In the matter of Dunleckney Limited.

And in the matter of the Companies Acts 1963 to 1990.

Company Law - Winding up by the court - Restoration to the register - Effect of restoration - Restriction of director - Period to be taken into account in determining whether a director acted honestly and responsibly - Retrospective effect - Failure to file statement of affairs - Companies Act 1963, section 311(8) - Companies Act 1990, section 150 - SI 117 of 1991.

The High Court (before Miss Justice Carroll); judgment delivered 18 February 1999.

The failure by a director to fulfil his statutory obligation, under the Companies Acts 1963 to 1990, to file a statement of affairs, and the failure by him to explain the reason for such non-compliance, is sufficient reason to make a declaration under the Companies Act 1990, restricting him from acting, inter alia, as a director of any company.

The High Court so held in making a declaration, under section 150 of the Companies Act 1990, that a director of a company, which was the subject of the above entitled winding up proceedings, should not, for a period of five years, be appointed, or act in any way, whether directly or indirectly, as a director or secretary, or be concerned with, or take part in, the promotion or formation of any company, unless that company met the requirements of section 150(3) of the Act.

Blathna Ruane BL for the Official Liquidator; David Hardiman SC and Martin Hayden BL for John Keenan.

Miss Justice Carroll set out the facts of this case stating that this was an application for an order under section 150 of the Companies Act 1963, that John Keenan should be restricted from acting as director or secretary of a company for a period of five years.

Dunleckney Limited (in liquidation), hereinafter "the company", was struck off the Register of Companies on 6 November, 1990. The last annual returns for the Company were filed in 1982, made up to 14 August 1981. On petition of the Revenue Commissioners, the company was restored to the Register on 21 October 1991. The office copy of the order was sent to the Companies Office on 6 January 1992 and returned receipted on the next day.

A winding up of the company was also ordered on 21 October 1991 and an official liquidator was appointed. Patrick Keenan (now deceased), and John Keenan were, as directors, ordered to file a statement of affairs within three weeks.

The company had sold 240 acres of land on 21 May 1979, from which the net proceeds were £796,000, and had incurred a corporation tax liability of £118,163.25. The company made an advance of £725,000, to its parent company, Keenan Brothers Holdings Limited (wound up on 21 December 1991), and £40,047 to its fellow subsidiaries within the Keenan group.

At the date of liquidation the company was the registered owner of lands in County Carlow, which were let on conacre at £5,000 per annum, which sum was paid to the company's solicitors from 1984. The solicitors, who held £12,785 on behalf of the company on the date of the liquidation, paid £1,475 to each of the directors on 8 August 1984, and £1,500 to John Keenan and the widow of Patrick Keenan on 24 February, 1988. This money was never repaid and no explanation was given by John Keenan. The lands were subsequently sold by the official liquidator for £85,000. The official liquidator of the company ascertained from the official liquidator of Keenan Brothers Ltd, (wound up on 21 January 1993), that there were no further assets available for distribution.

The official liquidator said that it appeared that no books or records were maintained and that apart from the payments from the rental income in 1984 and 1989, his investigation did not reveal any items upon which in his opinion, a statement of affairs would reveal any information which was not already available.

Mr Keenan, on affidavit, claimed that section 150 did not have retrospective effect, despite the restoration of the company to the register. The Companies Act 1990 was enacted on 22 December 1990 and Part 7, sections 149169, came into operation on 1 August 1991 by virtue of SI No. 117 of 1991.

Miss Justice Carroll stated that the followings points arose: firstly, whether Part 7 of the 1990 Act applied to the company; secondly, whether actions which took place prior to 1 August 1991 should be taken into account in deciding whether John Keenan acted honestly and responsibly in relation to the affairs of the company; and thirdly, was there any other reason why it would be just and equitable that John Keenan should be subject to the restrictions under the section.

The judge held that when the office copy of the order restoring the company to the register was delivered on 6 December 1992, the company was deemed, under section 311(8) of the Companies Act 1963, to have continued in existence as if it had not been struck off and therefore Part 7, which came into operation on 1 August 1991, applied to the company, which was not wound up until 21 October 1991. Section 149 applied, as the company was unable to pay its debts at the commencement of the winding up. John Keenan was a director of the company twelve months prior to the commencement of the winding up and the chapter applied. Under section 150 the court had to be satisfied that a director to whom section 149 applied had acted honestly and responsibly in relation to the conduct of the affairs of the company and that there was no other reason why it would be just and equitable that he should be subject to the restrictions imposed by the section.

In La Moselle Clothing Limited (in Liquidation) and Rosegem Limited (in Liquidation) (appli- cants) v Djamel Soualhi (respondent) (High Court, 11 May 1998, unreported), Mr Justice Shanley stated that acting honestly and responsibly related to the conduct of the affairs of the company and arguably bore no relation to any period after the commencement of a winding up or receivership where the person may not be involved any further in the conduct of the affairs of the company; however, the court was allowed to take into account any relevant conduct of the director after the commencement of a winding up or receivership, for example any failure to co-operate with the liquidator or receiver, in deciding whether or not to make an order under section 150(1) of the Companies Act 1990.

In Hefferon Kearns Ltd, Dublin Heating Company Ltd v Thomas Hefferon & Others [1993] 3 IR 191, Mr Justice Murphy held that section 30(1)(a) of the Companies Amendment Act 1990, which deals with the liability in certain circumstances of the officers of a company under the protection of the court, was not retrospective in its effect.

Miss Justice Carroll held that the same principles applied to section 150, so that it was the conduct of the affairs of the company after the coming into operation of Part 7, which must be looked at, to determine whether the directors acted honestly and responsibly in relation to the affairs of the company and not, conduct prior to that date. This was not to say that the court could not look at the background information provided by actions and events prior to the coming into operation of Part 7, to explain matters arising after the operative date. The relevant period in this case was from 1 August to 21 October 1991 and as Mr Keenan did not act at all in relation to the affairs of the Company during that period the first aspect of the director's conduct did not arise.

The question of whether there was any other reason allowed the court to look at Mr Keenan's conduct after the winding up, to determine whether it would be just an equitable that he should be subject to restrictions under the section. He did not file a statement of affairs and gave no explanation in his replying affidavit for his failure to comply with this statutory obligation. The official liquidator, who said that Mr Keenan co-operated, did not think that a statement of affairs would reveal any information not already available. However, it was not for the official liquidator to excuse a director from his statutory obligation.

Miss Justice Carroll went on to state that there was the matter of the payments of £1,750 and £1,500 out of company funds, which, while they occurred prior to the relevant date of 1 August 1991, appeared to be a debt due to the company with a continuing obligation. No explanation was given by Mr Keenan as to why he failed to repay any part of this sum. However, this was a matter for the official liquidator to pursue.

Miss Justice Carroll held that the failure of Mr Keenan to fulfil his statutory obligation by filing a statement of affairs and the failure to explain why, was sufficient reason to make the declaration under section 150 of the Companies Act 1990 that he should not for a period of five years be appointed or act in any way, whether directly or indirectly, as a director or secretary, or be concerned with, or take part in, the promotion or formation of any company, unless that company met the requirements of section 150(3) of the Act.

Solicitors: Kenny Stephenson Chapman (Dublin) for the Official Liquidator; James Cody & Sons (Co Carlow) for John Keenan.