Mehigan v Duignan

• Jurisdiction: Ireland
• Judge: Mr. Justice Shanley
• Judgment Date: 01 January 1997
• Neutral Citation: [1996] IEHC 18
• Court: High Court
• Docket Number: No.4988P/1993,[1993 No. 4988P]
• Date: 01 January 1997

[1996] IEHC 18

THE HIGH COURT

No.4988P/1993

MEHIGAN v. DUIGNAN

IN THE MATER OF MANTRUCK SERVICES LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990

IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 150 AND 204 OF

THE COMPANIES ACT 1990

ON THE APPLICATION OF DAVID F MEHIGAN OFFICIAL LIQUIDATOR

BETWEEN

DAVID F MEHIGAN

APPLICANT

AND

JOHN DUIGNAN

RESPONDENT

Citations:

COMPANIES ACT 1990 S150

COMPANIES ACT 1990 S204

COMPANIES ACT 1963 S245(6)

ALUMINIUM FABRICATORS LTD, IN RE 1984 ILRM 399

COMPANIES ACT 1990 S202

COMPANIES ACT 1990 S204

COMPANIES ACT 1963 S383

COMPANIES ACT 19901990 S 202(10)

COMPANIES ACT 1990 S202(1)(b)

COMPANIES ACT 1990 S202(3)(a)

COMPANIES ACT 1963 S297

O'KEEFE V FERRIS 1993 3 IR 165

COMPANIES ACT 1963 S297(1)

COMPANIES ACT 1955 (NEW ZEALAND)

MALOC CONSTRUCTION LTD (IN LIQUIDATION) V CHADWICK & ORS 1986 3 NZ CLC 99

BATER V BATER 1950 2 AER 458

BANCO AMBROSIANO V ANSBACHER 1987 ILRM 669

HANAFIN V MIN FOR ENVIRONMENT UNREP SUPREME 12.3.96 1996/5/1262

COMPANIES ACT 1990 S202(1)(a)

COMPANIES ACT 1990 S202(1)(b)

COMPANIES ACT 1990 S202(1)(d)

COMPANIES ACT 1990 S202(2)

COMPANIES ACT 1990 S202(3)(b)

COMPANIES ACT 1990 S202(3)(c)

BUSINESS COMMUNICATIONS LTD, IN RE UNREP MURPHY 21.7.95 1995/6/1869

COMPANIES ACT 1990 S150(2)

COMPANIES ACT 1990 S194

COMPANIES ACT 1990 S197

COMPANIES ACT 1990 S242

Synopsis:

COMPANY LAW

Winding-up - failure to keep proper books of account - ss.150, 202, 204 Companies Act 1990 - whether managing director to be held personally liable without limitation for company debt - judicial discretion to be exercised in accordance with constitutional principles - standard of proof - Held: Respondent director made liable for additional costs of liquidation occasioned by failure to keep proper records - civil standard of proof appropriate - mandatory 5 year restriction under s.150 imposed - (High Court - Shanley J. - 08/10/1996) [1997] 1 IR 340- [1997] 1 ILRM 171

|In the matter of Mantruck Services Ltd (in liquidation) Mehigan v. Duignan|

1 JUDGMENT of Mr. Justice Shanley delivered the 8th day of October, 1996

2 Mantruck Services Limited (herein called "the Company") was incorporated on 11th August, 1988: its registered office is at Farnbeg, Strokestown, County Roscommon. The registered shareholders of the Company are John Duignan (the Respondent) and one John Dooley. Its directors are the Respondent and his wife Mary Duignan. The main business of the Company was the supply of tail lift units and refrigeration units for commercial vehicles. It had distribution agreements with suppliers of refrigeration units and a supplier of tail lift units, Zepro Lyften Produkpion AB (herein called "Zepor"). On the 2nd July, 1993 the Company's creditors resolved that the Company be wound up, and Michael Butler, an insolvency practitioner was appointed as its liquidator. Subsequently, on 29th July, 1993, on the petition of Zepro, the company was ordered to be wound up by the Court and the applicant (Mr. Mehigan) was appointed Official Liquidator. The Company was then insolvent and unable to pay all of its debts.

