The High Court has declined to make restriction declarations against three former directors of Money Markets International Stockbrokers Limited (MMI), finding that the evidence did not provide a sufficient basis for the orders sought by the company’s liquidator.
The application was brought under section 150 of the Companies Act 1990. The remaining respondents addressed in this judgment were Timothy Murphy, Oisin Fanning and Colm O’Reilly. The court said there was no issue about their honesty; the question was whether they had acted responsibly. Six other respondents had already had the application dismissed against them in July 2006. The application against Peter O’Byrne had been adjourned for personal reasons.
MMI traded in oil exploration shares, including Dana Petroleum and Tullow Oil, and offered clients rollover and “give and take back” transactions that allowed them to hold shares without paying for them immediately. The court described the business as high-risk and said clients understood the risks. It considered whether the directors had acted irresponsibly in allowing clients’ Dana exposure and extending credit, in relation to a deficit in client funds, and over other matters including securities held by Pru-Bach, communications with the Central Bank, company records and Fanning’s cooperation with the liquidator.
MMI stopped trading in September 1998 after a series of events, including a fall in oil exploration share prices, the withdrawal of its CREST facility by Ulster Bank and a demand by Pru-Bach for repayment of its margin account. A proposed sale of the business for £1 did not prevent the company from ultimately being wound up in March 1999. The judgment records that the directors took steps at personal financial cost to protect clients and creditors during the attempted rescue.
The judge concluded that the directors’ conduct was not shown to be so incompetent as to amount to irresponsibility, nor to have caused MMI’s insolvency or an asset deficiency. He found that the liquidator had not established irresponsibility over Dana exposure or client credit, the September 1998 client-funds deficit, or the directors’ awareness of Pru-Bach’s April 1998 transfer of securities from fully paid to margin status. The evidence also did not show inadequate communication with the Central Bank before 4 June 1998.
On company records, the court found insufficient evidence to make an adverse finding concerning Cater Allen accounts, client Patrick Lumley or set-offs between client accounts. It also rejected the claim that Fanning’s conduct concerning three alleged debts was irresponsible. The judgment noted that proceedings against Denis Flannelly had been set aside and that no indebtedness was accepted as existing.
The court therefore declined to make the declarations sought. It did not make findings that the directors were responsible for MMI’s insolvency.