Joseph Arkins v David Murphy and Another
| Jurisdiction | Ireland |
| Judge | Mr. Justice Max Barrett |
| Judgment Date | 13 January 2015 |
| Neutral Citation | [2015] IEHC 2 |
| Court | High Court |
| Date | 13 January 2015 |
[2015] IEHC 2
THE HIGH COURT
AND
COMPANIES ACT 1990 S150
COMPANIES ACT 1963 S214
COMPANIES ACT 1963 S213(E)
COMPANIES ACT 1990 S31
COMPANIES ACT 1990 S152
MITEK HOLDINGS LTD, IN RE; GRACE (LIQUIDATOR) v KACHKAR & MCCELLAN CARRIGAN 2010 3 IR 374 2010/36/9110 2010 IESC 31
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BUSINESS COMMUNICATIONS LTD v BAXTER UNREP MURPHY 21.07.1995 1995/1869
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PINEROAD DISTRIBUTION LTD, IN RE; STAFFORD v FLEMING UNREP HANNA 7.3.2007 2005/57/12150 2007 IEHC 55
FREDERICK INNS LTD, IN RE 1994 1 ILRM 387 1994 ITR 779 1993/11/3568 1993 IESC 1
KINSELA v RUSSELL KINSELA PROPERTY LTD 1986 4 NSWLR 722 1986 4 ACLC 215
XNET INFORMATION SYSTEMS LTD, IN RE HIGGINS v STAFFORD UNREP O'NEILL 10.10.2006 2006/29/6134 2006 IEHC 289
DIRECTOR OF CORPORATE ENFORCEMENT v SLATTERY UNREP BARRETT 23.7.3.2014 2014 IEHC 363
HUNTING LODGES (IN LIQUIDATION), IN RE 1985 ILRM 75 1984/7/2295
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COMPANIES ACT 1963 S60
ZUCCINI CAFE & RESTAURANT LIMITED (IN VOLUNTARY LIQUIDATION) IN RE MCCoy v COURTNEY UNREP BARRETT 25.07.2014 2014 IEHC 369
MINT RESTAURANT LTD, IN RE; MCCOY v COURTNEY UNREP BARRETT 25.7.2014 2014 IEHC 370
Company Law – Directors – Declaration of Restriction – s. 31 and s. 150 of the Companies Act 1990
Facts: The applicant applied for a declaration of restriction against each of the respondents pursuant to s. 150 of the Companies Act 1990. The applicant alleged that both respondents had a want of responsibility as a company director. The applicant also alleges that it was just and equitable for the court to issue a restriction in the circumstances. No allegation of dishonesty was made against either respondent. The applicant argued that the respondents did not discharge the company”s debts due to the Revenue Commissioners and issued cheques that were subsequently dishonoured. The applicant also contends that the last set of company accounts filed were incorrect. The applicant”s third allegation was that the respondents should have convened a creditor meeting earlier than they did and only did so after receiving a statutory demand from the Revenue Commissioners. The applicant”s fourth allegation was that the respondent directors breached s. 31 of the Companies Act 1990 because they never repaid a loan made to them. The applicant”s final allegation was that the respondents provided a creditor with a misleading document that overstated the financial position of the company months prior to its winding up.
Held by Barrett J: In relation to the first allegation the parties agreed there was no dishonouring of cheques. The court considered the case law in this area and determined that non-payment of tax did not always result in a declaration of restriction being issued. In this instance the court said the requisite factors required for a declaration of restriction against the respondents for non-payment of taxation were not present. The court did not consider it otherwise just and equitable to issue a restriction.
In relation to the second allegation of filing incorrect accounts, the court determined that the respondents” behaviour was not irresponsible enough to require a declaration to be issued. Again the court did not consider it otherwise just and equitable to issue a declaration of restriction.
The court stated that it was difficult to identify exactly when a creditor meeting should be held and some leeway should be given to directors in this regard. The court determined that the directors” actions in not convening a meeting earlier did not demonstrate a want of responsibility justifying the issuance of a declaration. Nor did the court consider it otherwise just and equitable that a restriction be issued in relation to allegation three.
