THE HIGH COURT
		1993 No. 4988P
IN THE MATTER OF MANTRUCK SERVICES LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990
IN THE MATTER OF AN APPLICATION  PURSUANT TO SECTION 150 AND 204 OF THE COMPANIES ACT 1990
ON THE APPLICATION OF DAVID F MEHIGAN OFFICIAL LIQUIDATOR
BETWEEN
DAVID F MEHIGAN
		APPLICANT
AND
JOHN DUIGNAN
		RESPONDENT

JUDGMENT of Mr. Justice Shanley delivered the 8th day of October, 1996

	Mantruck Services Limited (herein called "the Company") was incorporated on 11th August, 1988: its registered office is at Farnbeg, Strokestown, County Roscommon.  The registered shareholders of the Company are John Duignan (the Respondent) and one John Dooley.  Its directors are the Respondent and his wife Mary Duignan.  The main business of the Company was the supply of tail lift units and refrigeration units for commercial vehicles.  It had distribution agreements with suppliers of refrigeration units and a supplier of tail lift units, Zepro Lyften Produkpion  AB (herein called 'Zepro').  On the 2nd July, 1993 the Company's creditors resolved that the Company be wound up, and Michael Butler, an insolvency practitioner was appointed as its liquidator.  Subsequently, on 29th July, 1993, on the petition of Zepro, the company was ordered to be wound up by the Court and the applicant (Mr. Mehigan) was appointed Official Liquidator.  The Company was then insolvent and unable to pay all of its debts.
	On 9th July, 1993, an employee of Mr. Butler, Paul O'Brien, visited the Company's premises at Roscommon and collected certain book and records of the Company which were in a room on the premises.  He filled his car with these and intended, he says, to "return to collect other things he saw there".  He confirmed that he had not been given, or shown, any books of the Company which throughout this hearing were referred to as "red Cathedral books".  Mr. O'Brien prepared a list of the books and records he removed on the 9th July, 1993 and a list of the books and records ultimately delivered by him to the Applicant's Solicitors on 30th July, 1993.  On 20th August, 1993, Murphy J. ordered the directors of the Company to hand up to the Official Liquidator "all books records and documents and all of the stock and assets of the Company" in their or their agents respective possession power or procurement.  Following his appointment as liquidator, Mr. Mehigan examined the books and records as delivered to his Solicitors by Mr. O'Brien on 30th July, 1993 as a result he believed there were, as he said, "significant and extensive" omissions in the Company's records.  He was of the view that these omissions resulted in substantial uncertainty as to the assets and liabilities of the Company and substantially impeded the orderly winding up of the Company.  His belief that the records were incomplete led him to apply for the Order granted by Murphy J. on 20th August, 1993.  On 18th November, 1994, two invoices of the Company were furnished by the voluntary Liquidator to the Applicant's Solicitors.  Save for these two invoices no other documents books or records were received from the Respondent on foot of the Order of 20th August, 1993.  From the commencement of the liquidation, the Official Liquidator  had been in regular contact with the Respondent.  He had met him on 29th July, 1993 at Strokestown where the Company's premises was: the Respondent told him he had no business being there and that the voluntary Liquidator had removed all the books and records of the Company.  There then followed lengthy correspondence relating to what the Official Liquidator saw as gaps, inaccuracies or deficiencies in the records he had been given.  By letter of 16th August, 1993, he was assured by the Respondent that "with regard to the records again I have advised on a number of occasions that the previous Liquidator had collected all books and records of the Company".  In an affidavit, filed on 17th November, 1994 (which Murphy J. ordered to be admitted in evidence on the hearing of this motion), the Respondent exhibited the list of the records taken by the Voluntary Liquidator (Mr. Butler) and asserted that:-

	"proper books and records of the Company were maintained and that these books and records were duly made available to and acknowledged by the voluntary Liquidator."  (para. 22).

The correspondence between the Official Liquidator and the Respondent continued, somewhat inconclusively, during the years 1993 and 1994.  In November 1994, the Applicant Liquidator brought a motion for certain declarations pursuant to Sections 150 and 204 of the Companies Act 1990, and Murphy J., on 21st November, 1994, ordered that the motion be heard on Affidavits filed on the 4th July, 1994 (by the Applicant) and 17th November, 1994 (by the Respondent) and on oral evidence.  By a further Order made on 20th November, 1995 by Murphy J. the Respondent was directed to be examined on oath before the Master in relation to the promotion, formation, trade dealings, affairs and property of the Company.  That examination took place on 7th February, 1996.  During the course of that examination, the Respondent told the Master that when recording purchases, sales and receipts of the Company they were written up into "a temporary record book" and, after being "input" into a computer, the books were "scrapped", "disposed of " or "thrown out".  The Respondent also said that at the end of 1992, the Company was told by the VAT Inspector to keep manual records and that they then ceased to use the computer and reverted to a manual system at which time the "original temporary books" were thrown out.  Although the Respondent signed this transcript of evidence taken before the Master he did so adding in writing on the transcript:-

	"This document does not represent the evidence as given in the examination."

