Re Bovale Dev: Director of Corporate Enforcement v Bailey

• Jurisdiction: Ireland
• Judge: Ms. Justice Irvine
• Judgment Date: 01 November 2007
• Neutral Citation: [2007] IEHC 365
• Court: High Court
• Date: 01 November 2007

Director of Corporate Enforcement v Bailey

IN THE MATTER OF BOVALE DEVELOPMENTS LIMITED AND

IN THE MATTER OF THE COMPANIES ACTS 1963 - 2005 AND

IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 160(2) OF THE

COMPANIES ACT, 1990

BETWEEN/

THE DIRECTOR OF CORPORATE ENFORCEMENT

APPLICANT

AND

MICHAEL BAILEY AND THOMAS BAILEY

RESPONDENTS

[2007] IEHC 365

[No. 282 COS/2006]

THE HIGH COURT

Abstract:

Company law - Evidence law - Practice and procedure - Admissibility of evidence Hearsay - Tribunal Report - Weight of evidence - Natural justice - Revenue Documents -Memoranda - Legislative omission - Auditors documents - Prematurity of application - Production order - District Court - Companies Acts 1963-2005

: The respondents sought

inter alia to exclude evidence in disqualification proceedings being brought against them by the applicant. The respondents objected to the use of evidence in the proceedings arising from a Tribunal of Inquiry, Revenue documents and auditors documents. The respondent alleged that a production order made by the District Court was invalid. The applicant alleged that the application was premature.

Held by Irvine J. that the production order was not validly obtained. The application was not premature. The rule of natural justice would entail the exclusion of evidence emanating from Tribunal reports, Revenue Documentation and memoranda. Auditors opinions would be admissible. The legislature had not provided for the use of Tribunal reports in other proceedings to be used to prove the truth of its contents. That evidence would be hearsay opinion evidence otherwise.

Reporter: E.F.

COMPANIES ACT 1990 S160(2)

COMPANY LAW ENFORCEMENT ACT 2001 S14

COMPANY LAW ENFORCEMENT ACT 2001 S42

RSC O.40 r4

RSC O.40 r12

RSC O.19 r27

COMPANY LAW ENFORCEMENT ACT 2001 S12(6)

CRIMINAL JUSTICE ACT 1994 S63

COMPANIES ACT 1990 S160(7)

F (BT) v DPP 2005 2 ILRM 367

BYRNE v GREY 1988 IR 31

NATIONAL IRISH BANK LTD, IN RE 1999 3 IR 145 1999 1 ILRM 321

RSC O.75B r3(z)

RSC O.75B r7

RSC O.75B r9

ROSSAGE v ROSSAGE & ORS 1960 1 WLR 249

GILBERT v ENDEAN 1878 CC D 259

SUN FAT CHAN v OSSEOUS LTD 1992 1 IR 425

SAVINGS & INVESTMENT BANK LTD v GASCO INVESTMENTS (NETHERLANDS) BV 1984 1 AER 296 1984 1 WLR 271

CROSS & TAPPER ON EVIDENCE 10ED 2004

CULLEN v CLARKE 1963 IR 368

COMPANIES ACT 1990 S22

CHILDREN ACT 1997 S23

GOODMAN INTERNATIONAL v HAMILTON 1992 2 IR 542

LAW REFORM COMMISSION CONSULTATION PAPER ON PUBLIC ENQUIRIES INCLUDING TRIBUNALS OF ENQUIRY (CP 22-2003) 2003

LAWLOR v FLOOD 1999 3 IR 107

COMPANIES ACT 1948 S165

COMPANIES ACT 1948 S172

CIVIL EVIDENCE ACT 1968 S4 (UK

H v SCHERING CHEMICALS LTD 1983 1 AER 849 1983 1 WLR 143

C (O) v C (T) UNREP MCMAHON 9.12.1981 1982/10/1986

MCG (P) v F (A) UNREP BUDD 28.1.2000 1999/17/5283

KENNEDY v LAW SOCIETY OF IRELAND & ORS 2002 2 IR 458

CURTIN v DAIL EIREANN & ORS 2006 2 IR 556

TRIBUNALS OF ENQUIRY (EVIDENCE) (AMDT) ACT 1979

COUNTYGLEN PLC v CARWAY 1998 2 IR 540 1996 2 508

COMCAST INTERNATIONAL HOLDINGS INC & ORS v MIN FOR PUBLIC ENTERPRISE & ORS UNREP GILLIGAN 13.6.2007 2007 IEHC 297

COMPANIES ACT 1985 S441 (UK)

REX WILLIAMS LEISURE PLC, RE 1994 CH 1

COMPANIES ACT 1985 S432(2)

COMPANY DIRECTORS DISQUALIFICATION ACT 1986 S8

COMPANIES ACT 1985 S447

COMPANIES ACT 1985 S431

COMPANIES ACT 1985 S432

COMPANIES ACT 1985 PART XIV

COMPANIES ACT 1985 S18

COMPANY LAW ENFORCEMENT ACT 2001 S18

COMPANIES ACT 1990 S160(7)

COMPANIES ACT 1990 S194

KEANE COMPANY LAW 4ED 2006 PARA 30.152

COMPANIES ACT 1963 S370

COMPANY LAW ENFORCEMENT ACT 2001 S62

COMPANY LAW ENFORCEMENT ACT 2001 S110A

COMPANIES (AUDITING & ACCOUNTING) ACT 2003 S52

INVESTMENT FUNDS, COMPANIES & MISCELLANEOUS PROVISIONS ACT 2005 S74

COMPANY LAW ENFORCEMENT ACT 2001 S12(1)(C)

COMPANY LAW ENFORCEMENT ACT 2001 S12(6)

