The High Court found that a director of Shemburn Limited acted irresponsibly by failing to take appropriate action to have the company wound up promptly after a related company went into liquidation. The court has not yet decided whether to make a restriction order against him.
In a judgment delivered on 19 July 2017, Mr Justice Robert Haughton said the second respondent, who opposed the liquidator’s application, had not acted responsibly in relation to the company’s affairs. He reserved the question of whether the order should be made under section 150 of the Companies Act 1990 or section 819 of the Companies Act 2014, saying he would hear further submissions from counsel.
Shemburn’s main activity was leasing aircraft to The Pilot Training Centre of Ireland Limited (PTCI), a linked company. PTCI went into liquidation in 2012, owing Shemburn about €1.5 million. The court said Shemburn depended on PTCI for lease income and its aircraft were grounded when PTCI ceased trading. Shemburn was placed into liquidation in May 2014, about 22 months later.
The liquidator argued that the delay allowed storage costs to accumulate and caused the aircraft to lose value. The second respondent said his role had become non-executive while he trained and worked as a commercial pilot. He relied on information from his father, the first respondent, and trusted his father’s judgment about efforts to sell the aircraft and reach an agreement with creditors. He said the questionnaire sent by the liquidator had gone to his father’s address and had not been brought to his attention.
Justice Haughton said a short delay to explore an orderly sale might have been reasonable, but a process lasting more than 18 months was not responsible. The second respondent had a duty to supervise the company’s affairs and should have sought independent or professional advice rather than accepting his father’s strategy without question. The court also found he bore some responsibility for the increase in unsecured debts owed to Weston and Waterford airports during the delay.
The court did not find that he was dishonest. It also rejected the allegation that he acted irresponsibly by failing to return the questionnaire, accepting that he had not seen it and had no additional information to provide. The judge was not satisfied that the aircraft’s depreciation itself showed irresponsibility by the second respondent, noting the evidence that weather damage followed outdoor storage and that there was no evidence he knew of that storage.
The judgment separately records that the first respondent did not oppose the application and was restricted from 3 July 2017. The third respondent, who did not appear or oppose it, was also restricted from that date. Those orders concerned the other respondents; the judgment addressing the second respondent ends with the restriction-order question still to be determined.