George Maloney v Ray Kane Senior, Alan Kane, Gary Kane and Alison Kane

• Jurisdiction: Ireland
• Judge: Mr. Justice Allen
• Judgment Date: 14 January 2022
• Neutral Citation: [2022] IEHC 10
• Court: High Court
• Docket Number: [2020 No. 369 COS]

In the Matter of Eurosurgical Limited (In Liquidation)

And in the Matter of the Companies Act 2014

And in the Matter of Section 228 of the Companies Act 2014

And in the Matter of Section 608 of the Companies Act 2014

And in the Matter of Section 609 of the Companies Act 2014

And in the Matter of Section 842 of the Companies Act 2014

Between

George Maloney

Applicant

and

Ray Kane Senior, Alan Kane, Gary Kane and Alison Kane

Respondents

[2022] IEHC 10

[2020 No. 369 COS]

THE HIGH COURT

Settlement agreement – Disqualification – Companies Act 2014 – Applicant seeking orders disqualifying each of the respondents from being appointed or acting as a director or other officer, statutory auditor, receiver, liquidator or examiner or being in any way, whether directly or indirectly, concerned or taking part in the promotion, formation or management of any company, friendly society or industrial and provident society for such period as seemed just and appropriate – Whether the minimum periods of disqualification to which the respondents had agreed were sufficient

Facts: The applicant liquidator, Mr Maloney, by originating notice of motion issued on 18th November, 2020, and originally returnable for 11th January, 2021, applied for a number of reliefs including orders pursuant to s. 842 of the Companies Act 2014 disqualifying each of the respondents, the Kanes, from being appointed or acting as a director or other officer, statutory auditor, receiver, liquidator or examiner or being in any way, whether directly or indirectly, concerned or taking part in the promotion, formation or management of any company, friendly society or industrial and provident society for such period as seemed just and appropriate. The applicant also sought orders imposing personal liability on each of the respondents for losses caused as a consequence of the failure to maintain proper books of account as required by the 2014 Act, and orders for the recovery of company monies pursuant to ss. 228(1)(a), 608(2) and 609(2) of the 2014 Act. In November, 2021 a settlement agreement was signed by each of the applicant and the respondents which dealt with the money claims and by which each of the respondents agreed to submit to disqualification orders for minimum periods. The High Court considered whether the minimum periods of disqualification to which the respondents had agreed were sufficient.

Held by Allen J that, having taken into account in each case the fact that the application – having been contested for a long time on correspondence and on affidavit – was conceded at the eleventh hour, and in the case of the fourth respondent the fact that her complicity was less, and for a shorter period of time, the actual period of disqualification in the case of the second and third respondents should be fourteen years and three months, and in the case of the fourth respondent nine years and nine months. Allen J made an order in the terms of the notice of motion disqualifying the first respondent for a period of fifteen years, disqualifying each of the second and third respondents for fourteen years and three months, and disqualifying the fourth respondent for nine years and nine months.

Allen J held that, as had been agreed in the settlement agreement, there would be judgment against the first respondent on a several basis for €18,000,000.00, with a stay on execution on the terms set out at para. 2; judgment against the second respondent on a several basis for €18,000,000.00, with a stay on execution on the terms set out at para. 3; and judgment against the third and fourth respondents on a joint and several basis for €18,000,000.00, with a stay on execution on the terms set out at para. 4. Allen J made an order to receive and file the settlement agreement and stay all further proceedings with liberty to apply to enforce the terms and conditions of the settlement agreement.

Settlement agreement.

JUDGMENT of Mr. Justice Allen delivered on the 14th day of January, 2022

Introduction

1 By originating notice of motion issued on 18th November, 2020, and originally returnable for 11th January, 2021, the applicant liquidator applied for a number of reliefs including orders pursuant to s. 842 of the Companies Act, 2014 disqualifying each of the respondents from being appointed or acting as a director or other officer, statutory auditor, receiver, liquidator or examiner or being in any way, whether directly or indirectly, concerned or taking part in the promotion, formation or management of any company, friendly society or industrial and provident society for such period as seemed just and appropriate.