At the hearing of this motion the Respondent accepted the accuracy of the transcript of evidence but objected to its admissibility - an objection which I disallowed having regard to the provisions of Section 245(6) of the Companies Act 1963 and the decision of O'Hanlon J. in In re Aluminium Fabricators Limited, 1984 ILRM 399.
	The hearing of this motion commenced on 18th day of June, 1996.  The Official Liquidator, Mr. Mehigan, was the first witness.  Thereafter, Christopher Chisholm, a partner in Grant Farrell Sparks, Auditors and accountants, and Paul O'Brien of Michael Butler & Co. were called as witnesses.  On the morning of 20th June, 1996, it was indicated to the Court, on behalf of the Respondent, that there might be certain books, papers and records of the Company either at the Company's old premises, or at a farm owned by the Respondent at Kilgrass, Strokestown in County Roscommon.  An Order was made on that date for the purpose of providing for the delivery up of such books and records to the Official Liquidator and the hearing of the motion was adjourned until the 16th day of July, 1996.
	The Motion resumed on the 16th day of July, 1996: the Official Liquidator then resumed his evidence.  He gave evidence of having visited the Roscommon premises  on 20th June, 1996 and that he recovered 28 computer discs and five red Cathedral books.  These books comprised a Sales Book, a Purchases Book and two Cash Books and a Wages Book.  The Sales Book contained details of sales invoices for the period April 1991 to March 1993: in addition, at the back of the book, it had a record of credit notes issued by the Company for the same period.  The Purchases Books had details of purchase invoices for the period June 1991 to March 1993.  The Cash Books recorded cheque payments and cash receipts of the Company and were in two separate books - one covered a Bank of Ireland account for the period 17th January, 1992 to 15th August, 1992 and the other a National Irish Bank account for the period 15th October, 1991 to 26th June, 1993.  There was also a Wages Book covering the period April 1991 to March 1993.  The 28 computer discs, according to the Official Liquidator, were of no assistance to him in  his examination of the books and records of the Company.
	Following receipt of the red Cathedral books, the Official Liquidator outlined in evidence the position in relation to the books and records of the Company.  The following basic information and records were missing, according to Mr. Mehigan:-

(i)	Stock records for February 1992 and March 1993.
(ii)	Purchase Book prior to June 1991.
(iii)	Cash receipts and cheque payments prior to 15th October, 1991.
(iv)	Credit notes from January 1993 to July 1993.
(v)	Record of  factored invoices and receipts.
(vi)	Record of certain carrier refrigerated units.
(vii)	Debtors, Creditors and Nominal Ledgers for 1992-3.
(viii)	Details of finance agreements entered into.

	Mr. Mehigan said that, by reason of the absence of these records,

(a)	the books and records did not enable him to determine the financial position of the Company with reasonable accuracy.
(b)	the books and records did not enable the Company to be readily and properly audited.
(c)	the books and records did not properly record the assets and liabilities of the Company.
(d)	the books and records did not properly record all goods purchases and sold by the Company in sufficient detail to enable the goods sellers and buyers to be identified and did not properly record all the invoices relating to such purchases and sales.
(e)	the books and records did not properly record all sums of money received and expended by the Company or the matters in respect of which the receipt and expenditure took place.

	Mr. Mehigan expressed the view that the failure of the Company to keep books of account (so as to properly record the above matters, and enable the financial position of the Company be determined with reasonable accuracy and its accounts readily and properly audited) had resulted in substantial uncertainty as to the assets and liabilities of the Company and had substantially impeded its orderly winding up.  The uncertainty as to assets arose because 

(i)	there was no proper record of stocks for the years ending March 1992 and 1993.
(ii)	there was no debtors ledger for the year ending 31st March, 1993.
(iii)	there was no copy credit notes for the last quarter of the Company's operation.

The uncertainty as to liabilities arose because 

(i)	There was no creditors ledger for the year ending 31st March, 1993.
(ii)	The amount, if any, due to International Facters Limited, could not be ascertained from the records of the Company.
(iii)	The liability to VAT could not be ascertained with any accuracy: there were three different records none of which appeared to tally with the returns to the Collector General.
(iv)	The Respondent had made two statements of affairs which did not coincide one with the other.

	These uncertainties as to assets and liabilities, according to Mr. Mehigan, could be traced back to gaps or deficiencies in the records of the Company.  In his evidence he detailed a litany of error or failure to record: among these were the facts that 149 invoices were not recorded in the Sales Book; there were also 304 cases where sales invoice copies could not be located.  There were unrecorded credit notes and sales invoices for refrigerated units were missing; the Purchase Book was unreliable in showing entries where goods with VAT paid at point of entry were analysed as net purchases.  A gross profit analysis done by Mr. Mehigan disclosed a gross margin of 8.71% for the two years to 31st March 1993 compared with a gross margin for the year ending 31st March, 1991 of 34.65%.
	Mr. Mehigan estimated that some 80% of the time spent by him and his staff (and the outlay expended) related to his efforts to overcome deficiencies in the books and records of the Company.  The professional fees and outlay for all the Liquidators work on the Liquidation to date was £94,256 plus VAT at 21%.  80% of that sum is £91,239.80.  Mr. Mehigan expressed the view that in his search for the books and records of the Company Mr. Duignan had not been in any way co-operative with him. 
	George Chisholm was an audit manager with Farrell Grant and Sparks who audited the accounts of the Company for the 17 months ending 31st March, 1990.  He last did work on the books of the Company in the month of July 1991.  He gave evidence that there was a manual record of sales, purchases, cheque payments, cash receipts, wages and salaries when the accounts were audited for the period of 17 months to 31st March, 1990. 
	Declan Hogan, a fellow of the Institute of Chartered Accountants, gave evidence.  He is a former member of the Council of the Institute and of the Auditing Practices Review Committee.  In addition, he is a member of the Consultative Committee of Accountancy Bodies.  He gave evidence of having received all the records that were before Mr. Mehigan (including the books obtained on 20th June, 1996).  In his opinion these books and records did not contain a record of the assets and liabilities of the Company.  He drew attention to the failure to record stocks for February 1992 and thereafter; the failure to list creditors after March 1992 and the failure to record fixed assets after March 1991.  Because of such deficiencies, he was of the opinion that one could not properly prepare a balance sheet, or indeed, a set of accounts for the Company.  He said that he would have expected to see copies of all credit notes and copies of any leases so as to properly explain the transactions of the Company.  Eugene Finneran is a Higher Grade Tax Officer and an Inspector of Taxes who in the years 1990 to 1993 was involved in VAT inspections of the Company.  In July or August 1990 he met the then Company book-keeper for the purpose of checking on a VAT reclaim the Company had made.  He did not see at that time any red Cathedral books.  On 1st March, 1991, his office wrote to the Company seeking

	"the purchase and sales day books plus creditors and debtors ledgers".

