RE Squash (Ireland) Ltd

JurisdictionIreland
CourtSupreme Court
JudgeMcGuinness J.
Judgment Date08 February 2001
Neutral Citation[2001] IESC 200
Date08 February 2001
Docket Number[S.C. No. 245 of 1999],Ref. No. 245/99

[2001] IESC 200

The Supreme Court

McGuinness, J.

Geoghegan, J.

Fennelly, J.

Ref. No. 245/99
SQUASH (IRELAND) LTD, RE
In Re Squash (Ireland) Ltd & Cos. Acts

Citations:

COMPANIES ACT 1990 S150

BUSINESS COMMUNICATIONS LTD V BAXTER UNREP MURPHY 21.7.95 1995/6/1869

COMPANIES ACT 1990 S150(1)

COMPANIES ACT 1990 S150(3)

COMPANIES ACT 1990 S152

LANDLORD & TENANT (AMDT) ACT 1980

LA MOSELLE CLOTHING LTD & ROSEGEM LTD V SOUALHI 1998 2 ILRM 345

LOW-LINE MOTORS LTD, IN RE 1988 BCLC 698

Synopsis:

Company Law

Company; directors; disqualification; company provided services of a sporting and leisure nature; directors mistakenly believed that they held a valuable interest in a lease on their operating premises which they wished to realise; on foot of this mistaken belief directors entered into agreement to sell premises and subscriptions were sought as a matter of routine from members at a time when directors were becoming aware that liquidation imminent; liquidator seeking order that directors were not to be appointed or act in any way, directly or indirectly, as a director for five years; whether the director's conduct could be regarded as incompetent to such a degree as to amount to irresponsibility; whether the directors acted dishonestly; s.150, Companies Act, 1990.

Held: Appeal allowed.

In re Squash (Ireland) Ltd. - Supreme Court: McGuinness J. (ex tempore), Geoghegan J., Fennelly J. - 08/02/2001 - [2001] 3 IR 35

The High Court had ordered that the present applicants, who had been directors of Squash Ireland, be restricted from acting as directors for a period of five years pursuant to section 150(1) of the Companies Act, 1990. In this application the directors appealed against this order. McGuinness J, delivering judgment, held that the proper basis to approach the application was to examine the entire tenure of the applicants as directors. In this regard the applicants had acted honestly and responsibly. The appeal would be allowed and the order of the High Court restricting the applicants would be overturned.

1

McGuinness J. delivered the 8th day of February 2001 [nem diss]

2

The appeal concerns an application pursuant to Section 150 of the Companies Act 1990. Section 150 provides as follows

"(1) The Court shall, unless it is satisfied as to any of the matters specified in sub-section (2), declare that a person to whom this Chapter applies 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 it meets the requirements set out in sub-section (3) and, in subsequent provisions of this Part, the expression "a person to whom Section 150 applies" shall be construed as a reference to a person in respect of whom such a declaration has been made."

3

(2) The matters referred to in sub-section (1) are -

4

(a) that the person concerned has acted honestly and responsibly in relation to the conduct of the affairs of the company and that there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this section,................."

5

The remainder of the matters in sub-section (2) do not concern us here.

6

The section was referred to in a general way by Mr Justice Murphy in his helpful judgment of the 21st July 1995 in the case of Business Communications Limited v Keith Baxter and Colm Parsons in which he said:

"It is clear that Chapter 1 of the Companies Act 1990contains provisions of the utmost importance to the commercial community generally and in particular to those who have undertaken or propose to undertake the duties of the Director of a company. In appropriate circumstances the chapter applies to every insolvent company which is being wound up whether compulsorily or voluntarily. The next significant feature of the code created by Chapter 1 aforesaid is that the introductory words to Section 150, that is to say, the phrase "the Court shall" are clearly mandatory and leave the Court with no discretion in those cases to which the chapter applies unless the persons concerned establish that the case falls within one or other of three exceptions set out in sub-section (2) of Section 150. Again it is notable that the period of the restriction is the fixed period of five years and that in the first instance at any rate the Court has no discretion to impose a lesser restriction."

7

In this case the liquidator Mr Morreau brought the requisite motion before the High Court by Notice of Motion dated the 10th May 1999 which was grounded on his own affidavit. In this affidavit Mr Morreau set out the facts of the situation with what I feel was admirable fairness and impartiality. He expressed a degree of concern on some matters concerning the final months of the life of the company including in particular the fact that subscriptions were sought from sporting members of the company after the Directors had become aware that the company was on the verge of liquidation. But the attitude of Mr Morrell throughout his affidavit is a very fair one in seeking the directions of the Court as opposed to trying to criticise the Directors in any severe way. His affidavit cannot in any way be described as a "witch hunt" which was a form of affidavit deplored by Mr Justice Murphy in the Business Communications judgment..

8

Affidavits were sworn by the two Directors concerned, Mr Balbirnie and Mr Watkins and the motion was heard by the learned President of the High Court on the 6th October 1999. This Court has had the benefit of counsel's agreed note of the proceedings before the President in addition to the affidavit evidence already provided. The learned President made an order on the 6th October 1999 where he declared pursuant to sub-section (1) of Section 150 of the Companies Act 1990:

"that the said Mr Balbirnie of 6 Pembroke Street, Dublin 2 and the said Trevor Watkins of 8 Knocknashee, Goatstown, Dublin 14 shall not for a period of five years from the date hereof be appointed or act in any whether directly or indirectly as a Director or secretary or be concerned or take part in the promotion of formation of any company unless it meets the requirements set out in sub-section (3) of the said section, reserving to them their right to apply under Section 152 of the said Act."

9

It is clear from counsel's note of the proceedings before the learned President that what chiefly concerned him was the fact that subscriptions as a matter of routine were being sought during the end of November and early December 1997 at the time when the Directors were becoming aware that the liquidation of the company was imminent. The Directors now appeal from the Order of the President.

10

The company itself had been in existence since the early 1970s and Mr Balbirnie and Mr Watkins had been Directors for some eighteen years. The company provided services of a sporting and leisure nature, principally squash but also other sports and leisure activities. The members paid either an annual subscription or a subscription for a somewhat lesser period. It is clear from the...

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