COMPANY LAW ENFORCEMENT ACT 2001 S13(1)

COMPANY LAW ENFORCEMENT ACT 2001 S13(2)

COMPANY LAW ENFORCEMENT ACT 2001 S13(1)(c)

COMPANY LAW ENFORCEMENT ACT 2001 S3

COMPANY LAW ENFORCEMENT ACT 2001 S29

INTERPRETATION ACT 2005 S18(c)

CRIMINAL JUSTICE ACT 1994 S63

COMPANIES ACT 1990 S19(3)(a)

CREAVEN & ORS v DISTRICT JUDGE CLYNE & MIN FOR JUSTICE UNREP CLARKE 6.10.2006 2006 IEHC 290

CRIMINAL JUSTICE ACT 1994 S31

CRIMINAL JUSTICE ACT 1994 S9

COMPANIES ACT 1963 S297(1)

COMPANIES ACT 1990 S137

COMPANIES ACT 1990 S194(1)(b)

CRIMINAL JUSTICE ACT 1994 S63(4)

1 Judgement of Ms. Justice Irvine delivered on the 1st day of November 2007

2 By formal notice delivered herein on the 29th June, 2006, the respondents, who are directors of Bovale Developments Limited ("Bovale"), were notified that the Director of Corporate Enforcement ("Director"), intended to institute proceedings seeking, inter alia, to disqualify them as directors pursuant to s. 160(2) of the Companies Act, 1990 (as amended by ss. 14 and 42 of the Company Law Enforcement Act, 2001).

3 The originating notice of motion was delivered on 8th August, 2006 and is grounded upon two affidavits, namely the affidavit of Mr Peter Lacy, a partner in PriceWaterhouse Coopers ("PWC"), sworn on the 30th June, 2006, and the affidavit of Mr. Dermot Madden, an officer with the Director of Corporate Enforcement sworn on the 8th August, 2006. The affidavit of Mr. Lacy relates principally to investigations carried out by his firm, ("PWC"), in relation to the affairs of Bovale at the instigation of the applicant.

4 Shortly after the issue of these proceedings, the respondents issued a notice of motion dated the 22nd November, 2006, seeking to curtail the evidence put forward by the applicant in the grounding affidavits. In simple terms the relief sought by the respondents in their notice of motion can be stated to cover three particular objections, namely:-

5 (1) the admissibility of certain aspects of the evidence upon which the applicant seeks to rely.

6 (2) an allegedly impermissible and unlawful delegation by the applicant of his functions to PWC pursuant to the Company Law Enforcement Act, 2001 and

7 (3) the validity of a District Court production order dated the 22nd November, 2002.

8 The applicant fully contests the legal basis upon which the respondents' seek the relief set out in the notice of motion and further submit that irrespective of the legal merits of the respondents' objections, their application is premature.

9 I propose to deal with the issues raised for the Court's attention in the following order namely:

10 1. A brief summary of the objections made by the respondents to the applicant's claim.

11 2. Preliminary observations.

12 3 Whether or not the respondents' application is premature.

13 4. The admissibility of the evidence objected to by the respondents.

14 5 The lawfulness of the delegation of the applicant's functions to PWC under the Corporate Enforcement Act, 2001.

15 6 The validity of the District Court warrant dated the 22nd November, 2002.

1. Brief summary of the respondents' objections to the applicant's proceedings.

(A) Evidence.

16 The respondents seek to challenge the admissibility of certain aspects of the evidence put before the court in the affidavits of Mr. Lacy and Mr. Madden. The evidence which is objected to by the respondents as inadmissible is identified at paras. 1 - 5 of the notice of motion. In support of their application the respondents rely, not only upon the Court's inherent jurisdiction but also on the provisions of O. 40, rr. 4 and 12 and O. 19, r. 27 of the Rules of the Superior Courts.

17 The evidence to which the respondents object can be synopsised as follows:-

18 (a) Extracts from the second interim report of the Tribunal of Inquiry established to Inquire into Certain Planning Matters and Payments ("the Tribunal Report"). Extracts from the Tribunal Report are set out in the affidavit of Mr. Madden and the entirety of the report of the Tribunal is referred to at para. 10 of Mr. Madden's affidavit "when produced".

19 Mr. Madden refers to paras. 14-43 to 14-63 of the Tribunal Report. These paragraphs contain findings of the Chairperson of the Tribunal of significant wrongdoing on the part of the respondents and one Caroline Bailey.

20 It is not necessary to set out in detail the contents of the aforementioned material for the purposes of this judgment. However, I will briefly refer to one paragraph from the Tribunal Report which is exhibited at exhibit "DM11" to the affidavit of Mr Madden, to demonstrate the seriousness of the wrongdoing now contended for by the applicant and which he seeks to introduce into evidence against the respondents:-.

"14-63. The Tribunal is satisfied that Mrs. Caroline Bailey and the directors of Bovale, Mr. Michael Bailey and Mr. Tom Bailey had for years systematically prepared false documents including cheques, cheque payment journals and books of account when it suited their purpose to do so."

21 The evidence established that the underlying methodology used was to falsely attribute an established expenditure to a heading under which the sum was not expended, for example, by entering the name of a legitimate trade creditor in the cheque journal as the payee of a cheque that was in fact lodged to the personal account of the directors."

22 Counsel on behalf of the applicant in the course of the hearing and further at para. 56 of his written submission has advised the Court that the findings of the Tribunal are not sought to be relied upon on their own but rather they are to supplement the evidence which is provided as a result of the Director's own investigations.

23 (b) Documentation emanating from the Revenue Commissioners and directed for the attention of the Director of Corporate Enforcement which documentation is exhibited at exhibit "DM6" to the affidavit of Mr. Madden.

24 The aforementioned documentation imparted...