THE HIGH COURT
		1992 No. 1968P
IN THE MATTER OF FERNGARA ASSOCIATES LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)
AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990 
BETWEEN
GERARD ROBINSON
		APPLICANT
AND
BARRY FORREST 
OFFICIAL LIQUIDATOR OF FERNGARA ASSOCIATES LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)
		RESPONDENT

Judgment of Ms. Justice Laffoy delivered on the 11th day of February, 1999

	This is the Applicant's application for an Order pursuant to Section 152 of the Companies Act, 1990 (the Act of 1990) that he be granted relief in full from the restrictions imposed on him by order of this Court made on 22nd January, 1998 pursuant to Section 150 of the Act of 1990.
	The background to the application is that on 30th March, 1992 it was ordered by this Court that Ferngara Associates Limited (the Company) be wound-up by the Court and that the Respondent be appointed Liquidator for the purposes of the winding-up.  In the course of the winding-up the Respondent took certain action against two of the Directors of the Company, namely, Stephen Ross (Mr. Ross) and the Applicant.  First, he procured an Order from this Court that they be examined pursuant to Section 245 of the Companies Act, 1963 (the Act of 1963) and such examination was carried out before the Master.  Secondly, he brought proceedings against them and a number of other parties, which I will refer to as "substantive proceedings", in which he alleged that both Mr. Ross and the Applicant were party to the carrying on of the Company's business with intent to defraud the creditors of the Company and that they were both knowingly parties to the carrying on of the business of the Company in a reckless manner contrary to Section 297A of the Act of 1963 and in which he sought relief under Section 298 of the Act of 1963 for recovery of certain sums which he alleged were misappropriated by or at the behest of Mr. Ross and the Applicant.  Thirdly, the Liquidator sought Orders under Section 150 of the Act of  1990 restricting both Mr. Ross and the Applicant in the manner stipulated in Section 150.
	On 22nd January, 1998 two Orders were made by this Court in the matter by the late Shanley J..  In the first, the Respondent was given liberty to compromise the substantive proceedings in the terms in which they were subsequently compromised.  In the second, the compromise was given effect too.  Under the terms of the compromise the Collector General was joined as an Applicant in the substantive proceedings.  It was the Revenue Commissioners who had provided the funds to prosecute the substantive proceedings.  As against Mr. Ross, it was ordered that the Collector General should recover the sum of £20,000 against him on the terms specified.  As against the Applicant, it was ordered that the Collector General should recover the sum of £20,000 on terms that execution should be stayed provided the said sum was paid on or before 19th March, 1998.  That sum was duly paid.  The second order also embodied the Court's determination on the applications under Section 150.  As regards Mr. Ross, the determination of the Court was in the following terms:-
	
	"And in respect of Stephen Ross THE COURT not being satisfied as to any of the matters specified in subsection (2)(a) of Section 150 of the Companies Act, 1990 DOTH DECLARE pursuant to subsection (1) of that Section that he shall not for a period of five years from the date hereof 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) of the said Section - reserving to him his right to apply under Section 152 of the said Act".

Mr. Ross had not resisted the making of that declaration.  As regards the Respondent, the determination was in the following terms:-

	"And in respect of Gerard Robinson THE COURT not being satisfied that he acted responsibly in relation to the conduct of the affairs of the Company DOTH DECLARE pursuant to subsection (1) of Section 150 of the Companies Act, 1990 that he shall not for a period of five years from the date hereof 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) of the said Section - reserving to him his right to apply under Section 152 of the said Act".
The significance of the terms of the determination in respect of the Applicant is that the Court, while not satisfied that he had acted responsibly in relation to the conduct of the affairs of the Company, was satisfied that he had acted honestly.  It was further ordered that the operation of the order under Section 150 against the Applicant should be stayed until after 22nd July, 1998.  
	The procedural history of this application is as follows:-

(a)	The Applicant's motion was issued on 22nd June, 1998.  It was directed to and served on the solicitors for the Respondent.  It was grounded on the Affidavit of the Applicant sworn on 8th June, 1998, which referred to an Affidavit sworn by the Respondent in the substantive proceedings on 10th March, 1997 and an Affidavit sworn by the Applicant in response thereto on 9th May, 1997.

(b)	The motion was returnable for 13th July, 1998 and on that day was transferred from a Chancery list to the Examiner's Court list for hearing on 20th July, 1998, that is to say, before the stay expired.  Subsection (2) of Section 152 requires an applicant for relief under that Section to give not less than 14 days notice of his intention to the liquidator of the insolvent company and subsection (3) requires the liquidator, on receipt of such notice, to forthwith notify such creditors and contributories of the company as have been notified to him or become known to him that he has received such notice.  Due to an oversight, the Liquidator had not notified the creditors and the contributories of the application for relief under Section 152 and the Applicant's application was adjourned from time to time to give the Liquidator an opportunity to do so.

