High Court of Ireland Decisions

1. On 6th December 1994 the Applicant (the Official Liquidator of Verit Hotel and Leisure (Ireland) Limited) issued a Motion under section 150 of the Companies Act 1990 seeking a declaration that the Respondents should not be appointed to act as directors or secretaries or be involved with the promotion or formation of any company for a period of five years. That Motion was not proceeded with. Some five years later a notice of intention to proceed of 15th February 2000 was served on behalf of the Applicant and it was followed by a notice of re-entry dated 3rd March 2000.

2. By Notice of Motion dated 21st March 2000 the Respondents sought to dismiss the application under section 150 on the grounds of delay. Essentially, the Respondents are relying on two grounds. Firstly, they submit that the Motion brought under section 150 is now of no effect because five years have elapsed since it was issued. It is submitted that an order made pursuant to section 150 of the Companies Act 1990 must date from the commencement of the proceedings as the section does not specify when the five-year term commences. In that regard it is argued that the absence of such a provision in the section gives rise to an ambiguity and that the court must construe the section strictly as it is a penal provision and cannot interpret it as it thinks it might be interpreted.

3. If I considered section 150 to be ambiguous, I accept that I would be required to interpret it strictly and would not be entitled to put my own interpretation on it. However, I do not think that it is ambiguous. It is quite clear, it seems to me, that the five-year period is to commence whenever the court says that it is to commence.

4. If the argument advanced on behalf of the Respondents is correct, there would, it seems to me, be an enormous number of anomalous consequences. For example, a company director who is anxious to limit the restriction imposed by the section could delay its commencement with vexatious proceedings or delay it by filing a series of affidavits and so on. As Mr Gleeson said, it would have arbitrary results in that the extent to which a director would be restricted from acting would depend on when the particular liquidator was in a position to bring a motion. It could be, he says, that one director could not act for a period of four-and-a-half years whereas another director would not have to be disqualified for four years or less.

5. It is also argued on behalf of the Applicant that if the section is to be interpreted in the manner suggested by Dr Forde (on behalf of the Respondents) it would have to be retrospective.

6. In my view, if a statute is intended to be retrospective it would have to be so stated in the body of the statute itself. In that regard, my view is confirmed by the judgment of Murphy J. in Hefferon Kearns Ltd and the Companies Act 1990 [1993] 3 IR 177. In any event, I agree with Mr Gleeson that the section is obviously prospective. I do not accept the submission by Dr Forde that any of the other sections in the Companies Act 1990 to which he referred or, indeed, section 1 of the English Companies Act 1986, indicate an ambiguity in section 150. An ambiguity is something which appears on its face. It seems to me that there is no ambiguity on the face of this section. It is quite clear that the restriction is to date from the date on which the order is made.

7. If Dr Forde is correct, another consequence of interpreting the section in that way is that a person would be necessarily notionally disqualified for periods during which they were actually acting as a director because it would be ordered that they would cease to be a director as of such a date, which might be a year or more before the application was heard. In those circumstances I reject Dr Forde’s first ground.

8. Dr Forde’s second ground is that, generally speaking, there was excessive and inordinate delay in bringing on this motion. He submits that justice requires that the motion should be dismissed. He accepts that the motion could not have been proceeded with while constitutional proceedings instituted by the Respondents were in being but submits that there was inordinate, inexcusable and oppressive delay after those proceedings were disposed of. In particular, he rejects the suggestion that a claim for damages which had been brought by the Liquidator against the Respondents was an excuse for delaying proceeding with the section 150 notice because, firstly, a motion under section 150 is the easiest thing in the world for a liquidator to bring; that by virtue of the provisions of the Companies Act the onus of proof is reversed and that there is therefore no difficulty for the Liquidator in proceeding with the motion. In any event, he says, the damages claim related to the management of the Company which is also involved in a section 150 application and it would therefore have been convenient had the two matters proceeded in tandem. He says that the failure to do so on the part of the Liquidator gives rise to duplication and unnecessary costs. Dr Forde accepts that there was no specific prejudice to the Respondents but says there is an implied prejudice because section 150