	In reply, by letter of 21st March 1991 the Respondent stated

	"the records are inputted into a computer and there is no manual system".

Mr. Finneran replied on 25th April, 1991 again asking for 

	"purchases and sales day books and creditors and debtors ledgers".

Between July 1990 and October 1992, Mr. Finneran paid eight or nine visits to the Company premises to inspect the records of the Company.  He never saw or was shown any red Cathedral books.  During this period manual listing of sales, purchases and credit notes were prepared by the Company on sheets with a "Zepro" heading (herein called 'the Zepro listings').  These listings purported to show figures for sales, purchases, credit notes and related VAT figures.  Revised VAT returns were prepared on foot of these Zepros Listings for the period July 1988 to August 1992 which did not coincide with the original returns.  Throughout the period of his visits Mr. Finneran was never told there was a manual system (his last visit was in October 1992) of recording sales and purchases and credit notes.  Indeed he had been told the contrary in March 1991.  Further, the fresh preparation by the Company of the Zepro Listings for sales, purchases and credit notes ostensibly "downloaded" from the Company's computer served to underpin the representation that there was not in existence any similar or colourably similar manual record of purchases, sales or credit notes.
	John Duignan is an engineer by profession and holds the degree of Bachelor of Engineering.  In relation to the list of information and records which Mr. Mehigan said was missing.  Mr. Duignan gave evidence that all of the following information could be obtained from the computer system used by the Company:-

(i)	Stock Records
	He said there was an opening stock figure for 1st April, 1992 and that all sales and material purchases could be derived from the computer.
(ii)	Purchase book prior to June 1991
	Again, Mr. Duignan said this information could be printed out from the computer.
(iii)	Cash Receipts and Cheque Payments prior to October 1991
	This data could be derived also from the computers.
(iv)	Credit notes from January 1993 to 29th July, 1993
	These, said Mr. Duignan, were listed at the back of the Sales Book.  Mr. Finneran had copies of eight of the notes; he could not explain the absence of other copies for the particular quarter.
(v)	Factored invoices and receipts
	Again, all data in relation to the factoring of invoices was capable of being derived from the computer.
(vi)	Carrier units
	The Liquidator had suggested that carrier refrigerated units had been sold for which there was no sales invoice the Sales Value of which amounted to £87,914 or £106,375 inclusive of VAT.  Mr. Duignan produced a series of 17 invoices which he alleged represented invoices for the units the Liquidator said had no invoices.

(vii)	Debtors, Creditors and Nominal Ledgers for 1992, 1993
	Mr. Duignan asserted that such ledgers could be derived from some of the 28 discs obtained by Mr. Mehigan on 20th June, 1996 and that it would only take a couple of days for this information to be "downloaded" from the computer discs.  The basis for this assertion was the opinion of a software expert who had written to the Respondent's Solicitors but who was not called to give evidence.
(viii)	Finance Agreements
	Mr. Duignan said that the finance houses did not use lease agreements in duplicate and accordingly, the Company had no records of such agreements.

	Mr. Duignan refused to classify the red Cathedral books as comprising "a manual system".  Taking the Sales Book as an example, he said that it was not a manual book because there were computer references in it both identifying, by number code, VAT rates and equipment type.  Accordingly, he says, he was correct in pointing out to Mr. Finneran by letter of 21st March, 1991 that there was no manual system operated by the Company.  The Sales Book differed from the Zepro Listings (as to sales) in that there was a computer number in lieu of a VAT rate.  The manual books that he referred to in evidence before the Master were 1st March, 1991 books and these were not in fact destroyed - they could still exist on the premises repossessed by the ICC Bank in Roscommon. Mr. Duignan said he had copied the Cathedral Books in June 1993.  He said that Mr. Mehigan had never told him what records he had and he did not believe he had any records the Liquidator did not have.  He believed that Mr. Mehigan had the Cathedral Books and he only became aware that he did not have them on 20th June, 1996.  The five red Cathedral books were found along with the computer discs on 20th June, 1966 in a crate in Mr. Duignan's house in Roscommon.
	In his evidence before the Master (Q.109) Mr. Duignan had noted that the Company had stopped using the computer in August 1992.
	Michael Butler an insolvency Practitioner gave evidence of having been appointed on 2nd July, 1996, Voluntary Liquidator of the Company.  He first got the papers on 9th July, 1993 and did not look at them until  12th July, 1993.  Although he did not inspect the records until 12th July he felt able to write to Mr. Finneran on 9th July saying

	"Having examined the Statement of Affairs together with the underlying books and records it is quite clear there will be insufficient funds available to pay a dividend to the creditors in this case."

	He expressed the view that the books and records of the Company were more than adequate to facilitate the orderly winding up of the Company and that the absence of copy credit notes was not a bar where Third Party verification was possible.

