O'Keeffe v Ferris

• Jurisdiction: Ireland
• Judge: Mr. Justice Francis D. Murphy
• Judgment Date: 01 January 1994
• Neutral Citation: 1993 WJSC-HC 4197
• Court: High Court
• Docket Number: [1992 No. 6979P],No. 6979p/1992
• Date: 01 January 1994

1993 WJSC-HC 4197

THE HIGH COURT

No. 6979p/1992

O'KEEFFE v. FERRIS

BETWEEN

SANDRA O'KEEFFE

PLAINTIFF

AND

MARTIN V. FERRIS, IRELAND AND THE ATTORNEY GENERAL

DEFENDANTS

Citations:

COMPANIES ACT 1963 S297(1)

USHER COMPANY LAW IN IRELAND 525

COMPANIES ACT 1963 S297(3)

MELLING V O MATHGHAMHNA 1962 IR 1

CUSTOMS CONSOLIDATION ACT 1876 S186

CUSTOMS CONSOLIDATION ACT 1876 S204

CUSTOMS CONSOLIDATION ACT 1876 S205

CUSTOMS CONSOLIDATION ACT 1876 S223

CUSTOMS CONSOLIDATION ACT 1876 S256

COMPANIES ACT 1963 S297(2)

LEITCH BROS 1932 2 CH D 71

SALOMON V SALOMON 1897 AC 22

DILLON V DUNNES STORES 1966 IR 397

COMPANIES ACT 1963 S297

KENNY OUTLINES OF CRIMINAL LAW

Synopsis:

WINDING UP

Fraud

Disclosure - Business - Conduct - Perpetrator - Personal responsibility for debts of company - Validity of enactment - Whether implementation of enactment involved the trial of a person on a criminal charge - Standard of proof - Companies Act, 1963, s. 297 - (1992/6979 P - Murphy J. - 28/7/93) [1993] 3 I.R. 165

|O'Keeffe v. Ferris|

CONSTITUTION

Statute

Validity - Offence - Creation - Remedy - Nature - Company - Fraud - Disclosure - Business - Conduct - Perpetrator - Personal responsibility for debts of company - Validity of enactment - Whether implementation of enactment involved the trial of a person on a criminal charge - (1992/6979 P - Murphy J. - 28/7/93)

|O'Keeffe v. Ferris|

EVIDENCE

Facts

Proof - Standard - Offence - Creation - Remedy - Nature - Company - Fraud - Disclosure - Business - Conduct - Perpetrator - Personal responsibility for debts of company - Proof of fraud on balance of probabilities - (1992/6979 P - Murphy J. - 28/7/93)

|O'Keeffe v. Ferris|

WORDS AND PHRASES

"Criminal charge"

Company - Fraud - Disclosure - Business - Conduct - Perpetrator - Personal responsibility for debts of company - Validity of enactment - Whether implementation of enactment involved the trial of a person on a criminal charge - (1992/6979 P - Murphy J. - 28/7/93) - [1993] 3 I.R. 165 - [1994] 1 ILRM 425

|O'Keeffe v. Ferris|

FRAUD

Evidence

Facts - Proof - Standard - Statute - Offence - Creation - Remedy - Nature - Company - Fraud - Disclosure - Business - Conduct - Perpetrator - Personal responsibility for debts of company - Proof of fraud on balance of probabilities - (1992/6979 P - Murphy J. - 28/7/93) - [1993] 3 I.R. 165 - [1994] 1 ILRM 425

|O'Keeffe v. Ferris|

1 Judgment of Mr. Justice Francis D. Murphy delivered the 28th day of July 1993.

2 In this case the Plaintiff claims a declaration that Section 297 (1) of the Companies Act 1963is unconstitutional or alternatively that the manner in which the above named Martin V. Ferris has sought to invoke that subsection against her is invalid.

3 The impugned section provides as follows:-

4 2 "297 (1). If in the course of the winding-up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court on the application of the liquidator or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any persons who are knowingly parties to the carrying on of the business in manner aforesaid shall be personally liable, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.

5 On the hearing of an application under this subsection the liquidator may himself give evidence or call witnesses.

6 (2) Where the court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration and in particular may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him or any company or person on his behalf, or any person claiming as assignee from or through the person liable or any company or person acting on his behalf, and may from time to time make such further order as may be necessary for the purpose of enforcing any charge imposed under this subsection.

