Re Newcastle Timber Ltd ((in Liquidation))

• Jurisdiction: Ireland
• Judge: Mr. Justice McCracken
• Judgment Date: 16 October 2001
• Neutral Citation: [2001] IEHC 146
• Docket Number: [1998 No. 220 Cos.]
• Court: High Court
• Date: 16 October 2001

NEWCASTLE TIMBER LTD & ABWOOD LTD, RE

IN THE MATTER OF NEWCASTLE TIMBER LIMITED (IN LIQUIDATION) AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1999

AND

IN THE MATTER OF ABWOOD LIMITED (IN LIQUIDATION) AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1999

[2001] IEHC 146

No. 220 COS/1998

No. 187 COS/1999

THE HIGH COURT

Synopsis:

COMPANY LAW

Directors

Liquidation - Duties of directors - Restriction and disqualification of directors - Fiduciary duty - Application by liquidator - Onus of proof - Furnishing of accounts - Whether proper records and accounts kept by directors - Whether directors acted honestly and responsibly - Whether companies traded while being unable to discharge liabilities - Companies Act, 1990 sections 150, 160 (1998/220 & 1999/187COS - McCracken J - 16/10/01)

In re Newcastle Timber Ltd - [2001] 4 IR 586

The liquidator of two companies sought orders of disqualification and or of restriction in respect of two individuals. The individuals were directors of both companies. At the dates of winding up substantial amounts were owed to the Revenue Commissioners. Mr. Justice McCracken was satisfied that in respect of an order of disqualification under section 160 the onus was on the liquidator whereas under section 150 the onus was on the director to satisfy the court as to his honesty and responsibility. Taking the overall behaviour of the directors a disqualification order was not necessary to protect the public against their future conduct. However the directors had been sufficiently irresponsible to warrant making a restriction order particularly in allowing one of the companies to have traded insolvently for some 4 years and allowing Revenue debts to build up. A restriction order pursuant to section 150 would be made against both directors.

Citations:

COMPANIES ACT 1990 S150(1)

COMPANIES ACT 1990 S150(2)(a)

COMPANIES ACT 1990 S160

COMPANIES ACT 1990 S160(2)(b)

COMPANIES ACT 1990 S160(2)(d)

LOW-LINEB MOTOR LTD, RE 1988 BCLC 698

LA MOSELLE CLOTHING LTD V SOUALHI 1988 2 ILRM 345

SQUASH (IRL) LTD, RE UNREP MCGUINNESS 8.2.2001

CB READYMIX LTD UNREP SMYTH 20.7.2001

1 Mr. Justice McCracken delivered the 16th day of October, 2001

2 These are applications by George Maloney, the Official Liquidator of each of the companies named in the title hereof (hereinafter called the "the Liquidator") for Orders under Section 160 of the Companies Act, 1990or alternatively under Section 150 of the Companies Act, 1990restricting or disqualifying George Smullen and Madeline Smullen as company directors. Both of the companies in the title hereof named (and hereafter called respectively "Newcastle" and "Abwood") are being wound up by the Court, the Liquidator is Liquidator of both companies and George Smullen and Madeline Smullen are Directors of both companies, and accordingly these applications have been heard together by the consent of all parties. Counsel for the Liquidator has made it quite clear that he is primarily seeking an Order of disqualification pursuant to Section 160.

3 Newcastle was incorporated on 9th October, 1987 and its primary business was operating a sawmill from a property in Glenealy, Co. Wicklow. By Order of the High Court dated 2nd November, 1998 made on the application of the Collector General, Newcastle was wound up and the Liquidator was appointed official Liquidator. At the date of the winding up the company had virtually no assets, as its premises had already been sold to satisfy a secured creditor, and had liabilities amounting to some £230,000. By far the largest creditor was the Revenue and trade creditors amounted to less than £24,000.

4 Abwood was incorporated on 16th October, 1989 and its principle business was the manufacture and sale of garden sheds and fencing. By Order of the High Court dated 1st November, 1999 Abwood was wound up and the Liquidator was appointed official Liquidator. According to its statement of affairs it had assets of some £17,700 and liabilities of almost £175,000, of which just over £50,000 was due to George Smullen and just over £120,000 was due to the Revenue. A sum of £3,600 was due to trade creditors.

5 Section 60(2) of the Companies Act, 1990, so far as it is relevant to these applications, reads:-

" Where the Court is satisfied in any proceedings or as a result of an application under this Section that:-"

6 (b) A person has been guilty, while a promoter, officer, auditor, receiver, liquidator or examiner of a company, of any breach of his duty as such promoter, officer, auditor, receiver, liquidator or examiner, or (d) The conduct of any person as promoter, officer, auditor, receiver, liquidator or examiner of a company, makes him unfit to be concerned in the management of a company.

7 The Court may, of its own motion, or as a result of the application, make a Disqualification Order against such a person for such a period as it sees fit".

8 Section 150 of the same Act, so far as it is relevant, reads:-

9 2 " (1) The Court shall, unless it is satisfied as to any of the matters specified in subsection (2), declare that a person to whom this chapter applies shall not, for a period of 5 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 it meets the requirements set out in subsection (3)......

10 (2) The matters referred to in subsection (1) are:- (a) That the person concerned has acted honestly and responsibility in relation to the conduct of the affairs of the company and that there is not other reason why it would be just and equitable that he should be subject to the restrictions, imposed by this section".

11 A very important distinction between these two sections is that under Section 160 where, as in the present case, an application is made by a Liquidator for a Disqualification Order, the onus is clearly on the Liquidator to satisfy the Court that the conditions of the section have been complied with, while on the other hand, under Section 150, the Court must make a Restriction Order unless it is satisfied that the person acted honestly and responsibly, and therefore the onus is on the Director concerned...