(a) 	THE RELEVANT STATUTORY PROVISIONS
	Section 202 of the Companies Act 1990 deals with the keeping of books of account.  It provides as follows 

	"(1)	Every company shall cause to be kept proper books of account, whether in the form of documents or otherwise, that - 

		(a)	correctly record and explain the transactions of the company,
		(b)	will at any time enable the financial position of the company to be determined with reasonable accuracy,
		(c)	will enable the directors to ensure that any balance sheet, profit and loss account or income and expenditure account of the company complies with the requirements of the Companies Act, and
		(d)	will enable the accounts of the company to be readily and properly audited.

	(2)	The books of account of the company shall be kept on a continuous basis, that is to say, the entries therein shall be made in a timely manner and be consistent from one year to the next
	(3)	Without prejudice to the generality of subsections (1) and (2), books of account kept pursuant to those subsections shall contain -

		(a)	entries from day to day of all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure takes place,
		(b)	a record of the assets and liabilities of the company,
		(c)	if the company's business involves dealing in goods -

			(i)	a record of all goods purchases, and of all goods sold (except those sold for cash by way of ordinary retail trade), showing the goods and the sellers and buyers in sufficient detail to enable the goods an the sellers and buyers to be identified and a record of all the invoices relating to such purchases and sales,
			(ii)	statements of stock held by the company at the end of each financial year and all records of stocktakings from which any such statement of stock has been, or is to be, prepared, and 

		(d)	if the company's business involves the provision of services, a record of the services provided and of all the invoices relating thereto.

	(4)	For the purposes of subsections (1), (2) and (3), proper books of account shall be deemed to be kept if they comply with those subsections and give a true and fair view of the state of affairs of the company and explain its transactions.
	(5)	Subject to subsection (6), the books of account shall be kept at the registered office of the company or at such other place as the directors think fit.
	(6)	If books of account are kept at a place outside the State, there shall be sent to and kept at a place in the State and be at all reasonable times open to inspection by the directors such accounts and returns relating to the business dealt with in the books of account so kept as will disclose with reasonable accuracy the financial position of that business at intervals not exceeding 6 months and will enable to be prepared in accordance with the Companies Acts the Company's balance sheet, its profit and loss account or income and expenditure account and any document annexed to any of those documents giving information which is required by the said Acts and is thereby allowed to be so given.
	(7)	Books of account required by this section to be kept, and accounts and returns referred to in subsection (6), shall be kept either in written form in an official language of the State or so as to enable the books of account and the accounts and returns to be readily accessible and readily convertible into written form in an official language of the State.
	(8)	A company shall make its books of account, and any accounts and returns referred to in subsection (6), available in written form in an official language of the State at all reasonable times for inspection without charge by the officers of the company and by other persons entitled pursuant to the Companies Acts to inspect the books of account of the company.
	(9)	A record, being a book of account required by this section to be kept or an account or return referred to in subsection (6), shall be preserved by the company concerned for a period of at least 6 years after the latest date to which it relates.
	(10)	A company that contravenes this section and a person who, being a director of a company, fails to take all reasonable steps to secure compliance by the Company with the requirements of this section, or has by his own wilful act been the cause of any default by the Company thereunder, shall be guilty of an offence:
		Provided, however, that -
		(a)	in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by a company with the requirements of this section, it shall be a defence to prove that he had reasonable grounds for believing and did believe that a competent and reliable person was charged with the duty of ensuring that those requirements were complied with and was in a position to discharge that duty, and
		(b)	a person shall not be sentenced to imprisonment for such an offence unless, in the opinion of the court, the offence was committed wilfully."

	Section 204 of the 1990 Act deals with the personal liability of officers of a company which has contravened Section 202 of the 1990 Act.  It provides:

	"(1)	Subject to subsection (2), if -

		(a)	a company that is being wound up and that is unable to pay all of its debts has contravened Section 202, and
		(b)	the court considers that such contravention has contributed to the company's inability to pay all of its debts or has resulted in substantial uncertainty as to the assets and liabilities of the company or has substantially impeded the orderly winding up thereof,
		the court, on the application of the liquidator or any creditor or contributory of the company, may, if it thinks it proper to do so, declare that any one or more of the officers and former officers of the company who is or are in default shall be personally liable, without any limitation of liability, for all, or such part as may be specified by the court, of the debts and other liabilities of the company.
	(2)	On the hearing of an application under this subsection, the person bringing the application may himself give evidence or call witnesses.
	(3)	(a)	Where the court makes a declaration under subsection (1), it may give such directions as it thinks proper for the purpose of giving effect to the declaration and in particular may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him or any company or other person on his behalf, or any person claiming as assignee from or through the person liable under the declaration or any company or person acting on his behalf, and may from time to time make such further order as may be necessary for the purpose of enforcing any charge imposed under this subsection.
		(b)	In paragraph (a) "assignee" includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest created, but does not include an assignee for valuable consideration (not including consideration by way of marriage given in good faith and without notice of any of the matters on the ground of which the declaration is made.

	(4)	The court shall not make a declaration under subsection (1) in respect of a person if it considers that - 

		(a)	he took all reasonable steps to secure compliance by the company with section 202, or
		(b)	he had reasonable grounds for believing and did believe that a competent and reliable person, acting under the supervision or control of a director of the company who has been formally allocated such responsibility, was charged with the duty of ensuring that that section was complied with the duty of ensuring that that section was complied with and was in a position to discharge that duty.

	(5)	This section shall have effect notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.
	(6)	In this section "officer", in relation to a company, includes a person who has been convicted of an offence under section 194, 197 or 242 in relation to a statement concerning the keeping of proper books of account by the Company."

