McStay v Duggan and Kelly
| Jurisdiction | Ireland |
| Judge | Mr. Justice Roderick |
| Judgment Date | 19 October 2007 |
| Neutral Citation | [2007] IEHC 346 |
| Court | High Court |
| Date | 19 October 2007 |
[2007] IEHC 346
THE HIGH COURT
AND
COMPANIES ACT 1990 S150
COMPANIES ACT 1990 S160
PRIMOR PLC (PMPA) v FREANEY & STOKES KENNEDY CROWLEY 1996 2 IR 459
RSC O.27
EUROPEAN CONVENTION ON HUMAN RIGHTS ACT 2003
MCMULLEN v IRELAND UNREP ECHR 29.07.2004
STEPHENS v PAUL FLYNN LTD UNREP CLARKE 28.4.2005 2005/56/11682 2005 IEHC 148
KNOCKLOFTY HOUSE HOTEL LTD & ECCLESHALL LTD, IN RE 2005 4 IR 497 2005 35 7353 2005 IEHC 105
SUPREME OIL COMPANY ( IN LIQUIDATION) v DUFFY & HANRATTY 2005 1 IR 571
VERIT HOTEL & LEISURE (IRL) LTD (IN RECEIVERSHIP & LIQUIDATION), DUIGNAN v CARWAY UNREP O'DONOVAN 27.7.2000 2000/6/2142
DAVIES v UNITED KINGDOM 2002 35 EHRR 29
EUROPEAN CONVENTION ON HUMAN RIGHTS & FUNDAMENTAL FREEDOMS ART 6(1)
EASTAWAY v UNITED KINGDOM 2006 2 BCLC 361
PRACTICE AND PROCEDURE
Dismissal of proceedings
Delay - Want of prosecution - Balance of justice - Conduct of parties - Whether balance of justice lies in dismissing proceedings - Whether real risk that respondent prejudiced in conduct of defence - Company law - Directors - Application to disqualify/restrict directors - Determination of civil rights and obligations within reasonable time - Companies Act 1990 (No 33), ss 150 and 160 - European Convention on Human Rights Act 2003 (No 20) - Primor plc v Stokes Kennedy Crowley [1996] 2 IR 459, Stephens v Paul Flynn Ltd [2005] IEHC 148 (Unrep, Clarke J, 28/4/2005), Davies v United Kingdom [2005] EHRR 29 and Eastaway v United Kingdom [2006] 2 BCLC considered, Re Knocklofty House Hotel Ltd. (in liquidation) [2005] 4 IR 497 followed, Duignan v Carway [2001] 4 I.R. 550 distinguished - Application to dismiss proceedings refused (1988/205COS - Murphy J - 19/10/2007) [2007] IEHC 346
McStay v Duggan
The second named respondent sought an order dismissing the applicant’s claim for orders pursuant to ss. 150 and/or 160 of the Companies Act, 1990 for want of prosecution or, alternatively, for inordinate and inexcusable delay. The second named respondent was a director of the company in relation to which the applicant was appointed liquidator. The relevant company was wound up by order of the High Court on 14 December 1998. The first named respondent was the executive director of the company but passed away in 2004.
Held by Murphy J. in refusing the application: That neither party complied with the timetable laid down by the court in relation to these proceedings. However, the second named respondent was not prejudiced by reason of the delay.
Reporter: L.O’S.
Mr. Justice Roderick Murphy dated 19th October, 2007.
A notice of motion returnable for 19 th June, 2006, was heard by this Court on 23 rd March and 26 th June, 2007. Ambrose Kelly, the second named respondent, sought an order dismissing the applicant's claim for orders pursuant to ss. 150 and/or 160 of the Companies Act, 1990 for want of prosecution or, alternatively, for inordinate and inexcusable delay. The applicant, John McStay, was appointed liquidator of Countyglen plc (in liquidation) (the Company) which was wound up by order of the High Court on 14 th December, 1998.
Mr. Kelly had been a director of the Company. He stated that he had resigned on or around 24 th April, 1998, within a year of the winding up order.
Mr. Duggan, the first named respondent, had died on 4 th June, 2004 but neither the liquidator nor Mr. Kelly were aware of his death until late the following year.
2 2.1 The application of the liquidator commenced by notice of motion dated 14 th February, 2001, grounded on the affidavit of the liquidator. A replying affidavit was sworn on 14 th May, 2001 by Mr. Kelly. No further affidavits were sworn until the affidavits of discovery in 2005.
