THE HIGH COURT
DUBLIN
Record No: 86 Cos/1996
IN THE MATTER OF THE COMPANIES ACTS 19963-1990
and
IN THE MATTER OF CB READYMIX LIMITED (In Liquidation)
and
IN THE MATTER OF AN APPLICATION PURSUANT TO S.I60 OF THE COMPANIES ACT 1990
Between/
EDMOND P. CAHILL (Official Liquidator)
Applicant
-and-
DR. MICHAEL GRIMES
Respondent
MR. JUSTICE T.C. SMYTH DELIVERED JUDGMENT, AS FOLLOWS, ON FRIDAY, 20TH JULY 2001
MR. JUSTICE SMYTH:       This Motion concerns an application pursuant to Section 160 of the Companies Act, 1990.  So far as is relevant to this application that section provides as follows:
"S.160(2) Where the court is satisfied in any proceedings or as a result of an application under this section that –
(b) a person has been guilty, while a promoter, officer, auditor, receiver, liquidator of examiner of a company, of any breach of his duty as such promoter, officer, auditor, receiver, liquidator or examiner; or
(d) the conduct of any person as promoter, officer, auditor, receiver, liquidator or examiner of a company makes him unfit to be  concerned in the management of a company, the court may of its own motion, or as a result of an application, make a disqualification order against such a person for such period as it sees fit.
(4) An application under paragraph (b) or (d) of subsection 2 may be made by –
(b) any member, contributory, officer, employee, receiver, liquidator, examiner or creditor of any company in relation to which the person who is the subject of the application -
(i) has been or is acting or is proposing to or being proposed to act as officer, auditor, receiver, liquidator or examiner, or
(ii) has been or is concerned or taking part, or is proposing to be concerned or take part, in the promotion, formulation of management of any company." (Emphasis added) 
The definition of disqualification order is contained in Section 159 of the Act, 1909 and means:-
"An order under this Part that the person against whom the order is made shall not be appointed or act as an auditor, director or other officer, receiver, liquidator or examiner or be in any way, whether directly or indirectly, concerned or take part in the promotion, formation or management of any company, or any society registered under the Industrial and Provident Societies Act, 1893 to 1978."
THE FACTS -
Cork Company Registrations, an enterprise owned and/or controlled by Dr. Grimes organised the formation of the company and sought and obtained a 'tax number’ for the company.  The date of incorporation was 7th April 1988.  The company was in the business of quarrying and selling sand and gravel.  The company got into financial difficulties, in particular, in respect of returns and payments to the Revenue both in respect of PAYE and VAT.  The Revenue commenced proceedings against the company by way of Summary Summons on 15th March 1995 seeking liberty to enter final judgment in the sum of £50,510.70.  When the matter was eventually listed before the Master, the Revenue became aware that the company had been struck off the Register of Companies on 26th September 1995 for failure to furnish its annual returns to the Registrar of Companies.  It would appear from Exhibit "EPC 4" of the Applicant's affidavit herein that the company may have {did or purported to) transfer one of its	main (if not its only real asset) assets, a quarry at Imokilly, Co. Cork which, by a transfer dated 1st July 1995, was purportedly transferred to Ladysbridge Investments of which the Respondent was the Secretary.  The property is that referred to in Folio 893 Co. Cork.   Three of the four witnesses to the stated sealing of the transfer are all members of the Cronin family who were at some stage involved in or associated with the company.

 On 15th January 1996 the company, whilst struck off the Register, purported to pass a resolution winding up the company and appointing the Respondent, Dr. Grimes, as Liquidator of the company. 

On 25th March 1996 Barron J. ordered the restoration of the company to the Register and restrained the Respondent from acting as Liquidator until 22nd April 1996.

On 27th March 1996 the Master of the High Court by Order granted the Revenue liberty to enter final judgment against the company in the sum of £50,510.70.

On 25th April 1996 the Applicant was appointed as Provisional Liquidator of the company by Order of Costello J. (on foot of the petition of the Revenue dated 18th April 1996). 

