Walsh v Barrett

• Jurisdiction: Ireland
• Judge: Mr. Justice Tony O'Connor
• Judgment Date: 27 July 2016
• Neutral Citation: [2016] IEHC 525
• Docket Number: [2013 No. 335 COS]
• Court: High Court
• Date: 27 July 2016

IN THE MATTER OF EVENTELEPHANT LIMITED (IN LIQUIDATION) AND IN THE MATTER OF THE COMPANIES ACTS 1963-2013

BETWEEN

JOSEPH WALSH

AND

NEIL HUGHES

APPLICANTS

AND

ALAN BARRETT

AND

RON DOWNEY

RESPONDENTS

[2016] IEHC 525

[2013 No. 335 COS]

THE HIGH COURT

Company – Ss. 160(2) and 150 of the Companies Act 1990 – Ss. 842 and 819 of the Companies Act, 2014 – Disqualification and restriction – Undisputed wrongful acts – Irresponsible conduct

Facts: The applicants/liquidators, by way of the present application, sought an order to disqualify the first named respondent and restrict the second named respondent under s 160(2) and s. 150 of the Companies Act, 1990 and s. 842 and s. 819 of the Companies Act, 2014, respectively. The second named respondent fairly recognised the per se omissions, which could be attributed to the first named respondent. The second named respondent contended that the first named respondent, by acting deceitfully and fraudulently, had hindered compliance by the second named respondent.

Mr. Justice Tony O'Connor made an order to disqualify the first named respondent and a declaration to restrict the second named respondent. The Court found the commission of unchallenged wrongful actions by the first named respondent in connection with the companies and its creditors and thus, made an order of disqualification for five years under s. 160 (2) (a) of the 1990 Act or s. 842(a) of the 2014 Act. The Court held that it was not satisfied that the second named respondent acted responsibly in the matters of the company. The Court held that the plea of naivety and ignorance of potential deceit by the first named respondent could not excuse the necessity of the second named respondent to act responsibly. The Court held that having regard to the nature of work required to be performed by the second named respondent, the second named respondent ought to have made proper enquiry into the continuing noteworthy losses incurred by the company, according to the information available.

JUDGMENT of Mr. Justice Tony O'Connor delivered on the 27th day of July, 2016

Introduction

1 This is an application to disqualify the first named respondent and restrict the second named respondent pursuant to s. 160(2) and s. 150 of the Companies Act 1990 (‘the 1990 Act’)[s. 842 and s. 819 of the Companies Act 2014 (‘the 2014 Act’) respectively]

Background

2 Eventelephant Limited (‘the Company’) operated a self-service online event registration website which allowed customers to use the site to create their own web pages to advertise and sell tickets for events. The Company processed ticket payments and received a commission for same. Many charities and some high profile sport organisations and airlines used the website according to the report of an independent accountant dated 18th July, 2013 which was relied upon to appoint the first named applicant as an interim examiner on that day. The applicants were appointed joint liquidators by order of this Court on 9th August, 2013. A mareva type injunction was made on 23rd August, 2013 freezing the accounts and assets of the first named respondent.

Fraud

3 The first named respondent did not dispute any of the facts asserted by the liquidator. The second named respondent in his replying affidavit of 28th May, 2015 recognised his obligation to satisfy the Court that he acted responsibly from an objective viewpoint at the times relevant to the Court's consideration. No allegation of dishonesty was levelled at the second named respondent.

4 Suffice to say that the first named respondent siphoned off significant portions of the income destined for the customers of the company to a paypal account of the Company which he then transferred to a PTSB account in the first named respondent's name and control. The software developed for the Company should have been intended and designed to direct payments to a trust account or the actual account of the event organiser.

5 The first incident of wrongful diversion as detected by the applicants occurred in 2009 which was within a year of the commencement of business and incorporation of the Company. The applicants identified that a total of €967,276.71 was transferred from 8th May, 2009 to 6th August, 2013 to the paypal account controlled exclusively by the first named respondent in a 21 page listing of each such transfer.

6 In addition, solicitors for the second named respondent brought to the Court's attention quite properly a letter from the solicitors for the first named respondent dated 1st June, 2016 confirming that the second named respondent had pleaded guilty to nine charges of making incorrect VAT returns for nine different periods in the years 2009, 2011, 2012 and 2013 in addition to one charge of failing to comply with keeping PAYE records. The letter indicated that the first named respondent awaits sentencing on 25th October, 2016.

Disqualification

7 Mr. Flynn, counsel for the first named respondent, implicitly acknowledged the inevitability of a disqualification order and the obligation on the Court to disqualify. In regard to the period of disqualification he emphasised that the first named respondent is 38 years of age with young children. I was informed that one of the children has a long term medical condition. Counsel sought to ensure that there was no infirmity in the disqualification order by reason of the...