High Court declares directors unfit under Companies Act 2014 s.819 for lack of responsibility in company affairs.

THE HIGH COURT

Record no. 2023/184 COS

[2025] IEHC 358

IN THE MATTER OF DOWNTUL LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACT 2014

AND

IN THE MATTER OF SECTION 819 OF THE COMPANIES ACT 2014

Between:

PATRICK O’CONNELL

Applicant

-and -

CIARAN BUTLER and COLUM BUTLER

Respondents

JUDGMENT of Ms Justice Nessa Cahill delivered on 24 June 2025 TABLE OF CONTENTS

INTRODUCTION ......................................................................................................................... 4

A. SUMMARY OF FACTS ........................................................................................................... 7

The Group ......................................................................................................................................... 7

The Company.................................................................................................................................... 7

The Respondents ............................................................................................................................... 7

The Lease .......................................................................................................................................... 7

Rent suspension ................................................................................................................................ 9

Events from July 2020 onwards........................................................................................................ 9

B. PRELIMINARY MATTERS ...................................................................................................... 11

(a) The nature of a restriction application ....................................................................................... 11

(b) Rules of Procedure .................................................................................................................... 13

(c) Role of an applicant.................................................................................................................. 13

(d) Onus on Directors .................................................................................................................... 14

(e) Test of Responsibility ................................................................................................................ 14

(f) Reasonable person ................................................................................................................... 18

(g) Dishonesty ................................................................................................................................ 19

(h) Role of the Court ....................................................................................................................... 20

(i) Consideration of other companies............................................................................................. 21

(j) Summary ............................................................................................................................. 23

C. EXPERT EVIDENCE .............................................................................................................. 23

(a) Relevant Rules .................................................................................................................... 23

(b) Irish cases............................................................................................................................ 24

(c) English cases ....................................................................................................................... 28

(d) Summary of legal principles ............................................................................................... 30

(e) Expert evidence in applications for restriction ................................................................... 31

(f) Expert evidence in this Application .................................................................................... 32

(g) Evidence of Mr Wallace...................................................................................................... 33

D. GROUNDS OF RESTRICTION ............................................................................................. 41

(a) Corporate structure, inter-company transactions ...................................................................... 42

(b) Accounting records, financial statements .................................................................................. 47

(c) Corporate governance................................................................................................................ 59

(d) Relationship with the Landlord........................................................................................... 63

(e) Allegation of Dishonesty .......................................................................................................... 66

(f) Revenue matters....................................................................................................................... 69

E. MISCELLANEOUS TOPICS .................................................................................................... 73

(a) Date of insolvency .............................................................................................................. 73

(b) Cooperation with the Liquidator ......................................................................................... 75

(c) Participation of the Second Respondent ............................................................................. 75

(d) Criticisms of the First Respondent’s evidence .................................................................... 76

F. CONCLUSIONS .................................................................................................................... 77

INTRODUCTION

1. By this Application, Mr O’Connell (“the Liquidator”) seeks an order under section 819(1) of the Companies Act 2014 (“the Act of 2014”) declaring that the Respondents

“shall not, for a period of 5 years, be appointed or act in any way, directly or indirectly, as a director or secretary of a company, or be concerned in or take part in the formation or promotion of a company, unless the company meets the requirements set out in subsection (3)”.

2. The essential threshold facts are that the two Respondents were directors of a company (Downtul Limited, referred to in this judgment as “Downtul” or “the Company”), which was placed in voluntary liquidation at a creditors meeting held on 15 November 2022.

3. The Liquidator submitted a report to the Corporate Enforcement Agency (“the CEA”) as required by section 682 of the Act of 2014 on 15 May 2023 (“the CEA Report”). In the CEA Report, the Liquidator did not seek to be relieved of the obligation to make this Application, but rather listed his concerns regarding the conduct of the Respondents under ten headings (appendix 7 to the Report).

4. The Liquidator concludes in that Report that “the responses from the directors have not provided me with sufficient evidence that the directors acted honestly and responsibly with regard to their duties, responsibilities and actions as directors of the Company.”

5. At the hearing, it was common case that the Company did not trade or carry on a business and that its sole transaction was a lease that was entered with Stephen Court Limited (“the Landlord”) on 19 December 2013 (“the Lease”). The Lease related to the ground floor of a building at Stephen Court, St Stephen’s Green in Dublin city centre from which a Starbucks café was operated (“the Property”).

6. The grounds for the Application relate, broadly speaking, to the management of the Company in relation to this Lease and its engagement with the Landlord. There are specific alleged failures with regard to books and records, revenue filings and the financial statements of the Company. In addition to a want of responsibility, it is alleged that the Respondents failed to act honestly. In the course of the hearing, additional issues were raised, including issues based on the oral evidence given by the First Respondent.

7. The Respondents oppose the Application and every ground on which it is made although the Second Respondent did not furnish written or oral evidence (other than a confirmatory affidavit delivered before the final day of the hearing).

8. This Application has a number of relatively unusual features. The hearing itself lasted five days and included the evidence and cross-examination of the Liquidator, the First Respondent and Ms Deirdre Hayes (a director of the Landlord). Evidence was given by two expert witnesses, Mr Niall Hughes and Mr Kieran Wallace, on behalf of the Liquidator and the Respondents, respectively. This is rare for an application under section 819 (or indeed under its predecessor, section 150 of the Companies Act 1990).

9. In terms of the substance of the Application, some novel and important questions were raised, including questions about the impact of Covid on the roles and responsibilities of directors.

There is also a specific assertion that the Respondents should be restricted on the ground of dishonesty, a rare assertion in an application of this nature and one for which extensive reliance is placed on the interaction between the Respondents and the Landlord.

10. Very helpful written submissions were furnished by the Liquidator and the Respondents both before the commencement of the hearing and before closing oral submissions were made.

These written and oral submissions have assisted greatly in identifying and assessing the issues that fall for determination on this Application.

11. Having considered the evidence and the submissions (written and oral), I am not satisfied that the Respondents acted responsibly with regard to the conduct of the affairs of the Company.

Consequently, I am mandated by section 819(2) to make the declaration of restriction sought by the Liquidator.

12. The primary ground for this finding relates to the Respondents’ approach to structuring the assets and liabilities of the Company and its engagement with a related company, such that, while Downtul bore the liability and burden of and under the Lease, that separate related company (Atercin Liffey Unlimited Company, “Atercin”) occupied and traded from the Property and earned revenue from that trade. I have seen no evidence of an agreement properly so-called, or of any consideration being given to the rights of Downtul.

13. The result of the arrangements was that Downtul did not occupy or use the leased property and had no income, or means to generate income, to discharge the liabilities arising under the Lease, including rent. There was also no evidence of any enforceable mechanism for Downtul to recover monies from Atercin to meet its liabilities. There are no accounting records, disclosures in financial statements, or board minutes which even refer to the apparent arrangements with Atercin.

14. Downtul – and consequently its creditor - had no rights or claims in respect of the revenue earned at the Property.

15. Atercin ultimately occupied the Property rent-free for 2.5 years, while also obtaining support from the Government to deal with the effects of the Covid pandemic. Throughout that period, Downtul received no contribution from Atercin towards the rent owed (or any part of that debt), and, consequently, was unable to pay its debts as they fell due.

16. In allowing the Company to enter and maintain these arrangements, and in failing to ensure an enforceable mechanism by which the Company could obtain the funds necessary to discharge its liabilities as they fell due or otherwise protect its position, the Respondents failed to demonstrate responsible conduct with regard to the interests of the Company as a separate legal entity within the Group.

17. The fact that the financial statements make no reference to the Lease or to the receipt of monies from Atercin to pay the rent and other charges associated with the Property underlines the lack of transparency in relation to the affairs of Downtul and the absence of any clarity as to Downtul’s assets and liabilities or the basis of the assertion of solvency. The failure to keep proper accounting records, the omission of material disclosures from the financial statements and the failure to minute a single board meeting since 2017 are also – independently of my primary findings of irresponsibility – separate grounds on which I am not satisfied that the Respondents acted responsibly.

18. I am satisfied that the Respondents have not demonstrated that they acted responsibly within the meaning of section 819. I am however of the view that they have discharged the burden of showing they acted honestly. This does not overcome the findings made or alter the mandatory order that falls to be made under section 819(2).

19. This judgment is structured as follows:

1. In the first section (A), the relevant facts will be summarised as concisely as possible.

2. In the second section (B), certain preliminary questions of law which necessarily frame and inform the correct approach to this Application are addressed.

3. In the third section of the judgment (C), I consider and determine a challenge that was made to the admissibility of the expert evidence tendered by the Respondents. This necessitates and therefore includes an account of the relevant duties of expert witnesses.

4. In the fourth section (D), the grounds on which the Respondents are alleged not to have acted honestly or responsibly (and the grounds on which they assert they did so act) are considered. My conclusions in respect of each ground are set out.

5. The fifth section (E) includes some miscellaneous topics which arose in the course of the Application and which are addressed for completeness.

6. In the sixth final, section (F), I set out my conclusions.

A. SUMMARY OF FACTS

The Group

20. The Respondents own and control various Irish companies which are involved in well-known businesses in the State, including businesses which trade as Starbucks, TGI Fridays, Mao, Hardrock Café, and others. For ease of reference, these companies are referred to in this Judgment as “the Group”.

The Company

21. The Company, a private company limited by shares, is a member of the Group and is wholly owned by a different private limited company in the Group, Desert Limited (“Desert”). Desert was incorporated, and has its registered office, in the Isle of Man.

22. The issued share capital of the Company was €100 divided into 100 equal shares of €1 each.

23. Prior to 31 December 2017, the Company was owned by a related company, Atercin. Atercin was incorporated in Ireland as a private limited company but was converted to a private unlimited company by a resolution dated 1 July 2016. Atercin operates a number of coffee shops in the Starbucks franchise.

The Respondents

24. It seems to be undisputed that the Respondents are the ultimate beneficial owners of Atercin and Desert, through various Isle of Man companies.

25. The Respondents were directors of the Company since 10 October 2013. They were also directors of Atercin at all material times.

26. The First Respondent is a director of approximately 134 Irish companies and the Second Respondent is a director of over 170 Irish companies. There was some uncertainty on the figures during the hearing, but they are also both directors of a sizeable number of non-Irish companies (40 was the figure estimated by the First Respondent).

The Lease

27. By indenture dated 19 December 2013, the Company agreed to lease the Property from the Landlord for a period of ten years (“the Lease”). The stated purpose of the Lease was to operate a Starbucks branded coffee shop at the Property.

28. One relevant provision of the Lease for the purpose of this Application was Clause 14.1:

“__the tenant shall not, without the consent of the landlord, such consent not to be unreasonably withheld, to use the premises for any purpose other than for use as a Starbucks branded coffee shop in connection with its business and in particular and without restricting the generality of the foregoing from carrying on any trade, manufacture or business of any description save as aforesaid.”

29. Another provision of relevance here is clause 29.10 which includes the following:

"...the lessee may, without the prior consent of the lessor, share occupation of the premises with a Group Company provided that (i) This shall not cause any VAT liability for the Lessor.. and (ii) no such Group Company shall at any time be entitled to acquire rights under the Landlord and Tenant Acts (iii) the Lessee shall ensure that no tenancy is created or allowed to arise and (iii) [sic] The lessee shall as soon as practicable give the Lessor written notice of such proposed occupation together with any further information that Lessor may from time to time reasonably request in relation to the same and shall notify Lessor in writing when any such occupation ends."

30. A further provision of relevance is clause B(C), a rent suspension clause:

"In the event of the premises being destroyed or damaged by fire or any other insured risk so as to render the premises wholly or partially unfit for occupation or inaccessible, the rent, or a proportionate part thereof, according to the extent of the damage, shall forthwith cease to be payable until the premises are fit for occupation or for a period of three years (whichever is the shorter period)."

31. There was a deed of renunciation entered on the same date as the Lease under the Civil Law Miscellaneous Provisions Act 2008 by which the Company renounced any entitlement to a new tenancy that the tenant may enjoy under Part 2 of the Landlord and Tenant (Amendment)

Act 1980.

32. There was also a deposit paid in the amount of €40,000 which was documented by way of a Rent Security Deposit Deed. This security was required by the Landlord owing to the fact that the Company was a newly formed company with a share capital of only €100.

33. The rent for the first year of the Lease was €63,000, which increased in increments annually thereafter, reaching €95,000 in the fifth year of the Lease.

34. The Lease was varied by a deed of variation executed on 18 November 2016 and the rent increased to €140,000. That deed also conferred on the Landlord the power to terminate the Lease at any time after 27 June 2020 on the provision of six months’ notice in writing.

35. There is a dispute regarding this deed of variation as it was subsequently amended by the Landlord to bear the date 5 May 2020.

36. There was a further deed of renunciation executed on 18 November 2016. There is also an issue with this deed, as it referenced the name “Gardiner Group Limited” in place of the name of Downtul and, it is common case, this was amended by hand by the Landlord sometime after the deed had been executed to refer instead to Downtul Limited. The rent deposit was released by the Landlord in February 2017.

37. At all times since the Lease was entered, Atercin and not Downtul has occupied the Property and operated the coffee shop throughout the term of the Lease. The position of the Landlord and the Liquidator is that this was not known by, or disclosed to, the Landlord until October 2022. This was asserted to be in breach of the Lease and also to be evidence of dishonesty, a point which was the subject of significant attention at the hearing.

Rent suspension

38. When Covid led to the closure of all hospitality and catering outlets, the Company suspended the payment of rent to the Landlord. This occurred in April 2020.

39. There is a dispute concerning the entitlement of the Company to invoke the rent suspension clause in the Lease and the timing of same.

40. It is however common case that no rent was in fact paid for the two and a half years between April 2020 and the date of the appointment of the Liquidator (the final rent payment having been made in January 2020). There was also a failure to pay service charges, with a payment made in August 2020 (on a without prejudice basis) for the first two quarters of 2020 and a payment of €16,000 in 2022, leaving an overall amount of €43,000 outstanding for services charges.

Events from July 2020 onwards

41. There was some (often sporadic) engagement between the Landlord and Downtul from March 2020 onwards in relation to the payment of rent and related matters. This included a proposal by the Company to engage via an agent to agree a fair and reasonable rent suspension. It is common case that proposals to seek to resolve the issue of the rent and service charges owed to the Landlord were made by the Company in 2020, 2021 and in 2022.

42. On 15 July 2020, the Landlord furnished the Company with notice that it was exercising a break option in the Lease (pursuant to the deed of variation dated 5 May 2020 albeit executed in November 2016). The Landlord furnished six months’ notice of termination of the Lease, requiring it to be vacated by 18 January 2021. This was said to be part of the longer-term plans of the Landlord’s parent company (Irish Life Assurance plc, “Irish Life”) to significantly re-develop the site of which the Property formed part.

43. On 21 September 2020, the Company wrote to the Landlord asserting that the rent was validly suspended under the Lease and seeking to agree a fair and reasonable rent suspension.

44. On 4 December 2020, the Company served on the Landlord a Notice of Intention to Claim Relief pursuant to section 20 of the Landlord and Tenant (Amendment) Act 1980 (“the Act of 1980”) claiming an entitlement to a new tenancy. The Landlord then invoked the second deed of renunciation which it was said had been signed in 2016 and which annulled any right to such a tenancy. As noted earlier, there is a dispute regarding aspects of these deeds.

45. On 7 January 2021, the Company initiated Circuit Court proceedings by means of a Landlord and Tenant Civil Bill, claiming a new tenancy pursuant to section 16 of the Act of 1980 (“the Circuit Court Proceedings”). It was pleaded that the deed of renunciation relied upon was invalid, void and of no legal consequence and that it was unlawfully amended and was unenforceable and a nullity.

46. These proceedings did not progress and were ultimately discontinued by the Liquidator on 14 February 2023.

47. On 30 September 2022, the Landlord wrote to the Company demanding payment of the sum of €507,595.04 said to be due and owing.

48. In September 2022, the Landlord wrote to the Company requesting that the Property be vacated.

49. A proposal was made by the Respondents by letter dated 10 October 2022 for the payment of a lump sum of €75,000 for rent, the discharge of all service charge liabilities of €55,000 plus VAT, the discharge of all insurance charges of €2,500 plus VAT and a rent of €95,000 plus VAT per annum thereafter. It was proposed that the Landlord would have the right to secure vacant possession within three months of obtaining planning permission to redevelop the Property. This recognised that the Landlord at all material times intended to substantially redevelop the Property and wanted to ensure it could quickly obtain vacant possession when required.

50. Three days later, by plenary summons dated 13 October 2022, the Landlord initiated High Court proceedings against the Company seeking possession of the Property and the payment of arrears of rent and service charge (“the High Court Proceedings”).

51. The Respondents’ offer of 10 October 2022 was then rejected by letter dated 26 October 2022.

52. By a motion issued on 3 November 2022, the Landlord sought summary judgment in respect of the monies claimed and other interlocutory orders.

The Liquidation

53. On 3 November 2022, the Respondents provided notice to the Landlord of a creditors meeting to be held pursuant to section 587(1) of the Act of 2014.

54. That meeting took place on 15 November 2022. An ordinary general resolution was passed to wind up the Company by way of creditor’s voluntary liquidation. The sole creditor (the Landlord) appointed the Liquidator on that date. The statement of affairs showed a net deficit of € 508,000.

55. The Liquidator relinquished possession of the Property to the Landlord and, on 14 February 2023, discontinued the Circuit Court proceedings.

56. The Liquidator assessed that there was no defence to the Landlord Proceedings and entered a settlement to pay the sum of €473,060.64 plus costs to the Landlord (which related to the period up to the end of the third quarter of 2022). A court order to that effect was made on 13 February 2023 (“the Court Order”).

57. It appears from the Liquidator’s grounding affidavit that this settlement figure covers the period to the end of the third quarter of 2022 and that further charges are owed for “part of the fourth quarter of 2022” which are quantified by the Liquidator as €523,676 (albeit not yet adjudicated) (para. 33).

58. The Liquidator submitted the CEA Report on 15 May 2023. He did not seek relief from the obligation to bring this Application.

59. By letter dated 2 June 2023, the Liquidator wrote to Desert enclosing a copy of the Court Order and calling on Desert to discharge the sum of €473,060.64 owed to the Landlord.

60. According to the Respondents, that sum included arrears of rent, service charges and insurance up to the date of the termination of the Lease (18 January 2021) and mesne profit rates for rent from 18 January 2021 to 30 September 2022. The mesne rates were calculated at the same rate as the rent payable under the Lease, €140,000. There is a dispute between the parties as to the appropriateness of that approach.

61. By letter dated 22 September 2023 (albeit bearing an apparently erroneous date of 22 November 2023 on its face), the CEA informed the Liquidator that he was not relieved of the obligation to bring this Application.

This Application

62. The Originating Motion was issued on 28 September 2023, grounded on the affidavit of the Liquidator. Amoss LLP entered an appearance for the Respondents on 3 October 2023.

Affidavits were sworn by the First Respondent on 4 December 2023 and by Mr Wallace on 8 December 2023.

63. The Liquidator swore a second affidavit on 19 February 2024. Mr Hughes’ affidavit was sworn on 20 February 2024 and Ms Hayes’ affidavit was then sworn on 23 February 2024.

The First Respondent swore a second affidavit on 5 April 2024; Ms Hayes swore a second affidavit on 9 May 2024.

64. On 17 June 2024, it was ordered by the High Court (White J.) on consent that each of the deponents would be available for cross-examination at the hearing of this Application.

65. Mr Wallace swore a second affidavit on 1 July 2024.

66. Written submissions were delivered on behalf of the Liquidator dated 26 November 2024 and those of the Respondents were dated 6 January 2025.

67. The Application was heard over five days in January 2025.

B. PRELIMINARY MATTERS

(a) The nature of a restriction application

68. The rules that govern an application for a declaration of restriction under section 819 (like section 150 of the Companies Act 1990) are unusual. The statutory regime was described by Hardiman J. in Re Tralee Beef & Lamb Limited [2008] 3 IR 347 at para. 15 as “unique”

(relative to other common law jurisdictions) and “draconian”.

69. It only needs to be shown that an individual was a director of a company and that the company in question is in liquidation and insolvent for the risk of restriction to arise. This is a legislative presumption that a director of an insolvent company that is being wound up has or may have a case to answer.

70. Once the primary criteria are made out, the liquidator must decide whether to request, and the CEA must decide whether to grant, relief from the obligation to apply to court for the restriction of the director(s) in question (section 683(3)).

71. If an application is required to be made to court, the onus then shifts to the director(s) to demonstrate to the satisfaction of the court that they acted both honestly and responsibly in relation to the conduct of the affairs of the company in question and that they cooperated with the liquidator.

72. The specific test set out in section 819(2) is whether the court is satisfied that:

“(a) the person concerned has acted honestly and responsibly in relation to the conduct of the affairs of the company in question, whether before or after it became an insolvent company,

(b) he or she has, when requested to do so by the liquidator of the insolvent company, cooperated as far as could reasonably be expected in relation to the conduct of the winding up of the insolvent company, and

(c) there is no other reason why it would be just and equitable that he or she should be subject to the restrictions imposed by an order under subsection (1).” (section 819(2))

73. Unless a court is satisfied of each of these matters, cumulatively, the legislation is crystal clear:

the court has no discretion and “shall” make the declaration of restriction. Accordingly, any one of the matters in section 819(2) is a standalone basis on which a person may be restricted.

74. It is important to be clear that, while the final sub-clause of section 819(2) does reference considerations of justice and equity, they are not a ground on which restriction may be resisted or refused. They have no exculpatory role in applications under section 819.

75. The court can only weigh factors of justice and equity in restriction proceedings when an application for relief from restriction is made under section 822. Those factors are not relevant to deciding whether the director should be subject to restriction, only whether they should have relief from the effects of that restriction.

