The High Court has restricted two former directors of Meridian Motors Ltd for five years after finding they had not shown that they acted honestly and responsibly in the company’s affairs. The court declined to disqualify them, finding that the liquidator had not proved the serious fraud allegations on the evidence presented.
Mr Justice Quinn delivered judgment on 21 December 2021 on an application by liquidator George Maloney under the Companies Act 2014. He sought disqualification under section 842 or, alternatively, declarations of restriction under section 819.
Meridian Motors, which bought, sold and imported high-end cars from premises on Sleaty Road, Co Carlow, entered liquidation on 5 December 2017. Stephen Murphy was its sole director at that time. His father, Liam Murphy, had resigned as a director in May 2017. The court said section 819 applied to both men.
The liquidator raised concerns about missing vehicles, VAT assessments, alleged false invoices, cooperation with the liquidation, company records, trading while insolvent and a transfer of a Porsche to connected company Cyc-Lok Ltd. The court found the explanation that “conmen” stole vehicles implausible, noting that registration documents were also missing. It said, however, there was no evidence before it establishing what happened to the cars.
The court also said the material about vehicle invoices raised questions but did not prove a fraudulent VAT scheme. The liquidator had not supplied further evidence to establish which invoices were paid, and the director’s explanation that SLDS Ltd imported and resold the vehicles was uncontradicted by evidence. The court stressed that it could not determine the company’s actual VAT liability in these proceedings. It also found the allegation concerning “missing traders” was unsupported by sufficient evidence.
Other matters did support restrictions. The liquidator had not received key accounting records and VAT working papers needed to pursue tax appeals, and their absence impeded his work. The court found that the company continued trading and incurring liabilities while insolvent, relying in part on an earlier court finding that it was insolvent by 27 April 2017. It also noted an earlier order reversing the transfer of a Porsche to Cyc-Lok as an unfair preference to a connected company.
For a restriction order, the directors had to satisfy the court that they acted honestly and responsibly. The judge found they had not done so, pointing to the unpursued VAT appeals, the unexplained estimated deficit of more than €1 million, the records and cooperation failures, continued trading while insolvent and the unfair preference.
For disqualification, the liquidator carried the burden of proving the grounds. The judge said the serious fraud allegations were presented without enough probative evidence. Although the conduct could have supported disqualification, he applied the lesser sanction under section 845(3). The order bars both respondents for five years from acting as company directors or secretaries, or participating in company formation or promotion, unless the company meets the capital requirements in section 819(3).