Sagamu Developments Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Tony O'Connor |
| Judgment Date | 02 February 2017 |
| Neutral Citation | [2017] IEHC 87 |
| Court | High Court |
| Docket Number | [No. 2009/627 COS] |
| Date | 02 February 2017 |
[2017] IEHC 87
THE HIGH COURT
O'Connor Tony J.
[No. 2009/627 COS]
IN THE MATTER OF SAGAMU DEVELOPMENTS LIMITED
AND
IN THE MATTER OF THE COMPANIES ACTS 1963 – 2009
AND
IN THE MATTER OF SECTION 150 OF THE COMPANIES ACT 1990
AND
Company – The Companies Acts 1963–2009 – S. 150 of the Companies Act 1990 – Capital requirements – Insolvency – Delay in Establishing Facts in Liquidation – Winding Up – Lack of Cooperation – S. 56 of the Company Law Enforcement Act 2001 and S. 683 of the Companies Act 2014 – Extension of Time.
Facts: The applicant liquidator brought an application for a declaration that the respondents be restricted from acting as a director or secretary of a company that does not meet the capital requirements of s. 150(3) of the Companies Act 1990 (as amended). The applicant claimed extension of time on the grounds of alleged lack of cooperation.
Mr. Justice Tony O'Connor held that the application for a declaration that the respondents be restricted from acting as a director or secretary of a company would be refused. The Court stated that the first named respondent did not act dishonestly or irresponsibly in the conduct of the affairs of the Company. The Court observed that the purpose of such an application would be to protect the public. The Court found that the alleged lack of cooperation related principally to two years only.
By Notice of Motion dated 25th April, 2013 the applicant liquidator (‘the Applicant’) of Sagamu Developments Limited (‘the Company’) brought an application for a declaration that the respondents be restricted from acting as a director or secretary of a company which does not meet the capital requirements of s. 150(3) of the Companies Act 1990 (as amended).
Seven affidavits in addition to two affidavits as to documents were sworn by the Applicant between 16th April, 2013 and 5th June, 2015 while ten affidavits were filed for the respondents between 22nd November, 2013 and 29th June, 2015 prior to a full day of opening the application in January 2016. Then there were two further and separate days for cross examination of three deponents in February and March 2016. Final written and oral submissions with a spreadsheet of a chronology of events considered relevant by one or other of the parties were completed in Michaelmas term 2016.
It is with that background that this Court finds itself in the unenviable position of reviewing the evidence and submissions. Parties like those before the Court now and the Court itself should avoid such protraction in the future.
The following extract from the judgment of Hogan J. in Donnellan v. Westport Textiles Limited [2011] IEHC 11 at para 31 is quite apt although the claim for hearing loss which lead to that judgment is different to the circumstances giving rise to the motion before the Court now:-
‘…quite apart from any considerations of the personal rights contained in Article 40 and Re Haughey-style basic fairness of procedures, the speedy and efficient dispatch of civil litigation is of necessity an inherent feature of the court's jurisdiction under Article 34.1. As I ventured to suggest in my own judgment in O'Connor v. Neurendale Ltd. [2010] IEHC 387, this constitutional imperative means that the courts have a jurisdiction (and, in an appropriate case, a duty) to exercise their powers in a way which will best ensure that a litigant's right to a hearing within a reasonable time is best vouchsafed. In any event, and for good measure, the same right is guaranteed by Article 6 ECHR: see Gilroy v. Flynn [2004] IESC 98, [2005] 1 ILRM 290 and McFarlane v. Ireland [2010] ECHR 1272. One might add that this duty also extends to protecting the public interest in ensuring the timely and effective administration of justice…’
The form of application before the Court now is mandated by the Oireachtas for the protection of the public ‘ against the future supervision and management of companies by persons whose past record as directors of insolvent companies have shown them to be a danger to creditors and others’. Those are the words of Finlay Geoghegan J. in Re Colm O'Neill Engineering Services Limited [2004] IEHC 83.
The alleged irresponsible conduct which was the focus of this application is traced back to 2008. The Company was wound up on 30th November, 2009 and the Applicant further highlighted alleged lack of cooperation and candour on the part of the respondents following his appointment.