76. In terms of the consequences of a declaration of restriction, it prevents a person from acting as a director for five years unless the company meets the capitalisation requirements of section 819(3) (an allotted share capital of nominal value of not less than €100,000 in the case of a company other than a public limited company). This has led to Hardiman J. observing that the regime is

“… largely symbolic in that being restricted pursuant to its provisions is of little practical effect (requiring only that any new company of which the restricted person is a director be modestly capitalised) but is gravely damaging to the reputation of a person thus afflicted. Indeed, a number of the cases on the topic use the words ‘stigma’ and ‘stigmatised’…” (Re Tralee Beef & Lamb at para. 15).

77. It must be observed that the Respondents are directors of well in excess of 130 companies each and it is plain from this fact - and from the vigour with which this Application was opposed - that the declarations of restriction sought in the particular circumstances of this case would have significant implications for them, beyond the symbolic or reputational.

78. The impact of restriction is not a factor to which any weight falls to be attached in this Application, as there is no discretion conferred on a court once the criteria of section 819(2)

are met; there is no role for considerations of proportionality; and questions of justice and equity cannot warrant a refusal to make a declaration of restriction. The irrelevance of the impact of restriction on an individual was confirmed in Re 360 Atlantic (Ireland) Limited [2004] 4 IR 266 at para. 40).

79. Nonetheless, the significance of this Application for the Respondents underscores the need (present in any such application) to ensure the rights of the Respondents, including the right to fair procedures, are properly applied and respected in the process.

(b) Rules of Procedure

80. The procedural rules which govern applications under section 819 are contained in Order 74, Rule 93 of the Rules of the Superior Courts (introduced by Rules of the Superior Courts (Companies Act 2014) 2015, SI 255/2015). These Rules require the application for restriction to be commenced by an originating notice of motion, grounded on an affidavit which must set out “all the facts the applicant considers should be brought to the attention of the Court for the purpose of determining whether” the three cumulative criteria of section 819(2) are met.

81. Rule 93(3) prescribes that the motion should be returnable at least 28 days after the motion is issued and, according to Rule 93(5), any replying affidavit should be served at least four clear days before the return date.

82. Any application for extensions of time “shall not be granted save exceptionally where the Court is satisfied that the extension of time is required for good reason.” (Rule 93(7)). It is notable that the Rules also specifically provide that an application for a Declaration of Restriction may be decided on the first return date (Rule 93(8)).

83. These rules demonstrate that the default procedure is that an application under section 819 will be determined on affidavit and may be heard and determined within 28 days of its issue (even if opposed).

84. It is also interesting to observe the limited requirements imposed on the applicant: the grounding affidavit should address facts which the court should be aware of when deciding “whether” the criteria of section 819 are met, but there is no requirement to set out a statement, proof or even a view as to whether or how those criteria are or are not satisfied.

(c) Role of an applicant

85. It is firmly established that an application under section 819 (formerly section 150) is not a typical adversarial application. The Respondents in their closing written submissions fairly point to the comment by Keane J. in Keane J. in Re Doherty Brothers Timber Company Ltd [2016] IEHC 588 that

“It is clear that, in the context of a s. 150 application, the liquidator's role is more obviously that of information provider to the Court than that of adversarial litigant in the true sense.” (at para. 33).

86. The limited obligations, and limited potential role, of the liquidator were addressed in Re Alvonway Investments Limited [2022] IECA 160 (“Re Alvonway”). There, the High Court

decision to grant the declaration of restriction was challenged on appeal, the primary ground being the alleged insufficiency of the liquidator’s affidavit and the asserted failure to make out a case against the appellant.

87. This appeal was rejected. The Court of Appeal (Faherty J, Costello and Haughton JJ.

concurring) upheld the declaration of restriction while noting “the Liquidator’s somewhat minimalist approach in setting out the case against the appellant” (at para. 75).

88. The emphasis in the judgment of the Court of Appeal was squarely on the director’s onus to put all material before the court on which he wished to rely to demonstrate responsibility, rather than an obligation on the liquidator to do the opposite.

89. The question of the sufficiency of the liquidator’s proofs also arose in Re Red Herring Seafood Limited [2022] IEHC 161 and, while the High Court (Quinn J.) refused to make a declaration of restriction in that case, it was noted that such sanctions should not be escaped “merely because of deficiencies in the liquidator’s presentation of their application, or paucity of evidence proffered by the liquidator” (at para. 115).

90. The important point that emerges from the legislation, rules and caselaw, is that there is an onus on the director/respondent, not on the liquidator/applicant. It is for each director to decide what information is relevant to demonstrate responsibility in the conduct of the company’s affairs and place that information before the court. The liquidator does not have to adopt the role of prosecutor or even that of plaintiff.

(d) Onus on Directors

91. The legislative onus is the same for every director to whom section 819 applies, but the reality is that the case they must address and on which they must satisfy the Court, will typically and substantially hinge on the matters put forward by the liquidator.

92. This does not alter the onus or convert the application into an adversarial piece of private litigation. It remains a statutory application within a specific and unusual legislative framework.

93. Further, in addition to answering any case put forward by the liquidator, it also falls to the director “to put before the court any other matters which he or she considers relevant to a consideration by the court of the overall conduct of the person during his or her tenure as a director” (Re RMF (Ireland) Limited [2004] 3 IR 498 at para. 8; Re Alvonway Investments Limited [2022] IECA 160 at paras. 56, 81).

(e) Test of Responsibility

94. The question of whether the onus has been discharged by a director must be assessed objectively. McGuinness J held in Re Squash Ireland Limited [2001] 3 IR 35 (at page 39)

(“Squash Ireland”) that the question of whether a director acted responsibly “must be judged by an objective standard”. This has been endorsed and adopted repeatedly since, including by the Court of Appeal in Re Alvonway Investments Limited [2022] IECA 160 at para 57.

95. Another important threshold point is that commercial errors or misjudgements are not sufficient to warrant a finding of want of responsibility. This was also emphasised by McGuinness J in Squash Ireland and adopted as a guide consistently since.

96. A related note of caution to heed is that an application for a declaration of restriction must not be based on a hindsight. This has been established since the seminal judgment of Murphy J.

in Business Communications Limited v. Baxter and Parsons (unreported, 21st July 1995):

"…of course one must be careful not to be wise after the event. There must be no “witch-hunt” because a business failed as businesses will."

97. This sentiment was echoed by Peart J. in Re UCITS Limited:

“With the benefit of hindsight it is natural perhaps that a liquidator can look at the situation at a particular time and from a perfectly proper view that a situation should have been looked at differently or that a different decision ought to have been made. But that is not the point in my view when this Court must decide whether it is satisfied whether directors acted honestly and responsibly.”

98. I consider this theme that recurs throughout the cases on restriction applications to be a vitally important one. There is a particular need to be cautious and not apply hindsight in this Application, when all normal rules surrounding the occupation and operation of coffee shops were thrown into disarray with the onset of the Covid pandemic. It is crucial not to apply the restored norms when assessing what happened during that utterly abnormal time. This cannot of course be a panacea for all actions or conduct or for those that long post-date or are unconnected with the pandemic or its effects. The analysis is of necessity a tightly factspecific one.

99. Bearing those words of caution in mind, the matters to which a court should have regard in determining whether the onus of showing “responsibility” is met were authoritatively established by Shanley J. in La Moselle Clothing Ltd. v. Soualhi [1998] 2 ILRM 345:

“(a) The extent to which the director has or has not complied with any obligation imposed on him by the Companies Acts 1963–1990.

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

(c) The extent of the director's responsibility for the insolvency of the company.

(d) The extent of the director's 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.”

100. Those criteria (“the La Moselle Criteria”) were applied consistently in restriction applications since their formulation in 1998, reaching “near canonical status” (per Hardiman J. in Re Tralee Beef & Lamb). In 2006, Finlay Geoghegan J. (then in the High Court) amplified the so-called “La Moselle Criteria” to include the requirement under sub-paragraph (a) that “a court should have regard not only to the extent to which a director has or has not complied with any obligation imposed on him/her by the Companies Acts but also with duties imposed by common law.” (Re Tralee Beef & Lamb Limited [2004] IEHC 139).

101. On appeal, the Supreme Court overturned the decision to restrict the respondent director and also rejected the amplification of the La Moselle Criteria (Re Tralee Beef & Lamb Limited [2008] 2 IR 347).

102. Hardiman J. explained this decision by reference to the centrality of this extension of the law to the decision of the High Court to make the declaration of restriction in that case; the amorphousness and generality of the common law duties sought to be imported; the want of notice of the intended amplification; and the breach of fair procedures it entailed. Hardiman

J. cautioned against treating a judgment as one would a statute. Nonetheless, observing Shanley J.’s status as “a judge of great authority in this area of the law”, Hardiman J. opined that, in devising the criteria as he did “he may safely be taken to be speaking of those duties and not of others which may arise from another source”

103. In a subsequent judgment of the Supreme Court in Re Mitek Holdings Limited [2010] 3 IR

374 (“Re Mitek”) Fennelly J. (Hardiman and Finnegan JJ. concurring) considered the decisions and the outcome in Re Tralee Beef & Lamb Limited, emphasising the procedural fairness issue that arose in that case. By contrast, the decision of Finlay Geoghegan J.

amplifying the La Moselle Criteria was the subject of submissions in the High Court in Re Mitek (that hearing having taken place the day after the High Court judgment in Re Tralee Beef & Lamb), and Fennelly J. left open the possibility that common law duties could be factors to be weighed in a restriction application. He echoed the previous judgment of Hardiman J. in Re Tralee Beef & Lamb Limited: “I would not be disposed to limit the matters to which regard should be had or to substitute standardised judicial criteria for the general words of the statute” (para. 79). The result of Re Mitek was to leave open the possibility of relying on breaches of statutory or common law duties in a restriction application. It also made plain that, whichever category of duty is at issue, “it is not every criticism that enables one, in the words of McGuinness J., "to categorise conduct as irresponsible"” (quoting Re Squash (Ireland) Limited [2000] 3 IR 35).

104. The fact that it is not a matter of mechanical rules and breaches to be applied was plain from the following finding of Fennelly J. in Re Mitek:

“The Act of 1990 itself evinces public concern that directorships involve real responsibility and that persons who do not conform at least to some generally acceptable minimum standards either should not, in the public interest, be permitted or should be restricted in regard to future holding of directorships.” (at para. 79).

105. This signalled a move away from one source or another of directors’ duties in restriction applications and towards a broader view of “generally acceptable minimum standards”.

106. An intervening event of some importance since then is the introduction in the Companies Act 2014 of section 228(1). Codifying what were previously the common law duties of directors, section 228(1) provides that a director shall,

“(a) act in good faith in what the director considers to be the interests of the company;

(b) act honestly and responsibly in relation to the conduct of the affairs of the company;

(c) act in accordance with the company's constitution and exercise his or her powers only for the purposes allowed by law;

(d) not use the company's property, information or opportunities for his or her own or anyone else's benefit unless—

(i) this is expressly permitted by the company's constitution; or

(ii) the use has been approved by a resolution of the company in general meeting;

(e) not agree to restrict the director's power to exercise an independent judgment unless—

(i) this is expressly permitted by the company's constitution;

(ii) the case concerned falls within subsection (2); or

(iii) the director's agreeing to such has been approved by a resolution of the company in general meeting;

(f) avoid any conflict between the director's duties to the company and the director's other (including personal) interests unless the director is released from his or her duty to the company in relation to the matter concerned, whether in accordance with provisions of the company's constitution in that behalf or by a resolution of it in general meeting;

(g) exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both—

(i) the knowledge and experience that may reasonably be expected of a person in the same position as the director; and

(ii) the knowledge and experience which the director has;

and

(h) in addition to the duty under section 224 (duty to have regard to the interests of its employees in general), have regard to the interests of its members.”

107. The effect of this provision is to amplify the La Moselle Criteria in substantially (if not entirely) the same manner as proposed by Finlay Geoghegan J. in Re Tralee Beef & Lamb Limited.

108. It is now beyond doubt that the duties that may be considered in a restriction application do not exclude common law duties (as appeared to be the case in the wake of the Supreme Court judgment in Re Tralee Beef & Lamb), such duties now being codified in the Companies Act 2014.

109. While Re Mitek already signalled a move away from reliance on any one judicial formulation or another, the enactment of section 228(1) may further undermine the weight to be attached to the La Moselle Criteria. For example, paragraphs (b) to (e) of the La Moselle Criteria may now be largely subsumed by the application of that sub-section.

110. There is also a circularity here: if the La Moselle Criteria are applied, one of the factors to be weighed in deciding whether a director acted “honestly and responsibly” is whether the director complied with the obligations imposed by the Act of 2014, which now expressly include the obligation to act honestly and responsibly.

111. The specific impact of section 228(1) on the La Moselle Criteria (or any other test of “honestly and responsibly”) has not been determined by the Superior Courts, and I do not consider that it is necessary to make a determination on this legal question to decide the Application before me. Both La Moselle and section 228(1) (among other judgments, including those referred to above) were invoked and relied upon by the Liquidator and the Respondents.

112. Whichever formulation of the test of responsibility is preferred, it appears that the correct approach must be to weigh the relevant facts and circumstances as presented by the liquidator and the respondent, with a view to assessing whether the respondent was responsible and honest in relation to the conduct of the affairs of the company (including by reference to the duties codified in section 228(1)), with a particular focus on the facts and events surrounding and leading up to the insolvency of the company.

113. One point that warrants particular emphasis is that section 819 does not hinge on or require proof or a finding of illegality or unlawfulness. It does not even require a concrete finding that there was a breach of a provision of the Act of 2014. There may be no law specifically prohibiting a particular transaction or course of action, but the character and impact of that transaction or conduct can nonetheless be weighed by a court in determining the responsibility or otherwise of the company’s directors.

114. This approach can be seen in the decision of White J. in Re Winning Ways Limited [2020] IEHC 264. Certain payments were made by the directors to discharge the company’s indebtedness to a bank while the company was making losses. The Court had regard to these payments as a relevant factor that weighed in favour of making the declarations of restriction sought, despite finding that there was not a sufficient evidential basis to find that the payments were prohibited by the Act of 2014:

“Whilst unfair preference within the meaning of Section 604 of the Companies Act 2014 is not clearly established, the continuance of substantial payments to the bank throughout the loss making years up to the time of liquidation, in combination with other aspects of the respondents’ stewardship of the company, is a factor which I take into account in my conclusions below.” (para. 68).

115. This nuance is important here, as counsel for the Respondents relied in closing submissions on the proposition that the arrangements between Downtul and Atercin were not unlawful.

That is simply not the test. Of course, if a transaction is prohibited by the Act of 2014, that may well support a finding of irresponsibility or dishonesty but that does not mean that the converse is true: the fact that a transaction is not unlawful does not mean it is not relevant to assessing a director’s honesty or responsibility.

(f) Reasonable person

116. The only provision of section 228(1) that has been specifically relied upon by the Liquidator here is section 228(1)(g). This requires an assessment of the individual experience and expertise of the director(s) and the Liquidator underlines that the Respondents to this Application are both qualified chartered accountants and profess to have “huge experience in these areas” (day 3, page 161).

117. It is said that this heightens the duty of skill, care and diligence on them (Liquidator Closing Written Submissions para. 56). I accept that this is so and that, while an objective assessment must be undertaken of the honesty and responsibility of each of the Respondents individually, the “reasonable person” must be taken to be one with the heightened knowledge and experience of the Respondents.

(g) Dishonesty

118. When it comes to discharging the onus to show honesty, Peart J. described the test as follows in Re UCIT World plc [2005] IEHC 285:

“dishonesty implies something akin to improper dealing with money or other assets belonging to the company, or some form of fraudulent trading. In an extreme case this would involve a director depleting the assets of the company directly for his own benefit, rather than settling his creditors, thereby leading to the collapse of the company; or obtaining funds from others with a fraudulent intent.”

119. The threshold of dishonesty is a high one and, on the basis of the interpretations applied to section 819 (and section 150 of the Companies Act 1990) to date, it necessitates some form of impropriety in dealing with the assets of the company in liquidation.

120. Notably, neither side has identified a restriction case in which a director has been found to have failed to act honestly and I have identified scant examples of cases in which such an allegation has been made.

121. Even in Re La Moselle Clothing Limited [1998] IEHC 66, Shanley J. made damning findings about the unreliability of Mr Soualhi as a witness and about his use of company funds for his own extravagant lifestyle, but yet did not make a specific finding of dishonesty:

“In conclusion, I have no doubt whatsoever that Mr Soualhi traded at a time when he knew that Rosegem and La Moselle were insolvent. I am quite satisfied that he used monies due to the Collector-General and CCL to finance his trading activities and his travel. I have little doubt that he was aware that Rosegem and La Moselle could not trade and at the same time discharge their liabilities to the Collector-General and CCL. Such conduct was, in my view, improper conduct and if it was not to be described as actually dishonest it was certainly irresponsible.”

122. In Re Meridian Motors Limited [2021] IEHC 826 White J. refused to order disqualification of a director and instead made a declaration of restriction. The primary reason for this decision was that the liquidator had alleged fraud in the application papers, referencing VAT fraud, theft of cars, and “missing traders”, but did not press this at the hearing. Instead, disqualification orders were sought on the less serious ground that the director was “unfit to be concerned in the management of a company” (section 842(d)).

123. The Court refused to order disqualification, reasoning that, “I should take account of the fact that the respondents have had to meet allegations of fraud which were serious in nature but were presented without adducing probative evidence” (para. 137).

124. It is plainly correct that a liquidator must carefully consider whether to make so grave an allegation as one of dishonesty or fraud. These are particularly weighty, and potentially damaging, accusations to make in the case of professional persons, bearing in mind the risk to their reputation and professional standing in any restriction proceedings (as observed by the Supreme Court in Re Tralee Beef & Lamb Limited).

125. The dearth of cases dealing with dishonesty under section 819 (and section 150) is not surprising as an allegation of dishonesty is a serious one and one which does not need to be made to obtain a declaration of restriction. A liquidator simply does not need to go that far.

126. Indeed, it is essential that allegations of fraud or dishonesty are not advanced by a liquidator unless there are substantial, sufficient grounds to do so. Given the unique nature of restriction proceedings and the burden they impose on directors, there is a particular imperative that liquidators proceed cautiously in this respect.

127. For the reasons that will be addressed below, I am far from satisfied that the case made by the liquidator meets the necessary threshold or that the allegation of dishonesty is one that was properly or appropriately made.

(h) Role of the Court

128. In terms of the role of the court, it must be underlined that the only function is to assess and decide whether it is “satisfied” of the matters listed in section 819(2). It is not the court’s role in a restriction application to make conclusive findings on liability or to decide disputed or contentious questions of fact as between two private parties. This is underlined by the fact that the court must make an objective assessment of the question of responsibility, not subjective findings of individual legal liability. The Applicant acknowledges in his closing submissions that it is not necessary to attempt to decide every conflict of evidence.

129. Indeed, given the very specific and unusual nature of the court’s role in an application under section 819, it is perhaps not surprising that oral evidence is very much the exception rather than the rule in such an application.

130. This case is an outlier and I cannot avoid the impression that the hearing before me bore several of the hallmarks of an adversarial contractual dispute. It was frequently difficult to discern a difference between the position of the Liquidator and that of the Landlord (a point understandably emphasised by the Respondents). The fact that the only affidavit sworn in reply to the First Respondent’s second affidavit was by Ms Hayes on behalf of the Landlord rather than the Liquidator is a simple illustration of this pattern.

131. The fact that this Application took on that character does not however alter the statutory framework or fundamental character of the proceedings: still less does it enlarge the scope of the Court’s role, or the purpose of the Court’s findings.

132. On the contrary, I approach this Application on the basis that my task under section 819 is tightly circumscribed by the terms, context and purpose of that provision. The unusual burden-shifting that occurs in this Application (about which Hardiman J. expressed serious misgivings in Re Tralee Beef & Lamb Limited [2008] 3 IR 347) makes it imperative that the findings made in this Application are necessary for, and limited to, the purpose for which they are made. It could give rise to a risk of real unfairness and prejudice if findings made in this Application could then be used directly against the Respondents in another context or other proceedings, in which distinct procedural and pleading rules may apply and in which the balance and burden of proof may be cast quite differently. This is a risk that the Respondents have referred to repeatedly in this Application – in an apprehension that this Application is being used as “a stalking horse” for other proceedings.

133. Given this apparent risk, I consider it important to clarify at the out-set that I am not making binding findings of fact as between two opposing sides to a contractual dispute. The findings made here are made for the purpose of deciding the precise statutory question presented by section 819 and are based solely on the test and criteria of that provision.

(i) Consideration of other companies

134. There are two related, but distinct, points here:

135. First, it is only a director’s conduct in relation to the affairs of the company in liquidation that is tested under section 819. The question is not whether the director’s acts or omissions advanced (or, conversely, harmed) the interests of another company or person, or whether it represented a fair compromise as between the interests of different companies. It is the director’s duties to, and conduct in relation to, the company in liquidation that is measured.

Another company’s grievance against a director for harm inflicted by the management of the company in liquidation is only relevant if that was irresponsible or dishonest vis-à-vis the company in liquidation. Put another way: the purpose of a restriction application is not to resolve or remedy the grievances of third parties (save where these manifest themselves as evidence of a lack of responsibility or honesty in relation to the company in liquidation).

136. The second point is that membership of a group of companies does not abrogate the duties of a director. The seminal authority on the correct approach to assessing the responsibility of directors of companies which are part of a larger group structure is the judgment of Finlay Geoghegan J. in Re 360 Atlantic (Ireland) Limited [2004] 4 IR 266.