On 29th April 1996 Barron J. ordered a stay on the appointment of the Applicant as Provisional Liquidator.  27th January 1997 Barron J. discharged the stay on the restraining of the Applicant from acting as Provisional Liquidator, declared the resolution winding up the company and appointing the Respondent as Liquidator of the company on 15th January 1996 to be invalid.  It was further ordered that the stay on the entry of judgment on foot of the Master's Order dated 25th March 1996 continue until the hearing of the appeal to the Supreme Court.  Other than the issue and service of the Notice of Appeal, the Respondent has taken no step to advance or prosecute the appeal.

In the instant application before the Court, Counsel for the Applicant indicated that not only had no application been made by the Respondent to expedite the appeal, but notwithstanding the Order of Barron J. is now almost four and a half years on the court record, the books of appeal have not been lodged.  The Respondent has sought to argue that the instant application is premature until the outcome of the appeal is known and available.  I reject that submission as untenable having regard to the terms of Section 160 and the implied proposition that a person who fails to prosecute an appeal can use such failure to act in defeasance of another's right to invoke the provisions of Section 160 and the function of the Courts to adjudicate on an application under the section. 

The Applicant has set out in great detail the several steps taken by him since his appointment as Provisional Liquidator, originally, and as the Official Liquidator of the company appointed by Kelly J. per Order dated 23rd June 1997.  There were several other Court Orders (Shanley J., Moriarty J., Laffoy J., a hearing before McCracken J. and the Supreme Court) which are unnecessary of recitation.

The Respondent has sought to argue that other than being concerned with the formation of the company and obtaining its tax number/ he has had no hand, act or part in the affairs of the company.  On the one hand he sought to argue that once the resolution by which his appointment was declared invalid, he never did become a liquidator and, accordingly, never did have any obligations in that capacity.  On the other hand, he has filed numerous documents in both the Supreme Court and the High Court in which he asserts that he was and is and believed/believes himself to be the liquidator of CB Readymix Limited (In Liquidation) including inter alia:- 
1)  Notice of Appeal No. 9604261 paragraph (3) dated 26th April 1996.
2)  Notice of Appeal No. 96042621 paragraph (6) dated 28th March 1996.
3)  Notice of Appeal No. 96042604 paragraph (6) dated 26th April 1996.
4)  Affidavit sworn on 20th April 1996 paragraph (2) Ref. No. 96042102.
5)  Affidavit sworn in April 1996 paragraphs (2) and (39) Ref. No. 96042602. 
6)  Affidavit sworn on 29th April 1996 paragraph (2) Ref. No. 96042922. 
I accept the submission of Mr. Shipsey S.C. for the Applicant that the Respondent is estopped by court record from denying that he believed himself to be and held himself out as liquidator of the company. Furthermore, the record of the several meetings and events deposed to by the Applicant and set out in Exhibit "EPC 2" are not put in issue by the Respondent,   to wit:-
1)  Page 36 of a Meeting on 24th April 1996: "Dr. G.[Grimes] made the point that even if his appointment as Liquidator was defective, that did not necessarily invalidate his acts and dealings."
2)  Page 38 a report of Mr. Lally on the same meeting, item (5):  "Dr. Grimes stated in reply to my question that he was the Liquidator in a creditors voluntary winding up."
3)  Page 42 a further report of the same meeting: "Dr. G. [Grimes] contends that his action [the restoration of the Register] validates his appointment as liquidator." 
I am satisfied that whatever be the true legal position, and I accept as valid until {if ever reversed on appeal) the Order of Barron J. on 27th January 1997, that the Respondent held himself out is a liquidator with all the rights and duties of such under the Companies Acts. Concerning the books and records of the company, it is recorded by the Applicant and not disputed by the Respondent that:-
a)  At a meeting on 2nd May 1996 that "Dr. Grimes stated quite categorically that the books could have an accident."  (EPC 2 p.244). 
b)  At a meeting on 12th October 1996 that when an enquiry was made of the Respondent as to in whose possession the books and records of the company were, Mr. Grimes responded that he did not know. Towards the end of the meeting Dr. Grimes stated: "that he had the books and records of the company in his possession and he further stated that the books and records were, in is opinion, adequate." {EPC 2 p.47).
c)  At paragraph 18(iv) of the Applicant's grounding affidavit in this application it is averred as follows:-
"In an affidavit sworn by Dr. Grimes on 29th October 1996 in the course of explaining what happened with the books and records of the company following an order that he ceased to be acting as Liquidator of the company, he states that: 
My understanding for this was that I was finished, not going to be consulted further and therefore had no further responsibility for any of the books of the company which I had and now I no longer needed.  I checked the relevant Acts insofar as I was able and it appeared to me that since I never had been an officer of the Company and never been Liquidator, I had nothing to do with the Company and that I did not expect that I was going to be brought back before this Honourable Court and asked to produce documents which, not having had need of, I decided not to keep and dumped.”
Furthermore at paragraph 21 of the affidavits he states that:
'It was in my opinion that I have had and currently do not have any legal obligations to declare the books of Company and I could see no reason to clutter up my office with stuff I didn't need’
On enquiry as to how 'the dumping' was done, Mr. Grimes, who represented himself, stated that he had filled about two and a half sacks and put them out for collection with the garbage.  On further enquiry he stated that the books and records were "dockets for sand and gravel and where they went." I was and remain unconvinced as to this latter response in the light of the sworn evidence - "the books of the company which I had." Mr. Grimes in submissions tried to make light of the dockets on the basis that they were duplicates or could be duplicated or could be reconstructed or copies were with the auditors or the Applicant (of none of which there was evidence). 