	Section 383 of the Companies Act 1963 provides:

	"For the purpose of any provision in this Act which provides that an officer of a company who is in default shall be liable to a fine or penalty, 'officer who is in default' means any officer of the company who knowingly and wilfully authorises or permits the default, refusal or contravention mentioned in the provision."

	Section 150 of the Companies Act 1990 provides:

	"(1)	The court shall, unless it is satisfied as to any of the matters specified in subsection (2), declare that a person to whom this Chapter applies shall not, for a period of five years, be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless it meets the requirements set out in subsection (3); and, in subsequent provisions of this Part, the expression "a person to whom section 150 applies" shall be construed as a reference to a person in respect of whom such a declaration has been made.
	(2)	The matters referred to in subsection (1) are - 

		(a)	that the person concerned has acted honestly and responsible in relation to the conduct of the affairs of the company and that there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this section, or
		(b)	subject to paragraph (a), that the person concerned was a director of the company solely by reason of his nomination as such by a financial institution in connection with the giving of credit facilities to the company by such institution, provided that the institution in question has not obtained from any director of the company a personal or individual guarantee of repayment to it of the loans or other forms of credit advanced to the company, or 
		(c)	subject to paragraph (a), that the person concerned was a director of the company solely by reason of his nomination as such by a venture capital company in connection with the purchase of, or subscription for, shares by it in the first-mentioned company.

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

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

			(i)	in the case of a public limited company, be at least £100,000
			(ii)	in the case of any other company, be at least £20,000,
		(b)	each allotted share to an aggregate amount not less than the amount referred to in subparagraph (i) or (ii) of paragraph (a), as the case may be, shall be fully paid up, including the whole of any premium thereon, and
		(c)	each such allotted share and the whole of any premium thereon shall be paid for in cash.

	(4)	Where a court makes a declaration under subsection (1), a prescribed officer of the court shall cause the registrar of companies to be furnished with prescribed particulars of the declaration in such form and manner as may be prescribed.
	(5)	In this section - 
		"financial institution" means -

		(a)	a licensed bank, within the meaning of section 25, or
		(b)	a company the ordinary business of which includes the making of loans or the giving of guarantees in connection with loans, and

		"venture capital company" means a company prescribed by the Minister the principal ordinary business of which is the making of share investments."

(b)	The Submissions of the Liquidator	
	Counsel for the Liquidator, Mr. Mehigan, submits that there is evidence before me which establishes:-
	(i)	that the Company was unable to pay all its debts at the time of its winding up.
	(ii)	that the Company over an extended period of time was in contravention of Section 202 in failing to keep proper books of account.
	(iii)	that Mr. Duignan, as its managing director, permitted the contravention of Section 202
	(iv)	that the failure to keep proper books of account resulted in substantial uncertainty as to the assets and liabilities of the Company, and also, substantially impeded the orderly winding up of the Company.
	(v)	that Section 204 permits the court in its discretion to declare that Mr. Duignan should be personally liable without limitation for all of the debts of the Company.
	(vi)	That an Order under Section 150 of the 1990 Act should be made restricting Mr. Duignan from acting as a director of the Company for five years.

(c)	The contravention of Section 202

	It is worth noting that before any liability can be imposed on any officer, or former officer, of a company, the Court must be satisfied that a contravention of the provisions of Section 202 of the 1990 Act has been committed by the Company. 
	In other words, the Court must be satisfied that a criminal offence has been committed by the Company.  Section 202(10) make it an offence for a company to contravene the section.  Section 202 details the nature and extent of the accounting records which a company is obliged to keep.  It is clear from the words of the section that the obligation of a company to "keep" proper books of account is not an obligation to act as a mere passive custodian of books and papers but rather the positive obligation to create books and records in a particular form with specified contents.  It is also clear from the wording of the section that the obligation to keep proper books of account is necessarily a continuing obligation: they should be kept on a "continuous and consistent basis" and must be such that they "will at any time enable the financial position of the Company to be determined with reasonable accuracy" (S. 202(1)(b)) and books of account shall contain entries "from day to day" of all sums of money received and expended by the Company (S. 202(3)(a)). 

(d)	Liability under Section 204.
	Before any liability can be declared under Section 204 the following matters must be established in evidence.
	(a)	the company in question is being wound up.
	(b)	the company is unable to pay all its debts.
	(c)	the company has contravened Section 202.
	(d)	such contravention has contributed to the company's inability to pay all of its debts or has resulted in substantial uncertainty as to the assets and liabilities of the Company or has substantially impeded the orderly winding up of the company.
	(e)	the officer (or former officer) of the company knowingly and wilfully authorised or permitted the contravention by the company of Section 202, or, the "officer" is a person convicted under Ss. 194, 197 or 242 in relation to a statement concerning the keeping of proper books of account.

	Where the foregoing matters are established in evidence, the Court may, if it thinks it proper to do so, declare that such officer or officers be personally liable without any limitation of liability for all or such part as may be specified by the Court of the debts and other liabilities of the company.  As is clear from paragraph (d) above, "officer" of the company is not restricted solely to executives of the company but may, in certain circumstances, embrace the auditors of the company and any person convicted of providing false information in purported compliance with the Companies Acts.  While therefore the scope of Section 204 is sufficiently wide to catch members of a company if they are "Officers in default", it also applies to person who are not members of the company.  Any suggestion therefore that the section has as its object the removal of the benefit of limited liability and the placing of the person (on whom liability is to be imposed) in the same position as if he were a sole trader is erroneous.  As Murphy J. noted in relation to Section 297 of the Companies Act 1963 in O'Keefe -v- Ferris, 1993 3I.R. 165 at pp 173-4.