137. The company in liquidation in that case was a subsidiary in a worldwide group of companies, which was established on foot of professional advice that there be a separate corporate structure in each jurisdiction. The operations of the company were financed, managed and controlled as part of a worldwide group. The first respondent was the only director resident in the State. The applicant contended that the company was operated as a division of the 360 Atlantic group rather than as a separate company and was managed and controlled from Barbados and that there was an abdication of responsibility by the respondents to the financial management team in Barbados.

138. The facts relied upon included the execution of a guarantee and debenture creating a fixed and floating charge over the assets of the company as part of group wide financing, without the company being given any apparent consideration for the security and without any proper consideration of the benefit (if any) to the company of such transaction. There was then a failure to refer to that guarantee or charge in the accounts for the relevant year and a lack of any clear information as to the financial transactions of the company after that period, as well as a failure to keep proper books of account.

139. In deciding to make the declaration of restriction sought, Finlay Geoghegan J. made a number of factual findings, the most relevant ones for the purposes of this judgment, being the following:

- “the operations of the 360network group in Ireland were financed managed and controlled as part of worldwide operations on essentially a group divisional basis.”

- “There is no evidence of any meeting which included a consideration of any substantive issue (other than the approval of annual accounts) relating to the operation or business of the company.”

140. The focus of that case was on whether and to what extent the court should have regard to the fact that the company was a member of a worldwide group of companies when determining the honesty and responsibility of the directors. The starting point of the Court’s analysis of this issue was that

“The fact that the company is a wholly owned subsidiary within a worldwide group does not appear to alter the legal principles applicable to the duties of directors but rather to create a particular factual scenario which must be taken into account when considering the discharge of those duties” (para. 31).

141. The judgment then referred to the fact – an important parallel with the instant case - that the employees and creditors of the company in liquidation “do not appear to have had any rights against or access to other companies within the group” (para. 33). The judgment continued:

“In such a factual scenario it would appear totally permissible and, indeed, a proper exercise of the duties of directors in the interests of the company for the directors to fully take into account and even to follow the policies adopted for the entire group when managing the business of the Irish company. However, notwithstanding such a factual scenario and, indeed, the almost total dependence of the company on other companies within the group, it does not seem permissible for directors of the company to effectively abdicate all decision-making in relation to the affairs of the company.

They must be considered to remain under a duty to inform themselves about the affairs of the company as distinct from any other corporate part of the group and to join with each other in supervising and controlling the affairs of the company. Otherwise their position as directors is meaningless.” (para. 34)

142. The key conclusion was that a director of a subsidiary company

“…must be able to establish, at a minimum, that he did inform himself about the affairs of the Irish subsidiary company as distinct from any other company within the group and, together with his fellow directors, that he did take real steps to consider and take decisions upon at least significant transactions to be entered into or projects undertaken by the Irish subsidiary company. There must be evidence of a real consideration by the directors of whether significant transactions or operations to be undertaken were desirable in the interest of the Irish subsidiary company or could be said to be for the benefit of the Irish subsidiary company. I readily recognise that in many instances the interests of the Irish subsidiary company may be so intertwined with the affairs of the group as a whole that the answer may be obvious. However, the fact that the answer is obvious does not appear to absolve the directors from at least addressing the question.”

143. These conclusions are directly applicable here and confirm (if confirmation is needed) that the Respondents can have regard to the interests of the Group in the discharge of their roles as directors of the Company but that this cannot and does not absolve them of their duty to join together to control the affairs of the Company including by separately considering whether significant transactions that are being proposed are in the interest, and for the benefit, of the Company. This is the approach that must be applied here.

(j) Summary

144. In summary, the default position is that an application such as this is envisaged as being heard swiftly on affidavit, without necessarily entailing a full adversarial hearing, and with the onus resting on the director(s) to satisfy the court that they acted responsibly and honestly in the conduct of the affairs of the insolvent company. The test is not one based on hindsight or a quest for perfection, but on an objective assessment of the conduct of the director(s) in question in the specific context of the insolvent company during their tenure as director.

145. These features of an application for a declaration of restriction are not and cannot be in dispute.

The cases cited here were all relied on by the parties to this Application. This summary is simply included to underline some particular points that are relevant here, and which assist to contextualise the Application and define the court’s role in respect of it.

C. EXPERT EVIDENCE

144. It is highly unusual to have expert evidence adduced in the context of an application for a declaration of restriction and a significant amount of time was taken up at the hearing before me in dealing with certain aspects of that evidence. Given the relative novelty and the general importance of some of the issues raised, I will deal with this aspect of the Application as follows:

145. First, I will address a general question which arose as to the relevance and admissibility of expert evidence in restriction applications of this nature. Second, I will consider the relevance and admissibility of the particular species of expert evidence that was presented in the context of this Application. Third, very specific objections and criticisms have been made in relation to the evidence of Mr Wallace and the independence of that evidence and these will be separately appraised and determined. Before addressing each of these points, I will outline the relevant legal landscape and rules.

(a) Relevant Rules

146. Order 39, rule 57 of the Rules of the Superior Courts 1986 (the Rules), a provision introduced in 2016 by the Rules of the Superior Courts (Conduct of Trials) 2016 (S.I. No. 254/2016)

sets out the rules that govern expert evidence:-

“(1) It is the duty of an expert to assist the Court as to matters within his or her field of expertise. This duty overrides any obligation to any party paying the fee of the expert.

(2) Every report of an expert delivered pursuant to these Rules or to any order or direction of the Court shall:

(a) contain a statement acknowledging the duty mentioned in sub-rule (1);

(b) disclose any financial or economic interest of the expert, or of any person connected with the expert, in any business or economic activity of the party retaining that expert, including any sponsorship of or contribution to any research of the expert or of any University, institution or other body with which the expert was, is or will be connected, other than any fee agreed for the preparation by the expert of the report provided or to be provided in the proceedings concerned and any fee and expenses due in connection with the participation of the expert in the proceedings concerned.”

147. The obligation to “disclose any financial or economic interest of the expert, or of any person connected with the expert, in any business or economic activity of the party retaining that expert” is a strict one and its rigour and breadth is manifest from the fact that even sponsorship of research carried out a body with which an expert was previously connected must be disclosed.

148. A further rule of relevance is contained in Order 39, rule 58(1) of the Rules (also inserted in 2016):

“Expert evidence shall be restricted to that which is reasonably required to enable the Court to determine the proceedings.”

149. In Duffy v. McGee [2022] IECA 254 (“Duffy”), the Court of Appeal (Collins J., Noonan and Binchy JJ concurring) explained the background to, and impetus for, the introduction of those Rules:

“…Concern about excessive (and expensive) recourse to expert evidence prompted changes to the Rules of the Superior Courts to give courts significantly greater control over the calling of expert evidence in civil proceedings.” (paras. 4-5)

150. This reference to control being conferred on courts with regard to expert evidence is notable.

(b) Irish cases

151. In Duffy, the witness in question, Dr Thompson, was proffered as an expert for the defendant in an action in which damages were claimed for personal injuries alleged to have been suffered by the plaintiffs as a result of exposure to toxic chemicals in their home. The evidence of Dr Thompson was the central plank of the defendant’s case: among other matters, he opined that the toxic substance complained of (isocyanates) could not have been responsible for the plaintiff’s injuries because it was undetectable in the atmosphere 30 minutes after spraying. The plaintiff’s expert’s evidence was that the overwhelming likelihood was that the injuries to the plaintiff had been caused by isocyanate exposure. Dr.

Thompson then advanced an alternative hypothesis, namely that the plaintiff’s injuries had in fact been caused by exposure to fibreglass dust.

152. The issue in Duffy was not that Dr Thompson had some external interest in, or connection with, either party, or was partial in that sense. Rather, the challenge to his evidence arose from the approach he took to the discharge of his duties as an expert witness.

153. Several aspects of his evidence were highlighted as particularly problematic by the Court of Appeal (Noonan and Collins JJ.), including the provision of opinions on matters of law that were no part of his stated expertise as a toxicologist; the proffering of views on disputed questions of fact about which he had no means of knowledge; his comments on the opinions of expert respiratory physicians and psychiatrists (beyond his area of expertise); and the making of accusations that the plaintiff was guilty of deception and dishonesty (despite having no independent means of knowledge of the facts); among other matters. It was noted that the manner in which he gave evidence did not demonstrate any willingness or ability to comply with his duties as an independent expert.

154. In the course of his judgment, Collins J. addresses the question of impartiality: “arguably the most significant concern about expert evidence relates to issues of objectivity, impartiality (lack of bias) and independence” (para. 20). The frequent failure of expert witnesses to understand and confine themselves to the proper limit to their roles was adverted to and it was cautioned that “..courts need to be forceful in policing the rules and in taking appropriate measures where those rules are not complied with” (para. 24).This was elaborated upon in the following passage:

“Any significant departure from the essential requirements of objectivity, impartiality and independence must be taken very seriously. There was considerable debate here as to whether such matters went only to weight or whether a want of objectivity, impartiality or independence might reach the point where the evidence of an expert should be excluded altogether. I have no hesitation in concluding – in agreement with Noonan J – that, as a matter of principle, (lack of) objectivity, impartiality and independence may (and in an appropriate case will) go to the admissibility of expert evidence, not merely to the weight to be given to such evidence.” (para. 25)

155. The threshold test identified and repeated by the Court of Appeal in Duffy was whether the expert was “unwilling or unable to comply with their duties as expert”, the primary duty being the duty to give objective, impartial and independent evidence (Collins J. at paras. 34, 26). If not, the evidence should be deemed to be inadmissible and should be excluded. This requires “significant departures from the fundamental requirements of objectivity, impartiality and independence” (para. 34).

156. In the course of the judgments of both Noonan J. and Collins J. in Duffy, reference was made to the guiding and oft-cited principles contained in the judgment of Cresswell J. in National Justice Compania Naviera S.A. v. Prudential Assurance Co. Ltd (The Ikarian Reefer) [1993]

2 Lloyds Rep. 68 at 81–82. The most relevant principles for the purposes of this judgment are the following:

“1. Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation…

2. An expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within his expertise… An expert witness in the High Court should never assume the role of an advocate.

3. An expert witness should state the facts or assumption upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion…

4. An expert witness should make it clear when a particular question or issue falls outside his expertise.…”

157. Applying the rules found to be applicable to expert witnesses, the Court of Appeal in Duffy concluded that, taken together, the various shortcomings in Dr Thompson’s approach constituted a “wholesale abdication” by him of his duties as an expert witness and demonstrated that he was unable or unwilling to comply with the requirements of that role (Noonan J. at para. 103, Collins J. at para. 36). The Court of Appeal upheld the decision of the trial judge that the evidence in question was inadmissible in its entirety.

158. A somewhat different issue – and outcome – arose in one of the cases discussed in Duffy, Kenneally v. De Puy International Limited [2017] 2 IR 487 (“Kenneally”). There, the defendant applied to exclude the evidence of an expert regarding allegedly defective hip replacements on the basis that the same expert was involved in proceedings against the defendant in the United States. This application was made before the trial. It was said that the expert could make substantial financial gain from that involvement and that this tainted his independence.

159. Barton J. refused to exclude the expert evidence, noting that

“… the power to exclude expert evidence, whether on an application made before trial, such as at the case management stage or at trial, which on the face of it will enable and assist the court to determine the issues in respect of which it is sought to be adduced, should be exercised with circumspection and where it is clear on the evidence and the materials before the court that such evidence ought not to be admitted” (para. 72).

160. Collins J. noted that “[i]t is difficult to disagree with those observations but they must be understood in the context in which they were made, which differs very significantly from the position presented here” (Duffy, para. 33).

161. There were three particular features of the application in Kenneally to note. First, the application to exclude his evidence was made before the expert gave evidence. It was not therefore based on any criticism of the evidence given or the approach taken in relation to it.

Barton J. did not exclude the possibility of an objection to the expert being renewed depending on the evidence that witness actually gave at trial (a point which was emphasised in Duffy). Second, the expert in Kenneally did not have “any financial or other apparent interest in the litigation or connection with the plaintiff other than as an independent expert for an agreed fee.” (para. 65) Third, the Court rejected the complaint that the expert had adopted the role of advocate.

162. In Duffy, Collins J. considered the decision of Barton J:

“Nothing in the careful judgment of Barton J in Kenneally v DePuy International Ltd is inconsistent with the proposition that where it is evident that an expert witness is either unwilling or unable to comply with their duties as expert, their evidence can — and ordinarily should — be excluded as inadmissible. I am not referring here to minor transgressions, which may properly be seen as going only to weight. Rather, I am speaking of significant departures from the fundamental requirements of objectivity, impartiality and independence” (para. 34).

163. In light of Duffy, expert evidence can be excluded in its entirety, but this requires clear evidence of “significant departures” from the requirements of independence, objectivity and impartiality: “minor transgressions” are not sufficient. It must be apparent that the witness is unable and/or unwilling to comply with the duties of an expert witness and, if this be the case, that evidence ordinarily should be excluded as inadmissible.

164. Neither party has identified any Irish case decided since Duffy in which an expert’s failure to disclose a conflict of interest has been addressed. One case quoted by the Respondents in their closing written submissions is Environmental Trust Ireland v. An Bord Pleanala [2022] IEHC 540, the quote in question including the line that “the law recognises that a necessary pragmatism generally requires the issue of independence be usually treated as an issue of weight of evidence rather than its admissibility” (per Holland J. at para. 100).

165. That case was determined on 3 October 2022, with Duffy coming just over a month later on

7 November 2022. Further, in Environmental Trust Ireland itself, the Court did deem the purported expert opinion of a witness (who was accepted to be a litigant in the case) to be inadmissible.

166. While the evidence of other experts was admitted, despite their prior involvement in the planning application at issue, this was on the basis that (a) there had been no challenge to the independence of that evidence under cross examination; (b) no application was made for the exclusion of that evidence; (c) it was “commonplace” that the affidavit(s) of experts who had been involved in planning applications would feature in subsequent judicial review proceedings; (d) when advising on, and contributing to, planning applications such experts “owe, to the Board and the public, similar duties of independence and professionalism to those they owe to the courts…” (para. 107); and (e) it would not be proportionate or justifiable to require litigants to retain an entirely new team of expert witnesses for legal proceedings (paras. 107, 108).

167. These aspects of that case – as well as the fact that there was no apparent question of nondisclosure of the previous role of the experts in question - distinguish it sharply from this one.

168. The Liquidator identified two judgments of the High Court of England and Wales which are asserted to be of assistance and which warrant some consideration.

(c) English cases

169. In Toth v. Jarman [2006] C.P. Rep. 44, the English Court of Appeal rejected the appellant’s appeal in a claim for damages for nervous shock and psychiatric injury which he alleged were caused by a medical practitioner who negligently treated his son. One of the grounds of appeal was that the expert witness for the respondent had failed to disclose his former membership of a committee of the Medical Defence Union. This was asserted to constitute a conflict of interest. The Court rejected this ground of appeal, finding the alleged conflict to be “immaterial”. However, noting that “important points of principle and practice” (para.

99) were raised, the Court proceeded to analyse the obligation of disclosure in some detail:

“We do not consider that the parties can properly agree that a conflict of interest which is otherwise disclosable need not be drawn to the attention of the court. A party who is in the position of wanting to call an expert with a potential conflict of interest (other than of an obviously immaterial kind) should draw the attention of the court to the existence of the conflict of interest or possible conflict of interest at the earliest possible opportunity.” (para. 112)

170. It was explained that, “[t]he court needs to be assisted by information as to any potential conflict of interest so that it can decide for itself whether it should act in reliance on the evidence of that expert.” (para. 113).

171. The English Court of Appeal concluded in this respect:-

“[A]s we have explained above, there is another side to independence. The expert should not leave undisclosed any conflict of interest which might bring into question the suitability of his evidence as the basis for the court's decision. The conflict of interest could be of any kind, including a financial interest, a personal connection, or an obligation, for example, as a member or officer of some other body. But ultimately, the question of what conflicts of interest fall within this description is a question for the court, taking into account all the circumstances of the case.” (para. 119)

(emphasis added)

172. The next case relied upon by the Liquidator was Essex County Council v. UBB Waste (Essex)

Limited [2020] EWHC 1581 (TCC). This was a case concerning the design, construction, financing, commissioning, operation and maintenance of a mechanical biological waste treatment plant in Basildon to process the county’s waste. An issue about the independence of one of the technical expert witnesses tendered by the defendant (Dr Weatherby) was only first disclosed when he delivered a replying report some two months before the hearing. The conflict in question was that he was the managing director of a firm which had advised the defendant in relation to the design and construction phases of the project and was found to have had “a number of dealings with” the defendant on the project. These dealings had not been disclosed during case management or in any of the eight reports he had previously prepared.

173. The Court found that “[h]ad the full extent of the conflict been identified at a case management conference, I doubt whether permission would have been given to UBB to rely upon Dr Weatherby’s evidence.” (para. 56)

174. Further issues regarding his role that called his independence into question emerged during cross-examination. In particular, a company related to the plaintiff had raised the possibility of making a claim against Dr Weatherby’s firm arising from the design. Prior to his engagement as an expert, it was then confirmed there was no such claim. This linkage between his willingness to give evidence and the confirmation there was no claim against his firm was found to raise questions about his impartiality (para. 54.3). The plaintiff also pointed to a want of impartiality in his approach to his evidence.

175. Pepperall J.’s criticisms of the defendant and their expert are notable here:

“Dr Weatherby and UBB should each have recognised that he was conflicted.

Prudence dictated that the instruction should either have been withdrawn or refused.

Upon deciding instead that it could proceed, there was no excuse for failing properly to disclose the conflict of interest. Instead, Dr Weatherby wrote seven expert reports for use in adjudications and his main report in this litigation before the matter of the claim was first disclosed in his reply report on 15 March 2019. Further, he failed to disclose the claim when questioned about his independence by Kim Franklin QC in April 2017 in the context of adjudication number 3. Dr Weatherby’s failure to understand and declare the problem inevitably causes further concern that he does not really understand either the difference between acting as a consultant advising a client and acting as an independent, impartial and objective expert, or his duty to the court.” (para. 55) (emphasis added)

176. The Court also concluded that Dr. Weatherby “has failed properly to distinguish between advocacy for a client and the rigour required when acting as an independent expert.” (para.

57)

177. Having made these findings, Pepperall J. declined “simply to exclude Dr Weatherby’s evidence on the basis of admissibility at this late stage”, a decision which appears to have been somewhat influenced by the argument that there was a finite pool of available expertise.

The Court decided instead to “treat his evidence with caution”. Nonetheless, Pepperall J.

referred to the qualifications, impartiality and “obvious objective professional detachment”

of the technical experts for the plaintiff, before making a general finding that he preferred the evidence of those witnesses to that of Dr Weatherby.

178. The strength of his views on this point was apparent when Pepperall J. later decided to award indemnity costs against the defendant, including on the basis of the instruction of Dr Weatherby. This was reasoned as follows:

“At paragraphs 54-55 of my principal judgment, I concluded that both Dr Weatherby and UBB should have recognised that he had obvious and serious conflicts of interest, that his instruction should either have been withdrawn or refused and that there was no excuse for failing properly to disclose the conflict. In ICI Ltd v. Merit Merrell Technology Ltd [2018] EWHC 1577 (TCC), Fraser J rightly observed, at [237], that partisan expert evidence is not the norm in this court. It is very important to the proper administration of justice that that should remain so.” (Essex County Council v. UBB Waste (Essex) Ltd. (No 3) [2022] EWHC 2387 (TCC) at para. 75).

179. The decisions of the English Court of Appeal in Toth v. Jarman and the English High Court in Essex County Council v UBB Waste (Essex) Limited were concerned with the specific topic of undisclosed conflict of interest, which did not arise in Duffy. Nonetheless, the principles and rationale underlying those decisions of the courts of England and Wales do align with the judgments of Collins J. and Noonan J. and with the requirements of Order 39, Rule 57. They are of comparative interest here, given the facts that emerged regarding Mr Wallace’s evidence.

(d) Summary of legal principles

180. The legal principles which fall to be applied in assessing the application to exclude the evidence of Mr Wallace may be summarised as follows:

(a) “the law expects and demands the highest standards of experts” (Duffy, per Noonan

J. at para. 79): the unique privilege of being permitted to offer opinions to the court and the significant impact such evidence may have, warrant the imposition of these standards.

(b) “arguably the most significant concern about expert evidence relates to issues of objectivity, impartiality (lack of bias) and independence” (Duffy, per Collins J. at para.

20).

(c) “..courts need to be forceful in policing the rules and in taking appropriate measures where those rules are not complied with” (Duffy, per Collins J. at para. 24).

(d) The evidence of an expert should “ordinarily” be excluded if there are “significant departures from the fundamental requirements of objectivity, impartiality and independence”: “minor transgressions” - by contrast - may go to weight rather than admissibility (Duffy, per Collins J. at para. 34).

(e) The overarching question is whether the expert is willing and able to comply with the fundamental requirements of objectivity, impartiality and independence: if not, the evidence should ordinarily be excluded as inadmissible.

(f) Any apprehended conflict of interest should be disclosed to the court at the earliest opportunity, to ensure the court can assess its impact and decide whether to admit the evidence. That is a decision for the court, not for the parties and not for the expert.

(g) Order 39, Rule 57(2)(b) expressly requires that “any financial or economic interest of the expert, or of any person connected with the expert, in any business or economic activity of the party retaining that expert” must be disclosed in every report delivered by that expert.

(h) It will be necessary to assess the facts and circumstances of each case (and, in some cases, the evidence actually tendered) to determine whether there has been a significant departure from those fundamental requirements or whether the transgression in question is immaterial or minor only.

(i) The following are some of the matters which a court may weigh in deciding these questions:

(i) Whether the expert has adopted the role of an advocate for the party retaining them;

(ii) Whether the expert has shown an appreciation and understanding of the fundamental requirements of their role and the duty owed to the court;

(iii) Whether the expert has gone beyond the proper limits of their area of expertise, contrary to Order 39, Rule 57(1);

(iv) Whether the expert has demonstrated an independent, enquiring and open mind;

(v) Whether the expert has shown a willingness to consider alternative interpretations, points of view and perspectives.

