Usit World Plc v Companies Act

• Jurisdiction: Ireland
• Judge: Mr Justice Michael Peart
• Judgment Date: 10 August 2005
• Neutral Citation: [2005] IEHC 285
• Court: High Court
• Docket Number: Record Number:38 Cos/2002
• Date: 10 August 2005

USIT World PLC, In re; Jackson v Colleaqry

In The Matter of: USIT WORLD PLC (in liquidation)

and

In the Matter of the Companies Acts 1963–2001

In The Matter of: USIT LIMITED (being a company incorporated under the laws of Northern Ireland)(in liquidation),

And

In The Matter of the Companies Acts 1963–2001

Applications by

Ray Jackson, "Liquidator", under s.150 of the Companies Act, 1990

[2005] IEHC 285

Record Number:38 Cos/2002

Record Number:25 Cos/2002

THE HIGH COURT

COMPANY LAW

Directors

Restriction - Criteria for determining liability - Whether directors acted honestly and responsibly -Whether causal link between matters complained of and demise of company necessary - Undefended proceedings - Whether presumption in favour of restriction where director takes no part in proceedings - Whether court can be satisfied from other sources that director acted honestly and responsibly - Companies Act 1963 (No 33), s 383(3) - Companies (Amendment) Act 1983 (No 13), s 40 - Companies (Amendment) Act 1990 (No 27) s 3(b) - Companies Act 1990 (No 33), ss 149, 150 and 202 - Company Law Enforcement Act 2001 (No 28), s 100 - Order refused (2001/38Cos & 25 Cos - Peart J 10/8/2005) [2005] IEHC 285

Re Usit World plc: Jackson v Colleaqry

Facts: The liquidator of USIT World Plc and USIT Limited brought an application for the purposes of obtaining orders pursuant to the provisions of s. 150 of the Companies Act, 1990 against a number of named individuals who were directors of the said companies within the 12 month period prior to the date of appointment of the liquidator. The founder and driving force behind the USIT group stated that the events of September 11th 2001 were the single cause of the collapse of the group and he provided reasons for that assertion. Two of the directors did not file affidavits and were not represented in the application.

Held by Peart J. in refusing to make the order sought:

1. That on the balance of probabilities the respondents acted honestly and responsibility in relation to the conduct of the affairs of the companies. Furthermore, there was a link between September 11th and the collapse of the companies.

2. That despite that fact that there was no response by two of the respondents, the facts placed before the court demonstrated that those two respondents also acted honestly and responsibly. The Act of 1990 did not provide for a presumption of dishonestly and irresponsibility where a director did not participate in the application.

3. That there was no other reason why a restriction order should be made.

Reporter: L. O’S.

COMPANIES ACT 1990 S150

COMPANIES ACT 1990 S149

COMPANIES ACT 1990 S202

COMPANIES (AMDT) ACT 1983 S40(2)

COMPANIES (AMDT) ACT 1990 S3(B)

MERGERS TAKEOVERS & MONOPOLIES (CONTROL) ACTS 1978 S9

BUSINESS COMMUNICATIONS LTD v BAXTER & PARSONS UNREP MURPHY 21.7.1995 1995/6/1869

COMPANIES ACT 1990 S150(1)

KAVANAGH v CUMMINS & ORS 2004 2 ILRM 35 2004/24/5602

GASCO LTD, IN RE UNREP MCCRACKEN 5.2.2001 2001/10/2716

COMPANIES ACT 1963 S383(3)

COMPANY LAW ENFORCEMENT ACT 2001 S100

SQUASH (IRL) LTD, IN RE 2001 3 IR 35 2001/23/6280

LA MOSELLE CLOTHING LTD & ROSEGEM LTD v SOUALHI 1998 2 ILRM 345 1998/23/8886

VEHICLE IMPORTS LTD, IN RE UNREP MURPHY 23.11.2000 2000/17/6574

COLM O'NEILL ENGINEERING SERVICES (IN VOLUNTARY LIQUIDATION) UNREP FINLAY-GEOGHEGAN 13.2.2004 2004/8/1824 2004 IEHC 83

LO-LINE ELECTRIC MOTORS LTD, IN RE 1988 BCLC 698 1988 CH 477 1988 3 WLR 26 1988 2 AER 692

Judgment of

Mr Justice Michael Peart

1 This is an application brought by the liquidator for the purposes of obtaining orders from this Court pursuant to the provisions of s. 150 of the Companies Act,1990 which provides, in so far as is relevant, as follows:

"(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 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 subsection 3; ………"

2 (2) The matters referred to in subsection (1) are —

3 (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, ………"

4 In the light of the provisions of s.149 of the Act, there is no question but that all the respondent directors named in the present application come within the scope of an application under s.150 of the Act.