7 For the purpose of this subsection "assignee" includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.

8 (3) Where any business of a company is carried on with such intent or for such purpose as is mentioned in subsection (1), every person who is knowingly a party to the carrying on of the person in manner aforesaid, shall be liable, on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine not exceeding £500.00 or to both or, on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding £100.00 or to both.

9 (4) This section shall have effect notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made."

10 By a special resolution passed on the 15th day of July 1988, it was resolved that Aluminium Alloy Refiners Limited (hereinafter referred to as Aluminium) be wound-up voluntarily and that the above first named Defendant, Martin V. Ferris, be appointed Liquidator thereof. At the date of the resolution and for some years prior thereto Sandra O'Keeffe, the above named Plaintiff, was a Director of Aluminium. Aluminium is hopelessly insolvent and the extent of its indebtedness was illustrated in debate by reference to the fact that the Revenue Commissioners were admitted as Creditors for a sum in excess of £1,000,000.00. By Notice of Motion dated the 26th day of August 1992, Martin V. Ferris instituted proceedings against the Plaintiff and others claiming relief under Section 297 of the Companies Act 1963. These proceedings were then instituted by the Plaintiff in October, 1992 seeking a declaration that Section 297 aforesaid was unconstitutional or, as I say, that the invocation of that section by the Liquidator was offensive to the provisions of the Constitution or some of them.

11 The question as to the constitutionality of Section 297 (1) of the Companies Act 1963was canvassed by Mr. Patrick Usher in his book on Company Law in Ireland. At page 525 he raised the issue in a passage relied upon by Counsel on behalf of the Plaintiffs which reads as follows:

"We know that Section 297 (3) specifically creates the criminal offence of fraudulent trading, punishable by fines and imprisonment. But what of Section 297 (1)? It is in form civil, and proceedings taken under it are not in practice treated as being criminal. Nonetheless, orders made under Section 297 (1) create fresh liabilities as opposed to enforcing existing liabilities; they do not enforce private rights, being neither restitutionary, compensatory, nor made in aid of the rights of any person. They do not therefore bear the hallmark of civil proceedings. There are in essence punitive. If, following this argument, Section 297 (1) proceedings are to be classified as being in substance criminal, certain constitutional consequences should flow. The Section 297 (1) action should not depart from the due course of law required by criminal proceedings by Article 38 Section 1 of the Constitution. At the very least this presently somewhat nebulous requirement should import the criminal standard of proof i.e., proof beyond reasonable doubt of the ingredients of the offence."

12 Counsel on behalf of the Plaintiff referred to the judgment of the Supreme Court in Melling and O'Mathghamhna 1962 I.R. 1 to provide a definition of a crime and to identify the indicia of criminal offences. In the Judgment of Kingsmill Moore J. (at page 24) certain definitions were quoted with approval. First the learned Judge quoted Cross and Jones as defining a crime in the following terms:-

"A crime is a legal wrong the remedy for which is the punishment of the offender at the instance of the State."

13 He then quoted Kenny on the Outlines of Criminal Law in the following terms:-

"Crimes are wrongs whose sanction is punitive and is remissible by the Crown if remissible at all."

14 Kingsmill Moore J. then went on to examine the legislation under review in that case, namely, Section 186 of the Customs Consolidation Act, 1876 and identified that legislation as possessing several features which were regarded as indicia of crimes, namely:-

15 1. That they were offences against the community at large and not against an individual.

16 2. That the sanction was punitive and not merely a matter of fiscal reparation.

17 3. That the acts required mens rea in the sense that the acts had to be done "knowingly" and "with intent to evade the prohibition or restriction".

18 O'Dalaigh J. does not appear to have had any difficulty in concluding that Section 186 created a criminal rather than a civil wrong. He dealt with the matter in his judgment (at page 40) in the following terms:-

"It is not, however, a feature of civil proceedings that the plaintiff can have the defendant detained in jail before the proceedings commence and keep him there unless he can obtain bail. Nor can he obtain a Warrant to enter and search the defendant's house or shop and seize goods and if obstructed break open any door and force or remove any impediment to such search, entry or seizure (see Section 205 of the Customs Consolidation Act, 1876). Nor yet is it a...