181. I will now address the challenge to the expert evidence tendered by the Respondents in this case.

(e) Expert evidence in applications for restriction

182. The nature of a restriction application, and the role of the court in such an application, have already been addressed. To recap: it is not a typical adversarial, inter partes application and the court is not making binding findings of liability as between two opposing sides or necessarily determining conflicts of fact.

183. The test is not whether the director(s) were right or wrong in decisions they took in the course of the oversight of the company’s affairs. The question is not whether a fully qualified and specialist expert examining the facts months or years later with the benefit of hindsight would have an issue with what the director(s) did or did not do or would have done things differently or the same. Mismanagement or mistakes are not the barometers.

184. On the contrary, the task of the court is to decide whether the court is “satisfied” that the director(s) have objectively demonstrated that they acted honestly and responsibly at the relevant time in relation to the conduct of the affairs of the company in liquidation. It is an objective assessment of the conduct of a reasonable person with the appropriate qualifications (and those of the director(s) in question), not a highly qualified expert.

185. Courts have assessed questions of director responsibility almost entirely without the benefit of expert opinion since the introduction of the restriction regime in 1990.

186. Given these features of a restriction application, I have a significant doubt as to whether or how expert evidence is relevant or of assistance to the court in such an application. It is simply not apparent to me that the role of a court under section 819 is intended to include making findings based on the views of expert witnesses. There is also a real risk of introducing inappropriate hindsight, a risk cautioned against in successive judgments in which the correct approach to restriction applications has been refined.

187. This view that expert evidence is beyond the intended scope of restriction applications is supported by the procedural rules which govern such applications and which envisage hearings on affidavit. While oral evidence can be introduced (by way of exception rather than rule), it is clear that the efficient conduct of restriction applications would be hampered by the widespread introduction of unnecessary expert evidence - quite apart from the more ideological and substantive difficulties with such evidence being adduced.

188. In short, I share the misgivings expressed on behalf of the Liquidator about the relevance or appropriateness of the introduction of expert evidence in an application of this nature. I doubt that such evidence is in principle “reasonably required” in restriction proceedings, within the meaning of Order 39, rule 58(1).

(f) Expert evidence in this Application

189. The misgivings just expressed are compounded here by the fact that the areas of expertise of the two tendered experts (accountancy and insolvency) overlap very substantially with the qualifications and experience of the Liquidator himself and of both Respondents, all of whom are also qualified chartered accountants. The Liquidator also identifies himself as an insolvency practitioner with over 25 years’ experience.

190. The purpose of the expert evidence that was tendered in this case is said to be to opine on the adequacy of the books and records, the accounting records and the financial statements.

However, the Liquidator is an independent office-holder and has the requisite expertise to have formed views on these questions and present same to the CEA. The Respondents themselves are qualified to proffer their own views and explain the approaches they did in fact take in the oversight and management of the Company’s affairs, including their approach to such matters as disclosures in financial statements and the adequacy of books and records.

191. Both experts also purported to offer expert evidence on topics such as the obligations of the directors in situations of pending insolvency; corporate governance requirements; and the alleged requirement to obtain written legal advice before issuing legal proceedings. Mr Wallace addressed the approach to commercial negotiations taken by the Respondents, and Mr Hughes responded in turn on this subject. Mr Wallace also discussed other legal proceedings into which he had an insight.

192. I do not consider the evidence of Mr Wallace or Mr Hughes on any of these topics to be properly within the scope of qualified independent expert opinion within the meaning of Order 39, Rule 57(1). They are matters of law and interpretation, not questions of accounting expertise.

193. In the specific circumstances of this case, I am far from persuaded that there is any need for, or benefit to be derived from, expert evidence of the type that has been proferred, quite apart from my general reservation about the relevance or necessity of expert evidence in restriction proceedings. This is not a comment on the content or quality of the evidence, but is rather based on its stated scope and purpose.

194. These views all lead to a conclusion that, of its nature, the expert evidence here is not of great assistance, was not necessary, and does not contribute to the task I face in this Application. Evidence of the type tendered is rather in danger of obscuring the true scope and purpose of this Application. For these reasons, I propose to attach little if any weight to the evidence of the expert witnesses tendered by the Liquidator or the Respondents.

195. In this respect, I note that the position of the Liquidator, as set out in oral submissions, was that he never intended that expert evidence would be required when bringing the Application and that the affidavit of Mr Hughes was only introduced to respond to the evidence of Mr Wallace. Doubts were expressed during the hearing about the relevance or admissibility of the evidence of both experts and it was confirmed in closing oral submissions that the position of the Liquidator was that there should be no expert evidence in this Application and no weight should be attached to the evidence of either expert (day 5, pages 28 to 29). I share that view.

196. While this conclusion obviates the strict need to attach weight to, or further address the evidence of, either expert in any detail (and I am satisfied that that is how I should decide this matter), I am mindful that a different view of this novel question could be taken.

197. I am also mindful of the observations of Noonan J. in Duffy the trial judge will be in the best position to assess the evidence given by experts to determine whether they are truly uninfluenced by the interests of the party retaining them and able to listen to and consider opposing propositions and perspectives (paras. 82-83).

198. For these reasons, I will consider the primary points from, and my observation of, the evidence of Mr Wallace and Mr Hughes on the topics that are properly within their area of expertise (ie questions of books of account and preparation of the financial statements). This treatment of their evidence is entirely subject to my fundamental, overarching view that the evidence of those witnesses is not “reasonably required” for me to determine this Application, within the meaning of Order 39, Rule 58(1) of the Rules.

199. Quite apart from the general questions about expert evidence in this matter, there were some serious objections made to the evidence of Mr Wallace. I will address these next.

(g) Evidence of Mr Wallace

200. It emerged during the cross-examination of Mr Wallace that, between the date on which he swore his first affidavit in these proceedings and the date on which he swore his second affidavit, he was appointed as joint liquidator of no less than twelve companies in the Group, each being a company of which the Respondents are directors. The appointments were made between 22 April 2024 and 29 May 2024.

201. This fact had not been disclosed to the Court until the cross-examination of Mr Wallace.

202. It was understandably the subject of extended cross-examination of Mr Wallace and of detailed written and oral closing submissions. It was contended that the Court needs to weigh and consider not just the facts, but how they arose and how they were dealt with by Mr Wallace in cross-examination.

203. The submission was made by counsel for the Liquidator that the Court must have “serious concerns” regarding Mr Wallace’s evidence. It was suggested that when there is a conflict which is not disclosed to the Court, “the presumption that the Court can act on the basis, the assumed basis, that the expert is to act independently and impartially is undermined” (day 5, page 28). It was said that the decision of Mr Wallace not to disclose material information to the Court about his involvement with the Respondents, combined with the fact that he has sought to advocate their position on affidavit and in oral evidence to the Court, makes this a case in which it is appropriate to deem his evidence to be inadmissible in its entirety.

204. While Mr Wallace did ultimately accept under cross-examination that it would have been better if his appointments by the Respondents had been disclosed, the position maintained in the Respondents’ closing written submissions is that, “the fact that Mr Wallace is liquidator of a number of companies of which the Respondents were directors does not, it is submitted, go to either the independence or impartiality of his evidence, which the Court can judge on its merits” (para. 85).

205. Counsel for the Respondent stated openly and clearly in closing submissions that the counsel team had no knowledge of these appointments before the cross-examination of Mr Wallace.

I fully accept this and I note the position in the closing written submissions prepared by those counsel that “obviously, the connection should have been disclosed” (para. 81). In those submissions, it is contended that the error in not disclosing the appointments does not “warrant the exclusion or reduction in weight of his evidence”. As will be apparent, I do not agree with this submission, but I do not believe that any criticism can be made of the counsel team acting for the Respondents in relation to the facts that emerged during the cross-examination of Mr Wallace and I make no such criticism. The same is not unfortunately the case with regard to the solicitors acting for the Respondents or the Respondents themselves.

Assessment

206. The rules that govern expert evidence are of vital importance to the proper and just conduct of legal proceedings in which such evidence is tendered. Expert witnesses are placed in the unique and privileged position of being permitted to offer opinions to the court. The price of that privilege is that expert witnesses must observe certain fundamental rules, most notably that their opinions must be limited to topics within their sphere of expertise and the expert and their evidence must be independent, objective and impartial. The facts here demonstrate a failure to comply with those rules.

207. Mr Wallace swore his first affidavit in these proceedings as an independent expert witness on 3 December 2023. Sometime in the ensuing three months, the Respondents (through their solicitors, Amoss Solicitors) approached Mr Wallace seeking to nominate him as liquidator of twelve companies that were related to Downtul.

208. The Respondents were directors of each of the companies in question and each of them was in insolvent liquidation, some with significant deficits. Mr Wallace accepted these appointments as a joint liquidator to each of these companies, at the request of the Respondents.

209. Mr Wallace swore his second affidavit as an expert witness in this Application on 1 July 2024 (filed by Amoss Solicitors). He made no reference in that affidavit to the appointments.

By that date, it had already been agreed and ordered that each of the deponents would be subject to cross-examination at the hearing of the Application.

210. Mr Wallace gave his evidence-in-chief on the fourth day of the hearing. He made no reference to the appointments in his direct evidence.

211. At the start of his cross-examination, counsel for the Liquidator put to Mr Wallace several documents related to each of the twelve companies, as filed with the CRO, including:

- The ordinary resolution to wind up the companies and appoint Mr Wallace and Mr Richardson as joint liquidators (signed by either the First or Second Respondent and presented by Amoss Solicitors)

- The notice of appointment of liquidator(s) signed by both Mr Wallace and Mr Richardson and presented by either Amoss Solicitors or by Interpath Advisory (Interpath (Ireland) Limited) (“Interpath”).

212. When it was put to him that these facts called his independence and impartiality into question, Mr Wallace replied:

“I take huge exception to that, … taking my professional integrity into question” (day 4, page 129).

213. When asked whether he should have disclosed these appointments to the Court, he disagreed in strong terms, repeating,

“I take huge exception that you would suggest that I would take on a job that would actually impugn my professional integrity, I take huge exception to that...” (day 4, page 129)

214. He continued to repeatedly take “huge exception” to the questions asked about whether he had failed in his duty to the court (day 4, pages 130 and 131): “I have been doing expert witness work for a very long time and I take huge exception in that regard.”

215. Ultimately, after extensive cross-examination on this net point, Mr Wallace accepted that

“A. I think disclosure would have been better in the circumstances, I appreciate that.

Q. Objectively, there was a failure of disclosure?

A. I didn't consciously set out to fail to disclose.” (day 4, pages 134-135).

216. It is a matter of concern – and a material one – that it took Mr Wallace some time to realise and acknowledge that there should have been disclosure of his appointments.

217. In the course of his evidence, and before accepting that there should have been disclosure, Mr Wallace raised different points in an apparent attempt to justify his position. His evidence was that the other joint liquidator would be dealing with the liquidations day-today because of his role as an expert in these proceedings. In this regard, I note with some concern Mr Wallace’s sworn evidence that his acceptance of the appointments to act a liquidator of twelve companies was on the apparently agreed basis that “Mr. Richardson would go on as Joint and do the work, rather than me, in relation to those companies” (day 4, page 131) and that “I don't get involved in them day-to-day. I stay clear of them” (day 4, page 130).

218. He explained this further a few minutes later:

“With the Butlers when they asked would I like to be put forward in relation to be the Liquidator of these companies, I said I would do it in the context of joint appointment with another colleague in the office and that he would actually look after those liquidations, given the work that I had been doing in respect of the Directors'

disqualification action” (day 4, page 131)

219. The result is that, while engaged to act as an expert witness in this case, he was appointed as a joint liquidator of twelve companies at the request and on the nomination of the Respondents and on the basis of an apparent agreement with the Respondents that he would be staying clear of the liquidations and not involved in day-to-day work on them.

220. This indicates that Mr Wallace discussed the impact of the appointments on his role as an expert with the Respondents, a fact which demonstrates an early awareness that it was an issue, and which raises questions for the Respondents and indeed for the solicitors acting for the Respondents.

221. Another point made by Mr Wallace in an apparent attempt to justify the non-disclosure of the appointments was that “my second affidavit is totally premised on my first affidavit, at which time I was not involved in any of these potential liquidations.” (day 4, page 130).

222. This is unconvincing as an answer and is also inconsistent with his overall insistence up to this point that there was no obligation of disclosure.

223. The attempted justification that “[t]hese appointments are not secretive, they're in the public domain” (day 4, page 133) similarly does not advance Mr Wallace’s position. If the appointments needed to be disclosed, then it was the obligation of Mr Wallace, the Respondents and the Respondents’ solicitors to ensure that was done. Suggesting that the information could have been found in the public domain entirely misses the point.

224. One of the other answers given by Mr Wallace was that “I don’t put my name to affidavits on information I don’t believe in” (day 4, page 133). Insofar as this was an attempt to justify or explain the non-disclosure, it shows a failure to appreciate that the issue is not the content or veracity of the affidavits, but the need to ensure that the court and parties appearing before the court can be assured of the impartiality, objectivity and independence of expert witnesses.

225. The justifications advanced underline that the appointments should have been disclosed and that they are relevant to this Application. In any event, even if Mr Wallace never did contemplate any possibility of disclosure (or any possibility of not accepting the appointments) in this case, that calls into question his ability or willingness to understand – and therefore comply with - the obligations of an expert witness.

226. Which side of the line he actually falls on was difficult to discern from Mr Wallace’s evidence. When questioned about there being no disclosure of the appointments in his second affidavit, Mr Wallace’s answer was “I didn't consciously omit it from my affidavit”

(day 4, page 133). However, he then said:

“The decision I took was that it didn't impact the work I was doing for the Court because I take the work for the Court very seriously and I do not sign my name to

affidavits. I'm not influenced by anybody, I don't take anyone else's views into account, they are my own views…”

227. Very shortly after that evidence, he said, “I didn’t decide to omit it. On balance, I didn’t include it” (day 4, page 134). There was an inconsistency in his evidence in this respect but, fundamentally, whether it was a deliberate or unconscious failure to disclose is not the barometer. The acceptance of the appointments while acting as an independent expert witness in proceedings pending before this Court, and the failure to disclose them before furnishing sworn written and oral evidence (in chief), constitutes a breach of the obligations of independence and impartiality that Mr Wallace owed to this Court. Indeed, if the failure was unconscious and inadvertent this points to an inability as well as an unwillingness to appreciate or understand the obligations of an expert witness (within the meaning of Duffy)

and consequently to comply with them.

228. However, on the basis of my observation of his evidence in its entirety, particularly those aspects of it which I have already described, I am of the view that Mr Wallace made a

decision not to disclose his appointment as liquidator to twelve companies related to Downtul. This appears to have been on the basis of his own strongly-held view that it would not impair his ability to give independent evidence.

229. The failure to appreciate that it is a matter for the court and not Mr Wallace to make that assessment constituted a significant failure to understand or comply with his duties as an expert witness.

230. Contrary to Mr Wallace’s apparent view of the situation, the obligation to make disclosure is not a subjective choice, or a matter at his discretion. Order 39, rule 57(2)(b) expressly requires an expert to disclose in “every report” “any financial or economic interest of the expert, or of any person connected with the expert, in any business or economic activity of the party retaining that expert…”

231. The Group is the business activity of the Respondents. I am of the view that, in the circumstances of this case, Mr Wallace’s appointment as liquidator of twelve companies in that Group gives Mr Wallace a financial or economic interest in that Group. There has been a direct failure to comply with that requirement of disclosure in the Rules of the Superior Courts.

232. Even if that were not so, the appointment as liquidator at the request and on the nomination of the Respondents gives rises to an evident connection between Mr Wallace and the Respondents and a conflict of interest with his role as an expert witness. Mr Wallace’s explanation of how the appointments came about does not assuage these concerns: “I had been doing some work with [the directors] on the first affidavit… They needed someone to tidy up the group, they asked would I do it.” (day 4, page 131).

233. This is not only historic: as joint liquidator of the related companies, Mr Wallace will be bound to independently opine on the honesty and responsibility of the Respondents in relation to the insolvent companies in his report to the CEA. Indeed, he must have reported to the CEA under section 682 between September and November 2024. He will potentially have to bring restriction proceedings such as this Application against the Respondents in their capacity as directors of those failed companies.

234. It does not sit easily with his role as an independent expert witness in this case, whose duty is to provide objective, impartial and independent evidence to the Court, that he has also accepted the Respondents’ nomination to opine and advise the CEA as to whether they acted honestly and responsibly in relation to the affairs of other related insolvent companies.

235. The failure to disclose the appointments here can be contrasted with the disclosure in his first affidavit that KPMG (a firm of which he was previously a partner) had acted in relation to the restructuring of the Group some four years previously. He states he had no involvement in these services and “aside from these matters, I confirm that I have no conflicts of interest of any kind” (para. 4(d)).

236. He regarded and treated this as a matter which he was obliged to disclose, despite having had no personal involvement in that work.

237. Given this disclosure, it is simply impossible to understand how he accepted the appointment to act as joint liquidator of twelve companies related to Downtul at the request of the Respondents and then proceeded to give written and oral sworn evidence to this Court without disclosing that fact.

238. I am mindful of the clear guidance from the Court of Appeal in Duffy that “courts need to be forceful in policing the rules and in taking appropriate measures where those rules are not complied with”. Adopting that approach, I am satisfied that the departure from the standards required of an expert witness here was of such significance as to warrant the exclusion of Mr Wallace’s evidence. It was not a minor transgression or an immaterial matter.

239. There are additional complaints made by the Liquidator regarding Mr Wallace’s evidence.

These will next be addressed.

Additional Challenges Raised

Exceeding his expertise

240. The Liquidator raised specific objections to the content and scope of Mr Wallace’s affidavits and oral evidence.

241. It is said by counsel for the Liquidator that his affidavits and evidence included both making of submissions and advocating for the position of the Respondents and making himself a witness of fact, none of which is part of the proper role of an expert.

242. It was said that an example of Mr Wallace going beyond the proper bounds of an expert opinion could be seen in his averment in his first affidavit that “withholding of rent is a commercial reality and common tactic employed by commercial tenants” (para. 13). An example of an averment in which he advocated the position of his clients was also given:

“the fact that the Company discharged all financial liabilities under the Lease in full and on time in the period from December 2013 to April 2020 undermines the suggestion that the structure of the group, of which the Company was a member, was engineered so as to avoid its liabilities” (first affidavit, para. 25).

243. The Liquidator criticised Mr Wallace’s evidence for going beyond questions of accountancy.

This was illustrated by reference to the inclusion in his evidence of commentary on other restriction applications; other liquidations and cases in which he has been involved; the Respondents’ corporate governance procedures; and his views as to what is typical or acceptable in commercial negotiations between landlords and tenants. Complaint is also made about Mr Wallace advancing his opinion as to whether the Respondents acted honestly and responsibly (written closing submissions, para. 83).

244. In closing submissions, Counsel for the Respondents did not heavily contest this question and accepted there were points on which Mr Wallace should probably not have given evidence. He cited the two key issues on which Mr Wallace gave evidence as concerning the books of account and the financial statements (day 5, page 143).

245. I am of the view that Mr Wallace’s evidence did exceed the scope of his established expertise and included assessments of legal questions and of modes of commercial negotiation. The limits to admissible expert evidence are clear and were exceeded here.

246. I am not however persuaded that, absent the undisclosed conflict of interest, these other excesses of his role by Mr Wallace would themselves justify a decision to exclude the entirety of his evidence. Nonetheless, they do combine with the very significant breach of his duties as expert which have occurred, to indicate an overall failure to respect the duties and confines of an expert’s role.

Meeting with Interpath

247. During the cross-examination of the First Respondent, he stated that he met with an (unnamed) expert from the firm of which Mr Wallace is the Managing Director (Interpath)

in August or September 2023 and obtained advice in relation to Downtul’s corporate tax returns and how to engage with the Liquidator (day 4, pages 77-80). There was then an attempt to file the outstanding tax returns in September 2023.

248. There is an apparent conflict between Mr Wallace and the First Respondent as regards whether Interpath did furnish advice to the Respondents in August or September 2023.

However, having carefully observed and considered the evidence on this point, I think the conflict is more apparent than real.

249. Mr Wallace’s evidence was that there could have been no advice by Interpath because Interpath did not have a taxation expertise at that time:

“I absolutely have zero recollection of that and I have no idea how that would have occurred because at that time in Interpath, we didn't even have a tax professional in the practice. So I don't know where that came about but we had no tax advisors in the practice at that time. So we would not have been able to provide any tax advice.” (day 4, page 136).

250. When asked whether he was saying that the First Respondent was wrong when he said he “took advice” from Interpath in August or September 2023, Mr Wallace’s answers are notable:

“He is absolutely wrong because we had no tax professionals to provide the advice in the first instance” (day 4, page 136).

251. The only reason given by Mr Wallace to dispute the evidence of First Respondent was that there was no specific taxation expertise in Interpath at that time.

252. However, the First Respondent’s recollection was that the meeting in question was “Just before we lodged the Corporation Tax returns… We pointed out this omission and we decided that we would attempt to lodge the returns, to correct the omission.” He confirmed that would have been in August or September of 2023 (day 4, page 79).

253. He said the purpose of the meeting also concerned engagement with the Liquidator: “we couldn't figure out how to get engagement with the liquidator” (day 4, page 80) and that they discussed this with the expert from Interpath at that meeting in August or September 2023.

254. I have seen no basis to believe that specialised taxation expertise was necessary to advise on these questions. Indeed, Mr Wallace himself addresses the specific question of corporation tax filings in his first affidavit filed on 8 December 2024. He also gave evidence about another case in which he has been dealing with a company’s failure to file corporation tax returns (day 4, pages 142 to 143).