2 The applicant also sought orders imposing personal liability on each of the respondents for losses caused as a consequence of the failure to maintain proper books of account as required by the Companies Act, 2014, and orders for the recovery of company monies pursuant to ss. 228(1)(a), 608(2) and 609(2) of the Act of 2014. I will come to the detail of the claims, which have since been admitted.

3 In November, 2021 a settlement agreement was signed by each of the applicant and the respondents which dealt with the money claims and by which each of the respondents agreed to submit to disqualification orders for minimum periods. This judgment considers whether the minimum periods of disqualification to which the respondents have agreed are sufficient.

Background

4 Eurosurgical Limited (“ the company”) was incorporated on 29th January, 1987 to carry on the business of the distribution of surgical and medical equipment to hospitals and doctors in Ireland, both in the public sector and the private sector. The company traded apparently successfully for nearly 30 years until July, 2015 when the Radio Telefís Éireann Prime Time programme made various claims concerning the company's business practices. The negative publicity had a significant effect of the company's business. At about the same time it became known that the first respondent had fraudulently misappropriated millions of euros of the company's funds and the company was the subject of a revenue audit.

5 By order of the High Court (Binchy J.) made on 23rd May, 2016, on the petition of the second, third and fourth respondents, which was presented on 19th May, 2016, the applicant was appointed provisional liquidator, and by order made on 13th June, 2016 (White J.) the company was ordered to be wound up and the applicant was appointed to act as liquidator.

6 At the time of presentation of the petition the first, third and fourth respondents were directors of the company. The first respondent had been so appointed on 6th February, 1987; the third respondent on 31st December, 2002, and the fourth respondent on 1st October, 2008. The second respondent had been a director from 1st September, 2000 until 23rd July, 2015.

7 At the time of presentation of the petition the first respondent owned 64.71% of the shares in the company and the second and third respondents each owned 17.65%.

8 In the meantime, on 9th May, 2016, on the eve of the presentation of the winding up petition, the company entered a purported business transfer agreement with a company called Gemini Surgical Innovations Limited (“ Gemini”). Two days later, on 11th May, 2016, the Revenue raised assessments on the company for €3,490,875.99, excluding interest and penalties.

9 Gemini was incorporated under the laws of Ireland on 13th January, 2016 as a company limited by shares. Its directors were Mr. Robert Dore, who was the company's solicitor, and Mr. Cathal McHugh, who had acted as the company's accountant. The second, third and fourth respondents were employees of Gemini. By the business transfer agreement the company purported to transfer to Gemini virtually all of the company's trading assets at what the applicant thought, but the second, third and fourth respondents for a long time contested, was a significant undervalue. To make a long story short, on 27th October, 2017 the applicant applied to the High Court pursuant to s. 608 of the Act of 2014 for a declaration that the purported transfer was void ab initio, and on 29th January, 2018 Gemini consented to an order in those terms.

10 The applicant takes as the starting point of the procedural history of the application now before the court a letter he wrote on 22nd October, 2018 to the solicitors for the second to fourth respondents and what was for all practical purposes an identical letter of 7th November, 2018 to the solicitors for the first respondent. These letters set out in a schedule a series of issues and transactions which had been identified by the applicant in the course of his investigation of the company and its affairs and which – it is now acknowledged – were a cause for serious concern. Over the following two years the solicitors for the respondents asked for time to respond – which they were given – and the solicitors for the first respondent asked for substantial documentation to allow them to address the queries – which they were given. None of the respondents dealt in correspondence with the substance of the applicant's questions and the motion issued on 18th November, 2020.

11 In response to the motion the first respondent swore a short affidavit on 17th February, 2021. The first respondent deposed that that on 19th December, 2016 he had been adjudicated bankrupt on his own petition. That adjudication, he said, would have captured all liabilities he had as at that date including “ any” liabilities he might ultimately be found liable “ as a result of the applicant's claims”. If he was correct in that, said the first respondent, the applicant would not be in a position to enforce any judgment he might obtain. And in any event, the first respondent said that he did not have the means to defend the claim.

12 The first respondent's solicitors had previously written to the applicant's solicitors on 7th...