Patrick McCoy v Gerard Courtney and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Barrett
• Judgment Date: 25 July 2014
• Neutral Citation: [2014] IEHC 370
• Court: High Court
• Date: 25 July 2014

[2014] IEHC 370

THE HIGH COURT

[No. 230 COS/2014]

McCoy (liquidator) v Courtney

IN THE MATTER OF MINT RESTAURANT LIMITED (IN VOLUNTARY LIQUIDATION)

AND IN THE MATTER OF SECTION 150 OF THE COMPANIES ACT 1990

AND SECTION 56 OF THE COMPANY LAW ENFORCEMENT ACT 2001

BETWEEN

PATRICK MC COY AS LIQUIDATOR OF THE COMPANY IN THE WITHIN PROCEEDINGS

APPLICANT

AND

GERARD COURTNEY AND PATRICIA COURTNEY

RESPONDENTS

COMPANIES ACT 1990 S150

LA MOSELLE CLOTHING LTD & ROSEGEM LTD v SOUALHI 1998 2 ILRM 345 1998/23/8886

KAVANAGH v DELANEY & ORS (TRALEE BEEF & LAMB LTD (IN LIQUIDATION), IN RE) 2008 3 IR 347 2008 2 ILRM 420 2008/32/6904 2008 IESC 1

SQUASH (IRL) LTD, IN RE 2001 3 IR 35 2001/23/6280

KAVANAGH v DELANEY & ORS (TRALEE BEEF & LAMB LTD (IN LIQUIDATION), IN RE) 2005 1 ILRM 34 2004/24/5615 2004 IEHC 139

MITEK HOLDINGS LTD & ORS, IN RE; GRACE (LIQUIDATOR) v KACHKAR & MCCLELLAN CARRIGAN 2010 3 IR 374 2010/36/9110 2010 IESC 31

VAN DESSEL v GILL UNREP BARRETT 30.5.2014 2014 IEHC 317

DIGITAL CHANNEL PARTNERS LTD (IN VOLUNTARY LIQUIDATION), IN RE; KAVANAGH v CUMMINS & ORS 2004 2 ILRM 35 2004/24/5602

Companies – Liquidation – Mitigating factors – Applicant seeking a declaration that the respondents be restricted in acting as company directors – Whether there are mitigating factors exempting the respondents from an application under s. 150 of the Companies Act 1990

Facts: The respondents, Mr and Ms Courtney, were each directors of Mint Restaurant Ltd, which ceased trading and passed into voluntary liquidation in 2009. The applicant, Mr McCoy, as liquidator of the company, applied to the High Court under s. 150 of the Companies Act 1990 seeking a declaration that the respondents be restricted in acting as company directors of Mint. The liquidator”s grounds were: (1) a failure by Mint to discharge certain tax liabilities and make certain tax payments towards the end of its existence; (2) a deficiency in Mint's company books and records; (3) a repayment of certain loan monies owed by Mint to the directors, (4) use of a company credit card to make non-business related purchases; and (5) a degree of non-cooperation with the liquidator. The liquidator stated that in his professional opinion there were significant mitigating factors which may justify no s. 150 declaration being made. Mr Courtney indicated that he had no objection to the declaration being made against him while Ms Courtney pleaded that she was merely a passive second director to satisfy the legal requirement that Mint have at least two directors and ought not to be the subject of a s. 150 order.

Held by Barrett J that, having considered La Moselle Clothing Limited (in liquidation) v Soualhi [1998] 2 I.L.R.M. 345 and Kavanagh v Delaney [2005] 1 ILRM 34, s. 150 enjoins the Court to have regard to whether an affected person has acted " honestly" and " responsibly" and also to consider whether there is any other reason why it would be " just and equitable" that a s. 150 order should issue. He held that there are no 'just and equitable' grounds alleged in this case. In deciding whether the respondents have acted honestly and responsibly, Barrett J held that the Court may have regard to their respective obligations as directors, to general commercial practice and to prior case-law but perhaps more to anchor than to determine any decision of the Court as to the responsibility or otherwise of their respective actions. Addressing the liquidator”s grounds, Barrett J held that: (1) there appears to be no suggestion that there has in this case been the deliberate decision to deploy such liabilities to the advantage of Mint in the manner that is contemplated in In the Matter of Digital Channel Partners Limited (in voluntary liquidation) [2004] 2 ILRM 35; (2) the actions of the respondents in this regard were unwise and reproachable but were not irresponsible; (3) there is nothing in the facts as known to the Court that suggest that any such loan payments or repayments involved or were due to dishonesty or a lack of responsibility on the part of either director; (4) In the absence of any explanation as to why or in what circumstances these purchases were made, the Court must conclude that the relevant purchases evidence, at the least, a want of responsibility on the part of Ms Courtney in her capacity as a director of Mint, and thus that a s. 150 declaration is required in respect of her; and (5) any failings of the respondents in this regard are reproachable but do not appear to have been irresponsible. Regarding Ms Courtney”s submission, Barrett J did not consider that this issue needed to be regarded in the present case because Ms Courtney directly involved herself in the company's operations to the extent of being a holder or user of a company credit card and proceeding to make private purchases with that card; thus it served no purpose to consider whether she might escape liability through the invocation of the passive director rationale.

Barrett J held that he was not satisfied that the Court is required to make a declaration under s. 150 in respect of Mr Courtney and that he was satisfied that the declaration must issue in respect of Ms Courtney; he issued the declaration on the terms contemplated by that provision.

Application refused in part.

Background to application

1 1. This is an application made under s. 150 of the Companies Act 1990, seeking a declaration that each of Mr. Gerard Courtney and Ms. Patricia Courtney be restricted in acting as company directors. It is the second such application against Mr. and Ms. Courtney in which the court is giving judgment today. Like the other application brought against Mr. and Ms. Courtney, it is perhaps somewhat unusual. On the one hand, there is a single affidavit from the liquidator in which he sets out several grounds on which a declaration under s. 150 might be merited but then immediately proceeds to identify a lengthy set of mitigating factors. On the other hand, the court has before it a letter from Mr. Gerard Courtney indicating that he has no objection to a declaration being made against him under s. 150. The court does not have before it a similar letter from Ms. Courtney; her principal plea appears to be that she was merely a 'helpful spouse' who agreed to be a passive second director so as to satisfy the legal requirement that Mint have at least two directors and who consequently ought not to be the subject of an order under s. 150. Thus this Court is presented on the one part with a liquidator who, admirably, states that in his professional opinion there are significant mitigating factors which may justify no s. 150 declaration being made, and, on the other part, with two respondent directors, one of whom is satisfied that a s. 150 declaration should issue against him and the other of whom considers that no liability should attach to her.

Applicable law

2 2. There is, if anything, a possible surfeit of judicial guidance on the criteria that are relevant to determining a s. 150 application. An early but significant contribution was made by Shanley J. in La Moselle Clothing Limited (in liquidation) v. Soualhi[199S] 2 I.L.R.M. 345, his observations having since been described by Hardiman J. in In the Matter of Tralee Beef & Lamb Limited [2008] 3 I.R. 347 at 358, as being, at least at that time, of "near canonical status". Shanley J.'s...