255. Mr Wallace had not been present when the First Respondent gave evidence on this point and his insistence that Interpath did not have taxation expertise at that time does not appear to me to actually answer or contradict the evidence of the First Respondent. I note that Mr Wallace did not say that a conflict of interest with his role as an expert witness would have arisen or preclude such advice being given.

256. Other points may be noted here. For example, Mr Wallace was the person dealing with the Respondents and his evidence was that he began to meet them in August or September 2023.

What he said in evidence was that,

“I started to meet the Butlers in relation this case, I think it was August/September '23 but it was in discussion in respect of this particular case. But there's no tax advice.”

(day 4, page 136, emphasis added)

257. To be clear: the First Respondent’s evidence was that they obtained advice in relation to this case in August or September 2023, not more general taxation advice. Mr Wallace also said “I would have known whether other people were providing advice to the Butlers other than -- sorry, I wasn't even providing advice, but if anyone was providing advice to the Butlers, I would have known about it” (day 4, page 138). I regard this answer as confirmation by Mr Wallace himself that he was the primary person in Interpath who dealt with the Respondents.

258. There was then the following exchange:

“Q. Mr. Butler. He said that one of the things that he wanted to achieve was to see if he could get the Liquidator to engage. Did you ask you for advice in relation to that?

A. He asked me what I would have done if I was the Liquidator, would I have engaged with the Directors or not on a regular basis.” (day 4, page 138).

259. Mr Wallace does not dispute that he was asked to give advice to the Respondents and – notably – does not say that he refused to advise them. When the answers given by Mr Wallace are scrutinised closely, I do not believe they substantively contradict the First Respondent’s view that advice was given by Interpath (likely Mr Wallace himself) at a meeting on the topic of how to engage with the Liquidator and the question of the outstanding corporation tax returns.

260. These answers taken together lead me to conclude that the most likely facts are that there were five or six meetings beginning in August or September 2023 at which Amoss LLP, the Respondents and Mr Wallace were in attendance. The Respondents regarded the purpose of one such meeting in August or September 2023 as being to obtain advice in relation to engaging with the Liquidator (to include the question of filing of corporation tax returns).

The First Respondent’s evidence was that he obtained advice. Mr Wallace himself confirmed he was at meetings with the Respondents during the same period of time and was asked questions related to engagement with liquidators (and did not say he refused to answer).

261. My interpretation of this evidence is that the lines may have been blurred between working on the affidavit and furnishing advice. This should not have happened. There can be no doubt about the experience, expertise or seniority of Mr Wallace. The issue is that he can apply these attributes either to assist a client as an adviser, or to assist the Court as an independent expert. He cannot do both. I am satisfied from the evidence outlined above this line appears to have been crossed to at least some extent at a meeting during August or September 2023. I consider that this would fall into the category of a “minor transgression”

if taken alone, but, in this Application, it must be added to the other more serious matters already addressed and tends to support the decision to exclude the evidence of Mr Wallace as inadmissible in this matter.

D. GROUNDS OF RESTRICTION

262. In the CEA Report, the Liquidator’s concerns regarding the conduct of the Directors were addressed under ten headings, which are summarised as follows:

a) Books and records

b) Accounting records

c) Financial Statements

d) Revenue filings and VAT

e) Litigation without written legal advice

f) Failing to assess the insolvency of the Company

g) Interaction with Landlord and breach of the Lease

h) Failure to comply with corporate governance standards

i) Failure to properly disclose or record related party transactions

263. It was said in the Liquidator’s grounding affidavit that the object and/or effect of the ten issues listed in the CEA Report was that there was a corporate structure which allowed liabilities to arise in the Company to the benefit of Atercin, which was allowed to trade at the Property without any liability to pay rent (para. 59). It was said that this allowed benefits to flow to the Respondents (via other related companies) and amounted to the deliberate engineering by them of a situation in which the Company failed to pay the sum of €523,676 owed to the Landlord.

264. A similar approach can be seen in his grounding affidavit. There, the Liquidator lists eight “issues of most serious concern” (paras 61 to 99), which are broadly (although not precisely)

the same as the grounds listed in the CEA Report. Again, the topic of the corporate structure and the inter-company transactions is not among this list.

265. I do not share the Liquidator’s apparent view that the question of the corporate structure does not warrant separate treatment as a ground of restriction. Rather, I regard the apparent intercompany transactions and corporate structure as the most significant aspect of this Application, which warrants distinct and standalone treatment as such.

266. For that reason, I adopt a slightly different approach to the categorisation of the grounds for restriction and address the grounds and concerns identified by the Liquidator under the following headings (in the order of priority as I see it):

(a) Corporate structure, inter-company transactions;

(b) Accounting records, financial statements

(c) Corporate governance;

(d) Relationship with the landlord;

(e) Allegation of dishonesty;

(f) Revenue matters.

(a) Corporate structure, inter-company transactions

267. The central issue in this case is that the Respondents put in place a structure whereby Downtul entered, and bore all the obligations of, the Lease, but had no trade, operations or revenue-earning capacity to meet those obligations. Atercin was then given the right to occupy, and operate its business from, the Property. In return, Atercin paid a fee to Downtul, if and when the Respondents decided that fee was owing and should be paid and asked Atercin to pay it.

268.This is – in broad terms - the arrangement that was described in the oral evidence of the First Respondent.

269.The position presented by the Liquidator is that Downtul is a shell company and that rent was only paid by Atercin on the basis of an ex gratia arrangement or some informal agreement or arrangement, with no enforceable legal obligation on Atercin to pay rent in return for its occupation of the Property. It was said in oral submissions that this could only be done because the Respondents ran the two companies and could control the transfer of funds, which was an asymmetric arrangement allowing Atercin to make profits with no liabilities for rent.

270.The Respondents’ position with regard to this aspect of the Application is (in broad summary)

that the arrangement insulated companies within the Group from risk.

271.The First Respondent explained in his direct evidence that,

“...the intention was for Downtul to take the lease in the premises and what was essential to us was that the user there, our intention was for Atercin to go in and trade that unit, and share occupation, whilst paying the fee which was effectively the property outgoings. So Downtul's entire business is holding a lease. This is our structure that we use, typical structure in the entire group is that you have a company that takes the lease and the plan there is that you insulate the property company. i.e.

the lease company, from the likes of Downtul from both internal and external risks.”

(day 3, page 144)

272. He was also entirely forthright in his description of this arrangement when asked if there was a board meeting or minutes of same (on the Atercin side) evidencing it: “it's common Directors and common members, it's like taking your right hand to your left hand.” (day 4, page 95)

273. There are several significant issues with this strategy from the perspective of Downtul and the responsible conduct of its affairs:

274. First, the purpose of the alleged arrangement, according to the evidence given by the First Respondent, was that the two companies would be insulated from the risks of the other:

“when we are setting up Downtul, Downtul's business is clear and we are limiting Downtul to its business, and the contagion goes from neither one to the other.” (day 4, page 31)

275. The First Respondent explained that Atercin “takes the risk of the profit and loss, whatever risk goes with the coffee shop business” (day 4, page 31). That is the risk against which Downtul should have been insulated. In turn, Atercin would be insulated from the legal obligations to the Landlord (day 4, page 32). However, this is not how it worked.

276. Before the pandemic, there was no issue, but, when Covid hit, Downtul was not “insulated”

against the risks faced by Atercin. On the contrary, Downtul relied on impacts on the use of the premises to suspend rents. In a letter of 4 August 2020, Downtul wrote to the Landlord stating “we were not permitted to use the premises due to the increased danger and obligation to comply with Government Directions/Lease..” The letter of 21 September 2020 states “we were not permitted to use the premises and are now using the premises in a curtailed and restricted fashion”.

277. If Downtul was properly insulated, it should still have received the “fee” from Atercin to pay rent regardless of impacts on the use of the Property by Atercin (being the only entity which did occupy the Property). That is clearly not what happened.

278. This is well-illustrated by the evidence about the receipt of payments from the State to deal with the effect of the Covid pandemic. There was conflicting evidence from the First Respondent on this topic. He initially gave evidence that the only pandemic supports received were employee-related (TWSS) and were therefore only for the staff of Atercin (day 3, page 170). Later in his evidence he then accepted there was also Covid restriction support scheme payments made (day 4, page 66). He could not provide any detail in this respect and when asked why these payments were not used to pay rent, his answer was that Downtul was engaged in negotiations with the Landlord. However, this does not explain why those financial supports were not received by Downtul or why they were not ring fenced to deal with liabilities related to the occupation of the Property.

279. This evidence illustrates again how the asserted arrangements with Atercin had the effect of favouring Atercin at the expense of Downtul and its creditors. Atercin remained insulated from rent obligations and continued to occupy the Property rent-free, despite obtaining State support to defray such costs. Downtul claimed the full effect of Covid to suspend rent but apparently neither sought nor obtained any State support to deal with those alleged impacts.

280.This just underlines this disparity as between the treatment of the two companies by the Respondents.

381. I note here that the First Respondent did contend in his evidence that the “business” referred to in the context of the pandemic (including in the letter of 4 August 2020) was the business of leasing the Property (day 4, page 27). While he persisted in saying that it was this business that was damaged and that Downtul was not relying on the damage to the coffee shop business, I reject that evidence. It was unconvincing and failed to acknowledge the plain reality which was that the impact arose from the closure of the business operated at the Property, the inability of the Starbucks coffee shop to trade. He tried to represent it as damage to the Property itself, but his answers on this point were strained and I do not accept them. Covid did not prevent Downtul leasing the Property and that is the only “activity” that Downtul undertook (according to the First Respondent). The evidence on this point also fails to acknowledge that, if the insulation of Downtul meant anything, it should have meant that Downtul was entitled to recover the “fees” from Atercin, regardless of interruption of the use or operation of the business at the Property. There was no such insulation for Downtul.

382. Second, Atercin, by contrast, remained insulated from the landlord-tenant dispute and continued in occupation rent-free for 2.5 years from the onset of the pandemic. Atercin thereby obtained all of the benefit of being an occupier of the Property, while being insulated against the risk of being pursued for rent or other charges.

383. Indeed, it is telling that when proposals were communicated by Amoss Solicitors via email on 18 October 2022 to attempt to resolve the impasse with the Landlord, it was the shareholder of Downtul (Desert) that was proposed to make the payments in question – not Atercin. It was said that “this will only be done if there is a commercial rationale for the shareholder to do so”. So, even then, there seemed to be no mechanism to enforce, or contemplation of seeking to enforce, an obligation by Atercin to pay to Downtul a fee for its continued (and then ongoing) rent-free occupation of the Property.

384. Atercin therefore enjoyed the full benefit of insulation from the risks faced by Downtul. In short, there was no reciprocity to the arrangement. The burden all rested on Downtul. Even during the pandemic, it appears that Atercin obtained the benefit of State supports to deal with costs such as rent that it was not discharging (and has not discharged). It is not clear how the directors of Downtul could possibly have decided this was in the interests of Downtul (if they did so decide).

385.Third, there are no documents evidencing this arrangement, which was at all times critical to the ability of Downtul to discharge its liabilities. A letter from Amoss Solicitors of 3 March 2023 confirms this,

"There are no documents. The coffee shop business was operated by Atercin. The Company permitted Atercin to use the premises. Atercin paid a fee to the Company equivalent to the rent...and other group companies paid and accounted for service charge and rates."

386.The only “evidence” of an agreement was the answers given by the First Respondent in crossexamination. He said,

“The arrangement that Downtul has with Atercin is that whatever expenses that Downtul have in relation to this property is, for want of a better word, underwritten by Atercin in exchange for permitting Atercin to share occupation of the premises.”

(day 4, page 31)

387.When asked whether Atercin was insulated because it had no legal obligation to pay rent, he replied under cross-examination:

- “It has an obligation to Downtul.”

- “there's nothing in writing, so I can't produce a legal document but there is an agreement which we stated. So that surely is a legal agreement, it's an agreement.”

- “Atercin has agreed to pay the monies that Downtul spends to maintain its interest in the property.” (day 4, pages 32-33)

388. His evidence was that “there's no contract between -- there's no written contract there. But the deal is that Atercin pays Downtul's cost of owning the lease and managing the lease”

(day 4, page 94).

389. He then stated that Atercin was bound to pay Downtul’s “incurred costs” which he described as costs which have been approved by Downtul. His evidence was that, if Downtul had approved costs as being due, Atercin would have paid them.

389.The First Respondent’s evidence that there was an “agreement” was inconsistent and unconvincing. The same questions had been asked repeatedly by the Liquidator, but it had never before been suggested there was a binding agreement with Atercin or what its terms or conditions were.

390.When asked about the existence of any evidence within Atercin of the alleged agreement (given that there are no board minutes of the board of Downtul from that period), there was the following exchange:

“Q. MS. JUSTICE CAHILL: Sorry, I have just one further question; is there any minute of a meeting with Atercin regarding this verbal agreement?

A. No, we're Directors and members, it's common Directors and common members, it's like taking your right hand to your left hand, no.” (day 4, page 95)

391.This does seem to me to encapsulate the First Respondent’s view of the interaction between the two companies and the Respondents role in them: they were simply blended (when convenient).

392.The evidence of the First Respondent does not satisfy me that there was anything approximating an “agreement” which conferred mutual rights that were properly formulated and capable of enforcement. The evidence before me simply did not indicate or support the existence of any such agreement.

393.The submission that was made on behalf of the Respondents was that an agreement did not have to be in writing and it is said in closing written submissions (for the first time to my knowledge) that there was a “contract”. The evidence does not support the existence of any contract or agreement, written, verbal or otherwise.

394.From considering and weighing the evidence, it is clear to me that the Respondents ensured monies were available for Downtul to pay rent as long as they wanted those monies to be available and they paid no attention to the separate legal personality or rights of Downtul or Atercin with regard to the occupation of the Property or the payment of rent, save when convenient to do so.

395.Fourth, there was not even a mechanism in place to secure the availability of funds to pay the rent. This was confirmed by the First Respondent in direct evidence:

“We just need to make sure that the money is going, that we feel we can access that money. We don't have to have that money sitting in our bank account and we don't have to have a guarantee from Atercin to say that that money is ring-fenced for you.

We have the benefit, I suppose, of being the directors of Atercin and understanding their liquidity position. So we are very confident that they will have the money when the rent or the service charge or whatever other bills, we have an obligation under this, when they become due for payment that the money is there.” (day 3, page 169)

396.This is striking evidence. It discloses an arrangement in which one company “permits”

another to have the full use and benefit of its one asset, with no guarantee of payment and no documentation. It is based instead on the directors personally knowing about the other company’s liquidity and having confidence or a “feeling” they can access the money. This cannot be described as a responsible approach to Downtul’s affairs.

397. Fifth – and fundamentally - even if there was some form of agreement (which I do not accept), it was an entirely one-sided one which resulted in Atercin occupying the Property rent-free from March 2020 until the vacation of the Property in November 2022 and Downtul being placed in insolvent liquidation with no recourse to the profits that had been made by Atercin through that rent-free occupation. The entry into any such agreement by the directors of Downtul (if it was entered) was not and could not have been in the interests of that Company and nothing that was said or presented in evidence has satisfied me that this was a responsible way to conduct the affairs of Downtul.

398. The contention that the Respondents could have asked Atercin to pay the rent but chose not to do so, and that this is somehow evidence of their responsible conduct as directors of Downtul, is a surprising and novel one, and one which I have no difficulty in rejecting.

399.Sixth, the way the “arrangement” worked was that the directors would decide whether a particular fee or charge was properly incurred and payable or not:

“Downtul will only pay properly incurred expenses and proper costs. So if Downtul deems that it is paying these costs and approving, for instance, a rates invoice, it will take the rates invoice, it will pass it to Atercin and say; 'Atercin, this is one of the costs.' I'm obviously explaining. Atercin will pay the rates.” (day 4, page 33).

400.This leaves Downtul entirely subject to the exercise of an open-ended discretion on the part of the directors to decide whether or not they “deem” a particular charge should be paid. If they do not, then Downtul will not have the funds to discharge that liability, leaving it exposed to an ever-present risk of insolvency. This is fundamentally at odds with the need to ensure protection of Downtul as a separate legal entity.

401.This is not to say that a structure cannot be used whereby one company is the lessee of a property and another the occupier. I make no such finding. The issue is that there needs to be clear and enforceable terms and conditions governing the rights and obligations of the parties to such an arrangement. It cannot simply be at the undocumented, ad hoc discretion of the common directors of the two companies as they see fit, which is what arose here.

402.The evidence of the First Respondent was forthright in several respects, but there was a fundamental failure to understand or appreciate the need to separately consider and weigh the interests of Downtul as a separate legal entity.

403.I have not heard any evidence or submissions which have satisfied me that the directors of Downtul, in allowing these apparent arrangements to be put in place, acted responsibly in relation to the affairs of Downtul.

404.I have no hesitation in finding that the conduct of the Respondents in putting this structure in place and allowing Atercin to gain all of the benefit of occupying the Property, while Downtul bore the burden and risk of the Lease (and of external business impacts), was not responsible. It worked to the advantage of Atercin and was decidedly not in the interests of Downtul.

(b) Accounting records, financial statements

405.There are some fundamental and pervasive differences between the Liquidator and the Respondents as regards the Company’s obligations to keep accounting records and the matters that need to be included and disclosed in the Company’s financial statements.

Liquidators’ position

406.The Liquidator’s view is that the accounting records should consist of a ledger showing the receipt of invoices related to the Lease, documenting the payment of those invoices and showing the flow of monies (via inter-company transactions) into the Company to discharge those invoices. Banking records would be necessary for this purpose, according to the Liquidator. He pointed to gaps between the accounting records and the financial statements:

the total invoices for costs related to the Lease (rent, rates, service charges and insurance)

for the period from July 2015 to 27 December 2020 amounted to €1,225.897.55, whereas the full unabridged financial statements only showed cumulative expenses of € 593,225 for that period.

407. Another point of concern for the Liquidator was the inability to ascertain whether rates were paid from the accounting records kept by the Company. It was necessary to obtain confirmation from Dublin City Council that the rates had been paid. The Liquidator was also critical of the absence of any record or documentation supporting intergroup transactions.

408. With regard to the financial statements, the Liquidator says that, while Downtul is a “small company” for the purposes of the Financial Reporting Standards (“FRS”), it nonetheless is required by FRS 102(1A) to make disclosures of material transactions to ensure a “true and fair view” is given of the company’s financial position. The Liquidator’s view is that this required disclosures regarding the lease, the litigation, and inter-company transactions with Atercin, as well as matters such as the suspension of the rent. His view was that these were material matters that needed to be disclosed and the failure to disclose them amounted to a failure to give a true and fair view of the Company’s financial position.

409.The Liquidator’s position is also that the payment of rates, service charges, insurance and administrative expenses are liabilities of Downtul and should be visible in the financial statements of Downtul and traceable back to the accounting records. The Liquidator points to alleged discrepancies between the accounting records and the financial statements in terms of expenses recorded in the latter not matching invoices received. He criticises the First Respondent for being unable to identify the origin or basis of the turnover figure in the 2020 accounts, which was not limited to the rent liability of €140,000 and for which there was no supporting disclosure or information.

The First Respondent’s evidence

410.The First Respondent approaches the question of accounting obligations on the premise that the Company only holds the Lease, is a small company, and is not bound to keep any further records, such as bank records, or to maintain ledgers.

411. He points to the fact that the Company does not hold a bank account.

412.He maintains the position that the financial statements, invoices and the Lease itself are sufficient to meet the requirement to keep books of account, given the limited activity of the Company, and the fact that it is a small company for the purpose of the FRS.

413. As regards the financial statements, the First Respondent’s view is that they are only directed towards the known, prime users of the accounts (including the Landlord), who were aware of the Lease and the Lease did not therefore need to be disclosed. He justified the nondisclosure of the transactions with Aterin, by saying that, as a small company, Downtul was not obliged to disclose them as they were not material. The same position appears to be taken with regard to the legal proceedings against the Landlord.

414.His position was that the expenses attached to the operations (rates, service charges) were payable by Atercin and this is the reason for the discrepancy between the figures in the accounting records and the financial statements on which the Liquidator placed some emphasis.

415. In legal submissions, the position of the Respondents was that the question is whether users were misled by the financial statements. It was said that there was no such misleading as the accounts disclosed that Downtul was a non-trading entity and questions of materiality do not therefore need to be determined.

Assessment

416.The disputes between the Liquidator and the First Respondent on the accounting questions that arose are not differences of degree or interpretation, but fundamentally divergent views of the Company’s obligations. The position of the Respondents flows from their view that it was proper and responsible for the Company to hold the Lease, allow Atercin to occupy the Property, and – essentially – have nothing other than the Lease, invoices (for which Downtul was apparently not liable) and financial statements by way of documentation and no obligation to even make disclosure of the Lease in the financial statements. It is on this basis that the First Respondent maintains that the invoices related to service charges, rates, insurance are not reflected in the financial statements of Downtul, as those expenses were discharged by Atercin.

417.I have already found that I am not satisfied that it was responsible for the Company to hand over the occupation of the Property in that manner without any enforceable or documented mechanism to secure payment of rent. It follows that the approach to the keeping of books of account and the disclosures in the financial statements (which reflect that strategy) are similarly wanting and fall short of what is expected of a responsible director in the position of the Respondents.

418.There should be clarity around the terms of the agreements with Atercin; documentation supporting the invoices and receipts as between the two companies; clarity as to precisely where the liability lies for each outgoing connected with the Property; some record of the transfer of funds to allow the payments to be made; and then a record of the payments being made by the correct entity. I accept the firm evidence of the Liquidator in that respect. The fact that there is nothing of that nature is a result of the structural defects, which is in turn evident in the flawed books of account and the disclosures in the financial statements.

