Kavanagh v Riedler

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 27 May 2004
• Neutral Citation: [2004] IEHC 334
• Docket Number: [2003
• Court: High Court
• Date: 27 May 2004

[2004] IEHC 334

THE HIGH COURT

[2004] IRLHC 334

[2003 No. 234 COS]

KAVANAGH v. RIEDLER & ORS

IN THE MATTER OF RMF (IRELAND) LIMITED (IN VOLUNTARY LIQUIDATION)

AND IN THE MATTER OF SECTION 1550 OF THE COMPANIES ACT 1990

AND SECTION 56 OF THE COMPANY LAW ENFORCEMENT ACT 2001

BETWEEN

TOM KAVANAGH

APPLICANT

AND

JOSEF RIEDLER, JUERGEN WEISSMAN, PATRICK COADY, KLAUS RAUCH, JOHN TWOMEY, AND RAY BUSHE

RESPONDENTS

Citations:

COMPANIES ACT 1990 S150

COMPANY LAW ENFORCEMENT ACT 2001 S56

COMPANIES ACT 1990 S150(1)

COMPANIES ACT 1990 S150(2)

COMPANIES ACT 1990 S150(2)(a)

SQUASH (IRL) LTD, RE 2001 3 IR 35

BARINGS PLC (NO 6), IN RE; SECRETARY OF STATE FOR TRADE & INDUSTRY V BAKER (NO 6) 1999 1 BCLC 433

VEHICLE IMPORTS LTD, IN RE UNREP MURPHY 23.11.2000 2000/17/6574

Synopsis:

- [2004] 3 IR 498

The applicant was the liquidator of RMF (Ireland) Limited (the company) and had brought proceedings seeking to have a number of respondents restricted from acting as directors under section 150 of the Companies Act, 1990. The proceedings had been finalised against all the respondents, barring one respondent (Mr. Coady), resulting in three declarations of restriction being made. The present application concerned Mr. Coady. Evidence was given by Mr. Coady that he had been a non-executive director of the company and at a certain point had become aware of the company's financial position and had thereafter assisted in organising a refinancing arrangement. In addition he had also engaged the services of an accountant to monitor the finances of the company. In the light of the accountant's report on the state of the company Mr. Coady had tendered his resignation as a director. The resignation was not however registered in the Companies Registration Office prior to the liquidation.

Held by Finlay Geoghegan J in dismissing the application. It was not disputed that Mr. Coady was a director within 12 months of the winding-up of the company. The court must however recognise a distinction between executive and non-executive directors and recognise that a non-executive director was entitled to rely upon infonnation provided by his fellow executive directors and rely upon them to carry out their normal management functions. Mr. Coady had discharged the duty of keeping himself informed of the financial affairs of the company and had taken significant steps to organise re-finance in a way which went beyond his role. At all relevant times Mr. Coady had acted responsibly in relation to the conduct of the company's affairs and the application would be dismissed.

Reporter.R.F.

1 Ms. Justice Finlay Geoghegan delivered on the 27th day of May 2004.

2 The applicant is the liquidator of RMF (Ireland) Limited (in voluntary liquidation) ("the Company"). The resolution that the Company be wound up was passed on 27 ^th November 2001. The applicant sought a declaration that each of the respondents be restricted under Section 150 of the Companies Act 1990, not having been relieved from his obligation to bring this application pursuant to Section 56 of the Company Law Enforcement Act 2001.

3 The applicant has averred to the fact that the fourth named respondent is deceased. The applications against each of the remaining respondents other than Mr. Patrick Coady the third named respondent have already been disposed of. The court was satisfied on 30 ^th July, 2003 that the fifth named respondent Mr. John Twomey was not a director of the company within 12 months of the date of commencement of the winding up. Declarations of restrictions were made on 28 ^th January, 2004 in respect of the first, second and sixth named respondents.

Background Facts

4 The company was involved in road haulage, international haulage, warehousing and logistics. The first, second, fourth and sixth named respondents appear to have been the executive directors of the company. The applicant, in his grounding affidavit identified a number of factors which in his view caused the insolvency of the company including poor management, loss of key agencies and contracts, loss of staff to competitors and increases in overheads. The final deficit appears to have been in the order of €3.5 million.

5 Mr. Coady has sworn an affidavit setting out his involvement in the company. The facts stated therein have not been disputed. It appears therefrom that he became a director of the company and acquired a shareholding at a cost of IR£191,000 in September 1997. The first named respondent Mr. Riedler was a personal friend and it was through him that Mr. Coady became involved in the company. In May/June 2000 Mr. Coady acquired a further 21.66% of the company from BTG Internationale Spedition Gmbh at a cost of DM 500,000.

6 It was agreed that Mr. Coady be a non-executive director of the company. He states that when he first became involved with the Company that he was an experienced business man with extensive interests, primarily in construction and the motor trade but with no experience of the type of business operated by the Company. He exhibited the notepaper of the Company which clearly indicates that he is a non executive director. He avers to the fact that he kept himself appraised of the company's affairs primarily through contact with Mr. Riedler but from September/October 2000 became more actively involved until his resignation in June 2001. It appears that in September/October 2000 after Mr. Coady's further investment in the Company he became aware of a factoring agreement between the Company and Bank of Ireland Commercial Services in relation to the Company's debtors. He became concerned that such a factoring agreement was necessary and began to examine the finances of the Company in greater detail. He thereafter assisted the executive directors in organising a refinancing arrangement with Bank of Scotland. He states that this was to the net benefit of the company by approximately €1 million. He continued to monitor the finances and when these did not appear to be improving he then engaged a Mr. O'Meadhra a Chartered Accountant to carry out a review. Together with Mr. Riedler and the then financial controller of the Company he had an initial meeting with Mr. O'Meadhra. Subsequently Mr....