The Supreme Court ruled that the directors of Wood Products (Longford) Limited had been persistently in default after failing to file annual returns for 13 years, but dismissed an appeal seeking their disqualification.
In a judgment delivered by Mr Justice Fennelly on 6 May 2008, the court held that persistent default did not require repeated court intervention or prior convictions. The statutory provision allowed persistent default to be proved in other ways; the “three strikes” mechanism in the legislation was not a requirement.
The company’s last annual return before the Director of Corporate Enforcement’s application was delivered in 1991 and covered the year ending 31 December 1989. The company was struck off the register in June 1999 for failing to file returns and was restored by High Court order in May 2001. That order required the directors to deliver outstanding returns within three months. They did not do so, and no annual returns were filed until April 2004, after the Director began disqualification proceedings.
The directors, Patrick McGowan and Patricia McGowan, did not dispute the defaults. In an affidavit, Mr McGowan cited trading difficulties and delays in payments to the company. He accepted that the directors had not acted appropriately and apologised for breaching the 2001 order. The outstanding company returns and accounts were eventually filed. Patricia McGowan had resigned as a director in February 2004, and an accountant was appointed in her place.
The High Court had refused to disqualify the directors. It found their conduct irresponsible and close to the threshold for a finding of lack of commercial probity, but did not find them unfit to manage a company. The Director’s appeal challenged the High Court’s interpretation of persistent default, but did not challenge its failure to make the required finding of unfitness. The Supreme Court therefore confined its review to the persistent-default ground.
The Supreme Court held that the 13 years of repeated failures, followed by non-compliance with the 2001 court order, established persistent default. It said that the failure to file annual returns would ordinarily warrant disqualification. However, the court declined to make a disqualification order or a declaration under section 150, finding that either would serve no useful purpose at that stage and could disrupt the company’s continuing business. It also said it would be harsh to make an order against Patricia McGowan, given that she had left management and the judgment attributed responsibility for the defaults to her husband.
The court dismissed the appeal. Its decision did not make a finding that either respondent was unfit to manage a company; that issue was not before it on the appeal.