419.Lest I am incorrect in these overarching findings and the structure itself was not problematic, I am of the view that there are – separately and independently - aspects of the approach to the keeping of accounting records and the preparation of the financial statements which evidence a failure by the directors to act responsibly.

420. This is so for five primary reasons.

421.First, I am not satisfied that it is correct and sufficient to assess the disclosures in the financial statements primarily (or solely, as was sometimes suggested) by reference to the state of knowledge of the Landlord. This was the limited view of the relevant users that was advanced by the First Respondent. There was also a lack of clarity and coherence in this evidence, with the First Respondent proceeding on the basis that disclosures could be tailored by specific reference to the state of knowledge of the Landlord, while also referring to other potential creditors and the Revenue Commissioners and the rates department as relevant users:

“The primary users of these financial statements are the Directors and the members, obviously, and then potential creditors and existing creditors which is clearly the landlord, the Revenue Commissioner and the rates department.” (day 3, page 173, emphasis added).

422.I unequivocally prefer the evidence of the Liquidator himself on this question which was as follows:

“But it's in the public domain so just to mention other possible users, and again I don't think I can give you definitive exhaustive list of who all the users could be, but a member of the public could have reason to look at the accounts. Another landlord within the Entertainment Enterprises Group could have a look at those accounts to see the position with regard to another landlord/tenant situation, or a prospective landlord for the Entertainment Enterprises Group could look at those financial statements and could make a decision based on those financial statements. They could see that, okay, there's no assets, no liabilities…” (day 2, page 26).

423.I regard this evidence as being more persuasive, consistent, more reflective of the purpose of any disclosure obligations in a publicly filed and available document, and more indicative of a responsible approach to the preparation of the financial statements than the evidence proffered by the First Respondent.

444.Second, I regard the approach to “materiality” and disclosure taken by the Respondents to be equally flawed, tending to lead to an approach which was not a responsible one in terms of this Company’s affairs. I am satisfied that the correct starting point is that there is no absolute obligation of disclosure of the transactions in question, as the Company is a small company for the purposes of FRS. The question is whether the transactions in question are material such as that their disclosure is necessary to give a true and fair view of the Company’s financial position (FRS 102(1A)). While there were sharp differences of view on the question of materiality, I am satisfied that the key question is one of materiality, not compliance with a blanket obligation of disclosure.

445.For completeness, I reject the submission made on behalf of the Respondents that the only question is whether anyone was “misled” by the accounts into thinking that Downtul traded at the Property. That is not the test: it is whether the accounts disclose a “true and fair view of the assets, liabilities and financial position of the company” (section 228(4)). Even if a reader would know that Downtul was not a trading entity (as was accepted by all witnesses at the hearing), this does not mean that the accounts satisfy the applicable requirements.

446.The definition of “materiality” put to the Liquidator in cross-examination was the definition contained in the Companies Accounting Act 2017

“In this Schedule, 'material' means the status of information where its omission or misstatement could reasonably be expected to influence decisions that users make on the basis of the financial statements of the undertaking; and the materiality of individual items shall be assessed in the context of other similar items.”

447.The Respondents relied on their limited view of the relevant users to justify there being no reference to the Lease in the financial statements (day 3, page 173), but I am not persuaded by that evidence. What is said by the First Respondent on affidavit is that the Company had no transactions other than the Lease and the discharge of its obligations thereunder and receiving a fee equivalent to the rent (first affidavit, para. 72).

448.Given my rejection of the narrow definition of “users” relied upon by the Respondents, I am not satisfied that it was responsible for the directors to sign off on the financial statements which make no reference to the sole asset and purpose of the Company, the Lease.

449.Third, I do not accept the evidence of the First Respondent that the payments from Atercin are not “material” such as to necessitate their disclosure.

450.The First Respondent said in oral evidence that there was “no requirement for intercompany transactions under related party transactions under FRS 102 for a small company” (day 3, page 174). He said it was not material in his view without elaboration or any attempt to justify or explain this answer.

451.I note that at the conclusion of his evidence the First Respondent was asked by me whether there was any evidence of the arrangement with Atercin and his response was that “The evidence would be in the financial statements or in the accounts” (day 4, page 94). However, his earlier evidence was that there was no obligation of disclosure of the transactions with Atercin.

452.There is an apparent inconsistency here. Further, his view of disclosure is difficult to marry with his view that the Lease did not need to be disclosed because of the state of knowledge of the Landlord: no such justification for not disclosing the transactions with Atercin was attempted.

453.In my view, these inter-company transactions were clearly critical to the ability of Downtul to discharge its liability under the Lease. I simply fail to see how this is not material to a user or reader of the accounts. The evidence of the First Respondent was sparse and unconvincing on this topic.

454.Fourth, I think a responsible view of the Company’s financial position would lead to the

conclusion that the issues that arose with the Landlord (rent suspension, legal proceedings)

are matters that would be material for a user of the financial statements. I accept the evidence and perspective of the Liquidator that these items collectively are material and significant for this Company.

455.The explanation given by the First Respondent for the non-disclosure of the legal proceedings was that the Landlord was aware of those matters. This is difficult to marry with the evidence of the First Respondent that the relevant users could include the Revenue Commissioners and the rates department. It is not explained how those entities could be taken to be aware of the legal proceedings. For the same reason stated above, I do not accept that this was a responsible position for the directors to adopt in the context of the Company’s affairs at that point in time.

456.Fifth, with regard to the books of account, I can understand the Liquidator’s concern that there was a lack of responsibility with regard to how they were maintained. I do not however fully accept the scale of the obligations asserted by the Liquidator and do not believe there is any one form or format of records that must be kept in all cases to demonstrate responsibility. The insistence by the Liquidator on a “ledger” may be best practice, but I am not convinced (and do not need to decide) that its absence in this case is evidence of a lack of responsibility.

457.Rather, I am assessing the accounting records that were in fact kept here. According to the First Respondent himself, these consisted of the financial statements, the Lease and the invoices.

458.Taking the financial statements first, the Respondents contend the “financial statements serve as the nominal ledger” and repeat that “the financial statements serve as a ledger as is normal for group companies of this size” (letter from Amoss Solicitors 21 April 2023).

459.I have no difficulty in rejecting the contention that the financial statements fulfil the requirements of section 282. The circularity is clear: one of the purposes of accounting records is to enable directors to ensure that the financial statements comply with the Act of 2014. The financial statements themselves cannot do this. I also find it hard to see how financial statements can satisfy the requirements of section 282, as they are not prepared “in a timely manner” such as to enable “at any time, the assets, liabilities, financial position and profit or loss of the company to be determined”: section 282(1)(b) and 282(2)).

460.I note that the expert witness retained by the Respondents disputes that this was the position of the Respondents and has a different view (second affidavit of Mr Wallace ¶7).

461.With regard to the invoices, with the exception of rent, these were apparently paid by Atercin and recorded in Atercin’s financial statements. The fact that the invoices are nonetheless relied on by the Respondents to demonstrate Downtul’s compliance with its obligation to maintain adequate accounting records is difficult to understand. I have a real doubt about the utility of those accounting records in understanding the figures in Downtul’s financial statements or that Company’s compliance with section 282 (given the evidence of the First Respondent himself).

462.I simply do not see how invoices for rates, service charges or insurance are asserted to be relevant accounting records which can assist in understanding Downtul’s financial position or enabling an audit of that Company’s accounts for the purpose of section 282, if they are all invoices which should be directed to, and were paid and accounted for by, Atercin.

463.As regards the Lease, while it does disclose a transaction to which the Company is party (for the purpose of section 282(1)(a)), it demonstrably cannot satisfy any of the other requirements of section 282. The Lease does not, for example, “enable, at any time, the assets, liabilities, financial position and profit or loss of the company to be determined with reasonable accuracy” (section 282(1)(b)) or fulfil the other functions required of accounting records.

464.I simply do not see how this document executed in 2013 and which the First Respondent said in his evidence “is typically put in the legal files, put in a drawer. So it's not opened until there is a dispute” (day 4, page 12) can satisfy the requirement to keep proper books of account.

465.In the particular circumstances of this Company, and the specific evidence that I heard, the books that were kept were not sufficient to demonstrate a responsible approach by the Respondents to the maintenance of accounting records such as to enable compliance with section 282 of the Act of 2014. I do not believe that the fact that it is a small company or a company with limited activity provides an excuse or justification for not maintaining even a minimum record of the Company’s transactions (quite apart from the more fundamental issues with the Company’s interaction with Atercin).

466.There is one specific exchange during the cross-examination of the First Respondent that firmly illustrates both the insufficiency of the accounting records and a deficiency in the First Respondent’s knowledge of the Company’s financial affairs (despite being a chartered accountant with ample notice that he bore the burden to satisfy me of his responsibility in the conduct of the Company’s affairs).

467.During his cross-examination, the unabridged financial statements for the year ended 29 December 2019 were put to the First Respondent and the following exchange occurred:

“Q…Do you see there is a figure on the right-hand side of the page under the heading:

"Year ended 29 December 2019. Turnover: €163,836." ?

A. Yes.

Q. Okay. Can you explain to the Court precisely how that figure is arrived at?

A. The 163,836?

Q. Yes.

A. Right now, no. It would be arrived at from the books and records of the company at the time, as prepared by the administration team and the accountants.

Q. Well now, Mr. Butler, your case is that the books and records comprise of various invoices and financial statements and the lease?

A. Mm hmm.

Q. So how is one to ascertain how that number is arrived at? Because the liquidator has given evidence that having looked at the books and records and the information that he has been provided with, he can't figure out that number. So he has done that, he has carried out that exercise, he doesn't know what that number relates to. You're the Director that filed this financial statement and is saying that he behaved responsibly and carefully in doing so. I just want to give you an opportunity, Mr.

Butler, to tell us how that number is arrived at?

A. The accountants would have prepared a set of accounts at the time from the books and records of the company.

Q. So the answer is you can't explain it?

A. I can't explain it now what that number is made up of.

Q. Well, you are giving evidence to the High Court in relation to it. Presumably, you acquainted yourself with the papers before you came here to give evidence?

A. Obviously, Downtul incurred other costs other than the 140,000.

Q. Sure. What were they?

A. I can't tell you that now.

Q. Right.

A. I don't have the information.

Q. Did you know at the time?

A. I would imagine so.

Q. How do you know that?

A. I would imagine so because I signed them.

Q. Well, your imagining is one thing, but how do you know?

A. Because I wouldn't have signed them had we not been comfortable that they were accurate and they were produced by the accounting team, so I would have had confidence that they were correctly prepared.” (day 4, page 89)

468.The First Respondent therefore accepted that he could not explain the turnover figure in the unabridged financial statements of the Company for 2019.

469.Given the limited nature of the Company’s business and very limited number of books and documents produced by it, it should not have been unduly onerous for the First Respondent to have readily understood the Company’s turnover figure for the last full accounting year before the Covid pandemic (if proper books of account were kept).

470.As addressed later in this judgment, cross-examination in a section 819 application is very much the exception, and should not be treated as a live interview which must be passed.

However, questions about how turnover figures in the financial statements were arrived at had previously been asked by the Liquidator in correspondence. The onus is on the First Respondent, a chartered accountant with considerable experience, to satisfy me that he did act honestly and responsibly in the conduct of the Company’s affairs. If there was relevant information he could have furnished to explain the figures in the accounts, he had the full opportunity to do so. The fact that he could not assist the Liquidator or the Court in understanding the turnover figures and their mismatch with the accounting records is relevant to this Application.

471.This leaves the Court with a situation in which neither the First Respondent nor the Liquidator could figure out for the purpose of this hearing where the turnover figure in the financial statements came from. While I do not believe a ledger is universally required, I am of the view that the inability to understand the figures in the 2019 unabridged financial statements is strongly indicative of a failure to maintain sufficient supporting accounting records to enable the financial statements to be understood, as required by section 282 of the Act of 2014.

472.The explanation given in the letter from Amoss Solicitors of 3 March 2023 (on which much emphasis was placed during the hearing) was that the accounting records furnished to the Liquidator were sufficient because “the Company’s expenses were limited to the rent of the premises”; “rent was the only expense incurred by the Company”; and “the Company’s turnover was limited to the fee it received from Atercin.” This does not appear to have been the case, at least in 2019. These answers are not the same as the answer given by the First Respondend under cross-examination (“Downtul incurred other costs other than the 140,000”). This does indicate a failure by the Respondents to demonstrate a responsible approach to the maintenance of accounting records. Even if the primary concerns identified in this judgment were not present, the deficiency in the accounting records separately indicate a want of responsibility by the Respondents.

473.There are other complaints and criticisms raised by the Liquidator which I am not persuaded are indicative of a want of responsibility and I do not therefore consider further.

474.A complaint is made about the absence of management accounts. The need for management accounts must be assessed on a case-by-case basis. It is not an absolute statutory requirement. Here, given the limited nature of the Company’s activities, I am not satisfied that the absence of management accounts indicates a want of responsibility. This can be contrasted with Re Fergus Haynes Limited [2013] IEHC 53, for example, where the company was carrying on a heavily indebted construction and development business and the absence of management accounts was held to be highly irresponsible, as it left the directors with no ability to make informed decisions. These types of considerations do not arise here.

475.There are specific criticisms made by the Liquidator of the discrepancy between the accumulated invoice figures from the documentation gathered (€1,225.897.55) and the disclosure in the financial statements of cumulative administrative expenses of €593,225 from July 2015 to 27 December 2020.

476.The First Respondent explained this by saying that the difference between these figures arises because the costs related to the occupation of the Property (rates, insurance and service charge) were costs paid directly by Atercin as the operating entity. The Liquidator’s point is that all of these expenses are ones which the Liquidator would expect Downtul to be liable for and to appear in Downtul’s financial statements.

477. That expectation is based on a rejection of the overall strategy adopted: the strategy of leaving Atercin in control of the Property, discharging expenses associated with the Lease, without any transparency, clarity or documentation as regards the terms of that occupation or the liability for costs associated with it. If this overarching strategy and structure was not problematic (contrary to my view and findings), I do not see how the accounting approach that flows from it would independently indicate irresponsibility. It is part of the implementation of that Group policy. In short, I do not see that the criticism of the accounting issue survives independently of the overarching structural problem that it reflects.

478.A further point emphasised by the Liquidator to which I do not attach weight concerns mistakes in the 2020 financial statements. These record no liabilities, despite rates then being outstanding and so remaining until October 2021. I regard this to be in the category of possible errors which is regrettable but which I have not been given reason to believe evidences irresponsibility.

479.I take the same view of the points made about the description of the Company in the 2018, 2019 and 2020 financial statements as providing “retail and property letting services”. I do not regard this description as relevant to the decision I have to make on this Application.

480. Any other points that arose regarding the financial statements and accounting records and the disclosures made are not addressed, as they are not matters that are indicative of a want to responsibility by the Respondents and are not therefore relevant to this Application.

481.I have made the foregoing findings regarding the books of account and financial statements without recourse to the expert evidence tendered in this case. I am satisfied that this is the correct approach to adopt.

482.However, lest I am incorrect in my decision not to attach weight to the expert evidence tendered, I will now consider these issues in light of the evidence of Mr Hughes alone (on the basis of my decision to exclude the evidence of Mr Wallace). Then, the final alternative approach will be to consider the evidence of both experts and its impact (if any) on my findings.

Assessment of the Expert Evidence

483.Taking the evidence of Mr Hughes on the books of accounts, first, he was heavily critical of the absence of books and records and gave unequivocal evidence that there was a failure to maintain books required by the Act of 2014. His position was that there need to be books showing the flow of monies by means of invoices and receipts and that this is necessary to enable a company to deal with a revenue audit and to see what is behind a company’s financial statements.

484.His view from analysing the books of the Company was that it was immediately obvious that it could not get through a tax audit based on the financial statements being the prime books of account. He pointed to the absence of any disclosure or information in the financial statements of the inter-company transactions related to rent and service charges and he noted there were not even financial statements for 2021/2022 to constitute prime books (even if that were permissible). He also noted that, given the financial statements for 2020 were not prepared until November 2021, they could not comply with the requirement in section 282 of the Act of 2014 to keep accounting records on a continuous and timely basis.

485.He pointed out that, without back-up for the figures in the financial statements, the Liquidator could not identify where the turnover figures came from. Mr Hughes gave very clear evidence that the fact the Company did not have many transactions to record did not create any form of exemption from the obligation to keep prime books of account.

486.The evidence of Mr Hughes was entirely consistent with, and supportive of, that of the Liquidator and would tend to further support the findings already made on this topic. His treatment of the inadequacy of the financial statements as books of account was particularly compelling.

487.If the evidence of Mr Wallace was deemed to be admissible on this topic, it is notable that he had diametrically different views to those of the Liquidator and Mr Hughes. His position was that, for this Company, the Lease and invoices are the appropriate and sufficient books.

He appeared to differ from the view of the First Respondent that the financial statements were part of the books of account. He opined under cross-examination that it was unlikely there would be an audit, but expressed his satisfaction – without elaboration or explanation

– that the Revenue would look for the “underlying records” and that those records would be sufficient. He does not explain what records are available that would suffice for this purpose.

He also states that the records would be sufficient for his purpose as a liquidator, again without any elaboration or explanation.

488.I found the approach of Mr Wallace on the topic of the books of account to be excessively lenient and to impose a burden so light on the Company as to be virtually non-existent. He refers to “underlying records” and states that the books of account must enable the directors to determine the financial position of the company at any one moment in time (day 4, page 112). There is however little specificity as to what records he says were kept here that would fulfil that requirement. It is apparent from the evidence of the Liquidator and of the First Respondent that this function was not fulfilled by the records kept by the Company (at least with regard to the 2019 financial statements). I do not go so far as to find that a specific “ledger” is necessary in all cases - or even in this case – but the evidence of Mr Wallace does not persuade me that the records here were sufficient.

489.Even if the evidence of Mr Wallace was admissible, I would prefer the evidence of Mr Hughes and that of the Liquidator in relation to the sufficiency of the books and records in the particular circumstances of this case.

490.Accordingly, if I had regard to the evidence of both experts or to the evidence of Mr Hughes alone, neither would alter my findings in respect of the approach taken to the accounting records.

491.The final topic here concerns materiality and obligations of disclosure.

492.There was much debate about the difference between FRS 102 (1A) and 102. I have already found that the correct approach is to assess materiality within the meaning of FRS 102(1A), rather than the application of a blanket disclosure obligation.

493.The evidence of Mr Hughes was that “users” can include other potential stakeholders and persons. This is consistent with the evidence of the Liquidator himself. Mr Hughes’ view, which I do find to be rationale and consistent with the objectives of any disclosure regime, is that the Company’s obligations all relate to the Lease and that it is impossible to understand the proposition that the Lease is not a material matter and that it does not need to be disclosed in the financial statements. He underlined that the very purpose of the Company is to hold the Lease and discharge the obligations thereunder.

494.I share that view and believe that the Lease – being the sole asset of the Company – was material and should have been disclosed. I have seen no persuasive evidence to the contrary.

The same finding applies to the litigation with the Landlord and the inter-company transactions with Atercin.

495.Turning then to the evidence of Mr Wallace on this point. He described the question of materiality as a very subjective one, which certainly seems accurate in the context of this Application. Mr Hughes and Mr Wallace have directly contradictory views on such questions as disclosure of the Lease, the inter-company transactions with Atercin and the legal proceedings. These do largely hinge on the question of the “user” of the accounts.

496. In his oral evidence on this point, Mr Wallace refers to the Landlord as being the “prime user” and states of the financial statements “its only user was the landlord” (day 4, page 154)

and “there is nobody else of relevance” (day 4, page 107). However, in his second affidavit his view seemed somewhat different. There, he referred to “any external user of the

Company’s financial statements, to include the landlord and any other stakeholders of the Company” (para. 13).

497.Further, there is nothing in the written or oral evidence of Mr Wallace that would indicate a justification for the narrow view of “prime users” he adopts (and I note that this is a label that is not to be found in the FRS, as pointed out by the Liquidator). I do not find his evidence on this point to be persuasive.

498.Mr Wallace’s narrow view that the relevant “user” is only the Landlord was the premise for his opinions on the topic of “materiality” and, in particular, for his view that neither the Lease nor the legal proceedings needed to be disclosed under FRS 102(1A).

499.Given my rejection (for the purposes of this Application) of Mr Wallace’s interpretation of the relevant “users”, it follows that I am not persuaded by Mr Wallace’s resultingly narrow view of those questions of materiality.

500.The question of disclosure of the transactions with Atercin is separate, as the knowledge of the Landlord (if that is the only “user”) does not provide a justification for not disclosing those transactions. Mr Wallace’s oral evidence on this point was as follows:

“do you agree with Mr. Butler's interpretation that there isn't any obligation to disclose transactions of group companies and, if so, should it have been stated in the notes to the statements?

A. I agree there's no requirement to disclose related party transactions because it's actually intercompany transactions that were occurring between Downtul and Atercin and other companies…. It probably would have been more ideal if the company had a list of those intercompany transactions, but there's no need to disclose them in the accounts.

Q. MS. JUSTICE CAHILL: And it shouldn't disclose then amounts that are due or owing or have been paid from related companies, you don't think that's an obligation in the financial statements?

A. It would normally but in this case my understanding is Atercin never wanted to be repaid the money so, therefore, that wouldn't arise in the context of Downtul.”

501.This view is more equivocal than the view of the First Respondent and the premise of the answer - that Atercin never wanted to be repaid – is unconvincing as an excuse for nondisclosure. I also see no basis for that assumption in the documents before me. It is not something that was said by the First Respondent. More fundamentally, I do not see how the question of repayment would make the transactions less material for a reader (even if the Landlord was the only user).

502.Mr Wallace in his second affidavit gave a slightly different answer, opining that “the Respondents correctly determined that the Company had no related party transactions to disclose in that they were immaterial in the context of group activities” (para. 26). In his oral evidence, he then said that the relevant transactions with Atercin were intercompany not related party transactions. The same distinction was drawn by the First Respondent himself.

