The High Court declared Patrick Coughlan and Stephen Lake restricted under section 150 of the Companies Act 1990 after finding they had not shown they acted responsibly as directors of 360networks (Ireland) Limited, which was in receivership and liquidation.
In a judgment delivered on 21 December 2004, Ms Justice Finlay Geoghegan said the company was insolvent when its winding up began. Coughlan and Lake had each been directors within the preceding 12 months. The application was brought by Rory O’Ferrall, the company’s official liquidator, who had been appointed by court order in July 2001.
The company, a wholly owned subsidiary of a Canadian-headed corporate group, built a data centre and co-location facility at Clonshaugh. The judgment said the project was about 90% complete by May 2001. The company was stated to have received about $20 million from the group for construction and fitting out, but the court said it was unclear who advanced the money or on what basis. It was also unclear what property interest the company had in the site, despite the significant expenditure.
The central question was whether the directors had discharged their minimum duties to inform themselves about the company’s affairs and to supervise and control them. The liquidator’s counsel argued that they had abdicated responsibility for overseeing its financial affairs. The judge said no issue arose about the directors’ honesty.
The court concluded that the directors’ affidavits, considered alongside the liquidator’s evidence, did not show real steps to understand or manage the company as a distinct corporate entity, particularly its financial and property affairs. Their evidence showed confusion about the group’s holding companies, the company’s activities and its finances. The operation was financially managed from Maidenhead in England, but documents produced from there did not identify financial information relevant to the Irish company. Draft accounts were at an early stage and did not refer, for example, to a guarantee and secured debenture given by the company on 29 September 2000.
The judge took into account in Coughlan’s favour steps he took in summer 2001 to have a receiver appointed. Although the liquidator disputed whether that was appropriate, the court said the step followed legal advice and indicated some effort to manage the company.
The judgment confined its conclusion to the directors’ duties to this Irish company, rather than any responsibilities they may have had elsewhere in the 360networks group. The court said it was bound to make the restriction declarations sought. The judgment does not specify the duration of the restrictions.