In relation to allegation four the area of company loans to directors is tightly regulated. The court determined it had insufficient evidence to conclude that a breach of s. 31 of the 1990 Act occurred. It was satisfied that no loan monies were issued to Ms Murphy. The court was provided with evidence showing that most of the loans given had been repaid. While Mr and Mrs Murphy”s actions could be criticised they could not be considered irresponsible or dishonest, nor did they offer a basis on which it would be otherwise be just and equitable that they should be restricted as directors.
The court determined that the relevant document in relation to the final allegation had been prepared in good faith on the accounts available at the time and clearly marked as a “draft”. They held that the company accounts had been prepared and maintained to an appropriate standard and could reasonably be relied upon. The respondents” behaviour did not warrant a declaration of restriction under s. 150, nor was it otherwise just and equitable that such a declaration be made.
Judgment of Mr. Justice Max Barrett delivered on 13th January, 2015
1. This is an application for a declaration of restriction against each of the respondents brought pursuant to s.150 of the Companies Act, 1990, as amended. In the case of each respondent the allegation made is that he or she, as appropriate, evinced a want of responsibility as a director of Salesprint such as to require the issuance of a declaration of restriction at this time. Alternatively, it is alleged that it is otherwise just and equitable having regard to all the relevant facts that such a restriction should issue at this time. No allegation of dishonesty is made against either director nor, the court finds, does any suggestion of dishonesty arise from the facts.
2. In respect of each director the key issue arising is whether he or she, as appropriate, took the steps that one would expect of a company director when it became apparent that Salesprint was in financial difficulty. In respect of Ms Murphy, a second issue arises, being whether the purportedly nominal role that she played as a company director has the consequence that she ought not in any event to be exposed to a declaration of restriction under s.150.
3. Salesprint was incorporated on 26 th July, 1965. It entered voluntary liquidation on 28 th August, 2012. Salesprint encountered significant financial difficulties in roughly the last two years of its existence. Mr. David Murphy has averred in his affidavit evidence that Salesprint, throughout its existence, "provided both a sourcing and logistics handling service to clients". This line of business apparently included: sourcing advertising and point-of-sale materials for companies within the drinks industry; and providing customers with a logistics service whereby their advertising materials were warehoused, collected and delivered to the end-user. The company had annual contracts with companies such as Beamish & Crawford, Diageo, Bulmers, and Britvic Ireland.
4. In July 2010, following a review by Diageo of its operations, the annual service contract that it previously maintained with Salesprint was not renewed. This resulted in a revenue loss to Salesprint of about €330k. per annum. The loss of this business came as a considerable shock to Salesprint which to that time had anticipated that its business with Diageo would increase. Following this loss of business, Salesprint undertook a review of its business and, unfortunately for the individuals concerned, cut back immediately on its warehouse staff, reducing their number by about 30 per cent. Salesprint also agreed a surrender of the lease on one of three warehouses which it rented.
5. In January 2011, Salesprint undertook a full review of its business in light of the loss of the Diageo contract and put in place a number of measures to reduce its overhead costs. The principal such measures were: (1) all staff, to their credit, agreed to a 10 per cent wage cut and, in October 2011, some staff, regrettably, lost their jobs through redundancy, a combination of events that resulted in a substantial reduction of Salesprint's annual wage bill from €164k. per annum to €70k. per annum; and (2) the company agreed a surrender of the lease on the second of three warehouses which it had rented, as well as a rent reduction of 50 per cent on the remaining warehouse; these measures combined with the earlier surrender of a warehouse reduced Salesprint's annual rent bill from approximately €165k. to €44k. per...
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Tailored Homes Ltd
...are also to be found in the decisions of the High Court in Re Shellware Limited [2014] IEHC 184, para.8 and Arkins v. Murphy & Anor [2015] IEHC 2, para. 34). 35 When looking at the PAYE/PRSI dimension of matters, it appears to the court that there are three significant features to the respo......