The High Court has ordered restrictions under section 150 of the Companies Act 1990 against Leo Coady, a director of Careca Investments Limited, after finding that he failed to act responsibly in the company’s affairs.
In a judgment delivered on 4 March 2005, Mr Justice Clarke said the company had kept little or no adequate books and records, that Mr Coady accepted a payment from the proceeds of a property sale without satisfying himself it was proper, and that he failed to take adequate steps to have the company wound up within a reasonable time after it stopped trading.
The liquidator, Martin V. Ferris, had sought five-year restrictions against both directors. Peter Farrell did not contest the application, but the judgment dealt only with the case against Mr Coady. The issue before the court was whether Mr Coady could rely on the statutory exception by showing that he had acted honestly and responsibly. The court concluded that he had not and made the order sought. The judgment does not state further details of the restrictions in its concluding paragraph.
Careca had bought land in Donabate in or around May 1992 and sold it in June 1995 at a substantial profit. The judgment describes this as the company’s only significant transaction. The company later went into liquidation after a winding-up petition was presented by the Collector General over a capital gains tax liability, including interest, of IR£277,681.25. It had not traded for about four years before liquidation.
The court heard that the company borrowed IR£277,000 from the First National Building Society against land purchased for IR£170,000. Mr Coady said the additional funding was intended to progress potential development. The judgment records that building society staff appeared to have been led to believe the borrowing covered the purchase consideration, and that there was no adequate information to establish how the sale proceeds were distributed. The court made no finding in this judgment that Mr Coady personally misused the additional borrowing.
After the sale, the company’s solicitors received net funds of just over IR£335,000, according to the judgment. Mr Coady received two payments totalling IR£67,118.25. The court found he accepted payment without checking whether the company could properly make it, while a substantial tax liability remained unpaid.
Mr Coady argued that he had been excluded from the company’s affairs and had complained about its management. The judge found no significant evidence that he had been excluded before the property sale in a way that removed his responsibility to ensure proper records were kept. The court also found that his complaints largely lay dormant between October 1995 and September 1998, and that he had not taken adequate steps to secure a winding up despite advice to do so.
The judgment said delay could make it harder for the liquidator to recover sums due to the company, including because some claims might be time-barred. A question of costs relating to Mr Farrell had been left over; the judgment did not decide it.