The High Court made five-year restriction declarations against Francis Murphy and Anne Murphy, directors of James Murphy & Sons Sales (Dundalk) Limited, after finding they had not established that they acted responsibly in the company’s affairs. The declarations followed an application by the company’s official liquidator under section 150 of the Companies Act 1990.
The judgment, delivered by Ms Justice Finlay Geoghegan on 19 April 2010, records that the company was insolvent and that both respondents had been directors within the 12 months before its winding up. The court said the liquidator had established that section 150 applied. The directors then had to satisfy the court that they had acted honestly and responsibly. The judge said the concerns raised did not call their honesty into question, but did raise issues about responsibility.
The company had taken over a truck-body and equipment business in 2005. It leased premises at a monthly rent that was due to rise from €2,777 to €8,333. After rent went unpaid, the landlord obtained a €141,666 judgment, an order for possession and costs in June 2007. The company moved to other premises in November that year but did not pay the judgment. The landlord petitioned to wind it up in June 2008, and the winding-up order followed in July.
The liquidator argued that the directors should have recognised the company’s inability to pay debts by June 2007 and should have taken steps to wind it up. He also raised missing VAT returns and unpaid VAT. The first respondent disputed the VAT position, saying payments totalling more than €192,000 had been credited to a related company in error. The judge said the evidence remained unclear, but found it probable that the company had not filed VAT returns after February 2005 and had made no VAT payments from, at latest, early 2007. She also found that the directors had records showing significant VAT liabilities during 2007.
The judge accepted that the first respondent’s optimism in mid-2007 about recovering debts and moving premises was not wholly unreasonable. But by early 2008, she found, the directors knew or ought to have known the company had no reasonable prospect of paying its debts. The court cited the outstanding landlord judgment, tax liabilities, inability to meet PAYE and PRSI payments, and uncertainty about a major customer contract. Continuing to trade and failing to take steps to wind up the company showed a lack of commercial probity, the judgment said.
The second respondent said she had not participated in running the company. The judge held that accepting appointment as a director carried duties to learn about and supervise the company’s affairs; non-participation did not establish responsible conduct. The court said it was unnecessary to decide a separate issue about a payment into a bank account. It concluded that section 150 required restriction declarations against both respondents.