Re Verit Hotel & Leisure (Ireland) Ltd ((in Receivership) and Liquidation)

• Jurisdiction: Ireland
• Judge: Mr. Justice McCracken
• Judgment Date: 23 January 2002
• Neutral Citation: [2002] IEHC 1
• Docket Number: No. 225COS/1994
• Court: High Court
• Date: 23 January 2002

DUIGNAN v. CARWAY

IN THE MATTER OF VERIT HOTEL AND LEISURE (IRELAND) LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES ACT1963 TO 1990

BETWEEN

VINCENT DUIGNAN

APPLICANT

AND

STEPHEN ARTHUR CARWAY ELAINE CARWAY AND JOHN CARWAY

RESPONDENTS

[2002] IEHC 1

No. 225COS/1994

THE HIGH COURT

Synopsis:

COMPANY LAW

Liquidation

Restriction of directors - Practice and procedure - Duties of directors - Evidence - Delay - Estoppel - Nature of section 150 proceedings - Whether section 150 application could be brought by way of notice of motion - Whether liquidator estopped from pursuing proceedings - Whether directors should be restricted - Companies Act, 1990 sections 150 (1994/225COS - McCracken J - 23/1/02)

Duignan v Carway

Facts: The applicant, acting as official liquidator, had brought a motion under section 150 of the Companies Act, 1990 seeking to have the respondents restricted from acting as directors. The application had a long history having been subjected to a number of challenges. The respondents had attempted to have the application dismissed on the grounds of delay. The Supreme Court rejected the challenge in a judgment delivered on 31/07/2001. The respondents contended that the liquidator was estopped from bringing the application as they were closely interrelated to other proceedings. In addition it was argued that section 150 proceedings could not be brought by way of notice of motion. The respondents also contended that as the liquidator chose not to cross-examine one of the directors on his affidavit the facts contained therein must be accepted as being correct.

Held by Mr. Justice McCracken in stating that an order of restriction must be made in this case. There could be no question of the liquidator being estopped as section 150 proceedings raised an issue between the directors and the courts and not as between the directors and the liquidator. There did seem to be an omission in the Rules of the Superior Courts regarding the bringing of section 150 proceedings. However no finding would be made on this matter as the point was only being raised now although the application had been before the courts for a number of years. The respondents could not now be heard to raise a procedural objection at this stage. The court was entitled to form its view based on the exhibits and the evidence before it. The company concerned had been kept alive by the fact that it was trading on monies due to the Revenue and allowed huge arrears to build up. To trade by using what in effect was its employees’ money was quite bizarre and irresponsible. This appeared to be the policy of the board of directors and on this ground alone the directors must be restricted. For a considerable period before the company went into liquidation the directors knew or ought to have known that it was not a viable going concern and was going to lose money at the expense of its creditors and in particular the Revenue.

Citations:

COMPANIES ACT 1990 S150

COMPANIES ACT 1990 S149

COMPANIES ACT 1963 S297(a)

COMPANIES ACT 1963 S286

COMPANIES ACT 1963 S298

RSC O.74 r136

COMPANIES ACT 1950 S150(1)

RSC O.75(b) r3

COMPANIES ACT 1963 S160

Mr. Justice McCracken

1 The Applicant is the liquidator of Verit Hotel & Leisure (Ireland) Limited (hereinafter called "the Company") and has brought this application pursuant to Section 150 of the Companies Act1990seeking an order against each of the Respondents who are the directors of the Company, restricting them pursuant to that Section. This application has a very long history, having initially being brought by Notice of Motion dated 6th December, 1994 and I think I should briefly set out that history.

2 Under Section 149 of the 1990 Act, Section 150 applies to any company if,inter alia, at any time during the course of its winding up the liquidator of the Company certifies to the Court that it is unable to pay its debts. In the present case the Liquidator did so certify, and the validity of this certificate was challenged by the Respondents on constitutional grounds. By an Order dated 3rd July, 1996 Carroll J. refused the relief sought by the Respondents.

3 In addition to the present motion, the liquidator also brought a motion dated 21st November, 1994 against the Respondents and an associated company called Letcane Investments Ltd. for relief pursuant to Sections 297 A, 286 and 298 of the Companies Act1963.Unfortunately these two motions became somewhat intermingled as both the Respondents and the liquidator chose to file Affidavits common to both motions, which has caused considerable confusion, although I think that ultimately it is accepted by both parties that the evidence in all Affidavits is admissible in these proceedings, whether it is strictly related to this claim or to the claim in the other Motion. In any event, I am treating all such evidence and exhibits as being admissible and relevant to these proceedings.

4 The second proceedings were protracted and involved several Interlocutory Motions and appeals to the Supreme Court, and it was ultimately determined that the issues would be heard on oral evidence. They were eventually compromised by virtue of a settlement dated 11th December, 1998 whereby the Respondents agreed to pay the liquidator the sum of £500,000.00 and costs of those proceedings. There were further delays due to the implementation of this settlement, which were not resolved until May, 1999.

5 On 10th March, 2000 the liquidator served a Notice of Re-Entry of this present motion and by a Motion dated 21st March, 2000 the Respondents applied to dismiss this motion on the grounds of excessive delay. That motion came on for hearing before O'Donovan J. who refused to strike out the motion, and the Respondents appealed that refusal to the Supreme Court. By an Order dated 31st July, 2001 the Supreme Court upheld the decision of O'Donovan J. and dismissed the appeal.

6 The nature and length of these various proceedings is relevant in relation to two preliminary points which were made before me by Dr. Forde SC on behalf of the Respondents, and on which I have in fact already ruled during the hearing of the case, but I think it desirable that I should express my views briefly in this judgment.

7 The first point raised was that the liquidator is now estopped from pursuing these proceedings. The basis for this claim is an argument in that the issues in these proceedings and the issues which arose in the other motion are so closely interrelated that they must be dealt with together, and by settling the issues in the other motion the liquidator is estopped from proceeding with this motion. While there are certainly...