The High Court made a restriction order against Paul Swords, a director of Capital Auto Group Limited, after finding he had not satisfied the court that he acted honestly and responsibly in the company’s affairs. The application was brought by the company’s liquidator under section 150 of the Companies Act 1990.
Mr Justice Michael Peart delivered the judgment on 21 December 2005. The company, which sold motor cars, was wound up in October 2002. A restriction order had already been made against the second respondent, Gary Chambers, by consent in June 2005, so the application before the judge concerned Swords alone.
The liquidator said the company appeared insolvent by May 2002. Its statement of affairs listed a bank balance of €12,000 and trade liabilities of €68,998, including an estimated €66,250 owed to the Revenue Commissioners. Because company records were incomplete, the liquidator could not establish the precise liabilities, the cause or timing of insolvency, or what happened to stock that may have been worth €150,000 in May 2002. The judgment noted uncertainty about some figures and said little turned on the Revenue estimate.
The judge focused on a dishonoured cheque for €31,000 given to GE Capital Woodchester in October 2002 to settle hire purchase finance on a vehicle the company had sold. Swords said he had deposited about €34,000 before writing the cheque and blamed the company’s depleted funds on Chambers, alleging that Chambers had diverted money to another business. The liquidator said the cheque was written after a creditors’ meeting had been advertised. The judge was not satisfied that Swords had adequately explained why finance for the vehicle’s buyer had been arranged through a different institution, leaving the existing finance unsettled. He considered the handling of the transaction dishonest, even without direct evidence that Swords personally benefited.
The judgment also found Swords had not adequately ensured that proper books and records were kept, particularly after May 2002, when relations between the directors had deteriorated. The directors could each write cheques without the other’s signature, yet there appeared to be no process for keeping each informed of the other’s payments. The judge said Swords could not simply blame his co-director for the company’s records or affairs.
Swords said cheque stubs had been given to the first liquidator and suggested the current liquidator could obtain the cheques from the bank. The judge criticised the lack of follow-up but did not reach a final conclusion on whether this amounted to non-cooperation. He ordered the restriction sought, having found Swords had not shown that he acted honestly and responsibly in all respects. The judgment does not specify the duration or terms of the order.