The High Court has made restriction orders under the Companies Act against two directors, and one non-executive director, of a company which operated a restaurant in Liffey Valley Shopping Centre.
Eamon Leahy, liquidator of Spur (Liffey Valley) Restaurants Ltd which went into voluntary liquidation in 2013 after operating for some 11 years, sought the orders against Helen Jayne Bailey, Stephen James Logue and Denis Cremin.
At the time of liquidation, Ms Bailey was operations director of the company while Mr Logue was managing director and Mr Cremin was a non-executive director. After suffering poor trading over a number of years, it went into liquidation with a deficit of €309,000.
Mr Justice David Keane noted lease and franchise arrangements with another company, Trinity Leisure Ltd, which held 95 per cent of Spur's shares and of which Ms Bailey and Mr Logue were directors, cost the restaurant company about €825,000 and were not reflected on the balance sheet in the company's financial statements for 2010.
‘Entirely passive’
The fact Mr Cremin played an “entirely passive” role in the company did not exonerate him from responsibility, the judge said.
Mr Leahy sought the orders arising from how the firm dealt with a debt owed to it by Trinity Leisure. He had made inquiries about two transactions involving Trinity and Spur in 2010 which saw Trinity’s debt to Spur reduced by €825,000 when Spur acquired franchise rights and the transfer of the restaurant’s lease from Trinity for an agreed amount.
The explanations proffered to the liquidator were not sufficient, he claimed. He also sought documents and details about the agreements but was not provided with those which, he claimed, was a failure to co-operate.
The respondents did not oppose the application and were not represented during the proceedings.
In his judgment on Friday, the judge held there was failure to provide the liquidator with documents to allow a proper examination to support the transactions between Trinity and Spur.
The purported lease and franchise agreements gave rise to an obvious potential conflict of interest on the part of Ms Logue and Mr Bailey, he said.
The practical benefit the transactions had for Spur was at the very least questionable, he said. Spur had acquired assets that had little or no realisable value on insolvency when Spur was already in financial difficulty.
The amount expended in the transactions was €825,000, more than twice the company’s net deficiency on insolvency, he added.
Proper regulation
The judge said he was satisfied Mr Cremin does not appear to have played any part in the conduct of the company’s affairs and his position was very different from the other two directors.
The “inescapable fact”, however, was that Mr Cremin had agreed to become a director of the company, he said.
It would be “contrary to the whole notion of proper corporate regulation” to exonerate “token” directors from liability or relieve them from restriction” because of their voluntary adoption or entirely passive role, he said.
He made restriction orders under Section 819(1) of the 2014 Companies Act against all three directors.
