Supreme Court allows appeal holding 'person' in Companies Act 1990 s.150 excludes corporate shadow directors.

THE SUPREME COURT

Record No. 2005 No.166

Hardiman J.

Geoghegan J.

Fennelly J.

IN THE MATTER OF WORLDPORT

IRELAND LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF THE COMPANIES

ACTS 1963-2001

AND IN THE MATTER OF SECTION 150

OF THE COMPANIES ACT, 1990

(AS AMENDED)

JUDGMENT of Mr. Justice Geoghegan delivered the 16th day of December 2008

I have read the judgment about to be delivered by Mr. Justice Fennelly and I am in full agreement with it. There are some

further observations of my own which I would like to make. He has concluded (and I agree) that in section 150 of the

Companies Act, 1990, notwithstanding the provisions of section 11(c) of the Interpretation Act, 1937, the word “person” in

that section must be confined to human persons and does not include bodies corporate. Under that provision of the 1937

Act the word “person” would include a body corporate “unless the contrary intention appears”. For the reasons given in

the judgment of Fennelly J., it seems clear that “the contrary intention” does appear in section 150.

I am inclined to go one step further. When interpreted in context, it would seem to me that the provision contained in section

149(5) that “This Chapter applies to shadow directors as it applies to directors” refers only even on a proper

interpretation of that provision alone, though in context, to human shadow directors and not to corporate shadow directors. I

am of this view because of the words “as it applies to directors”. The heading of the chapter, i.e., Chapter I of Part VII

reads “Restriction on directors of insolvent companies”. The form of order contemplated by section 150(1) includes a

prohibition against acting as a director and indeed that is the first prohibition. As pointed out by Fennelly J., section 176 of

the Companies Act, 1963 prohibits bodies corporate from being company directors. I think that neither the Oireachtas nor

the draftsman of the Act ever adverted to the issue of whether a company could be a shadow director. It has since been held

by O’Leary J. and by Laffoy J. that it can be and I agree. But I am reasonably satisfied that even in section 149(5), it was

not intended that the chapter would in any way apply to corporate shadow directors. If it were otherwise, it is difficult to see

how the chapter could apply the same way as it applies to directors, as companies cannot be directors.

A second point which seems to me to be relevant and in support of the judgment of Fennelly J. is the form of order which

would be appropriate under section 150(1) in the case of a human shadow director. There is nothing in the wording of

section 150(1) to indicate or indeed permit that the court order would in addition to prohibiting a shadow director from being

a director for the specified period should also prohibit him from being a shadow director. If, however, the respondent is

correct in arguing that an adapted order can be made under section 150(1), the logical adaptation would be to prohibit the

company from being a shadow director. But if it would never have been contemplated that a human shadow director or

indeed a director should be expressly prohibited from being a “shadow director”, then it would be completely inconsistent

to make such an order in relation to a corporate shadow director. This would seem to me to further reinforce the view

adopted by Fennelly J.

The only alternative argument might be that in the case of a corporate shadow director, the prohibition would be confined to

its acting as secretary or being concerned or taking part in the promotion or formation of any company unless it met the

statutory requirements, but that would seem to be a major alteration to the intention of the subsection given that it is

primarily directed towards acting as director. Admittedly, O’Leary J. did seem to hint that that might be appropriate. I use

the word “hint” because one of the difficulties in this case is that inevitably O’Leary J. did not have to draft an order. This

is because he was merely asked to decide the two issues. Presumably, no order has ever in fact been made pending the final

outcome of these proceedings.

Some of the problems in determining this appeal arise from the way “shadow director” has been defined in the Companies

Act, 1990. In the first place, it is defined in section 3 which is the main definition section but that merely says that “shadow

director” has the meaning assigned to it by section 27. Section 27 does not strictly speaking contain a definition. Subsection

1 of that section reads as follows:

“(1) Subject to subsection (2), a person in accordance with whose directions or instructions the directors of a

company are accustomed to act (in this Act referred to as ‘a shadow director’) shall be treated for the

purposes of this Part as a director of the company unless the directors are accustomed so to act by reason only

that they do so on advice given by him in a professional capacity.”

There seems to be no reason why a body corporate cannot be a shadow director for the purposes of Part III which is the

Part referred to in section 27, though again even in the case of section 27 the question of whether a company could be such

a shadow director may not have been considered by the draftsman. It becomes wholly inappropriate when the section 27

definition is applied to section 150 or even as I have suggested, section 149.

For all the reasons given by Fennelly J. and these added reasons which seem to me to reinforce his views, I would allow the

appeal.