The letter from the liquidator to the first named respondent (‘Mr. A’) of 3rd January, 2012 as copied to the Director of Corporate Enforcement (‘DCE’) set out the Applicant's preliminary results of his investigations which outlined failures to:
(i) submit correct tax returns,
(ii) discharge VAT liabilities for identified periods,
(iii) file a correct Statement of Affairs and;
(iv) co-operate with the Applicant ‘ including delays in providing substantive and relevant company books and records despite requests from the applicant’.
The Applicant submitted four reports to the DCE beginning with a report on 26th May, 2010 and ending with a report on 13th June, 2012. The DCE by letter dated 19th July, 2012 confirmed that the Applicant was not relieved of his obligation to make this application.
It was accepted rightly and fairly by the Applicant under cross examination that the respondents were not responsible for a delay in establishing facts in the liquidation from February 2012. Nevertheless, the Notice of Motion was not issued until 25th April, 2013.
The liquidator in his affidavit sworn on 16th April, 2013 sought, for the first time from the Court, an order extending the time for seeking the declarations. At that time, only the Court could extend the time for bringing this type of application under s. 56 of the Company Law Enforcement Act 2001 (‘CLEA 2001’). S. 683 of the Companies Act 2014 which came into operation on 1st June, 2015 replaced s. 56 of the CLEA 2001 and that section allows the DCE to grant an extension. The DCE did not specifically allow for this late application.
Barrett J. in DLOK Electrical Services Ltd v. O'Kane and Long [2014] IEHC 481 (which involved a similar application under s. 150 of the Companies Act 1990) made a number of points about s. 56(2) of the CLEA 2001 including:-
‘First, it appears that each report made to the Director of Corporate Enforcement is a ‘report’ for the purposes of section 56, i.e. it does not appear that where a series of reports is made that the series of reports should be treated as a cumulative single report. Second, unless the Director of Corporate Enforcement has relieved a liquidator of the obligation to bring a s.150 application within the timeframe prescribed in s.56(2), such an application must (‘shall’) be brought, absent an extension of that timeframe by the court. Third, non-compliance with s.56( 1) or (2) by a liquidator renders the liquidator guilty of a criminal offence.’
In that judgment at para. 13 Barrett J. went on to state:-
‘It seems to the court that there are at least two grounds why a liquidator should seek to comply with s.56. First, it is the law and that should be reason enough. Second, it is in a liquidator's personal interest to comply. After all, a liquidator who breaches s. 56(2) will be guilty of an offence unless a court later grants an extension of the applicable timeline.’
Barrett J. at para. 14 went on to explain:-
‘…an appropriate course of action for a liquidator to take if he or she contemplates that a potential difficulty may arise under s.56(2) would appear to be that identified by Dr Ahern in her learned text, Directors' Duties, (Dublin, 2009) in which she states, at p.511, that:
‘Rather than a liquidator being in…[a] difficult position with the attendant criminal consequences, if there is likely to be a difficulty with the timing, it is sensible for a liquidator to make a pre-emptive application to the High Court for more time pursuant to s. 56(2).’
In Coyle v. O'Brien & Ors. [2003] 2 I.R. 627 at p. 633 Finlay Geoghegan J. indicated factors which the Court should bear in mind when granting an extension of time:-
‘It [the court] should consider the matters put forward by or on behalf of the liquidator grounding the application for an extension of time in the context of the very clear intent expressed by the Oireachtas in s. 56(2) of the Act of 2001 that the liquidator must within the specified time bring the application before the court and if he fails to do so is to be considered of an offence. It appears to be that the grounds must be such that they warrant the court in fairness and justice, [bold print added by this Court] relieving the liquidator from the intended statutory consequences of a failure to act within the specified time’.
The Applicant relied on the letter from the DCE dated 19th July, 2012 which did not relieve him from the requirement to bring proceedings. The Applicant accepted that as of 20th February, 2012 when he wrote a four page letter to the DCE, the basis for this application existed.
In summary, the alleged lack of cooperation with which this Court is concerned relates principally to the years 2010 and 2011 or more accurately a period which was just over two years.
Given the legal principles which I have referenced above, it is difficult to see the fairness and justice in allowing this application for a declaration to proceed to a determination against the second named respondent who is now 76 years of age with health issues. In any event, the focus of attention was always on...
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