9. Dr Forde agreed that it is in the public interest that certain people should not be directors of companies and accepts that section 150 was passed for that purpose. That being so, he says, a liquidator should move as quickly as possible in bringing a section 150 application. In that context Dr Forde referred to the decision in Manlon Trading Limited , an English case, and said that the interest of the public in obtaining a disqualification order must diminish with the passage of time from the relevant liquidation proceedings or from the commencement of the disqualification proceedings. He says that the necessity for bringing this Motion has virtually disappeared since so much time has passed. He also referred to a quotation from Manlon Trading Limited [1995] BCLC 84 and agrees that the court held in that case that “where no prejudice to a fair trial is established, the court should permit the proceedings to proceed”. He says that to disqualify an individual from acting as a director will involve allegations which, if proved, undermine the status and reputation of business people and that such proceedings should be brought as quickly as possible. In effect, that is what the Manlon Trading Limited case held.

10. Miss Byrne (with Dr Forde) submitted that as section 150 is a penal provision one should not be allowed the same latitude as in civil cases and that this is a delay in prosecuting a claim, not just a delay in

11. On behalf of the Applicant Mr Gleeson says that three reasons must exist before the court could dismiss a Motion of this nature on the ground of delay and they are that the delay is inordinate, inexcusable and that it would be against the interests of justice were the case to proceed. Mr Gleeson argues that the delay in prosecuting this claim during the period when the constitutional action was in being was excusable, and that is accepted by Dr Forde. He says that it was also excusable after the termination of the constitutional proceedings and during the continuance of the damages proceedings brought by the Liquidator against the Respondents. I think that that is so. If the Respondents had successfully defended the damages claim, it seems to me that they would probably have successfully resisted the application under section 150, and the Liquidator would have appreciated that fact. I therefore think it was totally reasonable that he should delay proceeding with the section 150 Motion until the damages proceedings had been disposed of. However, Mr Gleeson concedes (and I agree with him) that there is no reasonable excuse for not proceeding with the section 150 Motion after the damages proceedings were determined. While Mr Gleeson accepts that that delay was inexcusable, he says that it was not inordinate. I do not agree with him. I think it was inordinate. I cannot think of any good reason why the Liquidator should not have gone ahead with the section 150 Motion after the damages proceedings had been disposed of. In those circumstances I think that the delay was inexcusable and inordinate.

12. In that regard Mr Gleeson referred me to the decision of the Supreme Court in Primor plc v Stokes Kennedy Crowley [1996] 2 IR 459. It is submitted by Dr Forde that that case dealt with civil proceedings and that there was no penal element involved, as there is in this case, and that therefore the judgment of the Supreme Court is not relevant to this case. I do not agree with him. I cannot see any reason why the Supreme Court decision in Primor should not equally apply to these proceedings. What the Supreme Court held in that case was that “even where the delay has been both inordinate and inexcusable the court must exercise a judgment on whether, in it≤ discretion, on the facts the balance of justice was in favour of or against the case proceeding”.

13. Even though I have come to the conclusion that the delay in proceeding with this Motion was inordinate and inexcusable, it follows from the Supreme Court decision that that is not the end of the matter. I then have a discretion as to whether or not the balance of justice favours proceeding with it. The Supreme Court lists a number of considerations which must be taken into account when considering where the balance of justice lies and the relevant consideration in this case is whether the delay has given rise to a substantial risk that it is not possible to have a fair trial or is likely to cause or has caused serious prejudice to the Respondents.

14. As to the question of prejudice, Dr Forde concedes that there is no specific prejudice but says that there is a general prejudice arising from the fact that this Motion has been brought against his clients, the implication being that they are not honest or responsible people. However, that is a very general prejudice. I am not convinced that

15. As to the balance of justice, I am also influenced by the fact that the public interest requires that unsuitable persons should not be directors. In that context I think that the public interest would overcome any delay in this case. I accept, as Dr Forde said, that perhaps a conscientious liquidator might have been more diligent in bringing these proceedings. However, as I have said, I do not think that the delay, however reprehensible it might be, is going to affect the Respondents’ capacity to get a fair trial if the Motion proceeds. In my view public interest demands it.

16. I will therefore dismiss the Motion and order that the Liquidator’s costs in bringing this Motion be costs in the winding up.