Myles Kirby (in his Capacity as Official Liquidator of Westman Pland and Civils Ltd ((in Liquidation)) v Rabbitte

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian O'Moore
• Judgment Date: 30 January 2020
• Neutral Citation: [2020] IEHC 703
• Docket Number: [2017/147 COS]
• Court: High Court
• Date: 30 January 2020

BETWEEN

MYLES KIRBY (IN HIS CAPACITY AS OFFICIAL LIQUIDATOR OF WESTMAN PLAND AND CIVILS LTD. (IN LIQUIDATION))

APPLICANT

AND

KEVIN RABBITTE

RESPONDENT

[2020] IEHC 703

Brian O'Moore

[2017/147 COS]

THE HIGH COURT

Disqualification – Duration – Fraud – Applicant seeking an order that the respondent should be disqualified from acting as a director or other officer, auditor, receiver, liquidator or examiner or being in any way, either directly or indirectly, concerned with or taking part in the promotion, formation or management of any company or society – What was the period of time for which the respondent was to be disqualified?

Facts: The applicant, Mr Kirby, originally sought the following reliefs: (i) a declaration pursuant to s. 610 of the Companies Act 2014 that the respondent, Mr Rabbitte, while an officer of the Westman was knowingly a party to the carrying on of business of the company with intent to defraud creditors of the company (including the Revenue Commissioners), and any other person; (ii) an order pursuant to s. 610 of the 2014 Act making Mr Rabbitte personally responsible, without any limitation of liability, for all or any part of the debts or other liabilities of the company as the High Court would direct; (iii) an order pursuant to s. 842 of the 2014 Act that Mr Rabbitte should be disqualified for five years or such longer period as the Court deemed appropriate, from acting as a director or other officer, auditor, receiver, liquidator or examiner or being in any way, either directly or indirectly, concerned with or taking part in the promotion, formation or management of any company or society, and would be subject to a disqualification order for such period as the court would deem appropriate; (iv) there was also an application for costs, including costs on a solicitor and client basis and the costs of the liquidator. Mr Rabbitte agreed to the following: (i) he consented to a declaration pursuant to s. 610 of the Act that he while an officer of Westman was knowingly a party to the carrying on of business of Westman with intent to defraud creditors of the company (including the Revenue Commissioners), or any other person; (ii) he then consented to an order pursuant to the same section making him personally responsible for the debts or other liabilities of Westman in the sum of €1.5 million; (iii) he agreed that he should be disqualified and he consented to an order pursuant to s. 842 of the Act that he would be disqualified for a minimum of five years or such longer period as the court would determine; (iv) it was also agreed that the motion be struck out with no order as to costs. The costs application made by Mr Kirby was not proceeded with. The only question that O’Moore J had to decide was the period of time for which Mr Rabbitte was to be disqualified.

Held by O’Moore J that, having taken into account not just the fraud but the possibly less charged allegations made by the liquidator and established in the evidence of a failure to keep proper books and records of the company, the appropriate disqualification was, as was the case in Re Custom House Capital Ltd. [2016] IEHC 689, a period of fifteen years. O’Moore J noted that Mr Kirby and the other witnesses for the applicant had been saved the tedium and the difficulties of giving evidence, the liquidator had been saved a three-day trial and the liquidator had been saved the possibility of an appeal to the Court of Appeal. O’Moore J also noted that Mr Rabbitte had been saved all of those things himself; there may have been a reluctance on his part to be cross-examined on his affidavits, particularly given that the truth of the situation was that he was actually participating in the fraud. For that reason, the discount that O’Moore J provided on the fifteen years was a period of nine months.

O’Moore J held that he would disqualify Mr Rabbitte, in the terms of the Notice of Motion, for a period of fourteen years and three months.

Respondent disqualified for a period of fourteen years and three months.

JUDGMENT of Mr. Justice Brian O'Moore delivered on the 30th day of January, 2020.

1 The reliefs originally sought in this Motion were as follows:-

(i) A declaration pursuant to section 610 of the Companies Act 2014 that Mr. Rabbitte while an officer of the Westman was knowingly a party to the carrying on of business of the company with intent to defraud creditors of the company (including the Revenue Commissioners), and any other person.

