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High Court of Ireland Decisions |
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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Knocklofty House Hotel Ltd., Re [2005] IEHC 105 (5 April 2005) URL: http://www.bailii.org/ie/cases/IEHC/2005/H105.html Cite as: [2005] IEHC 105, [2005] 4 IR 497 |
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Neutral Citation No: [2005] IEHC 105
[1992 6118P]
EX-TEPORE JUDGMENT OF MS. JUSTICE FINLAY GEOGHEGAN ON TUESDAY, 5 APRIL 2005
MS. JUSTICE FINLAY GEOGHEGAN DELIVERED JUDGMENT, AS FOLLOWS, ON TUESDAY, 5 APRIL 2005:
These are two applications brought by Mr. Frank Kelly who is the official liquidator of each of Knocklofty House Hotel Limited and Eccleshall Limited pursuant to Section 150 of the Companies Act 1990. The two companies, whilst in separate liquidation proceedings, are related companies in the sense of having directors who are common to each and also shareholders in common. The first two named respondents whom I will refer to as Mr. and Mrs. O'Keeffe were the respondents to this application.
The official liquidator was appointed to Knocklofty House Hotel Limited by order of the High Court on 19 October 1992 and subsequently to Eccleshall Limited by order of 15 February 1993. These applications were brought pursuant to motions which were issues on 26 February 2004.
On behalf of the respondents, it is accepted that they were directors of each of the companies within 12 months prior to the date of the commencement of the winding up, and whilst some submissions were made, it is essentially accepted that the companies are insolvent, and accordingly that Section 150 applies to the companies and to the respondents.
Section 150 of the 1990 Act came into force on 1 August 1991. On behalf of the official liquidator, it is properly accepted by counsel on his behalf that having regard to the decision of Carroll J. in the matter of Dunlechney Limited, (unreported the High Court, 18 February 1999) that the relevant conduct in respect of which the directors must establish to the court for the purposes of Section 150 that they acted honestly and responsibly, is the conduct of the affairs of these companies from 1 August 1991.
The first issue that I must deal with is in effect an application on behalf of the respondents to refuse to entertain these applications or to dismiss them by reason of the delay in bringing this matter before the court.
Prior to dealing with the relevant principles, it must be observed that Section 150 as enacted in 1990 applies to these applications, and in that form, whilst it imposed a mandatory obligation on the High Court to make declarations of restrictions in respect of persons to whom the section applied, unless they satisfied the court of certain matters, it made no express provision for the manner in which such applications were to be brought before the High Court.
Having regard to that lacuna, Mr. Justice Francis Murphy in the early 1990s made a practice direction in relation to compulsory liquidations such as these directing that official liquidators should bring a motion in all such liquidations before the court in respect of companies to which Section 150 applied. Whilst, it is important to note this fact, the official liquidator in these liquidations was not under either any statutory obligation nor any even regulatory express obligation to bring this application or these applications before the court.
There is no dispute between the parties as to the relevant principles in relation to the delay. They are set out by the Supreme Court in Primor Plc -v- Stokes Kennedy Crowley [1996], 2IR459 and none applied to applications under Section 150 in the judgment of Fennelly J. in Duignan -v- Carway [2001], 4IR/550.
The principles as summarised by Hamilton CJ in Primor Plc are set out at page 560 in the decision of the Duignan -v- Carway. I do not propose referring to all, but it is perhaps helpful to recall the first three principles set out, and I quote:
"(a) The courts have an inherent jurisdiction to control their own procedure to dismiss a claim when the interests of justice require them to do so;
(b) It must in the first instance be established by the parties seeking a dismissal proceeding for want of prosecution on the ground of delay and the prosecution thereof that the delay was inordinate and inexcusable;
(c) Even where the delay has been both inordinate and inexcusable, the court must exercise a judgment on whether in its discretion on the facts the balance of Justice is in favour or against the proceeding of the case."
As was noted by both counsel, the application in this instance is different both to the precise applications before the court in either Primor PLC -v- Stokes Kennedy Crowley or Duignan -v- Carway insofar as the delay is not an allegation of delay after the commencement of the application under Section 150, but rather a delay in the bringing of the application.
However, similar principles have been applied by the courts to the delay in the commencement of the proceedings, and if anything those principles may be slightly more generous in favour of persons seeking to stay proceedings. Subject to that caveat, I propose considering this application in accordance with the principles set out in Primor Plc -v- Stokes Kennedy Crowley.
I am firstly satisfied on the facts of this case that the delay in commencing the application under Section 150 was both inordinate and inexcusable as that term has been used by the courts. It is not suggested on behalf of the official liquidator that he was unaware of his obligation pursuant to the practice direction to bring forward this application, Mr. Binchy on his behalf accepts that the length of time involved, which is a period of approximately 11 years (either side of 11 years in each of the applications) from the commencement of the winding-up is inordinate. Whilst the liquidator points to certain difficulties arising in the liquidation, they do not excuse a very significant portion of the 11 years.
