceedings against the directors described variously as being based on a fraudulent preference and for mismanagement of the company (which I will call the damages claim). At any rate, these proceedings were clearly serious. They were also protracted and appear to have involved several interlocutory motions and appeals to the Supreme Court. They were compromised on the agreement of the directors to pay £500,000 and the costs of the proceedings to the liquidator. The implementation of the settlement led to some further difficulties which were not fully resolved until May 1999.

14 The liquidator gave notice on 10 ^th March 2000 of re-entry of the Notice of Motion of 6 ^th December 1994. The directors brought the present motion on 21 ^st March 2000 Regulations to have that motion dismissed on the ground of excessive delay, by the liquidator. There was no reason for the delay after the judgment of Carroll J in July 1996 and the liquidator had given no satisfactory explanation for his subsequent delay of three years and nine months. They also said that they had assumed that the matter of the declaration was no longer being pursued especially after the December 1998 settlement.

15 O'Donovan J noted that the directors accepted that the delay during the currency of the constitutional proceedings was excusable. He also held that the delay during the period of processing of the damages claim was totally reasonable. It the directors had successfully defended those proceedings, they would probably have succeeded also in resisting the section 150 motion.

16 The directors have not contested that aspect of the decision of O'Donovan, J. Thus the crucial period is that between the conclusion of the damages claim, and the notice of re-entry. In this respect, the liquidator accepted that the delay was inexcusable, but said that it was not inordinate. The learned trial judge disagreed. He held that this period of delay was both inordinate and inexcusable. The liquidator has not challenged that conclusion.

17 The learned High Court judge cited the decision of this Court in Primor plc v Stokes...