The High Court found that John O’Brien acted irresponsibly in the affairs of Architectural and Industrial Coatings Limited after it became insolvent, and said his conduct warranted a restriction under company law. It also found that fellow former director Ray Cosgrave acted irresponsibly, but said it would not make a restriction declaration against him if he gave a five-year undertaking limiting his involvement in companies.
The judgment, delivered by Ms Justice Murphy on 17 December 2015, arose from an application by liquidator Edmond Cahill under section 150 of the Companies Act 1990. The court extended the time for bringing the application to 20 May 2014, the date it was issued. It said uncertainty about how correspondence between the liquidator and the Office of the Director of Corporate Enforcement affected the statutory time limit made it unfair to penalise the liquidator.
The company, which painted aluminium under contract and provided metal treatment services, lost a major customer in 2002 and later made substantial losses. By autumn 2004, the court said, the directors knew the company was insolvent, attempts to find investors had failed and its financial controller had warned of the risks of continuing to trade. The court said the directors should then have convened a creditors’ meeting as a step towards liquidation. It rejected lack of funds as a convincing explanation, noting that O’Brien had retained a consultant at a proposed fee of €10,000 a month.
Instead, the business was leased to Keltile Limited, whose general manager was Sean Kelly. The court said the company was struck off the register on 16 October 2005 after required returns were not filed, yet continued trading while struck off. It found that O’Brien knowingly allowed this and later failed to take the necessary steps to restore the company until the ODCE threatened proceedings. The court also found that the company’s assets were not preserved for creditors and that rent due under the lease was not recovered for their benefit.
At strike-off, the company had €246,634 in VAT liabilities, €149,627 in PAYE and PRSI liabilities, and €349,094 owed to unrelated trade creditors, according to the judgment. The court said these liabilities remained unpaid at liquidation. It also found that O’Brien had failed to disclose the strike-off to creditors on the evidence before it, and noted that he had previously been reprimanded and fined by an accountancy disciplinary tribunal over his failure to tell a creditor about the strike-off and allowing trading to continue.
The court recognised that Cosgrave was a non-executive nominee director, had tried to resign in 2005 and was excluded from the company’s affairs. But it found he knew of the company’s difficulties and failed to act in 2004 or 2005. It said a five-year undertaking would meet the interests of justice and public protection; if he gives it, the court will not make a restriction declaration against him. The judgment does not state that the undertaking had already been given.