Wood Products (Longford) Ltd v Companies Act

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 24 February 2005
• Neutral Citation: [2005] IEHC 41
• Docket Number: No. 570 COS/2003
• Court: High Court
• Date: 24 February 2005

[2005] IEHC 41

THE HIGH COURT

No. 570 COS/2003

DIRECTOR OF CORPORATE ENFORCEMENT v MCGOWAN

IN THE MATTER OF WOOD PRODUCTS (LONGFORD) LIMITED

AND IN THE MATTER OF AN APPLICATION PURSUANT TO

SECTION 160 OF THE COMPANIES ACT, 1990 AS AMENDED

AND IN THE MATTER OF AN APPLICATION PURSUANT TO

SECTION 160 (6A) OF THE COMPANIES ACT, 1990 AS AMENDED

BETWEEN/

THE DIRECTOR OF CORPORATE ENFORCEMENT

APPLICANT

AND

PATRICK McGOWAN AND PATRICIA McGOWAN

RESPONDENTS

COMPANIES ACT 1990 S160(2)(d)

COMPANIES ACT 1990 S160(2)(f)

COMPANIES (AMDT) ACT 1982 S12

COMPANIES ACT 1990 S160

COMPANIES ACT 1990 S160(1)

COMPANIES ACT 1990 S160(1)(a)

COMPANIES ACT 1990 S160(2)

COMPANIES ACT 1990 S159

COMPANIES ACT 1990 S160(3)

COMPANIES ACT 1990 S160(6)(a)

COMPANIES ACT 1990 S160(7)

COMPANIES ACT 1990 S160(9)(a)

COMPANIES ACT 1990 S150

COMPANIES ACT 1963 S125

COMPANIES ACT 1963 S371

SHORTER OXFORD ENGLISH DICTIONARY 3ED "PERSIST"

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

CAHILL (OFFICIAL LIQUIDATOR) v GRIMES 2002 1 IR 372

COMPANIES ACT 1990 S160(2)(b)

LA MOSELLE CLOTHING LTD v SOUALHI 1998 2 ILRM 345SQUASH (IRL) LTD, RE 2001 3 IR 35

NEWCASTLE TIMBER LTD & ABWOOD LRD, IN RE 2001 4 IR 586LO-LINE MOTORS LTD, RE 1988 BCLC 689 2 AER 692

COMPANY LAW

directors

Disqualification - Grounds - Persistent default in complying with filing obligations - Fitness to manage company - Whether directors persistently in default - Whether directors fit to manage company - Whether directors displayed lack of commercial probity - Whether remedy of default subsequent to issue of disqualification proceedings sufficient - Costs - Refusal of disqualification - Whether court had discretion to award costs against directors against whom no disqualification order was made - Restriction - Restriction as alternative to disqualification - Grounds for restriction - Whether directors should be restricted where company solvent and trading as going concern with outstanding tax liabilities - Companies Act 1990 (No 33), ss 150, 159, 160(2)(d) and (f), 160(9A) and 160(9B) - Application refused

Miss Justice Laffoy

1 This is an application by the Director of Corporate Enforcement (the Director) seeking disqualification orders in relation to each of the respondents pursuant to para. (d) and/or para. (f) of s. 160 (2) of the Companies Act,1990 (as amended).

2 Wood Products (Longford) Ltd. (the Company) was incorporated on 2nd January, 1975. When these proceedings were initiated the respondents were the only directors of the Company.

3 On 25th June, 1999 the Company was struck of the Register of Companies and was subsequently dissolved on 2nd July, 1999 due to its failure to file annual returns pursuant to s. 12 of the Companies (Amendment) Act,1982. In 2001 a creditor of the Company, ACC Bank Plc, brought proceedings in this court to have the Company restored to the register. By order of the court (O'Neill J.) made on 14th May, 2001, it was ordered that the Company be restored to the register. It was further ordered that within three months from the date of the order the respondents deliver all outstanding annual returns to the Registrar of Companies. The outstanding annual returns related to each year from and including 1990, the last annual return filed in 1991 having related to the year ended 31st December, 1989. It was further ordered that the respondents deliver to the Revenue Commissioners within three months from the date of the order the following outstanding returns:

4 (a) Corporation tax for the years ended 31st December, 1988 to 31st December, 2000;

5 (b) P35 returns for the years ended 5th April, 1997 and 5th April, 1998;

6 (c) P30 returns for the months ended 5th May, 2000 and 5th April, 2001; and

7 (d) Form VAT 3 for September/October, 1999.

