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Lynrowan Enterprises Ltd., Re. [2002] IEHC 90 (31 July 2002)

THE HIGH COURT

No. 1998 210 COS

IN THE MATTER OF LYNROWAN ENTERPRISES LIMITED

AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990

JUDGMENT of O’Neill J. delivered the 31st day of July 2002.

1. This is an application pursuant to Section 150(1) of the Companies Acts 1990 in which the liquidator of the above named company seeks orders against Messrs Thomas Mealy, James A. Mealy and James V. Mealy to the effect that for a period of five years from the date of the orders sought that they should not be appointed or act in anyway either directly or indirectly as a director or secretary or be concerned or take part in the promotion or formation of any company subject to the provisions of subsection 3(3) of Section 150 of the Companies Act 1990.

2. Of the three respondents Thomas Mealy and James A. Mealy were properly appointed as directors of the company in accordance with the provisions of the Companies Acts 1963 but James V. Mealy was not a de jure director of the company and he is sued as a respondent in this application on the basis that he was either a shadow director within the meaning of Section 27(1) of the Companies Act 1990 or a de facto director coming within the definition of “director” as contained in Section 2(1) of the Companies Act 1963.

3. The statutory provisions relevant to this application are as follows

4. The Companies Act 1963 Section 2(1) “In this Act unless the context otherwise requires ...

“Director” includes any person occupying the position of director by whatever name called;”

5. The Companies Act 1990 -

“27(1) subject to subsection 2, a person in accordance with whose directions or instructions the directors of a company are accustomed to act (in this Act referred to as “a shadow director”) shall be treated for the purpose of this Act as a director of the company unless the directors are accustomed so to act by reason only that they do so on advice given by him in a professional capacity.”

6. The Companies Act 1990 -

“Section 149 provides as follows;

(1) This chapter applies to any company if:

(a) at the date of the commencement of its winding up it is proved to the Court or

(b) at any time during the course of its winding up the liquidator of the company certifies, or it has otherwise proved, to the Court, it is unable to pay its debts (within the meaning of Section 214 of the Principle Act).

(2) This chapter applies to any person who was a director of a company to which this section applies at the date of, or within 12 months prior to, the commencement of its winding up.

(3) This chapter shall not apply to a company which commences to be wound up before the commencement of this section.

(4) In this chapter “the company” includes a company to which Section 351 of the Principal Act applies.

(5) This chapter applies to shadow directors as it applies to directors.”

7. The Companies Act 1990 Section 150

“(1) The Court shall unless it is satisfied as to any other matter specified in subsection (2), declare that a person whom this chapter applies shall not, for a period of five years, be appointed or act in anyway, either directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless it meets the requirements set out in subsection (3); and, in subsequent provisions of this part, the expression, a person to whom Section 150 applies” shall be construed as a reference to a person in respect of whom such a declaration has been made.

(2) The matters referred to in subsection (1) are-

(a) that the person concerned has acted honestly and responsibly in relation to the conduct of the affairs of the company and that there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this section, or

(b) subject to paragraph (a), that the person concerned was a director of the company solely by reason of his nomination as such by a financial institution in connection with the giving of credit facilities to the company by such institutions, provided that the institution in question has not obtained from any director of the company a personal or individual guarantee of repayment to it of the loans or other forms of credit advanced to the company, or

(c) subject to paragraph (a), that the person concerned was a director of the company solely by reason of his nomination as such by a venture capital company in connection with the purchase of, or subscription for, shares by it in the first mentioned company.

(3) The requirements specified in subsection (1) are that -

(a) the nominal value of the allotted share capital the company shall -

(i) in the case of a public limited company be at least £100,000.

(ii) in the case of any other company be at least £20,000.

(b) each allotted share to an aggregate amount not less than the amount referred to in subparagraph (i) or (ii) or paragraph (a) as the case may be, shall be fully paid up, including the whole of any premium thereon, and

(c) each such allotted share and the whole of any premium thereon shall be paid for in cash.

(4) Where a Court makes a declaration under subsection (1), a prescribed Officer of the Court shall cause the Registrar of Companies to be furnished with prescribed particulars of the declaration in such a form and manner as may be prescribed.

(5) In this section -

“Financial institution” means -

(a) a licensed bank, within the meaning of Section 25 or

(b) a company, the ordinary business of which includes the making of loans or the giving of guarantees in connection with loans and

“Venture capital company” means a company prescribed by the Minister the principal ordinary business of which is the making of share investment.”