(c)	Eventually, the matter was opened to the Court on behalf of the Applicant on 25th January, 1999.  Proof in the form of an Affidavit sworn by a staff member of the Respondent's accountancy firm of notification of the application to 93 creditors by pre-paid registered post and that, in the case of 27 creditors the letters had been returned by the postal authority undelivered, was put before the Court.  However, the Revenue Commissioners, the creditor which had funded the substantive proceedings, was not among the 93 creditors who had been notified.  The matter was adjourned until 25th January, 1999 to enable the Revenue Commissioners to put their views on the application before the Court.

(d)	When this application was first in the Examiner's Court List on 20th July, 1998 the stay on the Order of 22nd January, 1998 was extended until after the next adjourned date and thereafter the stay was extended on each adjournment.  In pursuance of the direction contained in subsection (4) of Section 150 the particulars prescribed by the Companies Act, 1990, (Part IV and Part VII) Regulations, 1991 (S.I. 209 of 1991) have been furnished to the Registrar of Companies, who has been apprised of the stay on the operation of the Order and the extension of that stay from time to time.

	This is the first application which has been brought under Section 152 of the Act of 1990.  Given the procedural difficulties which have arisen on this application, I think it appropriate to comment on the manner in which a liquidator should prove that he has complied with his obligation under subsection (3) of Section 152.  That that obligation is not to be taken lightly is borne out by the succeeding subsections.  Subsection (4) provides that on the hearing of an application under Section 152, the liquidator or any creditor or contributory of the Company may appear and give evidence.  Subsection (5) provides that any liquidator who contravenes subsection (3) shall be guilty of an offence and liable to a fine.  In my view, on an application under Section 152, the liquidator should personally swear an affidavit that he has notified all of the creditors and contributories of the company who have been notified to him or become known to him of receipt by him of the application under Section 152 and of the return date for that application.  In the instant case, the Liquidator has now filed an affidavit in this form.
	Subsection (1) of Section 152 provides as follows:-

	"A person to whom Section 150 applies may, within not more than one year after a declaration has been made in respect of him under that Section, apply to the court for relief, either in whole or in part, from the restrictions referred to in that Section......and the court may, if it deems it just and equitable to do so, grant such relief on whatever terms and conditions it sees fit."

"A person to whom Section 150 applies" is a person in respect of whom a declaration has been made under Section 150 (1) that he:-

	"....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).....".

In broad terms the requirements of subsection (3), in the case of a company other than a public limited company, are that it should have an issued share capital of at least £20,000 which should be fully paid up and paid for in cash.  
	The seminal authority on Section 150 is the decision of Murphy J. in 
Business Communications Limited -v- Baxter & Anor., in which judgment was delivered on 21st July, 1995.  In his judgment Murphy J. pointed to two significant features of subsection (1) of Section 150; first, it is mandatory and the court has no discretion unless the person against whom an order is sought establishes that the case falls within one or other of the three exceptions set out in subsection (2) of Section 150; and, secondly, the period of the restriction is a fixed period of five years and, in the first instance at any rate, the court has no discretion to impose a lesser restriction.  Murphy J. expressed some concern about the duration of the period of restraint and in general the lack of flexibility in Section 150.  Nonetheless, he highlighted a distinction between a disqualification order under Section 160 of the Act of 1990 and a restriction order under Section 150.  The former is comprehensive in its effect in that the person against whom it is made may not be appointed or act as an auditor, director or other officer, receiver, liquidator or examiner or be in any way concerned or take part in the promotion, formation or management of any company, however much the paid up capital thereof, whereas the latter order does not extend to participation in a company which meets the requirements set out in subsection (3) of Section 150.  In relation to this distinction, Murphy J. commented as follows:-

	"Financially and commercially this is clearly a well founded distinction.  It is hardly unreasonable to require a person who was a director of a failed company in respect of which he had committed no misconduct but for which he neglected to exercise an appropriate degree of responsibility from resuming such an office in another company, again with the privilege of limited liability except on condition that a stipulated and not excessive sum was provided for the paid-up capital thereof.  The figure of £20,000 must represent a very modest sum as the capital for any commercial enterprise and a very limited obstacle to anyone wishing to engage in trade through the medium of a limited liability company.  Indeed, it might not be unreasonable to suggest that every limited liability company should be required to have paid-up capital of at least that amount.  It would seem that the more serious penalty which the restraining order imposes is the stigma which attaches as a result of the making of the order and its filing in the Companies Office."

	In contrast to Section 150, the Court is given a very broad discretion under Section 152.  The discretion is so broad that the Court may accede to an application for relief in whole from the restrictions thereby imposed and, in effect, wholly negative the effect of the Order under Section 150.  The only criterion stipulated in Section 152 for the guidance of the Court is that it should be "just and equitable" to grant the relief.  
	In support of the Applicant's contention that it would be just and equitable to grant relief in whole from the restrictions imposed by the Order dated 22nd January, 1998, the following submissions were made on behalf of the Applicant by his Counsel, Mr. Ryan:-

(1)	The Applicant bears a lesser level of culpability for the failure of the Company than his co-director, Mr. Ross, in that, while the Court was not satisfied that he acted responsibly, it was satisfied that he acted honestly.  The Applicant accepts that he did not act responsibly but ascribes that to having permitted himself to be overborne in relation to the Company's affairs by Mr. Ross who was the Managing Director of the Company and by whom most of the management decisions were taken.  

