The High Court proposed five-year restriction orders against Raymond Lannen and Deirdre Lannen, directors of Swanpool Limited and Travelodge Limited, after finding that a payment to investors in Swanpool was made when it was clear the companies could not meet all their debts.
Mr Justice Clarke’s judgment, delivered on 4 November 2005, concerned applications by liquidator Eugene McLaughlin under section 150 of the Companies Act 1990. The court said the directors’ conduct was at the lower end of the seriousness spectrum, but still met the threshold for an order. The judgment states that the court would propose making the orders; it does not set out a final order or its terms beyond the five-year restriction sought in the applications.
The two companies were involved in the tannery and hide trade. The judgment records no allegation of dishonesty, poor record-keeping or general non-compliance with company law, and no finding that the circumstances leading to insolvency reflected adversely on the directors. At the time trading ceased, there was reason to believe both companies could meet their liabilities.
Swanpool’s remaining asset was a site at Clondra Mills, County Longford. A residential development initially appeared likely to realise about €2 million, but planning permission was refused after an appeal and a second application was also rejected over contamination concerns. The site was later sold for €475,000.
The liquidator raised three matters. The court attached little weight to the proceeds being paid into Travelodge’s bank account, because they remained identifiable. It accepted that the failure to retain enough money for VAT involved possible commercial misjudgement, but said it fell short of the irresponsibility or gross negligence required for a restriction order.
The central issue was Swanpool’s repayment of funds to Business Expansion Scheme investors. The first respondent had agreed to the repayment in July 2002, when the companies were expected to meet their liabilities. But by the time payment was made in April 2003, planning setbacks meant full repayment would leave the companies unable to pay all debts, particularly amounts owed to the Revenue Commissioners. The directors accepted that the payment should not have been made. They cited pressure to honour the earlier agreement; the court also noted that neither director nor anyone connected to them received a personal benefit.
The judge said the directors had failed in their duty to preserve company assets for creditors once insolvency was clear. He held that the seriousness of this failure warranted orders despite the otherwise proper conduct of the companies’ affairs. Deirdre Lannen said she relied on her father’s guidance and maintained broad familiarity with the businesses. The court did not decide whether her limited involvement was an additional ground for an order, but said she knew or ought to have known of the investor payment and shared responsibility for it.