8. All of the evidence before the Court suggests that Thomas Mealy although a de jure director of the company took no part whatsoever in its affairs and does not appear to have been expected so to do. In those circumstances in the absence of any evidence of specific irresponsible or dishonest behaviour on his part I am of the view that the granting of the relief sought against him would be inappropriate and I make no declaration pursuant to Section 150(1) in respect of Thomas Mealy.

9. The first issue which arises for consideration is whether or not James V. Mealy can be considered to be a “director” to whom Section 150(1) of the Companies Act, 1990 can be applied. It is accepted he was not a duly appointed director and therefore he can only be caught by Section 150 if he was either a “shadow director” or also, in the submission of the liquidator was de facto acting as a director so as to come within the definition of “director” in Section 2(1) of the Companies Act, 1963.

10. The question of the precise kind of activity or role which will result in a person being deemed to be either a de facto director or a shadow director does not appear to have been considered in any reported judgments in this jurisdiction.

11. In the jurisdiction of England and Wales the question has received some attention, and the law in regard to de facto directors was reviewed in the case of Re Richborough Furniture Limited (1996) 1 BCLC 507.

12. In this case Timothy Lloyd QC sitting as a Deputy Judge of the High Court in the Chancery Division comprehensively reviewed the English authorities. In that case what was in issue was whether or not a person could be disqualified to act as a director under Section 6(1) of the Company Directors Disqualification Act of 1996 where the person had not been validly appointed as a director.

13. In the course of his review the learned Deputy Judge quoted the following passage from the judgment of Brown-Wilkinson V-C in the case of Re: Lowe-Line Electric Motors Limited (1998) BCLC 696 at 706, (1998) Ch. 477 at 489 where the following was said

“As a matter of construction I would hold that the word “director” in Section 300 does include a person who is de facto acting as a director even though not appointed as such. Counsel for the respondent submitted that as the disqualification of a director is a penal process the word should be strictly construed. But, as I have said, the paramount purpose of disqualification is the protection of the public not punishment. I therefore approach the question of construction on the normal basis. Section 300 requires the Court to have regard to “conduct as a director”. I can see no reason why parliament should have intended that the decision to disqualify should turn on the validity of his appointment. The conduct relevant to future suitability to act as a director depends on a man’s past record as a director irrespective of the circumstances in which he came to act as such. Counsel for the respondent relied on Section 733(2) as showing that when parliament intended to include a de facto director it referred expressly to “any person who was purporting to act in any such capacity”. But Section 733 extends the criminal liabilty of a company to others and it is not surprising that in an exclusively penal provision the criminal liabilty of a de facto director has to be expressed therefore.”

14. Later on in his judgment the learned Deputy Judge quotes the following additional passage from the judgment of Brown Wilkinson VC in the same case as follows

“for the reasons I have given the plain intention of parliament in Section 300 was to have regard to the conduct of a person acting as a director whether validly appointed, invalidly appointed, or just assuming to act as a director without any appointment at all. In this context there is no logic in drawing the distinction put forward by counsel for the respondent.. In my judgment therefore under Section 300 the Court must have regard to the conduct of the respondent as director when validly appointed or invalidily appointed or merely de facto acting as a director.”

15. Later in his own judgment the learned Deputy Judge says the following

“in my judgment where Section 6(1) speaks of a person being or having being a “director” and of his conduct “as a director”, it includes the case where he has acted as a director even though not validly appointed or even if there has been no appointment at all. I accept the reasoning of Brown Wilkinson VC which fits with Millett J’s observation: “liability cannot sensibly depend on the validity of the defendant’s appointment”. Given the purpose of the legislation it seems to me that it would be bizarre if a person was liable to the jurisdiction if he had acted as a validly appointed director or as a shadow director, but not if he had acted as a director under an appointment which was for some technical reason invalid or if he had acted in the absence of any appointment at all.”

16. The learned Deputy Judge goes on further to say the following

“It seems to me that for some one to be made liable to disqualification under Section 6 as a de facto director, the Court would have to have clear evidence that he had been either the sole person directing affairs of the company (or acting with others all equally lacking in a valid appointment, as in Morris -v- Kanssen) or, if there were others who were true directors, that he was acting on an equal footing with the others in directing the affairs of the company. It also seems to me that, if it is unclear whether the acts or the person in question are referable to an assumed directorship, or to some other capacity such as shareholder or as here, consultant, the person in question must be entitled to the benefit of the doubt.”

