The High Court has refused a liquidator’s application to restrict two respondents from acting as company directors or secretaries under section 150 of the Companies Act 1990.
The judgment, delivered by Mr Justice Tony O’Connor on 2 February 2017, concerned Sagamu Developments Limited, which was wound up on 30 November 2009. The liquidator alleged failures involving VAT, a €13.3 million debt owed by another company in the Hanly group, and cooperation with the liquidation.
The court declined to extend the time for the application against the second respondent, who was 76 and had health issues. It therefore refused to make a declaration against him. The judge said the focus of the case had been the first respondent, his son.
The liquidator argued that the first respondent had acted irresponsibly by allowing VAT collected from property buyers to be used in the company’s cash flow, by writing off the inter-company debt, and by failing to cooperate promptly. The first respondent said the company faced severe financial pressure as the property market collapsed and its bank managed its cash flow. The court noted that the company engaged with the Revenue and entered an instalment arrangement, although significant VAT payments were not made.
The judge found the company’s insolvency was driven by its place within the Hanly group and the €13.3 million debt owed by Laragan Developments Limited. The debt’s recovery depended on the solvency of the group as a whole. The judge also found that explaining the debt’s write-off had been significantly delayed, increasing the liquidator’s work, but said the first respondent did not always have ready access to company records and advice.
The court concluded that, despite the delays and practices it said might not meet later governance standards, the first respondent had acted honestly and responsibly in the circumstances. It also found that he had now cooperated with the liquidator, although cooperation improved as the application approached and proceeded.
The court refused the declaration against the first respondent. It did not impose a restriction on either respondent. The judge said the application’s purpose was public protection, and that the matter was not about imposing penalties.