5 The applicant is the liquidator of Usit World Plc (hereinafter referred to as "Usit World") and of Usit Limited (hereinafter referred to as "Usit") having been appointed as such on the 15th May 2002 and the 18th February 2002 respectively.

6 Usit World was the holding company for all the subsidiaries of the Usit Group worldwide, and Usit operated as the treasury company for the Usit Group of companies.

7 I will first of all set out a relevant history to these applications.

8 Having done so I will deal with the applications against the various named director/respondents on an individual basis, except insofar as in some instances a number of directors can be grouped together given the commonality between them in relation to their role. The applications brought by the liquidator are as follows:

9 In respect of Usit World, the liquidator seeks an order against the following directors:

10 Gordon Colleary - he is described by the liquidator in his affidavit as being the founder and driving force behind the Usit Group, as well as being the chief executive and decision-taker in respect of most issues in relation to the affairs of the group until his resignation on 24th January 2002.

11 Mairín Colleary - she is the wife of Gordon Colleary, and a director of Usit World plc. The liquidator expresses his view that she shares the same responsibility as other directors. He states that she had an active involvement in the business, with a particular focus on an entity referred to as Usit Ireland Limited.

12 Gerard Connolly - he was appointed finance director of the company but was employed only from the 18th January 2001 to the 2nd July 2002. The liquidator states that he is unaware of the reasons for his resignation from that position, and has not made contact with him.

13 Lynn Millington-Wallace - she was appointed director of corporate governance in USIT World plc, but her duties included looking after these matters in relation to UST limited also, although she was not a director of USIT Limited.

14 Xavier Moreels - he was a director as of the date of appointment of the liquidator, but the liquidator does not believe that he had any active role in the company following the appointment of an Examiner to the company. As he is not in this jurisdiction, the liquidator has not made any contact with him.

15 These persons will be referred to as"the original directors" and were directors within the 12 month period prior to the date on which the liquidator was appointed.

16 Richard Porter; Mark Adams; Dan McGing:

17 These persons were also directors at the time of the liquidation, but were not appointed directors until 23rd January 2002 in the case of Messrs. Porter and Adams, and the 12th February 2002 in the case of Mr McGing. They were nominated as directors by a company called STA Travel Holdings Pte Limited ("STA"), a subsidiary of which, Solgun Limited, had acquired 90% of the shareholding of Usit World on the 23rd January 2002. These three persons will be referred to as the "STA directors".

18 These persons were directors of Usit Limited, as well as having been directors of Usit World, at the date on which the liquidator was appointed.

19 A usefully concise description of the inter-relation and modus operandi of both companies can be gleaned from the liquidator's affidavits, each sworn on the 4th July 2003 to ground these applications. In his affidavit sworn to ground his application in respect ofUsit World he avers as follows at paragraph 9 thereof:

"… Usit World was the holding company for all the subsidiaries of the Usit Group. It owned shares in 29 companies worldwide. While it did not of itself engage in trading activity, at the date of liquidation it was indebted to Usit Limited in the sum of approximately €54,376,300. Usit Limited operated as a treasury company for the Usit Group of companies and the net effect of the conduct of the affairs of Usit World Plc. Was to create a bad debt of €54,376,300 for Usit Limited which in turn affected the creditors of Usit Limited which included a very significant body of third party trade creditors who are owed in the region of €120 million to €155 million."

20 In his affidavit sworn to ground the application in respect ofUsit, he avers at paragraph 6(i) and (ii) as follows:

" 6 (i) The subsidiaries of Usit World plc. Worldwide would book tickets from airlines on behalf of ultimate passengers. The matrix of agreements between the Usit group and the airlines was such that any such booking was treated as a purchase of the flight by Usit Limited from the airline in question. Accordingly, Usit Limited was responsible to pay the airline for the cost of the relevant ticket. In turn, the relevant subsidiary would owe Usit Limited the price of the ticket plus a margin which amounted effectively to an administration charge. The subsidiaries would account to Usit Limited for the ordering of tickets on a periodic basis and make transfers of money to Usit Limited arising from the payment they received from the ultimate passengers from time to time. In turn, Usit Limited used this money to...