17. I find the above quoted passages persuasive, in the light of the purpose of Section 150 which was stated by Shanley J. in La Mosele Clothing Limited -v- Soualhi (1998) 2 I.L.R.M, 345, at p. 350 to be as follows

“Quite apart from the injustice that results from the failure to restrict directors whose conduct merits restriction, there is the fact that the primary purpose of the Section 150 restriction is the protection of the public from persons who by their conduct, have shown themselves unfit to hold the office of, and discharge the duties of, a director of a company and, in consequence, represent a danger to potential investors and traders dealing with such companies.”

18. I am of opinion that a person although not validly appointed a director of a company may nonetheless be said to be a de facto director and thus deemed to be “a director” within the meaning of Section 2(1) of the Companies Act 1993 and thus amenable to the restriction contained in Section 150 of the Companies Act 1990, in the following circumstances:

1. Where there is clear evidence that that person has been either the sole person directing the affairs of the company or

2. Is directing the affairs of the company with others equally lacking in valid appointment or

3. Where there were other validly appointed directors that he was acting on an equal or more influential footing with the true directors in directing the affairs of the company.

4. In the absence of clear evidence of the foregoing and when there is evidence that the role of the person in question is explicable by the exercise of a role other than director, the person in question should not be made amenable to the Section 150 restriction.

5. Where the object of the Section is the protection of the public from dishonest or irresponsible persons the absence of a valid appointment should not permit an escape from the restriction in Section 150. It would be nonsensical if a person who had been validly appointed a director was to be treated differently to someone who lacked valid appointment but nevertheless assumed in all other respects the role of director. I would agree that “liability cannot sensibly depend upon the validity of the defendant’s appointment”.

6. In the light of all of the foregoing then in my view the Companies Act 1963 to 1990 recognise and embrace in the provision of Section 2(1) of the Act of 1963 and Section 150 of the Act of 1990, the concept of the “de facto director”.

19. A somewhat different role is that of the “shadow director”. The essence of that role is to be found in Section 27(1) of the Act of 1990 already quoted and it would appear to be that the true directors of the company act on the instructions and directions of someone who is not a validly appointed director.

20. In the English case of Re Hydrodan (Corby) Limited (1994) 2 BCLC 180 the following was said by Millett J. at p. 183

“A de facto director, I repeat, is one who claims to act and purports to act as a director although not validily appointed as such. A shadow director by contrast does not claim or purport to act as a director. On the contrary claims not to be a director. He lurks in the shadows, sheltering behind others who he claims, are the only directors of the company to the exclusion of himself.”

Thus it would appear that an invariable characteristic of a shadow director is that his role is hidden behind that of the validly appointed or indeed de facto directors, through whom, in a concealed way, the shadow director directs the affairs of the company.

21. On the evidence in this case I am satisfied that James V. Mealy was not a “shadow director” he did not direct the affairs of this company by instructions or directions to the other director named James A. Mealy. His role, such as it was, was not hidden or concealed in anyway.

22. The evidence does however satisfy me, on the balance of probabilities that James V. Mealy was a de facto director of the company. From October 1996 until April of 1998 the evidence establishes to my satisfaction that James V. Mealy had virtual complete control over the affairs of the company and the only other director James A. Mealy had virtually no involvement in its affairs during that time. This fact is most visibly illustrated by the fact that during that period James V. Mealy carried out all bank transactions for the company. Whilst it could be said that the carrying out of bank transactions is not necessarily indicative of the role of a director, I am satisfied that in the context of the affairs of this company and the fact that its affairs could only have been directed either by James A. Mealy or James V. Mealy the fact that all of these transactions were carried out by James V. Mealy points to him having a decisive role in the direction of the affairs of the company. This conclusion, I think is fortified by the fact that James V. Mealy was the authorised signatory for the purposes of the bank account whereas James A. Mealy was not. The fact that James A. Mealy could not have written a cheque drawn on the company tends to persuade me that his role in the company was nominal only. In his evidence before the Master he appeared to readily accept that, and his lack of knowledge of the affairs of the company seemed to confirm that position. Thus the only person who could have exercised direction over the affairs of the company was James V. Mealy and there is ample evidence, in the conduct of the banking transactions of the company the inclusion of the company in advertisements for James V. Mealy’s own company to support this conclusion. The evidence establishes that 80% of the business done by the company was with the Futon and Fabric Workshop Limited a company in which James V. Mealy appears to be the principal shareholder and director. On its own, this fact would not be decisive in persuading me that James V. Mealy was a director of the company but in combination with the other evidence it tends to paint a picture of control and direction of the affairs of the company by James V. Mealy.

