The Court of Appeal allowed the Director of Corporate Enforcement’s appeal and imposed five-year restrictions on Brendan Walsh, Catherine Walsh and Patrick Walsh over their directorships of Walfab Engineering Ltd. and RPB Products Ltd.
In a judgment delivered on 20 January 2016, Mr Justice Kelly set aside a High Court order that had declined to disqualify or restrict the respondents. The Court of Appeal substituted declarations under section 150 of the Companies Act 1990, using the alternative sanction available under section 160(9A). The restrictions run for five years from the date of the Court of Appeal judgment. The court did not disqualify the respondents.
The Director’s application concerned the companies being struck off the register after failures to file annual returns. The respondents accepted that the formal requirements for the court to have jurisdiction were met. The appeal concerned the trial judge’s exercise of discretion over whether to impose a sanction.
The judgment records unsatisfied company debts, including judgments against both companies. The respondents’ evidence attributed the companies’ insolvency to the economic downturn and difficulties in the construction sector. Patrick Walsh said the businesses could not afford liquidation and that he and Brendan Walsh had acted honestly and responsibly. Catherine Walsh said she had been a non-participating director of Walfab, had no management role and received no remuneration.
The Court of Appeal held that the High Court had given weight to factors that did not excuse directors from their statutory duties, including the economic climate, the scale of the businesses and the respondents’ backgrounds. It also rejected the idea that a director’s passive role alone could relieve that director from responsibility to take reasonable steps to ensure annual returns were filed.
The appeal court said section 160(9A) permits a restriction declaration as a lesser alternative to disqualification in an appropriate case; it is not confined by all the requirements of a separate application under section 150. Applying that approach to the evidence and explanations before it, the court chose restrictions rather than disqualification for all three respondents.