On 15 th April, 2002, a year later, the official liquidator applied for an order directing that points of claim and of defence be filed and exchanged. The order of the Court dated 15 th April, 2002 provided that points of claim be delivered within five weeks. In fact they were not delivered until 28 th January, 2003 and amended on 10 th February, 2003, seeking a claim for restriction against both respondents.
An objection and points of defence was delivered by Mr. Kelly on 7 th August, 2003. Mr. Duggan, the first named respondent did not file points of defence.
The order of the court directed that once the pleadings were closed a further eight weeks were allowed for the making of discovery. By letter dated 7 th December, 2004 the solicitors for the liquidator indicated that discovery was ready and Mr. Kelly was not required to make discovery. An affidavit of discovery was sworn by the liquidator on 9 th February, 2005. On 20 th July, 2005 the liquidator, notwithstanding the letter of 7 th December, 2004, applied for an order compelling Mr. Kelly to make discovery.
In the meantime and unknown to the other parties, Mr. Duggan had died on 4 th June, 2004. Mr. Kelly averred that Mr. Duggan had been the only executive director and was charged with responsibility for the day to day management of the Company, which he did from his office in London. It was Mr. Duggan who kept the books and records of the Company and had direct involvement and responsibility for the vast majority of matters about which the official liquidator sought information.
2 2.2 Mr. Kelly claims that the allegations of the liquidator related to events occurring from the period 1995 to 1998.
The liquidator had sought an order for disqualification in February, 2001, over two years after his appointment; sought restriction in February, 2003, over four years after his appointment and sought discovery in February, 2005, more than six years after his appointment. Such delays in the initiation and prosecution of the respective claims for discovery restriction and disqualification were both inordinate and inexcusable..
Mr. Kelly averred that there was no question of delay on his part in respect of periods of three, six and three months in relation to his replying affidavit, points of claim and affidavit of discovery. During that period a number of changes of solicitors occurred, due in part to matters outside his control. Such delay could not, in any sense, excuse or detract from the manifest delays on the part of the liquidator in the context of proceedings that relate to events of up to eleven years and to a liquidation commenced more than seven years before the swearing of the present grounding affidavit on 25 th May, 2006.
The affidavit of discovery of the liquidator was sworn 9 th February, 2005, 18 months after the close of pleadings. (Mr. Kelly's affidavit of discovery was of 10 th October, 2005).
2 2.3 Mr. Kelly avers that the delays on the part of the liquidator in bringing and prosecuting the applications amounted to an infringement of the right to a speedy trial which, in the case of a restriction would very seriously undermine or, in the case of disqualification, deprive him of his ability to earn a livelihood through managerial participation in limited companies.
He says that the death of his former director and co-respondent seriously prejudiced his ability to defend himself in the allegations of the liquidator and on his ability to discharge any onus of proof to demonstrate that he acted honestly and reasonably.
The extensive points of defence, of 48 paragraphs, relate to matters that were undertaken by the first named respondent in relation to which he was responsible. Mr. Kelly says that he is deprived of collaboratory evidence. There is no other person comparably placed who could provide such evidence.
2 3.1 Mr. McStay's affidavit relates to complex issues arising out of the demise of the Company, formerly known as Glen Abbey Plc., which was listed on the Irish Stock Exchange until October, 1992 when it was suspended at the Company's request, pending the acquisition of a trading business. The listing was cancelled on 25 th October, 1996. The Company filed annual returns up until 30 th April, 1996. The resignation of Mr. Kelly was not recorded in the Companies Registration Office.
Mr. McStay says that a large volume of books and records were received from Mr. Duggan and from the Company's accountants. Having been reviewed, they were found to be incomplete. There were no statements from the Company's bank account from 5 th June, 1997 to the date of liquidation; no record of cheque payments from 19 th December, 1996 to the date of liquidation and board minutes were incomplete with no record of any board meetings having taken place between 31 st July, 1995 and 7 th April, 1997, or from 16 th April, 1997 to the date of liquidation. There were no files or records regarding a number of significant transactions.
Mr. McStay said that Mr. Kelly and Mr. Kelly's solicitor met with him on 18 th December, 1998. Mr. Kelly was unable to provide him with detailed information or explanations of certain activities of the Company which Mr. Kelly said had been dealt with on a day to day basis by Mr. Duggan.
A statement of affairs was filed by the directors on 29 th April, 1999. Statements disclosed that, in the opinion of the directors the Company's assets exceeded its liabilities by IR£89, 901. The statement of assets disclosed two assets, namely a secured loan from Valance Nine Development Corporation in the sum of IR£250, 448 and a leasehold property in Stockport with a book value of £150, 000. Mr. McStay's investigation subsequently revealed that...
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