	"One explanation offered for this unusual procedure and the consequence is the fact that limited liability is in general the creature of legislation and what the legislature grants the legislature can withdraw and furthermore that it would be well justified in doing so where the company engaged in trade for a fraudulent purpose.  That explanation is unsustainable.  The burden imposed by the subsection is not confined to or indeed directly related to the shareholders in or proprietors of the company."

	The observations of Murphy J. are equally appropriate in relation to Section 204, which, as I have noted, may, depending on the circumstances, result in the imposition of liability on persons who are not shareholders in or proprietors of the company.
	Section 204 requires as one of the conditions precedent to liability a contravention of section 202 which either
	(a)	contributes to the company's inability to pay all its debts
	or
	(b)	results in substantial uncertainty as to its assets and liabilities
	or
	(c)	has substantially impeded the orderly winding up of the company.

Where the foregoing is established (along with the other four matters listed above) the Court may if it thinks proper declare an officer in default liable for all the debts of the company.  The section, on its face, does not require that there be any causal relationship between the Section 202 contravention and the liability declared under Section 204.  Nor does the section, on its face, make any allowance for different degrees of blameworthiness which might attend contraventions of Section 202.  As to the absence of a causal connection between a contravention of S. 202 and the liability imposed under Section 204, there may well be a significant number of situations where the contravention bears little or no relationship to the amount of the debts of the insolvent company.  For example, where the insolvency is the direct result of unwise foreign exchange transactions and it is discovered that the auditors and directors have knowingly and consistently undervalued the assets of the company (thereby resulting in a contravention of Section 202) such that, while insolvent, the company's indebtedness is less than it would have been had the assets been properly valued.  Where such an undervaluation results in substantial uncertainty as to the assets of the company or substantially impedes the orderly winding up of the company liability under S. 204 is established, yet it would be clearly unjustifiable in principle to impose liability for all the debts of the company (caused by injudicious forex dealings) on the auditors and directors responsible for the company's contravention of Section 202.  On the other hand, where a particular contravention of section 202 can be seen to have a particular financial consequence resulting in a particular debt of the insolvent company, it is difficult to see how it could be argued that imposing liability for such a debt works any injustice.  
	It is quite clear that contraventions of Section 202 may take many forms:  the contravention may for example comprise a failure to properly records goods sold, or it may comprise the maintenance of false records for the purposes of tax evasion.  Where Section 204 is involved in relation to such contraventions it is clear that the Court should not view both contraventions in the same light but rather be disposed to regard the false accounting example as a basis for the imposition of greater personal liability.  However, on its face, Section 204 appears to allow that a Court, in the exercise of its discretion, can impose unlimited liability on an officer of a company in respect of all the debts of a company where the S. 202 contravention has not in itself resulted in any loss to the company, but has substantially impeded the orderly winding up of the company, or resulted in substantial uncertainty as to its assets and liabilities.  There may be circumstances where, if the Courts discretion is exercised in this way, the result achieved would be so harsh, unfair and disproportionate, having regard to the wrong committed, as to constitute an unjust attack on the personal rights of the affected officers.

(e)	The exercise of the discretion under Section 204.
	The Companies Act, 1990 is a post 1937 Statute and as such enjoys a presumption of constitutionality.  Thus, where the Act makes provision for the exercise by a Court of a discretionary power, that power must be exercised in such a way as to respect the provisions of the Constitution.  As Murphy J. said in O'Keefe -v- Ferris, supra, at page 174 (in relation to Section 297(1) of the 1963 Act)

	"The subsection confers a wide discretion on the Court and it must be assumed that the Court will exercise those powers not merely in a responsible but also in a constitutional fashion.  If the Constitution does require that in civil proceedings the burden imposed on the Defendants should in general be commensurate with the loss suffered by the Plaintiff (or the class whom the Plaintiff represents) then it must be assumed that the subsection will be so construed and applied."

	The discretion, given by section 204 to the Court, must be exercised, as Murphy J. notes (in relation to S. 297), in a "responsible but also in a constitutional fashion".  In my view, the Court in the exercise of this discretion must have regard to (but not necessarily exclusively) the extent to which the contravention of S. 202 resulted in financial loss and, if it did, whether or not such losses were reasonably foreseeable by the officer as a consequence of the contravention.
	In New Zealand, their Companies Act 1955 contains almost identical provision to Sections 202 and 204 of the Irish Companies Act, 1990, and Counsel for the Liquidator sought to rely on the New Zealand case of Maloc Construction Limited (In Liquidation) -v- Chadwick & Others, 1986 3NZ CLC 99, 794 in which Tompkins J. in the High Court, suggested that three factors were relevant to the exercise of the discretion given by the Act to the Court, namely, causation, culpability and duration.  As to causation, he suggested that there must be a causal relationship between the contravention of Section 202, the officers contribution to that contravention, and the losses of the company resulting therefrom.  As to culpability, Tompkins J. said that the less blame attaching to an officer for a Section 202 contravention the less liability should be imposed.  As to duration, Tompkins J. believed that it was relevant to consider whether debts were being incurred when the contravention was taking place.  It seems to me that the three elements identified by Tompkins J. are relevant to the principles which should guide the exercise of discretion under Section 204 and that in assessing liability under Section 204, the Court should have regard to the extent to which the officer's involvement in the S. 202 contravention resulted in financial loss and, if it did, whether such loss was reasonable foreseeable by the officer as a consequence of the contravention and that, save in exceptional  circumstances, liability should not be imposed for contraventions not resulting in loss, or for losses not reasonably foreseeable as a consequence of the contravention.