3 On 9th July, 1993, an employee of Mr. Butler, Paul O'Brien, visited the Company's premises at Roscommon and collected certain book and records of the Company which were in a room on the premises. He filled his car with these and intended, he says, to "return to collect other things he saw there". He confirmed that he did not been give, or shown, any books of the Company which throughout this hearing were referred to as "red Cathedral books". Mr. O'Brien prepared a list of the books and records he removed on the 9th July, 1993 and a list of the books and records ultimately delivered by him to the Applicant's Solicitors on 30th July, 1993. On 20th August, 1993, Murphy J. ordered the directors of the Company to hand up to the Official Liquidator "all books records and documents and all of the stock and assets of the Company" in their or their agents respective possession power or procurement. Following this appointment as liquidator, Mr. Mehigan examined the books and records as delivered to his Solicitors by Mr. O'Brien on 30th July, 1993 as a result he believed there were, as he said, "significant and extensive" omissions in the Company's records. He was of the view that these omissions resulted in substantial uncertainty as to the assets and liabilities of the Company and substantially impeded the orderly winding up of the Company. His belief that the records were incomplete led him apply for the Order granted by Murphy J. on 20th August, 1993. On 18th November, 1994, two invoices of the Company were furnished by the voluntary Liquidator to the Applicant's Solicitors. Save for these two invoices no other documents books or records were received from the Respondent on foot of the Order of 20th August, 1993. From the commencement of the liquidation, the Official Liquidator had been in regular contact with the Respondent. He had met him on 29th July, 1993 at Strokestown where the Company's premises was: the Respondent told him he had no business being there and that the voluntary Liquidator had removed all the books and records of the Company. There then followed lengthy correspondence relating to what the Official Liquidator saw as as gaps, inaccuracies or deficiencies in the records he had been given. By letter of 16th August, 1993, he was assured by the Respondent that "with regard to the records again I have advised on a number of occasions that the previous Liquidator had collected all books and records of the Company". In an affidavit, filed on 17th November, 1994 (which Murphy J. ordered to be admitted in evidence on the hearing of this motion), the Respondent exhibited the list of the records taken by the Voluntary Liquidator (Mr. Butler) and asserted that:;-

"proper books and records of the Company were maintained and that these books and records were duly made available to and acknowledged by the voluntary Liquidator." (para. 22).

4 The correspondence between the Official Liquidator and the Respondent continued, somewhat inconclusively, during the years 1993 and 1994. In November 1994, the Applicant Liquidator brought a motion for certain declarations pursuant to Sections 150 and 204 of the Companies Act 1990, and Murphy J., on 21st November, 1994, ordered that the motion be heard on Affidavits filed on the 4th July, 1994, (by the Applicant) and 17th November, 1994 (by the Respondent) and on oral evidence. By a further Order made on 20th November, 1995 by Murphy J. the Respondent was directed to be examined on oath before the Master in relation to the promotion, formation, trade dealings, affairs and property of the Company. That examination took place on 7th February, 1996. During the course of that examination, the Respondent told the Master that when recording purchases, sales and receipts of the Company they were written up into "a temporary record book" and, after being "input" into a computer, the books were "scrapped", "disposed of" or "thrown out". The Respondent also said that at the end of 1992, the Company was told by the VAT Inspector keep manual records and that they then ceased to use the computer and reverted to a manual system at which time the "original temporary books" were thrown out. Although the Respondent signed this transcript of evidence taken before the Master he did so adding in writing on the transcript:-

"This document does not represent the evidence as given in the examination."

5 At the hearing of this motion the Respondent accepted the accuracy of the transcript of the evidence but objected to its admissibility - an objection which I disallowed having regard to the provisions of Section 245(6) of the Companies Act 1963and the decision of O'Hanlon J. in In re Aluminium Fabricators Limited, 1984 ILRM 399.

6 The hearing of this motion commenced on 18th day of June, 1996. The Official Liquidator, Mr. Mehigan, was the first witness. Thereafter, Christopher Chisholm, a partner in Grant Farrell Sparks, Auditors and accountants, and Paul O'Brien of Michael Butler & Co. were called as witness. On the morning of 20th June, 1996, it was indicated to the Court, on behalf of the Respondent, that there might be certain books, papers and records of the Company either at the Company's old premises, or at a farm owned by the Respondent at Kilgrass, Strokestown in County Roscommon. An Order was made on that date for the purpose of providing for the delivery up of such books and records to the Official Liquidator and the hearing of the motion was adjourned until the 16th day of July, 1996.

7 The Motion resumed on the 16th day of July, 1996: the Official Liquidator then resumed his evidence. He gave evidence of having visited the Roscommon premises on 20th June, 1996 and that the he recovered 28 computer discs and five red Cathedral books. These books comprised a Sales Book, a Purchases Book and two Cash Books and Wages Book. The Sales Book contained details of sales invoices for the period April 1991 to March 1993: in addition, at the back of the book, it had a record of credit notes issued by the Company for the same period. The Purchases Books had details of purchase invoices for the period June 1991 to March 1993. The Cash Books recorded cheque payments and cash receipts of the Company and were in two separate books - one covered a Bank of Ireland account for the period 17th January, 1922 to 15th August, 1992 and the other a National Irish Bank account for the period 15th October, 1991 to 26th June, 1993. There was also a Wages Book covering the period April 1991 to March 1993. The 28 computer discs, according to the Official Liquidator, were of no assistance to him in his examination of the books and records of the Company.

8 Following receipt of the red Cathedral books, the Official Liquidator outlined in evidence the...