Sean Mulhern v John Blaney and Neil Blaney
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 21 January 2022 |
| Neutral Citation | [2022] IEHC 24 |
| Court | High Court |
| Docket Number | [2019 No. 193 COS] |
In the Matter of Inch View Limited (In Liquidation)
and
In the Matter of the Companies Act 2014
and
In the Matter of Sections 819 and 683 of the Companies Act 2014
[2022] IEHC 24
[2019 No. 193 COS]
THE HIGH COURT
Liquidation – Restriction declaration – Companies Act 2014 s. 819 (3) – Applicant seeking declarations that the respondents shall not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless that company meets the requirements as to capital stipulated in s. 819 (3) of the Companies Act 2014 – Whether the respondents had acted responsibly in relation to the conduct of the affairs of the company before its liquidation
Facts: Inch View Ltd (the company) operated a restaurant called “The Water’s Edge” at Rathmullen, Co. Donegal. By order of the High Court (White J) made on the 27th of July 2015, pursuant to a petition by the Collector General of the Revenue Commissioners, the company was ordered to be wound up by the Court and the applicant, Mr Mulhern, was appointed liquidator. The respondents, Messrs Blaney, were directors of the company at the commencement of the liquidation, although there was controversy as to the date when the first respondent commenced acting as a director. The applicant applied to the High Court seeking declarations pursuant to s. 819 of the Companies Act 2014 that the respondents shall not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless that company meets the requirements as to capital stipulated in s. 819 (3) (a restriction declaration).
Held by Quinn J that the respondents had demonstrated that they acted honestly in relation to the affairs of the company, and that they cooperated with the liquidator as far as could reasonably be expected in relation to the conduct of the winding up. Quinn J was not persuaded that the respondents had acted responsibly in relation to the conduct of the affairs of the company before its liquidation.
Quinn J made a declaration that the respondents shall not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless that company meets the requirements set out in s. 819 (3).
Declaration granted.
Judgment of Mr. Justice Quinn delivered on the 21st day of January 2022
Inch View Limited (“the Company”) operated a restaurant called “The Water's Edge” at Rathmullen, Co. Donegal. By order of this Court (White J.) made on the 27th day of July 2015, pursuant to a petition by the Collector General of the Revenue Commissioners, the company was ordered to be wound up by the Court and the Applicant was appointed liquidator. The respondents were directors of the Company at the commencement of the liquidation, although there is controversy as to the date when the first named respondent commenced acting as a director.
In these proceedings, the applicant seeks declarations pursuant to s. 819 of the Companies Act 2014 that the respondents shall not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless that company meets the requirements as to capital stipulated in subs. 3 of s. 819 (a restriction declaration).
Section 819 (2) provides that in relation to any person who has been a director of an insolvent company, a declaration of restriction shall be made unless the court is satisfied that:-
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“(a) the person concerned has acted honestly and responsibly in relation to the conduct of the affairs of the company in question, whether before or after it became an insolvent company,
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(b) he or she has, when requested to do so by the liquidator of the insolvent company, cooperated as far as could reasonably be expected in relation to the conduct of the winding up of the insolvent company, and
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(c) there is no other reason why it would be just and equitable that he or she should be subject to the restrictions imposed by an order under subsection (1)”.
On this application the onus is on the respondents to establish each of the matters referred to at (a), (b) and (c) above. I have concluded that the respondents in this case have demonstrated that they acted honestly in relation to the affairs of the company, and that they cooperated with the liquidator as far as could reasonably be expected in relation to the conduct of the winding up. However, I am not persuaded that the respondents have acted responsibly in relation to the conduct of the affairs of the company before its liquidation, and accordingly I am obliged to make the declaration provided for in s. 819.
The company was incorporated on 14 June 1998. It operated the Water's Edge restaurant at Rathmullen until it ceased trading in September 2013.
The second respondent Neil Blaney was the owner of 80% of the shares. The remaining 20% were owned by the father of the respondents, Mr. Edward Blaney.
The premises at which the company traded were owned by a partnership comprising the respondents, who are brothers, and their two other brothers, Micheal Blaney and Ciaran Blaney. This is referred to as the “Blaney Property Partnership” or “the Partnership”.
The exact circumstances in which the company ceased to trade in September 2013 were not before the court, although it is said by the respondents that the business encountered trading difficulties in 2012 and 2013. On 16 May 2014 Allied Irish Banks plc, which held security over the property owned by the Partnership appointed Kieran Wallace of KPMG as receiver of the property. Following his appointment, the receiver changed the locks and retained possession of the property.
On 3 July 2015, a petition was presented by Revenue for the winding up of the company. By order made on 27 July 2015, (White J.) the company was ordered to be wound up by the court and the applicant was appointed liquidator.
On 28 August 2015, a Statement of the Affairs of the company was sworn by the respondents, as required by the winding up order and the Act.
The Statement of Affairs estimated the total realisable value of assets at €25,000, being “fixtures and fittings”, which were the subject of a debenture in favour of Allied Irish Banks plc.
Total liabilities were estimated at €975,880. This amount was comprised of preferential creditors in an amount of €23,698 (comprising only Donegal County Council for local rates), €602,425 being a net balance due to AIB, and €349,757 for unsecured non – preferential creditors. The non – preferential creditors included Revenue for VAT in a sum of €52,447, and PAYE in an amount of €68,861, making a total of €121,308.
The application is grounded on an affidavit sworn by the applicant on 23 May 2019. Replying affidavits were sworn by the respondents on 8 October 2019. A supplemental affidavit was sworn by the applicant on 21 December 2020, and two further affidavits were sworn by the respondents on 20 August 2021.
Each of the respondents was a director of the company at the commencement of the winding up and it is accepted that they are persons to whom s.819 applies. The Companies Registration Office records their appointment having been made on 31 July 2013, less than three months before the date on which the company ceased trading.
In his replying affidavit the second respondent states that he was appointed a director on 31 July 2013. In submissions by his counsel, it was conceded on his behalf that he was a “de facto” director operating the business of the company for several years before that, and at all times relevant to the matters canvassed in this application.
By contrast the first named respondent states that he only became a director on 31 July 2013 when it became necessary to replace his father Edward Blaney, who was at that time suffering from poor health. He says that it was then necessary to have two directors appointed to the company. He says that he was never a shareholder in the company. He submits that only the events which occurred after 31 July 2013 are relevant to him, and points to the fact that the company ceased trading in September 2013.
The first respondent acknowledged that he is one of the partners in the partnership referred to as the Blaney Property Partnership which owned the premises from which the company operated and which leased the premises to the company and charged rent.
The first respondent says that when it became necessary to replace his father as a director, he was asked to do so by Mr. Seamus Farren of Farren Roarty who were the Company's accountants and auditors. Whilst the first respondent states in his replying affidavit that his brother Neil Blaney was involved in the day to day running of the company and that he was not a shareholder, he does not say that he had no prior involvement in the activities of the company. He then addresses the substance of the liquidator's application, including events going back to 2011. His affidavit is adopted and relied on by the second respondent.
In support of his claim that the first respondent was acting as a director prior to 31 July 2013, the applicant exhibits the abridged financial accounts of the company for the year ended 31 December 2009 which were signed by both respondents as directors of the company on 24 June 2010 and a copy of the abridged financial accounts for the year ended 31 December 2011 which were signed by both respondents as...
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