(ii) An order pursuant to section 610 of the 2014 Act making Mr. Rabbitte personally responsibility, without any limitation of liability, for all or any part of the debts or other liabilities of the company as this Court would direct.

(iii) An order pursuant to section 842 of the 2014 Act that Mr. Rabbitte should be disqualified for five years or such longer period as the Court deems appropriate, for acting as a director or other officer, auditor, receive, liquidator or examiner or be in any way, either directly or indirectly, concerned with or take part in the promotion, formation or management of any company or society, and would be subject to a disqualification order for such period as the court would deem appropriate.

(iv) There was also an application for costs, including costs on a solicitor and client basis and the costs of the liquidator.

2 This was the application which was due to be heard on the 28th of January 2020. That was then compromised and the nature of the compromise is as follows: Critically for the purpose of the decision I have to make, Mr. Rabbitte (on the legal advice he had obtained from Dore & Company Solicitors – the fact of such advice having been recorded in the Settlement Agreement) agreed to the following:-

(i) He consented to a declaration pursuant to section 610 of the Act that he while an officer of Westman was knowingly a party to the carrying on of business of Westman with intent to defraud creditors of the company (including the Revenue Commissioners), or any other person.

(ii) He then consented to an order pursuant to the same section making him personally responsible for the debts or other liabilities of Westman in the sum of €1.5 million.

(iii) He agreed that he should be disqualified and he consented to an order pursuant to section 842 of the Act that he would be disqualified for a minimum of five years or such longer period as the court would determine. That is the live issue before me.

(iv) It was also agreed that the motion be struck out with no order as to costs. The fairly elaborate costs application made by Mr. Kirby as liquidator of Westman was not in fact proceeded with for reasons which I think will become obvious during the course of the balance of this ruling.

3 At (2) of the settlement it was provided for as follows:-

“It is noted by Mr. Kirby that Mr. Rabbitte's consent to the order at paragraph 1(a)….”

And that was the paragraph accepting that he had been involved knowingly in the carrying on of the business of the company with intent to defraud:-

“[…] was stated by him to be without prejudice to any defence that Mr. Rabbitte may have to any further action taken against him by any party.”

That is of some significance because it indicates that Mr. Rabbitte wants to be free to argue the point of his participation in the fraud conceded before this Court in respect of any other form of proceedings that may be taken against him. But for the purpose of my ruling I must proceed on the basis that he has unequivocally acknowledged for the purpose of these proceedings that he was involved in the carrying out of a fraud in respect of the affairs of the company.

4 In light of this, the only question that I have to decide is the period of time for which Mr. Rabbitte is to be disqualified.

5 I note the following general points about the company and its activities. Firstly, Westman was incorporated on the 9th May 2014. It was struck off on 13th April 2016. It never made returns to the Companies Registration Office during the lifetime of the company. The Financial Statements of the company prepared by Mr. Rabbitte indicate that Westman never traded. No books or records of the company appear to have been kept, in the normal sense of that phrase, during the lifetime of the company. During the lifetime of the company VAT returns were filed on behalf of the company but consistently they showed that no VAT was chargeable or returnable to Revenue. And finally (in the light of the consent order, the declaration about Mr. Rabbitte's involvement in the fraudulent trading of the company, and also in the light of the fact that the company never seems to have carried out any legitimate trade, certainly none that is discernible from the affidavits before me or the settlement provided to me) it appears to me that the only trade engaged in by the company has been the business of fraud.

6 The type of the fraud involved is also important in terms of assessing the period of disqualification. In his affidavit grounding the current application Mr. Kirby sets out the fraud in which Mr. Rabbitte participated. I think it is important to describe this for the purpose of this ruling. The fraud is set out in Mr. Kirby's affidavit of the 12th December, 2018. While on the face of it is slightly involved, in truth the nature of the fraud is fairly straightforward. At paragraph 47 onwards Mr. Kirby gives the following evidence:-

“For reasons which I will go on to explain, I have concluded that Westman was used as a vehicle to perpetuate a substantial fraud on the Revenue Commissioners. The Revenue have raised assessments on the basis that the amount of VAT evaded was €3.2million but the actual liability may quite possibly be higher.”

7 I pause there to note that the figure put by counsel for Mr. Kirby to me as the acknowledged sum of VAT lost to Revenue is €1.2 million.

8 At paragraph 48 Mr. Kirby goes on:-

“48. My...