The High Court dismissed an Official Liquidator’s application to restrict three respondents from acting as company directors, finding that the delay in bringing the proceedings made it unjust to continue. The court also ruled that David Cullen was not a shadow director of Hocroft Developments Limited.
The judgment, delivered by Mr Justice William M. McKechnie on 9 December 2009, addressed two preliminary issues in proceedings under section 150 of the Companies Act 1990: whether David Cullen was a de facto or shadow director, and whether the liquidator could proceed despite the delay. The court’s ruling dismissed the restriction application against Stephen Cullen, Paul Rocliffe and David Cullen; it did not determine whether the respondents had acted honestly and responsibly in the company’s affairs.
Hocroft, a property development company, went into liquidation on 14 April 2000. Its Official Liquidator, Liam Dowall, brought the restriction proceedings in September 2006. The statutory timetable required an application within three to five months of the liquidator’s first report, unless the Director of Corporate Enforcement relieved him of that obligation. The Director declined to do so in August 2004. The liquidator later received relief in relation to a second report, but the court treated the current application as arising from the first.
The liquidator argued that David Cullen had significant influence over Hocroft, pointing to his authority as a cheque signatory, land transactions between him and the company, and his extensive involvement in a hotel development project. Cullen acknowledged being closely involved in the project but said his role was that of the hotel’s owner and developer, not a company director. The court accepted that explanation. It found no sufficient evidence that Hocroft’s directors were accustomed to act on Cullen’s directions or instructions, as required for shadow directorship.
On delay, the court found the application was about two years late and that the delay was both inordinate and inexcusable. It rejected the liquidator’s explanations, including the need to complete related examinations before applying. The court considered the age of the transactions and project, the passage of time since the winding-up order, the absence of a former employee who might have given evidence, and the burden respondents faced in defending a restriction application. It concluded that the delay and related circumstances prejudiced the respondents’ ability to defend themselves.
The court granted the respondents’ motion to dismiss and prohibited any section 150 prosecution against them. Because of that outcome, it did not need to decide the liquidator’s application for an extension of time.