8 It appears from the order that the Company was represented by counsel at the hearing of the application. In any event, both respondents were notified of the making of the order by letters dated 12th June, 2001, which were despatched by registered post, in which they were requested to deliver the outstanding returns without delay. When these proceedings were commenced the outstanding annual returns had not been delivered to the Companies Registration Office (CRO).

9 Further, when these proceedings were commenced the outstanding tax returns listed in the order of 14th May, 2001 had not been furnished to the Revenue Commissioners. In fact, on the application of the Revenue Commissioners, this court (Carroll J.) made an order on 13th October, 2003 extending for a period of two months the time within which the respondents were to deliver to the Revenue Commissioners the outstanding tax returns as listed in the order of 14th May, 2001. By this time the Revenue Commissioners had obtained two judgments against the Company. The first obtained in the Circuit Court on 11th February, 2003 and was for €33,525.41 together with the sum of €589 for costs. The second was obtained in this court on 12th May, 2003 and was for €246,287.63. Neither judgment had been satisfied when these proceedings were commenced. Each judgment had been registered as a judgment mortgage against the Company's property registered on Folio 1785F, Co. Longford.

10 These proceedings were commenced by an originating notice of motion dated 26th November, 2003.

11 The respondents' response is contained in three affidavits sworn by the first respondent on 27th February, 2004, 4th May, 2004 and 14th May, 2004. In essence, the first respondent, on behalf of both respondents, admitted the failure to comply with the provisions of the Companies Acts in relation to filing annual returns and the failure to comply with the order of the court to file the outstanding tax returns. The first respondent advanced what I think can fairly be described as two pleas in mitigation.

12 First, he averred that throughout the late 1980s and into the 1990s the Company was involved in substantial contracts at premises owned by a semi-State company and two Government Departments as a subcontractor and encountered difficulties securing payment from the main contractor. It was averred that sums aggregating in excess of €200,000 are due and owing, but it was not disclosed what, if any, steps the Company took to recover these sums. It was further averred that a policy decision was taken by the respondents not to act as a subcontractor wherever possible but to deal directly with the employer. This strategy had paid off and it was averred that by the end of 2003 the Company was in "quite a healthy financial position".

13 The second plea was that the second respondent suffered a depressive illness partly due to the difficulties in securing payment of monies due to the Company and partly due to a dispute with her former employer which had been ongoing since 1990. It was averred that the first respondent suffered from stress and anxiety as a result of the illness of the second respondent, who is his wife.

14 Following the commencement of these proceedings the following steps were taken by the respondents:

15 (1) The outstanding annual returns and accounts were filed in the CRO on 22nd April, 2004 and it was certified that the Company had met the annual return filing requirements of the CRO.

16 (2) The outstanding tax returns were filed with the Revenue Commissioners. The Revenue Commissioners issued nil assessments on foot of the Corporation Tax returns submitted.

17 (3) With effect from 27th February, 2004 the second respondent resigned as a director of the Company and Vincent Fox, an accountant by profession, was appointed a director in her place. On 22nd April, 2004 these changes were notified to the CRO on the relevant form (Form B10).

18 The Company's indebtedness to the Revenue Commissioners on foot of the High Court judgment had not been discharged and, in fact, further indebtedness had accrued. The evidence is that as of 31st December, 2003 in excess of €400,000 was due to the Revenue Commissioners in respect of outstanding taxes (PAYE / PRSI and VAT). After these proceedings were commenced, in separate proceedings in this court, the Revenue Commissioners had obtained an order declaring the money secured by the judgment mortgage registered in favour of the Revenue Commissioners on Folio 1785F well charged. Those proceedings had been stayed to enable the Company to raise the money to discharge the tax liabilities. Evidence was put before the court that a bank was positive to providing loan facilities for €400,000 to resolve the Company's tax liabilities, but it was made clear that approval would be subject to satisfactory repayment ability, security cover and compliance with the bank's normal lending terms and conditions. Evidence was also put before the court that the premises registered on Folio 1785F, which comprise a factory, office and showrooms on a one acre site in an Industrial Estate, have a market value of €850,000.

19 The Company continues to trade. The court was told that the Company has twelve employees.

20 In two situations, which are not relevant for present purposes but illustrate the gravity of the type of wrongdoing which the Oireachtas considered merited automatic disqualification, by virtue of s. 160, as amended, a person is deemed to be subject to a disqualification order for a specified period. The two situations are where a person is convicted on indictment of any indictable offence in relation to a company or involving fraud or dishonesty (sub-s. (1)), and where there is not proper compliance with the requirements in the Companies Acts of disclosure of any disqualification orders made by a foreign state (sub-s. (1A)).

21 Sub-section (2) lists nine situations in which the court is given a discretion to make a disqualification order. Insofar as it is relevant for present...