The Supreme Court has dismissed an appeal by Jack Kachkar and Robert McClellan Carrigan against a five-year restriction on acting as company directors, upholding the High Court order.
In a judgment delivered by Mr Justice Fennelly on 13 May 2010, the court found that the appellants had not acted responsibly in relation to transfers of money from Irish companies in the Miza group and the granting of security over company assets to CCL Industries Inc. The court affirmed the High Court’s restriction order under section 150 of the Companies Act 1990.
The companies had emerged from examinership in 2001 with obligations to repay creditors of the former Antigen group. The Supreme Court said they were unable to meet payments under the scheme of arrangement from February 2002, and that no new capital was invested. Between February and August 2002, more than €2.8 million was transferred from the Irish companies to related Miza businesses in the United States, the United Kingdom and Canada.
The appellants described the transfers as inter-company and corporate overhead allocations or transfers made under normal group practice. The court said they had provided no evidence of independent consideration of the Irish companies’ rights and property interests, or an objective and lawful justification for the transfers. It also noted that the companies were unable to meet their obligations to creditors under the scheme while money was transferred to other group companies.
The second issue concerned a debenture granted to CCL Industries Inc. on 13 September 2002, creating security over assets of the Irish Miza group. The judgment said the appellants were concerned about the companies’ financial condition by 10 September. A letter from the group’s solicitors had warned that the directors should consider whether the security was in the Irish companies’ interests, rather than only those of Miza Pharmaceuticals Inc. The Supreme Court agreed with the High Court that allowing security over the assets was irresponsible when the companies were becoming visibly insolvent.
The High Court had rejected two other complaints: that the appellants entered into the scheme without funding being provided, and that they allowed the companies to continue trading while insolvent. Those allegations were no longer issues on appeal. The Supreme Court stated that there was no issue about the appellants’ honesty. It considered only whether they had acted responsibly and upheld the restriction order on that basis.