The High Court declared Jack Kachkar and Robert McClellan Carrigan restricted directors after finding they had not satisfied the court that they acted responsibly in overseeing the affairs of five insolvent Irish companies in the Miza Group.
In a judgment delivered on 21 February 2005, Ms Justice Finlay Geoghegan said the companies had been unable to meet the full payments due to creditors under a court-approved scheme of arrangement from February 2002. The court was considering the liquidator’s applications under section 150 of the Companies Act 1990. The statute required restriction declarations unless the directors established that they had acted honestly and responsibly.
The judgment said there was no issue about the directors’ honesty, and the liquidator acknowledged this following his investigations. The court’s concern was whether they had properly supervised the Irish companies’ finances while serving as directors for about 10 to 11 months.
The judge accepted that financial difficulties were partly attributed to delays and funding problems involving Goldshield, a business partner under the restructuring arrangements. But she said those pressures increased the directors’ obligation to control and supervise the companies’ financial affairs.
The court found that, on the balance of probabilities, about €2.8 million in money or debts was transferred from the Irish group to Miza companies in the UK, US and Canada between February and August 2002. The group received loans of about €1 million from Miza Inc. in late July. The judgment said there was no evidence that Kachkar and Carrigan considered whether payments for intra-group corporate charges were appropriate for the Irish companies during that financially pressured period.
The judge also considered a September 2002 debenture granting security over the Irish group in favour of CCL Industries. The directors were properly concerned by early September about whether the group could continue trading, but the court found no clear explanation of how they considered it proper to issue the debenture after board discussions on 9 and 10 September.
The court said it was deciding only whether the two men had acted responsibly as directors of the five Irish companies. It did not determine their conduct as directors or executives of other Miza Group companies. The judge said continued trading after February did not by itself make the directors irresponsible, given the prospect of resolving difficulties with Goldshield and improving production.
The liquidator, Tom Grace, was appointed to the companies after an unsuccessful examinership. The judgment states that the court was bound to make the restriction declarations because it was not satisfied the directors had acted responsibly.