The High Court has declared that James Edward Esmonde and Patrick O’Toole are subject to restrictions under section 150 of the Companies Act 1990, after finding it could not be satisfied that they acted responsibly as directors of Noxtad Ltd in the company’s final year of trading.
The judgment, delivered by Ms Justice Finlay Geoghegan on 26 May 2014, followed an application by Noxtad’s official liquidator, David Van Dessel. The court said the company was insolvent and that the liquidator accepted the directors had acted honestly. The question was whether they had acted responsibly. The judge also rejected the liquidator’s concern about alleged non-cooperation, finding it was not serious enough to justify a restriction on that basis.
Noxtad began trading the Carlton Abbey Hotel in Athy in January 2010, after Carlton Athy Hotel Ltd had operated it. The directors knew that the earlier hotel operator had owed Revenue €430,000 in 2009 and had sacrificed Revenue payments to pay other creditors, the judgment said. A review prepared for the hotel’s lender had recorded that position.
The court considered Noxtad’s unpaid tax liabilities and its continued trading. From March 2010, only €2,000 in VAT was remitted, leaving a VAT liability of €183,877.94 over the 14 months before liquidation. PAYE payments stopped after September 2010, apart from an August return and payment, and the PAYE liability reached €118,690 by the start of winding up; part of that figure was estimated because returns were missing.
O’Toole said the directors believed the hotel could trade through its difficulties and ultimately pay Revenue. He acknowledged that insufficient attention was given to cash flow and Revenue liabilities, and that money due to Revenue was used to support the hotel’s cash flow. He also cited wedding bookings, discussions with the lender and an unexpected loss of trade during severe weather in December 2010.
The judge found that trade creditors had significantly increased in the months before winding up. She concluded that the directors had decided to use VAT collected and PAYE deducted from employees’ wages to finance continued trading. The Revenue Commissioners’ service of a statutory notice over debts Noxtad could not pay must, she said, have made the directors aware the company was insolvent.
The court was therefore unable to find that the directors acted responsibly in continuing to trade and use Revenue money, considered in the context of their full tenure. Because section 150 is mandatory where the required satisfaction is absent, the court made the restriction declaration sought. The judgment does not specify the start date of the restriction or address any application for relief from it.