The High Court has dismissed a liquidator’s application to restrict four former Pierse Contracting directors from acting as company directors for five years, finding they had acted responsibly in the company’s final years.
Mr Justice Cregan delivered the judgment on 30 January 2015. The application was brought by liquidator Simon Coyle under section 150 of the Companies Act 1990. Four of the nine respondents opposed it. The other five did not contest the application, and restriction orders had already been made against them earlier in the proceedings.
The liquidator argued that the directors should have placed the company into liquidation around 2009, about a year before it went into liquidation on 4 November 2010. His concerns included a roughly €40 million loan used in a 2004 share purchase, loans to UK subsidiaries, the revaluation of student accommodation in Marino, valuations of developments in Santry Cross, Eden and Carrickmines, and reliance on the contracting business to sustain the group.
The judge found the 2004 transaction had been carried out for bona fide commercial reasons, at arm’s length, with professional advice and in line with statutory requirements. He accepted that the company had been able to afford the loan when it was made and that the economic downturn and liquidation, rather than the transaction itself, made it irrecoverable.
The court also rejected the allegations about the intercompany loans and property valuations. It noted that the company’s auditors had approved the accounting treatments and that the directors were entitled to rely on the auditors and professional valuers. The liquidator’s later valuations, the judgment said, had the benefit of hindsight.
On whether the directors should have stopped trading sooner, the court considered the circumstances as a whole. These included continued bank support, funding for public-private partnership projects, new contracts, cost reductions and more than €10 million in personal funds advanced by directors. The company also expected to recover money from Gannon Developments after settling a claim for €13 million. NAMA later indicated the payment would not be made, a development the judgment identified as precipitating the company’s move towards examinership and liquidation.
The judge said the evidence did not suggest the respondents had acted other than honestly. He concluded they had acted responsibly and that there was no other reason it would be just and equitable to restrict them. The court dismissed the liquidator’s application against the four respondents who contested it; the judgment does not undo the restriction orders already made against the other five.