503.Mr Wallace’s evidence on the non-disclosure of the transactions with Atercin is lacking in clarity and seems to be based on different suppositions and characterisations, the basis of which is not stated. It is part of the obligation of an expert to explain the material and facts on which the opinion is based, but this has simply not been done on this point. If the relevant user is only the Landlord (as he opines), these transactions seem to be plainly material, but Mr Wallace does not give any plausible explanation as to how it could be responsible not to disclose them.

504.Given Mr Wallace’s acceptance that these transactions would “normally” be listed and disclosed, and given the clear magnitude of the transactions with Atercin for this Company, this is one area in which an objective expert may have been expected to make a concession and not defend the position of the person retaining him. Mr Wallace showed no willingness to do this.

505.In summary, even if I had regard to the evidence of both expert witnesses on the question of disclosure in the financial statements, this would not have changed my views on the inadequacy of the disclosures and the significance of same. I remain of the view that they are matters that go to the irresponsibility of the Respondents in the very particular circumstances of this case.

(c) Corporate governance

506.One of the grounds relied upon in this Application concerns the governance of the Company.

The Liquidator points out that the last recorded meeting of the board of directors of the Company was on 31 December 2017, when the sale of the shares in the Company from Atercin to Desert was approved. There are no records of meetings of the board since that date.

507.There are, as the Liquidator points out, no minutes of a meeting approving the decision to enter into the Lease. There is no record of a meeting at which the important question of allowing Atercin to occupy the Property or the terms on which that was to be done was discussed. There is in fact no record or minute of a meeting of the board of either Atercin or Downtul recording that key decision (according to the evidence of the First Respondent).

508.Similarly, when the decision was made to suspend the payment of rent, there is no document recording that decision or demonstrating that there was any discussion about it or the basis on which it was made.

509.The same point is made about the decision to issue the Circuit Court Proceedings.

510.The answer of the First Respondent was that,

“There is two Directors in the company, myself and Colum, Colum is my brother. We have offices next door to each other and we can shout at each other. So typically we have meetings discussing the company's business including Downtul's business and, at any point in time, we would have dozens of meetings obviously every day, we are permanently in each other's company… We have board meetings all of the time. There is no requirement at all for us to write a board minute to each other about the group

of which we are the directors of. But there's no requirement to do written board meetings.” (day 3, pages 163-163).

511. He further explains,

“the group employs OBH to advise us and so Downtul again has the advantage of OBH, our solicitors, and company secretarial experts. We engage with them to actually maintain all of the statutory books that are required, so be it the register of members, the register of Directors, etc… OBH would guide us which is in relation to other statutory meetings that are required. So in relation to statutory meetings of where the Board of Directors need to meet to pass various resolutions… They have to be minuted, there is a requirement to do that.” (day 4, page 7).

512. His position was unambiguous: “Colum and I, again we're in offices next door so we literally have a board meeting, you could argue that we're nearly in a permanent board meeting.”

513. In short, the Respondents’ position was that there was no need to document any board meetings and that, despite there being no minutes of a board meeting from 31 December 2017, no minutes were missing and there was no failing with regard to corporate governance.

The position advanced was an unequivocal and unapologetic one.

514. It is relevant in this connection to record that, when asked about the number of directorships held, the First Respondent was not able to say precisely how many companies he is director of but agreed that the evidence suggested it was 134 Irish companies. He was not certain how many of those companies were in the Group. He estimated as “a rough guide” that “comfortably a hundred” of the companies related to the operation of Starbucks. He then estimated there was a further thirty-five companies registered in the UK and six in the Isle of Man of which he was director (day 4, pages 16-17).

515.In legal submissions, it was contended on behalf of the Respondents that the day-to-day commercial reality is that many small companies such as this one do not hold any formal board meetings other than those which are specifically statutorily required (closing written submissions para. 109).

516.They rely on the judgment of Barrett J. in Re Tailored Homes (Navan) Limited [2017] IEHC

76 to support the proposition that courts accept such commercial realities.

Assessment

517.The First and Second Respondents chose to become directors of more than 170 and more than

200 companies respectively.

518.Being a director of so many companies brings with it onerous and important responsibilities.

This includes an obligation to ensure that, when a decision is being taken that affects a company, the interests of each individual company are considered and taken into account.

Directors must weigh the impact of a significant decision for that company as a separate legal entity and decide whether it is in the interests of that company to proceed in the manner proposed.

519.Given the vast number of companies of which the Respondents were directors, there was a particular onus on them to ensure there was a separate assessment of the independent interests of each company in the Group when key decisions or measures were being considered.

520.If anything, the sheer number of their directorships created a heightened onus to identify, and separately document and formalise, the decisions as between the many companies whose affairs they directed. This was necessary to ensure and demonstrate that their minds were applied to the conduct of the affairs of the distinct legal entities.

521.This is not to say that group policies or the interests of other companies in a group cannot be taken into account when acting as a director of a specific entity. It is plainly the case that there can be intersections and overlaps between the interests of a company and the broader interest of a group or of related companies and that the latter can be taken into account in managing the affairs of the former (Re 360 Atlantic (Ireland) Limited [2004] 4 IR 266 was already discussed on this topic). However, there must be consideration of whether and how this affects each company and a weighing of that company’s independent interests.

522.I am not suggesting this is a light task when the Respondents are responsible for some 150-

200 companies but it was the Respondents who made the decision to incorporate and direct the affairs of such a significant number of companies. The fact they have so burdened themselves cannot absolve them of the obligation to separately discharge the duties incumbent on them in each of those roles. The only question for me is whether they acted responsibly with regard to the affairs of Downtul.

523.In the absence of any record of a meeting or decision with regard to Downtul from 2017 onwards, I simply cannot be, and am not, satisfied in that respect.

524.The First Respondent’s description of how the Respondents conducted the business of the multiple companies of which they are directors fell wholly short of showing the requisite standard of responsibility was met with regard to Downtul. It seems that they relied on the fact they were brothers who saw and spoke to each other all the time, as substitutes for board meetings. They saw no need to document any decisions taken in relation to the Company and have no concern about the absence of any evidence of making, or considering the impact of, significant decisions for Downtul.

525.Their position is that, unless the meetings were specifically required for a regulatory purpose, or mandated by the Companies Act 2014, they did not need to happen. They deferred to the employees of the group who took care of filings and regulatory matters and did not document any decisions with regard to Downtul from December 2017 onwards.

526.This is so despite the limited nature of Downtul’s business and the key decisions that were taken with regard to the engagement with Atercin throughout the Company’s existence and the decisions that must have been taken during and since the Covid pandemic. There is simply no resolution or record of any of those matters.

527.I do not accept that this was an acceptable or responsible way to conduct the business of Downtul. On the contrary, it demonstrates a failure of governance.

528.In reaching this decision, I considered the judgment cited on behalf of the Respondents - Re Tailored Homes (Navan) Limited [2017] IEHC 76. The first point is that the judgment of Barrett J. in that case does not address the topic of board meetings. It simply is not part of that case. Declarations of restriction were made on the basis of failures to file tax returns and annual returns and a failure to discharge taxation liabilities. However, the Court rejected a complaint concerning a lack of documentation.

529.In that respect, Barrett J. states there is “no general legal requirement that companies must take care to document every significant commercial transaction, albeit that as a practical matter it would seem generally sensible and in their own best interests that they should” (para.

30). The commercial logic of the transactions at issue in that case was accepted by the Court and it was found that there was a commercial rationale for the two related companies in question to have structured their dealings as they did. The Court noted that “Matters could have been better documented, perhaps they should have been better documented, but in the context of the within application nothing seems to flow from the fact that they were not documented…”

530.This case is quite different. There is a significant question here about the arrangements entered with Atercin. Given the facts as they unfolded, the commercial rationale or logic of the alleged arrangements with Atercin from Downtul’s perspective is wholly unclear to me. There is simply no documentation to disclose benefits the arrangement was intended to yield for Downtul.

531.I consider this case to be more akin to Re O’Callaghan Trade Frames Limited [2022] IEHC

590 where a declaration of restriction was made on several grounds, including the lack of minutes of board meetings:

“Most serious under the heading is the absence of evidence of meetings of the directors or other documents concerning corporate governance. The respondents proffer no evidence to controvert the statements made by the applicant regarding the absence of such records apart from general statements that they believe they acted responsibly in relation to the affairs of the company.” (para. 150)

532. A case cited by the Liquidator, Fergus Haynes Development Limited [2013] IEHC 53 is another example of a case in which the absence of board minutes was weighed as a factor in granting a declaration of restriction. The failure in that case was for the period from 31 December, 2006, to the commencement of the winding up of the company on 17 September, 2008 (para. 18). That was a significantly shorter period than the five-year period in this case during which there are no minutes of a board meeting.

533.The absence of any record of a board meeting since 2017 makes it extremely challenging for the respondents to show responsible conduct of this Company’s affairs. A similar situation was considered in Re 360 Atlantic (Ireland) Limited [2004] 4 IR 266 and led to the finding that, “there is no evidence that the first respondent either collectively with his fellow directors or individually at any stage prior to July, 2001 addressed in a substantive way or determined whether significant transactions to be entered into by the company were in the interests of the company.” The same finding is squarely applicable here.

534.On the topic of delegation (given the Respondents’ reliance on the Group management team and finance function), the decision of Finlay Geoghegan J.in Re SPH Limited [2005] IEHC

152 is important. There, it is emphasised that delegation cannot relieve directors of their duty to be informed about the financial condition of the company or their duty to supervise and control the Company’s affairs. I do not see in this case how the existence of a strong management and finance function in the Group can or does absolve the directors of their duty with regard to the conduct of the affairs of the Company. No amount of delegation can overcome the failure to conduct a single documented board meeting since 2017.

(d) Relationship with the Landlord

535.A sizeable proportion of the hearing – and the affidavits delivered in advance of the hearing – were focussed on the relationship between the Company and the Landlord. This is not entirely surprising given that the only asset of the Company was the Lease and its only business was holding that Lease.

536.However, what emerged firmly from the evidence and documentation was that there is considerable acrimony between the Respondents and the Landlord since the onset of the Covid pandemic. The dispute between them has dominated this Application.

537.The most vivid illustration of this is the large proportion of time that was taken up with attempting to prove a breach of the terms of the Lease by the Company and that there was deliberate concealment by the Respondents of the occupation of the Property by Atercin. I am also struck that the book of “inter partes correspondence” furnished for the hearing consisted primarily of correspondence between the Landlord and the Company. The Landlord is avowedly not a party to this Application.

538.I have already addressed the proper scope and purpose of this Application. I reiterate here that I am not deciding a dispute between the Landlord and the Company (or the Landlord and the Respondents) and do not propose to get drawn into that exercise. I am particularly cautious in this respect given that this Application is likely not to be the final battle – and should not even be a part of that war.

539.However, as I have heard oral evidence in relation to the Landlord-tenant relationship, I would make the following points about that aspect of the Application:

540.First, the evidence given on behalf of the Landlord (which was prominent in this Application)

is of limited assistance to the decision that must be made under section 819. While I have no doubt regarding the honesty of the evidence given, it is necessarily subjective evidence, based on the partisan perspective of the Landlord and unavoidably viewed through the prism of protecting the Landlord’s interests.

541.In addition, the state of knowledge of the Landlord or the views or grievances of the Landlord cannot be applied with hindsight to colour or interpret the acts or omissions of the Respondents to decide whether they were responsible vis-à-vis the affairs of Downtul.

542.For example, questions that were put to the First Respondent in cross-examination about an internal memo prepared by the Landlord and the state of mind or priorities of the Landlord in entering the Lease do not appear to me to go to the responsibility of the Respondents.

543.I consider the evidence given on behalf of the Landlord to be of limited relevance or assistance in this Application.

544.Second, no notice for the purpose of clause 29(10) was found by the Respondents, the Liquidator or the Landlord. I proceed on the assumption that no such notice was delivered, which was the basis on which most of the evidence proceeded (it was a point on which the First Respondent could cast no light). The only available evidence regarding how the Company apparently failed to deliver a notice under clause 29(10) of the Lease was the evidence of the First Respondent and he explained it as a “minor breach” (day 3, page 167)

and something that was “not particularly material in my world” (day 4, page 13). I was not persuaded by the First Respondent’s evidence during which he attempted to emphasise the reference to “proposed occupation” in order to avoid the obligation to give notice.

Nonetheless, I do not believe there is a basis to find the apparent failure to deliver a notice as evidence of irresponsibility (whatever about its possible relevance to the Landlord as a contractual matter).

545.Third, whether the Respondents were legally and factually correct in invoking the rent suspension clause of the Lease is not a straightforward question. It is heavily fact-specific and would require detailed evidence of different parties and scrutiny of insurance policies, among other matters that would undoubtedly be in dispute. It is not a question of interpretation that can or should be decided in this Application. Indeed, the possibility that a court could form one view or another of the availability of that clause is not something that I consider remotely appropriate for me to interrogate.

546.Even if the Landlord has good grounds to contend that the rent suspension clause did not properly apply, and even if the Respondents may have been proven wrong if the different legal proceedings were fought to conclusion, I am not persuaded that would necessarily render it irresponsible in terms of the conduct of the affairs of Downtul for the Respondents to attempt to suspend the Company’s rental obligations.

547.I am also acutely conscious of the need to avoid applying a distant hindsight when interpreting the decisions taken by a Company that held a lease for a coffee shop, particularly during the Covid pandemic. Whether the Respondents were correct in their interpretation of the rent suspension clause is simply not something that needs to be, or should be, determined in this Application.

548.I note the criticism that legal advice was not obtained on this point, but I am persuaded by the evidence of the First Respondent that the Respondents had sufficient familiarity with, and experience of, the operation of the commercial rental market in Ireland to make informed decisions in the interests of the Company as to how to proceed.

549.Fourth, there was considerable criticism and heat on both sides about the events surrounding the execution of the deeds of renunciation and variation, and the hand-written amendment of certain of those documents by the Landlord post-execution. These are all matters that may be relevant to a landlord-tenant dispute, but I do not see how they feed into a decision under section 819. There were clearly rights and wrongs, mistakes and misinterpretations on both sides, but there is no basis I can see in these facts to doubt the responsibility of the Respondents (and certainly no basis to attach all culpability to them).

550.One observation I would make on this subject is that the Liquidator did enter the fray of the landlord-tenant dispute (and tended to adopt the position of the Landlord) to a greater extent than was necessary or perhaps appropriate. This can be seen in his treatment of the deed of renunciation. In his grounding affidavit, the Liquidator referred to the deed dated 18 November 2016, exhibiting “a true copy” of that deed. He states that the deed recorded the renunciation by the Company of a new tenancy. He makes no reference to the peculiar circumstances in which the document in question was unilaterally altered by the Landlord after its execution (to correct an apparently erroneous refence to the incorrect entity).

551.In the written submissions delivered on behalf of the Liquidator, it is said that the Respondents “sought (opportunistically) to capitalise on a typographical error on the face of” the 18 November deed (para. 13).

552.The simple fact is that there is an issue with this document: an amendment was made to the document years after it was executed. The witness for the Landlord (Ms Hayes) accepted and agreed in her direct oral evidence that “simply scribbling out the words and writing in in manuscript the name of the correct entity is perhaps not the ideal way of doing it” (day 3, page 66). Yet the Liquidator presented the deed in his grounding affidavit without reference to this obvious issue.

553.Fifth, complaint is made about the issue of the Circuit Court Proceedings and, specifically, it is asserted that those proceedings were issued without written legal advice, and this is evidence of irresponsibility. I am not aware of previous restriction applications where a need for written legal advice was relied upon as evidence of irresponsibility and it seems a stretch to insist on same, given the proceedings were clearly prepared by a legal team. Some of the restriction cases have addressed the question of the need for legal advice when a company is facing insolvency, but that is quite a distinct question.

554.In any event, the evidence of the First Respondent on this issue was clear: he said under crossexamination that legal advice was obtained before the issue of the Proceedings and, while there is an open question about the advice that was given when the deed of renunciation was actually executed in 2016, the Civil Bill was drafted by counsel on the instructions of Amoss Solicitors and there is no basis to assert that no legal advice was obtained prior to the issue of those proceedings. I certainly do not believe that a requirement of prior written legal advice is a condition of responsibility. In short, I do not see grounds to disbelieve the evidence of the First Respondent on this point and I do not do so.

555.Sixth, when it was put to the Liquidator in cross-examination that the Respondents set up the Company solely to hold the lease and not to trade as a coffee shop, he answered, “if I go back to the correspondence going back to when the lease was taken out, it was kind of represented to the landlord that it would be traded as a Starbucks coffee shop and it wouldn't be unusual for an entity to hold a lease and to carry on the trade.” (day 3, page 29).

556.The Liquidator is taking a position on correspondence exchanged in 2013 of which he had no contemporaneous or direct knowledge and I have seen no evidence of an representation in correspondence that Downtul would be entity trading as the coffee shop and no such evidence was given by anyone with the appropriate means of knowledge at trial.

567.What Ms Hayes said was “… we understood that we were getting a New Co, we understood that it had only been recently established and, accordingly, the Fund Manager at the time secured a €40,000 deposit.” (day 3, page 51) and “we knew that it was a New Co at that time but our clear understanding of it was that it was going to trade” (day 3, page 53).

568.She did not point to any correspondence or document grounding this understanding (other than the lease itself). I am not satisfied that there was evidence of a pre-contractual representation to the Landlord that Downtul would be the operating entity or that there is any aspect of the evidence on this point that is relevant to this Application.

569.Finally, in the course of the hearing, it emerged that the Landlord was funding this Application.

The law governing the funding of liquidations was opened to me and it was demonstrated to my satisfaction that there is no clear impediment or restriction on an application of this nature being so funded. There are practical reasons why funding of the costs incurred by liquidators is contemplated and permitted by section 617 of the Act of 2014. However, given the findings in this section of the judgment, I would caution that a liquidator should be particularly vigilant when an application of this nature is being funded by a creditor not to allow that creditor’s specific perspectives and interests to become a feature of the application. It is a unique type of procedure in which the Respondents bear the burden under section 819(2) and this burden should not be heightened by having to deal with the unnecessary presentation of inter partes grievances, as well as any grounds that are properly advanced under section 819. There will of course be cases in which the interaction with creditors will be a pivotal part of the evidence of irresponsibility (and indeed frequently that will be so), but private contractual disputes concerning questions such as the giving of notices and execution of documents, should not be aired unnecessarily in an application under section 819.

(e) Allegation of Dishonesty

570.When the Liquidator was asked in cross-examination about his view on the allegation of deception and dishonesty, there was the following exchange:

“Q… having put together the notice, the invoice and the accounts, you have effectively decided it is a conspiracy on behalf of my clients over many years?

A. I am not satisfied that there was an honesty in terms of the full disclosure of the reality and substance of what was happening and I have an issue with that” (day 2, page 99).

571.This threshold apparently imposed by the Liquidator is an exacting one: his complaint was that there was not “full disclosure of the reality and substance of what was happening”. This echoes what Ms Hayes on behalf of the Landlord said in her evidence: she cited the Code of Conduct between Landlords and Tenants for Commercial Rent (a code issued by the Department of Enterprise, Trade and Employment setting out “good practices” in dealing with the pandemic), describing this voluntary code as a “framework” for engagement with tenants (day 3, pages 73-74).

572.I regard the approach of both the Liquidator and Ms Hayes on this point to be wrong-headed in the context of this Application. Section 819 is not concerned with best practice. The question is whether the directors fell short of accepted minimum standards of responsibility.

This flawed approach is regrettably persistent in the Liquidator’s approach to the question of how the Respondents engaged with the Landlord.

573.When questioned as to the basis of his serious allegation that the Respondents misled the Landlord, the Liquidator accepted that the two items he relied on were the sub-letting notice not being sent under the Lease and incorrectly labelled invoices referring in the address block to “Downtul trading as Starbucks” (day 2, page 102).

574.Having weighed the evidence, I reject the allegation of dishonesty based on the engagement with the Landlord on the following grounds:

575.First, there was no evidence before me of an attempt or efforts by the Respondents to conceal the fact that Atercin was trading from the Property or make any express representation in advance that Downtul would be the trading entity. I accept the evidence of the First Respondent in this respect.

576.Second, the publicly available financial statements were agreed by all witnesses to disclose the fact that Downtul was a non-trading entity. The Liquidator accepted that the accounts showed that the Company did not trade as a coffee shop and had no profit or loss. He said: “there was no assets on the face of the balance sheet, it looked like nothing was happening” (day 3, page 20). He nonetheless maintained that there was deception by the Respondents in not telling the Landlord that the Company was not trading:

“A. To my mind, directors acting honestly and responsibly should have disclosed and shouldn't have had any reason not to disclose it and to be transparent in terms of what was actually happening.” (day 2, page 100)

577.The evidence of Ms Hayes was that the Landlord did not look at the financial statements until October 2020. This is not indicative of a want of honesty or disclosure by the Respondents, and rather points to a want of attention (or concern, perhaps) on the part of the Landlord. From his answers under cross-examination, it was apparent the Liquidator did not know what the Landlord had actually sought or reviewed (day 3, page 34): but nonetheless found that the Respondents had engaged in deliberate deception. I do not believe that this conclusion that the Respondents were guilty of deception or dishonesty in concealing that Downtul did not operate the Starbucks franchise directly is well-founded.

578.Third, the Liquidator placed reliance on references in the address line of invoices issued by the Landlord to “Downtul trading as Starbucks” and it was asserted that it was dishonest that this was not corrected. When asked whether the payment of the invoices without correcting the Landlord’s mislabelling of Downtul was deception, the Liquidator stated in evidence that it was:

“Q. But is it a deliberate deception on their part? If it simply comes in to them and they go 'that has to be paid'?

