Former Doherty Advertising chairman Pascal Taggart and two other non-executive directors will not have restrictions placed on their activities as directors after the High Court ruled against an application from its official liquidator, Jim Stafford.
Mr Justice Sean O'Leary said the single biggest factor in the demise of Doherty, which had debts of more than €3.77 million, was the "unwise financing" of a management buyout in 2001.
He said Mr Taggart and director Shay Moran "should not be proud" of their failure to insist on cash flow projections from November 2002 to mid 2003, but said that did not warrant making restriction orders against them.
The judge said that neither Mr Taggart, Mr Moran nor Liam Gaskin were directors of the company at that time of the 2001 buyout and added that there was no evidence of dishonesty by any of them.
In Mr Gaskin's case, he had resigned as director in November 2002 and bore no responsibility in relation to the liquidator's complaints about the absence of board meetings or cash flows.
Both Mr Taggart and Mr Moran bore some responsibility for the absence of formal board meetings, "which made the evasion of the executive directors easier to sustain" and the lack of cash flows, particularly in the period from October-November 2002 to August 2003 when a receiver was appointed to Doherty, the judge found.
As Mr Taggart was chairman of the company, he bore "more responsibility" for the absence of board meetings.
The improper opening and use of a bank account at AIB and the use of defective advance invoicing procedure were also not, in the court's view, the responsibility of the non-executive directors.
There was no evidence either Mr Taggart or Mr Moran had contributed to the insolvency or the net deficiency of the company, he added. While criticism could be made of their stewardship, it would be applying very high standards to conclude this amounted to incompetence or irresponsibility.
On that basis, the judge dismissed the liqiuidator's application which arose after the collapse of Doherty Advertising three years ago.
In his judgment yesterday on the proceedings against Mr Taggart, Mr Moran and Mr Gaskin, Mr Justice O'Leary said Doherty, prior to the management buyout on March 14th 2001, was a leading and prosperous company. Afterwards, it was an over-borrowed company "living on borrowed time".
The management buyout was largely financed by a loan of €3.5 million, subsequently increased to €4.6 million, from Doherty to another company, Craigbury, in order to pay the former owners for the sale of their shareholding.
Craigbury was listed as a debtor under the current assets in Doherty's balance sheet but, as Craigbury had no other assets, the sum due was of no practical day-to-day use to Doherty.
Because the inevitable happened and advertising business in general reduced in volume, Doherty failed to maintain its anticipated turnover with disastrous consequences.
The problem was masked from the non-executive directors to some extent by the creation of artificial sales figures based on advance billing of invoices.
However, that impropriety could not be visited on the three respondents, the judge said.
