The Role of the Liquidator
The High Court has made clear that if a liquidator is to discharge their role properly in an application to restrict a director, the information provided to the court must be "of meaningful assistance" and it is not sufficient for a liquidator to merely raise points of alleged concern about a director's behavior without also informing the court why those points mean that the director's behavior ought to be held to be less than responsible. In Hughes v Caffrey & anor Judge Barrett stated he was not in any way shifting the burden of proof in Section 150 cases but held that liquidators must do more than make bald assertions without informing the court of the basis for those assertions.
Delay in bringing a Section 150 application
The issue of timing in Section 150 applications was also discussed in a number of cases. In Taite v Breslin, Judge Barrett suggested that if a liquidator is in difficulty in relation to timing in bringing a Section 150 application they should make a pre-emptive application to the High Court seeking extra time. He went on to suggest that egregious delay by a liquidator in bringing a Section 150 application might provide a defence for an affected director. This was reiterated in Cotter v Gilligan & Ors. This is a new development and one which liquidators should be mindful of in the context of costs.
In Van Dessel v Gill & Anor the application was brought by the liquidator one week earlier than the time allocated under Section 56(2) of the Company Law Enforcement Act 2001 (not earlier than three and not later than five months after the date on which 'a report' under Section 56(1) is provided to the Director of Corporate Enforcement). While the Court noted that there was no power to extend the period to encompass an earlier time (it can be extended for a later time) it found that bringing proceedings outside the timeframe did not invalidate the proceedings.
In Kirk -v- O'Kane & anor, the liquidator filed three reports pursuant to Section 56 of the Company Law Enforcement Act 2001. In the first two he sought to be relieved of the obligation to bring a Section 150 application however, having received a notice from the Labour Court indicating that the Company had not made certain employee pension contributions, he then filed a third report. He also sought an order extending the time for the making of the application. The Court noted that the liquidator had never been relieved by the Director of Corporate Enforcement of the obligation to commence Section 150 proceedings yet had not done so, and the present proceedings were commenced out of time. The liquidator gave oversight on the part of his solicitors as the reason for the delay. However, Judge Barrett rejected this excuse as irrelevant and weak stating:
"The Oireachtas attaches such significance to compliance with the s. 56(2) time requirements that it renders a liquidator who commits an unexcused breach of same guilty of a criminal offence. ‘My solicitor did not get my affidavit ready on time’ does not seem much of a basis on which to justify a court in exercising its discretion under s.56(2) in such a way as to excuse non-compliance with requirements to which the Oireachtas clearly attaches considerable significance."
The Court again emphasised that if a liquidator has a potential time difficulty it should make a pre-emptive application to the High Court for more time and it was not for the liquidator simply to ignore the timeline established by Section 56(2).
As restriction orders had not been granted in this case, the delay issue did not arise. However, the Court noted that a number of factors might well have bolstered an application for relief by the directors on the grounds of excessive delay.
Application for costs against a liquidator rejected
In Taite v Breslin costs were sought by a director from a liquidator who failed in his application for a restriction order. The Court noted that Section 150 is silent on the issue and therefore it had a general discretion as to its approach to costs. The Court also noted that it was not the case that where a director satisfies the court that they acted honestly and responsibly that the normal rule is that they be awarded their costs. The director put forward a number of reasons as to why he believed he was entitled to his costs. He argued that the liquidator was unsuccessful in the application, he did not seek to be relieved by the Director of Corporate Enforcement from his obligation to initiate the restriction proceedings, he had made unwarranted and untrue criticisms of the director in the application and there was significant delay.
The Court refused the order for costs noting that there was no dispute that Section 150 applied to the company and to the director, the liquidator had put all relevant facts to the Office of the Director of Corporate Enforcement when making his reports and the director had an opportunity to comment on those facts in advance or to furnish the liquidator with relevant information in response to queries made.