23. I have therefore come to the conclusion that James V. Mealy was a de facto director of the company and is therefore amenable to the restriction in Section 150.

24. The jurisdiction contained in Section 150 has been amply elucidated by Shanley J. in the case of La Mosele Clothing Limited -v- Soualhi (1998) 2 I.L.R.M. where he says the following at p. 351 et seq

“As appears clear from Section 150, the Court is obliged to restrict a director unless he brings himself within one of the three exceptions set out in subsection (2). In the present case I am only concerned with the first such exception. As is clear from the wording of subsection 2(a) there are three hurdles that a director has to surmount:

(a) he must establish that he has acted honestly in relation to the affairs of the company.

(b) he must establish that he has acted responsibly in relation to the affairs of the company.

(c) he must satisfy the Court that there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this Section.

25. In considering the meaning of the word “responsibly” Murphy J. said in Business Communications Limited -v- Baxter, supra:

“Ordinarily “responsibly” will entail compliance with the principle features of the Companies Acts and the maintenance of the records required by those Acts. The records must be basic in form and modest in appearance. But they must exist in such a form as to enable the directors to make a reasonable commercial decision and auditors (or liquidators) to understand and follow the transactions in which the company was engaged.”

As Murphy J. noted the simple fact that a business fails is not evidence of a lack of responsibility nor indeed is evidence of dishonesty. But there may well be circumstance where a business will fail due to a lack of business probity or indeed sheer incompetence (without actual dishonesty or non compliance with the principal features of the Companies Acts) such as to amount to such a want of responsibility as to permit a restriction under Section 150(1) of the Companies Act 1990.

In England and Wales there is no directly comparable legislation to enable strict provisions of Section 150. However Section 300 of the Companies Act 1985 in England and Wales does provide for the disqualification of directors where their conduct makes them “unfit to be concerned in the management of a company”.

In the case of In Re Lowe-Line Electric Motors Limited (1998) BCLC 698, Brown-Wilkinson VC said at p. 703:

“What is the proper approach to deciding whether someone is unfit to be a director.? The approach adopted in all the cases to which I have been referred is broadly the same. The primary purpose of this section is not to punish the individual but to protect the public against the future conduct of companies by persons whose past record as directors of insolvent companies have shown them to be a danger to creditors and others ... . Ordinary commercial misjudgment is in itself not sufficient to justify disqualification. In the normal case the conduct complained of must display a lack of commercial probity, although I have no doubt that in an extreme case of gross negligence or total incompetence, disqualification could be appropriate.”

The conduct referred to by Brown-Wilkinson-VC is similar to the conduct identified by Murphy J., namely, that a director, broadly complying with his obligations under the provisions of the Companies Acts and acting with the degree of commercial probity during his tenure as a director of the company, will not be restricted on the grounds that he has acted irresponsibly.

Thus it seems to me that in determining the “responsibility” of a director for the purposes of Section 150(2)(a) the Court should have regard to:

(a) the extent to which the director has or has not complied with any obligations imposed to him by the Companies Act 1963 to 1990.

(b) the extent to which his conduct could be regarded as so incompetent as to amount to irresponsibility.

(c) the extent of the directors responsibility for the insolvency of the company.

(d) the extent of the directors responsibility for the net deficiency in the assets of the company disclosed at the date of the winding up or thereafter.

(e) the extent to which the director, in his conduct, of the affairs of the company has displayed a lack of commercial probity or want of proper standards.

These criteria necessarily overlap: for example a failure to keep proper books of account may directly contribute to the company becoming insolvent and may be caused by the incompetence of a director. But not all situations of a want of responsibility will result in a breach of obligations imposed by the Companies Act; for example a director’s inability to see the “writing on the wall” (e.g. an inability to see from a perusal of the company’s management accounts that the company was trading while insolvent) may result from sheer incompetence and justify a restriction (see Continental Assurance Company of London plc -v- Burrows (1997) 1 BCLC 48 where an inability to read and understand the statutory accounts of a company was considered a ground for disqualification of a director). Equally a director who takes excessive sums from the company by way of drawings for salary without regard to the financial state of health of the company may be said to have acted without commercial probity although he did not necessarily fail to comply with his obligation under the Companies Act.