(2)	The applicant has personally contributed sums in excess of £200,000 to meet the claims of the Company's creditors.  This figure includes the sum of £20,000 which the Applicant paid to the Revenue Commissioners in pursuance of the Order of 22nd January, 1998 and sums aggregating £181,998 which he has discharged or is committed to discharging to certain creditors of the Company which, in the main, relate to rent and rates due by the Company in respect of various premises occupied by the Company.  The Applicant contends that he has acted responsibly to the best of his abilities since the winding-up of the Company and that he has contributed the sums in question in a genuine effort to minimise the loss suffered by the creditors of the Company.

(3)	Since the winding-up of the Company he has traded through another company, Golden Spider Web Limited of which he is a director.  All of the liabilities of Golden Spider Web Limited to the Revenue Commissioners are up-to-date.  While no evidence has been adduced on this point, I assume that Golden Spider Web Limited is not capitalised in the manner stipulated in Section 150(3) and that the provisions of Sections 155 and 156 of the Act of 1990 would apply to it if the order of 22nd January, 1998 became operative and continued in force.

(4)	His sole means of livelihood is derived from the business carried on through Golden Spider Web Limited.  That company has five employees at various outlets.  In the event of the restrictions imposed on him continuing, his livelihood and the livelihood of those employees will be seriously jeopardised.  

	The Respondent expressed no view to the Court on the Applicant's application.
	On behalf of the Revenue Commissioners, their solicitor, Mr. Brennan, objected to the relief sought being granted.  The Revenue Commissioners object both in point of principle and on the facts.  As a matter of principle, it was submitted, the sanction provided for by the legislature in Section 150 would be devalued if a restricted director was relieved from the restriction imposed after six months.  In a case in which they have a right to be heard the policy which the Revenue Commissioners would propose adopting is that they will not support an application for relief unless the restriction endures for 2½ years at least and all of the debts of the Company are fully discharged.  On the facts, it was submitted as follows:-
	(a)	While the Applicant ultimately acknowledged that he acted irresponsibly, initially, he had refused to co-operate with the Liquidator and, in consequence, the Liquidator encountered considerable difficulty.  There is no evidence before the Court on this application from the Liquidator or the Revenue Commissioners on this point.  In the absence of such evidence, it is not a point which the Court can take into consideration.  I should perhaps say that no criticism of the Revenue Commissioners is implied in these remarks.  The Court appreciates the prompt response of the Revenue Commissioners to the application, given that they did not receive the notification they should have received.  

	(b)	The Applicant deserves no credit for discharging the debts of the Company which he has discharged or is committed to discharging because his motive was to assuage certain creditors with whom he wished to continue to do business through the medium of his own company.  Mr. Ryan's response to this submission on behalf of the Applicant was to acknowledge that the Applicant may have "cherry picked" but, nonetheless, the consequence was that the liability of the Company was reduced due to this action.

	(c)	The Company ran up considerable debts in a very short period of trading and was run as a fraudulent company.  Mr. Ryan's response to this submission on behalf of the Applicant was that this issue was dealt with in the substantive proceedings and, in any event, the Applicant was less culpable than his co-director, Mr. Ross.  

	(d)	While prima facie the Applicant's company, Golden Spider Web Limited is tax compliant, in the absence of a revenue audit, the Revenue Commissioners cannot verify that all taxes due by that company have been discharged.

	(e)	While the late Shanley J. had indicated when he imposed the restriction on the Applicant that it was open to the Applicant to apply within a short period for the removal of the restriction, he did not indicate that the restriction would be removed.  

	On the policy approach to applications under Section 152 adumbrated by the Revenue Commissioners, Mr. Ryan submitted that an erroneous view is being taken of the effect of Section 150 in conjunction with Section 152, in that these provisions do not envisage the imposition of a minimum tariff or restriction on the restricted person and this is evident from Section 152 itself, which empowers such a person to seek relief either in whole or in part from a restriction imposed on him.  
	This case, in my view, is an exceptional case, which falls to be determined on its own peculiar facts.  It weighs heavily with me that the late Shanley J. who dealt with the Respondent's application for leave to compromise the substantive proceedings and was aware of the issues of law and fact in the substantive proceedings and approved of the compromise and who determined the applications under Section 150 against both Mr. Ross and the Applicant, considered it appropriate to stay the Order against the Applicant for six months and to entertain the Applicant's application for relief under Section 152, which came before the Court within the six month period, to the extent that he adjourned the matter to enable the Liquidator to deal with the procedural shortcoming and, that, significantly, he extended the stay on the operation of the Order.  In the light of that factor and having regard to the facts as established on this application, for my own part, I consider that it would be just and equitable to give the applicant relief in whole against the restriction contained in the Order of 22nd January, 1998.  In particular, it seems to me that the deterrent value of the restriction order highlighted in the passage from the judgment of Murphy J. quoted above and such protection as it affords to current and prospective creditors of enterprises in which the Applicant is or may become involved will not be undermined if the restriction is lifted now because, on the evidence, I am satisfied that the Applicant has learned an expensive lesson from his involvement in the Company.