The Supreme Court in Primor Plc -v- Stokes Kennedy Crowley set out a number of matters which the court is entitled to take into consideration on the issue as to whether the balance of justice is in favour or against proceeding with the application. Those matters are matters some of which pertain specifically to inter partes proceedings. These proceedings are not strictly speaking inter partes proceedings. Undoubtedly the liquidator brings the application before the court, but then the onus is on the respondent directors to satisfy the court that they acted responsibly and honestly in relation to conduct of the affairs of the company, and unless they discharge that onus, the court is under a mandatory obligation to make the declaration of restriction. Accordingly, it appears to me that there are slightly differing factors which should be taken into account by the court.
The factors which I have taken into account in seeking to reach a view as to whether the balance of justice is in favour or against proceeding with this application are the following:
Firstly, the legislative intent of Section 150 of the Act of 1990 as has been identified in a number of case and referred to in Duignan -v- Carway. It includes the public interest in seeing that persons who have been directors of insolvent companies should no longer enjoy the unqualified right to become involved in the formation of companies. That public interest includes an element of protection for third parties dealing with companies.
Secondly, there is the constitutional rights of the respondents to have the application determined in accordance with their constitutional guarantee of fair procedures, and again as identified by Fennelly J. in Duignan -v- Carway at page 561, this would appear to include a right to a fair and speedy trial of the issue as to whether their normal rights to become directors and promote and take part in the formation of companies should be limited, restricted or taken away.
Thirdly, there are two special features of Section 150. Firstly it imposes the onus on the respondents of establishing that they acted honestly and responsibly in relation to the conduct of the affairs of the company if they are to escape the declaration of restriction, and secondly, the absence of any discretion in the court as to the period for which the declaration of restriction must be made.
If this application is now permitted to proceed, and the respondents did not satisfy the court that they acted honestly and responsibly in relation to the conduct of the affairs of this company, the court must now make a declaration of restriction for five years from the date of this decision.
Fourthly, it would appear on the facts of this application that there is now, if the application proceeds, an onus on the respondents to establish that they acted honestly and responsibly in relation to the conduct of the affairs of these from 1 August 1991, i.e. for a period of between 12 and a half years prior to the commencement of the application up to the date of commencement of the winding-up, that is to say 11 years.
Further, having regard to the issues which have been raised by the official liquidator in relation to the keeping of books and records and the preparation of the proper accounts and the filing of annual returns and the
facts referred to by the respondent on affidavit which include the disputes between them and Mr. Pascal Bergin, who was a director of the company for some period between 1989 at the minimum the Autumn of 1990 or possibly a little longer, the court would have to examine and have regard to facts which took place from 1989, and hence the court would be looking at and attempting to ascertain what happened for upwards of 15 years prior to the date of the hearing of the application.
I have considered the question of whether the respondents have established any actual prejudice in meeting this application having regard to specified facts, and I am not satisfied that they have established in accordance with the decisions that there is any actual prejudice in dealing with any particular fact, but it appears that I must have regard to the fact that there is inevitably an added difficulty in dealing with the detail of facts that took place between 11 and 15 years ago and have
regard to the onus of proof which exists on the respondents.
The last matter to which I have had regard is, whilst the legislative intent of Section 150 is that the directors should have to face and deal with the consequences of being the directors of an insolvent company, including applications under Section 150, in addition to considering and taking into account their constitutional right to a speedy determination of that issue, it appears that I must also have regard to their constitutional right to earn a livelihood, and in that context that there does or should come a time when directors may be able to put behind them the consequences of an insolvent liquidation.
On the facts of this case, it appears that these directors did have to face and did attempt to deal with a number of the consequences of this insolvency and did so through the 1990s and ultimately through litigation against their former solicitors and Mr. Bergin and his firm. This appears to have ended in early 1999.
On the facts as deposed to by Mr. O'Keeffe, they have since that date attempted to put that behind them and have attempted to recommence a small business through a limited company of which both the respondents are shareholders and directors. It appears that this commenced in or about five years ago, which would have been a period of approximately seven to eight years after the commencement of these liquidations. It appears to me that that is a reasonable time at which these directors should have been able to put behind them the consequences of this liquidation and start moving forward and should be entitled to do so now without having to face, at this stage, the threat of a declaration of restriction which potentially would interfere with their ability to conduct their present business through a limited company.
Having considered all those matters, I have concluded on the particular facts of this case that the balance of justice is against proceeding with the application. It is in favour of staying the application by reason of the delay in bringing the application. So I will dismiss the application as against the two respondents.
Approved: Finlay Geoghegan J.