Apart from satisfying the Court that, he, as a director, acted honestly and responsibly, the director must also satisfy the Court that there were no other reasons why it would be just and equitable to restrict him from acting as a director of a company. It is to be noted that acting honestly and responsibly relates to the “conduct of the affairs of the company” and arguably such bears no relation to any period after the commencement of a winding up or receivership of a particular company where the person may not be involved any further in the conduct of the affairs of the company. That the director must satisfy the Court that there is no other reason why it would be just and equitable to restrict the director, allows the Court to take into account, in my view, any relevant conduct of the director after the commencement of the 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.”

26. Against James A. Mealy the liquidator sets out the following grounds as justifying the restriction under Section 150. These grounds may be divided into those which relate to the affairs of the company prior to the winding up order on the 30th of November 1998 and those which relate to matters arising subsequent to that time.

Pre-winding up

That the company continued to trade when unable to pay its debts.

The company failed to file any returns. James A. Mealy contended in his evidence before the Master that he was unaware of this. The liquidator submitted that he should have been aware of this and his lack of awareness in regard to this matter was evidence of irresponsibility.

No proper books of accounts or other records were kept .

That he lacked familiarity with the day to day affairs of the company and in his evidence to the Master confirmed this and described himself as taking no part in the affairs of the company. The liquidator submits that this demonstrated a lack of responsibility on his part.

That the company was heavily in debt at the time of winding up and that as a small family business he was directly responsible for the financial deficit so created.

Post-winding up

That James V. Mealy signed two statements of affairs neither in the prescribed form and both different to each other one disclosing liabilities of approximately £12,000 the other £33,000, without any explanation of the difference.

That the second statement of affairs listed as a creditor a “James Mealy” and that the liquidator could not ascertain which James Mealy claimed this debt and James A. Mealy did not assist the liquidator with an explanation as to either the identity of the creditor or an explanation of the debt claimed and that in his evidence to the Master James A. Mealy was unable to explain this claimed debt save by a reference to his accountant.

That James A. Mealy, notwithstanding signing the second statement of affairs, admitted in his evidence to the Master that he had no involvement in the preparation of it.

That he would not sign the transcript of the proceedings before the Master.

27. The picture of the involvement of James A. Mealy in the affairs of the company as presented in his evidence before the Master is one of virtual total non involvement in the year and a half or so, prior to April of 1998. During that time he was not an authorised signatory on the company bank account, he did not sign any cheques or conduct any of the transactions on the company account. He did not receive any money from the company. He took no part in the day to day trading of the company, and although he enjoyed the title of managing director he took no active part in the affairs of the company. He appeared to be almost totally unaware of the detail of the company’s business. He acknowledged that during that period it was James V. Mealy who dealt with the affairs of the company but he appeared unwilling to accept that he i.e. James V. Mealy was responsible for the affairs of the company. Finally in his evidence he admitted that he was unaware that 80% of the moneys that came out of the company, some £164,846, was paid either to James V. Mealy or to the Futon shop, the business run by James V. Mealy.

28. I am satisfied from the evidence in relation to James A. Mealy that it does not reveal any dishonesty on his part. In particular I would be persuaded that his very unsatisfactory involvement in the preparation of two, inconsistent statement of affairs was not due to any dishonesty on his part but due to his virtual completion non involvement in the affairs of the company and hence his ignorance of its affairs, together with the fact that he ceded effective control over the preparation and completion of these statement of affairs to others.

29. In the ordinary course it could be said that this complete neglect of his responsibilities as a managing director could be said to be evidence of irresponsibility justifying the restriction under Section 150. However I am inclined to the view that his failures both in regard to the management of the company up to the time of the winding up and in relation to the preparation of the two statement of affairs thereafter can be attributed to having effectively passed all control of the affairs of the company to his son James V. Mealy and in the context of a small family business, having effectively permitted his son to take over control of the business, he having arrived at the stage of retirement.

30. It would I believe be unfair to him at this time to make a finding of irresponsibility against him leading to a restriction under Section 150 of the Act of 1990.

31. Accordingly I refuse to make the declaration under Section 150 in respect of James A. Mealy.

32. This brings me finally to the case of James V. Mealy. Earlier in this judgment I found that James V. Mealy was a de facto director of the company.