A. In my view it is.

Q. You would stand over that as a deliberate deception?

A. Yes.” (day 2, page 98).

579.This allegation of “deliberate deception” is a very damning conclusion to reach based on a reference in the address heading of invoices prepared by the Landlord. A far more benign interpretation of the facts was available to the Liquidator and I consider it to be strained and unnecessary for him to have gone so far as to regard this as “deliberate deception” by the Respondents.

580.I reject this evidence and accept the position of the First Respondent that he probably did not see these invoices, which would have gone to the accounts department (day 3 page 155) and that if the Landlord had asked, they would have been told about the arrangement with Atercin (day 3, page 159). I have no reason to doubt that evidence. The arrangement whereby Atercin occupied premises leased by other group companies was widespread in the Group and I saw no basis in the evidence before me to believe it was deliberately concealed such as to evidence dishonesty (or even irresponsibility) on the part of the Respondents. The test for “dishonesty”

in restriction applications is an exacting one, and this falls wholly short of that threshold.

581.Fourth, no communication was issued to the Respondents before June 2023 intimating an allegation of dishonesty or contrivance. The Liquidator under cross-examination accepted that the letter sent by Fieldfisher on 23 June 2023 was the first reference to a “contrived structure”.

582.An allegation of dishonesty is one that does not need to be made in a restriction application.

It is a matter of real gravity and import and can cause signification and irremediable reputational harm when it is made.

583. I consider it to be necessary as a matter of fair procedures that a director should be informed in advance of any intention to allege dishonesty and given an opportunity to address such an allegation and the grounds on which it is made, before a report is made to the CEA. There is no statutory requirement in this respect (by contrast with applications for disqualification orders which are governed by section 845(1) of the Act of 2014), and it is not a point on which I base any findings, but I would note that there was a series of correspondence between the Liquidator and the Respondents here before the CEA Report but the Respondents were not expressly told that their honesty was to be impugned. I would consider it to be more consistent with the imperatives of fair procedures for so serious an allegation as one of dishonesty to be disclosed in advance of being made.

584. Fifth, during his evidence, the Liquidator did rely on personal gain by the Respondents:

“I am of the view through their inaction, by not turning to Atercin and seeking to ensure that adequate resources were available, that there was ultimately personal gain” (day 3, page 45).

585.While I find the structure put in place to be plainly irresponsible, I reject the contention that it was a contrivance to enable personal gain to be made. I accept the First Respondent’s evidence that there was a genuinely held belief that a deal would be done. He gave repeated and emphatic evidence to the effect that it was in everyone’s interest to do a deal and said, “we were extremely confident that we would come to some kind of arrangement with the landlord”

(day 3, page 166). He explained, “Deals were being done left, right and centre, I suppose. It was the marketplace, we were all in this together at that stage. Landlords and tenants, I would say comfortably I was speaking to 30 or 40 landlords a week” (day 3, page 165). This is also consistent with the evidence of Ms Hayes herself: “we're in the business of working with tenants and engaging with them. And to the point I have just made, we had 400 tenants, there was only two we didn't come to an agreement with” (day 3, page 93).

586.The facts surrounding the offers that were made by the Respondents to seek to resolve the differences with the Landlord are not largely in dispute. The relevant correspondence was summarised at the beginning of the judgment.

587.On the basis of the facts and evidence presented, I accept the Respondents honestly intended to ensure monies would be made available to fund such a deal. The fact that this was regarded as being within their personal discretion, with Downtul (and its creditors) at their mercy, is the irresponsibility at the root of this matter, but I do not find it to be evidence of dishonesty or of a contrivance to make personal gain.

588.Similarly, while I have found fault with the accounting records and financial statements, I do not see how a finding of dishonesty arises from those failings. I accept the Respondents’ position on these points.

Conclusions on interactions with the Landlord

589.The stance taken by the Liquidator on this topic involved embroiling himself unnecessarily in a bilateral contractual dispute between the Company and the Landlord.

590.It moreover involved accepting several of the Landlord’s complaints and perspectives on contentious points and, most significantly, relying on them to ground the findings of deliberate deception and to advance the very serious case that the Respondents were dishonest. When it comes to questions of deception, fraud, dishonesty, the threshold is a high one and more benign conclusions should be drawn if available on the evidence.

591.I am satisfied that the Respondents have discharged the onus on them with regard to demonstrating their honesty for the purposes of this Application and that much of the evidence and propositions advanced related to the contractual relationship between the Landlord and the Company are not of direct relevance to this Application.

(f) Revenue matters

592.There were two specific grounds advanced by the Liquidator for doubting the honesty and responsibility of the Respondents that related to revenue matters.

593. Before addressing these grounds and my findings on them, two points must be emphasised.

594.First, my fundamental conclusion in this matter is that the structure of allowing Downtul to carry the Lease and the obligations imposed by it, but without any revenue or income (or enforceable or documented right to same), is fundamentally irresponsible. While I assess the failings alleged regarding revenue obligations on their own merits (and on the premise of there being no apparent liability to corporation tax or VAT claims or returns to make), this does not detract from the conclusion that Downtul should not have been in a situation of having no income or payments to record in its financial statements. That is a separate question.

595.Second, and independently of that fundamental conclusion, I have also found that, even if the structure put in place was not irresponsible, the Respondents were irresponsible for failing to properly document, record or disclose the Company’s transactions in the accounting records or in the financial statements. I have also found that there was a failure of corporate governance.

596.In this section, I will address the taxation questions on their own merit, without repeating or re-applying the above findings. This is not any absolution or excusing of those identified failings, but rather a recognition of the need to treat the grounds independently of each other insofar as possible to do so.

597.There is an element of artificiality to this exercise, but, in the very particular circumstances of this case, I consider it to be necessary to segregate out the grounds alleged and not allow multiple findings to be built on each other. This is strictly on the basis that my primary findings are those just summarised.

Corporation Tax

598.There was an admitted failure to file corporation tax returns from 2018 onwards. The Liquidator points to this as a ground for restricting the directors.

599. It is not in dispute that such returns must be filed whether there was profit or loss and whether the return would be nil or not. It is also not contentious that, given the lack of any trade by the Company in the years prior to 2019, the returns would have been nil returns. This is subject to the qualification that the Liquidator disputes that there are records to support this and there is some debate as to whether the returns from 2020 onwards would have been nil returns (given the losses that were apparently incurred by the Company from then, culminating in its insolvency). However, based on the financial statements (which I accept at face value for this purpose), it seems plain there would have been no liability to Revenue. Another relevant fact here is that the Respondents attempted to file the outstanding tax returns with the Revenue Commissioners in September 2023 and delivered the returns to the Liquidator.

600.There was a net dispute as to whether the returns for 2021 were due when the Company went into liquidation: Mr Wallace originally opined they were not, but then corrected this under cross-examination. Nothing arises from this point.

601.The Liquidator’s position on this ground was a stringent one. He was firmly dismissive of the explanation that this was an oversight:

“It is not a satisfactory explanation at all. They are in breach of their obligations under the Tax Acts in terms of the requirement to file in multiple years. So an oversight is not an acceptable or satisfactory response.” (day 2, page 81).

602.When cross-examined, he accepted that the directors’ position was that there was no profit and no corporation tax liability to return and repeated his concerns about the want of underlying documentation (day 2, page 154).

603.As regards the attempt to file the outstanding returns in September 2023, the Liquidator criticised that, absent accounting records, there was nothing to support the figures included in the tax returns (day 2, page 82). When he was asked in direct examination whether his view would be different if (as was said to be the case) the returns would all be nil returns, his answer was unequivocally that it was still “a breach of the tax acts” (day 2, page 82).

604.In his evidence, the First Respondent said that the Company had a group accounting team (which included a team of accountants) which dealt with financial reporting requirements and should have filed the returns but did not (day 4, page 75). He accepted fairly that the system failed in relation to these tax returns, while accepting that he was ultimately responsible for it.

His evidence was that this was not irresponsible:

“I certainly delegated this process; am I irresponsible in delegating it to a very substantial team fully resourced to carry out that function, no I don't think that is irresponsible.” (day 4, page 76)

605.He points to the fact that there was full compliance with all other filing and reporting obligations; that this was the only omission; and that there was no question of money being owed to the Revenue.

606.He also highlights that, as soon as the Liquidator drew their attention to this omission, they wrote back acknowledging this failure and offering assistance in remedying it, to which no response was received (day 4, page 77).

Assessment

607.The failure to file the corporation tax returns is undoubtedly an omission and a breach of the obligations of the Company. However, the law on restriction of directors is clear: omissions to comply with filing obligations through oversight are not necessarily irresponsible. Even in cases in which there were liabilities to revenue, omissions to file the necessary returns have been found not to support a declaration of restriction. Indeed, in Re. Digital Channel Partners (In Voluntary Liquidation) [2004] 2 ILRM 35, Finlay Geoghegan J. found that something more than non-compliance for a limited period of time with tax legislation is required to show that directors did not act responsibly in the management of the affairs of a company.

608.In this case, while the failures occurred over four years, I regard the position of the Liquidator to be unduly stringent. The fact that his view would be unaltered if it was established that the returns were nil returns shows the unforgiving rigour of his approach.

609.I consider the answers given by the First Respondent and the evidence presented to show that this was a genuine mistake, that there was no prejudice caused, and that the Respondents sought to remedy it (even if it was beyond their powers or competence to then do so). It was not unreasonable to delegate such filing responsibilities to a suitably qualified and resourced team: I do not consider that to exceed the proper scope of delegation for a responsible director.

610.In short, there was not a want of responsibility on this point such as to warrant a declaration of restriction.

611.This does not absolve the directors of responsibility for the underlying issue of failing to keep proper books of account, as repeatedly cited by the Liquidator and already found to evidence a want of responsibility by the directors. However, I do not think it is appropriate or warranted for that same shortcoming in the conduct of the Company’s affairs to also be relied upon to ground a complaint of irresponsibility in relation to the corporation tax returns. These two topics were blended by the Liquidator in his evidence and, while they are connected, they are separate questions and should be treated as such.

VAT Group

612.The second topic concerns the entry by the Company into a VAT group and the absence of apparent advice or VAT accounting records. Limited attention was paid to this question at the hearing.

613.The evidence of the Liquidator (in direct evidence) was that:

“any key decision that the directors of Downtul made in relation to the affairs of the company should have been duly considered and recorded in a directors' meeting and I would include the entering into a VAT group into that good behaviour and responsible act. As joining a VAT group brings with it responsibilities and exposures, an entity within a VAT group is jointly and severally liable or can be jointly and severally liable for all of the liabilities within that entire group. So it is not an insignificant decision to enter into or to join a VAT group and the directors should have given that due consideration with appropriate advice which applied at that time and was specific to that entity that supported their decision to enter into the VAT group. There is no such record.” (day 2, page 83).

614.Under cross-examination, he accepted that there was no liability for VAT and no claim to VAT arising from joining the VAT Group.

615.One of the primary criticisms on this point concerned the absence of any file of documentation including correspondence with the Revenue Commissioners.

Assessment

616.This ground appears to consist of a complaint about the absence of documentation and advice and the alleged failings of corporate governance, rather than a complaint that it was irresponsible per se to enter the VAT Group.

617.What the First Respondent said in evidence was that there was advice given by KPMG years previously when the VAT group was set up and that there had been no relevant changes. He explained how the VAT group worked and that it was revenue-approved and that no VAT was charged by Downtul (day 3, page 170).

618 .I accept the evidence of the First Respondent in this respect. There is no basis that I have seen to conclude that entering into the VAT Group was not a responsible decision for the Company, particularly given the nature of its business as reported in its financial statements (this is of course fully subject to the caveat that the overall structure reflected in the financial statements has been found to be irresponsible).

619.Taking the question of the VAT Group on its own, I do not see any evidence or basis to conclude that the decision to enter the VAT Group or the impact that had on the Company evidences irresponsibility. In particular, it cannot be said to be irresponsible in the circumstances of this case for the Company to rely on advice given to the group of which it is part on a question such as joining a VAT group.

E. MISCELLANEOUS TOPICS

620. The following topics are addressed here for completeness.

(a) Date of insolvency

(b) Cooperation with the liquidator

(c) Participation of the Second Respondent in this Application

(d) Criticisms of the First Respondent’s evidence

(a) Date of insolvency

621. There was a dispute in the course of this Application as regards when the Company became insolvent.

622. The position of the Liquidator in his evidence was that the Company was insolvent as of April 2020 and, from that point on, the Respondents should have assessed the question of solvency on a regular basis with legal and accounting advice and the assistance of an insolvency practitioner.

623. His view is that there should be minutes showing the taking of advice from that time onwards to attempt to contain the insolvency and avoid the situation deteriorating further.

624. He acknowledged settlement offers were being made by the Respondents during that time period but regarded them a “low-ball” offers. A related criticism is made of the issue of the abridged financial statements for the year ended 27 December 2020 on 21 November 2021 on a “going concern” basis with no reference to the dispute with the Landlord or the non-payment of rent. The statement that the Respondents had a “reasonable expectation that the Company had adequate resources to continue in operational existence for the foreseeable future” was queried on the basis the Company had no apparent resources (not even a bank account).

625. The First Respondent responded with his evidence that he was confident of the Company’s ability to continue as a going concern, as the group companies had liquidity to pay whatever was agreed to be paid (if a settlement was reached). His position was that “We were acting responsibly trying to negotiate a commercial settlement or agreement with our landlord, albeit having very little feedback from the landlord” (day 4, page 67). He further explained that the Respondents did not ask for the money to be supplied to Downtul as the amount to be paid had not been “established”. The Respondents’ position was that it was not until October or November 2022, when it was apparent a deal would not be done, that the Company became insolvent.

Assessment

626. In the very particular circumstances of this case, I do not see the date of insolvency (or the date when the risk of insolvency emerged) as being particularly important questions. It is not

apparent to me what useful purpose will be served by seeking to resolve whether it was April 2020 or November 2022 or some other date.

627. This is because I regard the Company’s insolvency as being traceable directly to the structure that was put in place and the decision to allow Atercin to occupy the Property with no enforceable right on the part of Downtul to recover rent (or an equivalent payment). The consequence of this structure, this arrangement, was that Downtul could have become insolvent whenever the Respondents decided that a liability was not “established” and that they would not arrange for the monies to be made available to Downtul to discharge it.

628. The Company had no independent resources or income, or means to pursue same, to discharge its liabilities. It did not even have a bank account. The Respondents reserved to themselves the right to decide whether the Company would or would not be put in funds to pay debts (or any debts). They could effectively decide whether and when the Company would become insolvent and ultimately decided in November 2022 that the Company would remain unable to pay its debts (or any part of them).

629. This marks this out as an unusual case.

630. I do not therefore consider that this case fits within the mould of other cases in which the build-up to insolvency has been scrutinised. This is not a case about growing debt, operational challenges, or the Company’s finances tipping over time into unviability.

631. I do not therefore believe that it is possible or helpful to try to pinpoint the date of insolvency in this particular case. The constant precariousness of the Company’s financial situation owing to the decisions apparently taken by the Respondents as to how to conduct its affairs is the more pressing and weighty issue of concern.

632. As regards the question of the Company’s accounts being prepared on a “going concern” basis in 2021 (for 2020), the different perspective of the parties stems from their polarised views of the overall arrangements in place. I have found those arrangements to be irresponsible. I agree with the Liquidator that it is impossible to see how Downtul could have been presented as an independent entity that had “adequate resources” to enable its categorisation as a “going concern” in 2021 (or indeed in previous years). The only resources the Company had were those the Respondents chose to request Atercin to provide for the purpose of paying rent.

633. For completeness, I would note that I observed the First Respondents’ evidence in relation to the attempts to reach a resolution with the Landlord and accept that he did genuinely believe that the negotiations were the correct course of action; that there would be an agreement; and that it was sufficient that he and his brother, as directors of both Atercin and Downtul, could ensure that the monies would be there to fund such an agreement.

634. While they might have believed the negotiations would bear fruit and that they would ensure Downtul would be put in funds to meet the agreed liability, the structure they put in place allowed them ultimately to decide not to discharge Downtul’s debts thereby rendering the Company insolvent. As the First Respondent put it himself, it was “like taking your right hand to your left hand”.

635. It was decisions taken by the Respondents that Downtul would have financial obligations, but no operations, income or any enforceable right to recover monies to discharge its debts, that directly led to the insolvency of the Company.

636. I do not – and do not need to – decide the scale of that insolvency.

637. Accordingly, while time was taken up at the hearing on the question of whether the rental rate that was reflected in the Court Order (based on mesne rates) was correct, and whether some aspects of the Liquidator’s figures were consistent or correct, there is no dispute that monies were owing and that no monies were available to Downtul to discharge even the acknowledged part of the debts owed.

(b) Cooperation with the Liquidator

638. There is a complaint made by the Liquidator of a want of cooperation. I do not see evidence of a want of cooperation and I consider that the Respondents did discharge the onus under section 819(2)(b) of showing that they co-operated with the Liquidator.

639. There was also an allegation of an attempt by the Respondents to put pressure on the Liquidator. This arose from a letter sent to the Liquidator directly on 30 August 2023 in which it was suggested that the Liquidator formed a negative view about the conduct of the Respondents upon or shortly after his appointment and stating that any application for restriction would be fully defended. I do not see anything inappropriate or relevant to my

decision in that correspondence.

(c) Participation of the Second Respondent

640. The Second Respondent did not file an affidavit or give evidence in defence of this Application, save for a brief confirmatory affidavit that was delivered before the fifth day of the hearing.

641. This was a choice that was made by the Second Respondent. It has two consequences:

642. First, there is no information before me about the conduct of the Second Respondent as an individually appointed director of the Company with his own fiduciary duties and responsibilities. I have no material before me on which to base any decision about the Second Respondent’s own awareness of, or attention to, the affairs of the Company.

643. A similar situation arose in Re 360 Atlantic (Ireland) Limited [2004] 4 IR 266. There, Finlay Geoghegan J. recorded that the two respondents who put no evidence before the court and found that, on the basis of the facts presented and “in the absence of any evidence from them, the court cannot be satisfied that they acted responsibly as directors of the company in relation to the conduct of the affairs of the company” (para. 38). The same finding was made in Re Meridian Motors Limited [2021] IEHC 126: “In this case no evidence whatsoever has been proffered as to measures taken by the second respondent to address the company's insolvency. In the absence of such evidence I cannot find that he acted honestly and responsibly in relation to the affairs of the company.” (paras, 131, 132).

644. Second, there can be no inference (and none was suggested) that his evidence would have contributed anything new or different to the defence to this Application. The only factual evidence he relied on to attempt to discharge the onus on him in this Application was the evidence given by his brother, the First Respondent.

645. I am satisfied on the evidence that the First Respondent did not discharge the onus of showing responsibility on several grounds. The same finding applies to the Second Respondent.

(d) Criticisms of the First Respondent’s evidence

646. Several criticisms were made on behalf of the Liquidator in closing written and oral submissions regarding the manner in which the First Respondent gave evidence and his inability to answer basic questions about the Company and its affairs.

647. The submission was made on behalf of the Respondents in reply that cross-examination is not a memory test and that the Respondents should not be deemed irresponsible for not having recall of specific facts or figures.

648. There is an important point underlying this dispute, which is that cross-examination (which is of course not usual for an application of this nature) is not an opportunity to conduct a live interview to test responsibility. That is very far from the intended scope or contours of a restriction application. There is no general interview-based approval process for company directors (such as exists for certain particular controlled functions in regulated financial service providers, for example), whether or not they have been directors of failed companies.

649. Under section 819, the primary question is the backward-looking one of whether “the person concerned has acted honestly and responsibly in relation to the conduct of the affairs of the company in question, whether before or after it became an insolvent company” (section 819(2)). It is plain from this provision that what I must consider is the Respondents’ conduct in relation to the affairs of Downtul, during their tenure as directors of that Company. This does not envisage an assessment of their responsibility based on their ability to answer questions in court proceedings years after they ceased to so act. Of course, the answers given in evidence may demonstrate relevant information or insights about the responsibility of the Respondents during their tenure as directors of the Company, and may be weighed as such.

650. For example, I do consider the inability to explain turnover figures in the financial statements to be relevant (for reasons explained in Section D(b) Accounting records and Financial Statements). That is one area where the First Respondent’s inability to furnish answers does support the conclusion of a want of responsibility during his tenure as director.

651. However, I do not consider criticisms of how the First Respondent gave evidence and his limited powers of recall on some points (as opposed to the evidence itself) to otherwise be relevant to the specific role conferred on the court by section 819.

652. On this basis, I reject the contentions by the Liquidator (closing written submissions, paras.

16 to 19) that the inability of the Respondent to answer certain factual questions is itself relevant to my assessment of his responsibility or honesty within the meaning of section 819(2).

653. This is subject to the possible caveat (not relevant to this case) that if a court did reach the stage of assessing whether there was any “other reason why it would be just and equitable that he or she should be subject to the restrictions” (section 819(2)(c)), it may conceivably be relevant to consider a former director’s inability to answer basic or important questions during a cross-examination. This stage of the analysis was not reached here.

F. CONCLUSIONS

654. On the basis of the findings made in this judgment, I am not satisfied that the Respondents acted responsibly in relation to the conduct of the affairs of Downtul within the meaning of section 819(2) of the Act of 2014.

655. I will therefore make a declaration that the First and Second Respondents shall not, for a period of 5 years, be appointed or act in any way, directly or indirectly, as a director or secretary of a company, or be concerned in or take part in the formation or promotion of a company, unless the company meets the requirements set out in section 819(3) of the Act.

656. I will list the matter before me at 10.30am on 8 July 2025 for the purpose of making final orders. Unless the parties are agreed as to the costs’ orders to be made, written submissions on the question of costs may be delivered no later than 3 July 2024 (such submissions not to exceed 3,000 words in length).