(f)	The Standard of Proof
	No argument was addressed to me to the effect that Section 204 created a criminal offence or was other than a civil wrong.  Accordingly, in considering the issue of the standard of proof, I am considering it in the context of the proof a civil wrong.
	In Maloc Construction Limited (In Liquidation), supra, Tompkins J., in considering the equivalent New Zealand sections to Ss. 202 and 204 said:-

		"I agree with Mr. Ross's submission that the standard of proof required for the purposes of the present proceedings is the civil standard of proof on the balance of probabilities but because the subject matter of the enquiry involves facts that if established would be an offence then a higher degree of probability is required than would otherwise be the case.  But it remains the civil standard - the liquidator does not have to prove non compliance beyond reasonable doubt.  This approach accords with the statement of appropriate principle contained in the Judgment of Denning LJ. in Bater -v- Bater, 1950 2 AER 458."

	In Bater -v- Bater, supra, Denning LJ. said at page 459:

	"A Civil Court when considering a charge of fraud will naturally require a higher degree of probability then that which it would require if considering whether negligence were established.  It does not adopt so high a degree as a criminal Court even when it is considering a charge of a criminal nature but still it does require a degree of probability which is commensurate with the occasion."

	The approach adopted by Denning LJ. and approved of by Tompkins J. in the Maloc case has not been followed in our Courts.  In Banco Ambrosiano -v- Ansbacher & Co., 1987 ILRM 669 Henchy J. said at page 701

	"I am unable therefore to discern in principle or in practice any rational or cogent reason why fraud in civil cases should require a higher degree of proof than is required for the proof of other issues in civil claims."

	In Hanafin -v- The Minister for the Environment and Others, 1996, unreported, the Supreme Court again considered, and rejected, a submission that in civil matters there were certain types of cases which warranted a higher degree of proof than the balance of probabilities.  
	Accordingly, in considering whether to impose liability under Section 204 no higher degree of probability of a contravention of Section 202 is required then in any other civil matter.
	
THE ISSUES

The issues I have to decide are

	(i)	Whether the Company contravened any of the provisions of Section 202 of the Companies Act, 1990 ('the 1990 Act') in relation to the keeping of proper books of account.
	(ii)	If it did contravene Section 202 was the Company at the time of its winding up unable to pay all its debts.
	(iii)	If it did contravene Section 202 did such contravention result in substantial uncertainty as to the assets and liabilities of the Company or, alternatively, did such contravention substantially impede the orderly winding up of the Company.
	(iv)	Whether if there was a contravention by the Company of Section 202 of the 1990 Act resulting in either of the matters at (iii) above whether Mr. Duignan is an officer of the company who knowingly and wilfully authorised or permitted the contravention.
	(v)	Whether Mr. Duignan can avail of any defence under Section 204 of the 1990 Act.
	(vi)	If not and the matters at paragraphs (i) to (iv) are established what Order, if any, should the Court in its discretion make against Mr. Duignan.
	(vii)	Whether an Order should be made under Section 150 of the Companies Act 1990 against Mr. Duignan. 

CONCLUSIONS

	I am satisfied that the books of account of the Company made available to the Official Liquidator both before and on 20th June, 1996 did not contain:-

	(i)	a record of stock for the years ending March 1992 and 1993.
	(ii)	copies of credit notes for the last quarter of the Company's trading activity.
	(iii)	a debtors ledger for the year ending 31st March, 1993.
	(iv)	a creditors ledger for the year ending 31st March, 1993.
	(v)	such records as would enable the Company's liability to the Revenue in respect of Value Added Tax to be correctly ascertained for the year ending 31st March , 1993.
	(vi)	such records as would enable the Company's liabilities to International Factors Limited to be ascertained for the same period namely the year ending 31st March, 1993.

	While Mr. Duignan contended that the computer of the Company could using the discs discovered on 20th June, 1996 produce a debtors and creditors ledger (and a nominal ledger), such records were not produced and the basis on which Mr. Duignan expressed this contention appears to have been his reliance on the views of a software expert (Mr. Desmond McLaughlin) who had expressed such an opinion to the Respondent's Solicitors but who was not called to give evidence.  I therefore do not attach any weight to the contention that a debtors and creditors ledger could be "downloaded" or retrieved from the discs.  In particular, little weight can be attached to this contention where Mr. Duignan himself swore to the Master that the Company stopped using the computer in July or August of 1992 (see pages 10 and 11 of Transcript of evidence before the Master).  Even if the discs retrieved on 20th June, 1996 could achieve the results Mr. Duignan stated in his evidence, the fact is that in the period from the commencement of the Court winding up (on 30th July, 1993) to 20th June, 1996 the absence of a debtors and creditors ledger rendered it impossible for the Liquidator to determine with any accuracy (let alone reasonable accuracy) the financial position of the Company or to ascertain from the records, the assets and liabilities of the Company.  Thus, even if one were to accept Mr. Duignan's evidence that the computer discs and the red Cathedral books between them (together with the earlier records provided to the Liquidator) provided records sufficient for the purposes of Section 202 of the 1990 Act there was, nonetheless, clearly a period of time when the absence of the discs and the books - and the consequent deficiencies in the Company's records - meant that the Company was during that period in contravention of Section 202 of the 1990 Act.
	I should say that I have some concern as to whether or not Mr. Duignan is accurate in stating that he believed the Liquidator at all material times had the "red books" and that it was only when he realised, in Court, that the Liquidator had not those books that he disclosed where they might be.  It is worth recalling that in his Affidavit filed on 11th November, 1994 Mr. Duignan states that 

	"all such books and records of the Company that were in my possession were made available and furnished to the Voluntary Liquidator and duly receipted by him and as appears from Exhibit B herein."