33. The grounds upon which the liquidator submits that it is appropriate to make the restriction under Section 150 against James V. Mealy may be divided into two periods namely up to the winding order on the 30th of November 1998 and thereafter, as follows:

Pre-winding up

That he permitted the company to trade while insolvent.

That no annual returns were filed.

That he made irresponsible drawings namely £2,000 was paid from the company funds to auctioneers as a deposit for a house purchased by James V. Mealy and this was done at a time when the company was in a parlous financial state.

As he was the person who had effective control and direction over the affairs of the company he was responsible for the insolvency of the company.

Post-winding up

That he failed to assist the liquidator in establishing the identity of the “James Mealy” in respect of whom £10,450 was claimed in the second statement of affairs and failed to explain to the liquidator and was unable to explain in his evidence before the Master how this debt arose.

That he failed to sign the transcript of proceedings before the Master.

34. I am satisfied that neither the evidence on affidavit nor that given before the Master discloses dishonesty on the part of James V. Mealy in the conduct and direction of the affairs of the company. In that regard the only matter which causes me difficulty is the question of payment by James V. Mealy of a deposit for the purchase of a house by him of £2,000 which payment was made by a cheque drawn by him on the account of the company. His explanation of how this came about is at question 389 of the transcript of proceedings before the Master, and bearing in mind the close familial relationship between himself and James A. Mealy and the fact that the company was the incorporation of a family business taken together persuade me that it would be unfair to James V. Mealy to characterise his use of company funds in this way on this occasion as dishonesty.

35. Without doubt there was gross irregularity involved and in my view evidence of irresponsibility in the conduct of the affairs of the company in the way this matter was transacted.

36. The failure to have filed annual returns was in breach of the Companies Acts. It could be said that in the light of the status of James V. Mealy as a de facto rather than a de jure director that he may have felt or believed that he did not have a legal obligation to attend to these duties and obligations under the Companies Acts. In the light of the fact that James V. Mealy may be the first person to be held in Irish law to be a de facto director some concession to him in that regard may be reasonable. Similarly the failure to ensure that annual returns were filed might be excused on a similar basis.

37. Likewise the continuing to trade after insolvency may be excused on two grounds. Firstly the nature of his status as a de facto director and secondly two of the major debts owed by the company making up approximately £18,000 of its indebtedness were due to a company known as Futon Ireland Limited, a company owned and controlled by Richard Mealy a son of James A. Mealy and brother James V. Mealy. This company was the petitioner in the proceedings which led to the winding up order and one would have to make some allowance for the fact that there appears to have been a deeply entrenched family split and that Richard Mealy appears to have been on one side of it and James V. Mealy and James A. Mealy on the other side. In addition it may in respect of this also be the case that James V. Mealy, having regard to his novel status as a de facto director may not have believed that it was his duty and obligation under the Companies Acts to bring about a cessation of trading in this circumstance of insolvency.

38. I have come to the conclusion that the only ground put forward by the liquidator which can be unequivocally regarded as acting irresponsibly in relation to the affairs of the company is the use by James V. Mealy of a company cheque to pay for the deposit on the house purchased by him.

39. In the post winding up period the only matter of relevance to this application that I see arising is the inclusion in the second statement of affairs of a claim of debt in the sum of £10,450 for a “James Mealy”. Neither James A. Mealy or James V. Mealy could explain this claimed debt in their evidence before the Master. I do not accept the evidence on affidavit of James V. Mealy that he was not asked about this by the liquidator. I think it highly improbable that the liquidator would not have asked him to identify the true debtor and to explain this debt. The complete failure of James V. Mealy is in his evidence before the Master to adequately or at all explain this debt leads to me to conclude that the putting forward of this claim in the second statement of affairs is a reason in itself why it would be just and equitable that he should be subject to the restrictions imposed by Section 150(1).

40. The explanation given on affidavit by James V. Mealy, persuades me that his tardiness in signing the transcript of evidence of proceedings before the Master should not be a reason why it would be just and equitable that he should be subject to the restrictions imposed by this Section.

41. Nevertheless I have concluded that for two reasons, namely, one his irresponsibility in relation to the £2,000 cheque drawn on the company account to pay for the deposit on his house and secondly the putting forward of the claim for £10,450 in the second statement of affairs without explanation, justification, or even identification of which James V. Mealy was the claimant, that I should make the declaration provided for in Section 150(1) of the Companies Act 1990.