	Exhibit B is a copy of the list of records taken by Mr. Butler.  The red Cathedral books are not on the list.  What is on the list is what Mr. Duignan was aware was given to Mr. Mehigan by the Voluntary Liquidator's staff.  It is difficult therefore to understand how he believed the Liquidator had the red Cathedral books.  It is also difficult to understand why the red Cathedral books were never produced to Mr. Finneran whom he knew was anxious to see purchase and sales day books and who paid the Company some 8 or 9 visits between July 1990 and October 1992.  The sales books recorded sales for the period from 1st April, 1991 onwards and the purchases book recorded purchases from June 1991 onwards.
	I have already indicated that I was satisfied that the books of account given to the Liquidator both before and on 20th June, 1996 were deficient in six material respects.  These deficiencies were such that the financial position of the Company could not at any time be determined with reasonable, or indeed any, accuracy or enable the Company to be readily and properly audited.  I am satisfied further that the deficiencies were such that the assets and liabilities of the Company could not be recorded and that there was not a sufficient recording or proper record of goods purchased and sold or of the purchasers and sellers of those goods or of invoices relating to all purchases and sales.  Equally, the records of the Company do not contain statements of stock held by the Company for the years ending March 1992 and 1993.  Finally, I am satisfied that the books of account were not kept in a continuous and consistent  basis and are deficient in failing to enter daily all sums of money received and expended by the Company and the matters in respect of which such took place.  Because I am satisfied as to the foregoing, I conclude that there have been contraventions by the Company of Section 202 1(a), (b), (d), 202 (2), 202 (3) (a), (b) and (c) of the Companies Act, 1990.  
	I am also satisfied that the Company, having contravened  Section 202, was unable to pay its debts at the date of its winding up; equally, the contraventions of Section 202 were such as to result in substantial uncertainty as to the assets and liabilities of the Company and also substantially impeded the orderly winding up of the Company.  Mr. Duignan was an officer of the Company who I find knowingly and wilfully authorised and permitted the Section 202 contraventions and cannot avail of any defence under Section 204.
	I am also satisfied that, while the Company is unable to pay all its debts, it is not possible to separate out liabilities of the Company prior to its winding up which result from any contravention of Section 202.  However, there is evidence from the Liquidator that some 80% of his time was occupied in seeking to overcome deficiencies in the books and records of the Company.  The losses which flowed from this expenditure of time (£91,239.80) were reasonably foreseeable by Mr. Duignan as a consequence of the contraventions of Section 202. Accordingly, pursuant to Section 204 I declare John Duignan to be personally liable to the Company in the sum of £91, 239.80.
	Finally, having regard to the mandatory words of Section 150 of the 1990 Act (in relation to which See In Re Business Communications Limited Murphy J. 21st July, 1995) I am satisfied that I have no discretion but to impose the 5 year restriction, contained in the section, on Mr. Duignan: he does not bring himself within any of the three exceptions of subsection 2 (of Section 150).

*****MOVED OUT OF TYPED VERSION TEMPORARILY *****

Where a company is being wound up, is unable to pay all its debts and has contravened Section 202 of the 1990 Act - Section 204 provides that the Court may if it thinks it proper to do so declare that an officer of the company who is in default

	"Shall be personally liable without any limitation of liability for all or such part as may be specified by the Court of the debts and other liabilities of the company."

	The first point to note in relation to Section 204 is that the Court is given a discretion as to whether or not is makes the declaration in question and if it does whether it should related to all or only some of the Company's debts.  The second point to note is that, on its face, Section 204 appear to allow the Court declare a person liable for losses that person did not necessary cause.  As to the exercise by the Court of its discretion Tompkins J. in the Maloc Construction Limited case, supra, at p. 99, 809, suggested that three factors were relevant to the exercise of discretion, namely, causation, culpability and duration.  As to causation, he suggested that there must be a casual relationship between the contravention of Section 202, the officer's contribution to the contravention and the losses of the Company resulting therefrom.  As to culpability , Tompkins J. suggested that the loss blame that attached to an officer for contravention of Section 202, the loss liability should be imposed.  As to duration, Tompkins J. suggests that it is relevant to consider whether debts were being incurred when the contravention was taking place.  In my opinion, there three factors, enumerated by Tompkins J., may be said to be elements of a general principle which appears entirely sensible namely that a Court, in the exercise of its discretion under Section 204, will wish to be satisfied that there is a casual relationship between the officer's involvement in the contravention and the personal liability imposed on him.  It seems to be that if the Court's discretion is exercised by an application of such a principle the section will not be open to attack.  On the ground that it offends any principle of constitutional justice.  In East Donegal Co-operative -v- Attorney General 1970 I.R. 317 Walsh J. said at page 341:

	" ... the presumption of constitutionality carries with it not only the presumption that the constitutional interpretation or construction is the one intended by the Oireachtas but also that the Oireachtas intended that proceedings, procedures, discretions and adjudications which are permitted provided for or prescribed by an act of the Oireachtas are to be conducted in accordance with the principles of constitutional justice."
	(emphasis added)

	If a Court in its discretion was not to have regard to any casual relation ship before imposing personal liability under Section 204 then it seems to one that a constitutionally questionable consequence and an absence of proportionality might follow where for minor contraventions of Section 202 personal liability of millions of pounds could be imposed.  Accordingly, it seems to me that I am bound to exercise the discretion given to me under Section 204 in such a way as to ensure that there is some casual nexus between the loss occasioned by the Section 202 contravention, the blameworthiness of the officer in question for such contravention and the liability declared under Section 204.