The Respondent did not challenge on affidavit or in his submissions the averment in the Applicant's affidavit (paragraph 18(ii)) concerning the meeting of 2nd May 1996 at Grattan Court, Washington Street,  Cork at which Dr. Grimes stated to the Applicant: "Surely I did not expect to get the books and records of company."  The events that occurred thereafter were the "prophesy" fulfilled. 

During the course of his submissions Dr. Grimes stated that:-
i)	"I was determined to screw the Revenue no matter what it took."
ii)	"I was prepared to blow up anyone who got in my way." 
iii)	"I was going to make an example of Mr. Cahill."
iv)	"I would not obstruct the Liquidator but I would not help."
v)	Whatever tactics it took I was going to bring the Revenue to book." 
Aside from the statutory entitlements of the Revenue as preferential creditors and the fact that Mr. Grimes is on his own averment Liquidator of some fifty companies, these several submissions were consistent with his professed view to the meetings at which the Applicant attended with Dr. Grimes. When Dr. Grimes summoned a meeting allegedly under Section 266 of the Companies Act, 1996 on 12th October 1996, the Applicant's solicitor, late in the day, enquired if Dr. Grimes would consider resigning as Liquidator, to which Mr. Grimes replied as follows:
"... and miss all the fun - no." ("EPC 2" p.47) 

In his submissions to the Court Dr. Grimes sought to (even if he may say he did not intend to) obfuscate the issue before the Court by reference to the several earlier applications to the Courts (to no less than seven different High Court judges) and raising in debate tangential points on various sections of various Companies Acts.  He statedly regarded all that would take place as between himself and the Applicant "as a game of chess" ("EPC 2" p.47) being Mr. Flynn's record of the meeting at Coachford on 24th April 1996.  The privilege of being headed "Without Prejudice" being disregarded by both parties. In conclusion I am satisfied and find as a fact as follows:-
A.  The Respondent believed and held himself out as a liquidator is estopped by court record and conduct from denying that he so acted. 
B.  It was not necessary for the order of Costello J. to refer to the books and records of the company whose property they were and are.
C.  The submissions that the Respondent acted from an honest, if mistaken belief might have had some conviction if other factors were consistent therewith.  In this case, on the contrary, the Respondent has, notwithstanding being well seasoned as a personal litigant, sought to justify a course of conduct which displays a most serious lack of commercial probity.  To seek, as the Respondent sought in this case, to argue that 'the books and records were not destroyed, they were just dumped displays a sense of gross negligence or total incompetence, and on the facts a complete failure to appreciate the gravity of the action taken. 

THE LAW -
The distinction between a restraining order under Chapter 1, Section 150 of the Companies Act, 1990 and Chapter 2, Section 160 therein in respect of the disqualification order is clearly drawn by Murphy J. in Business Communications Limited -v- Baxter & Parsons (unreported 21st July 1995).  I happily adopt that distinction.  The substantial burden to be discharged before the Court has jurisdiction to make a disqualification order are spelled out in Section 160(2)(b) and (d), already quoted.  In the instant case I am satisfied on a conspectus view of the evidence that the Respondent – 
(a)  Failed to act in an impartial manner.
(b)  Destroyed the books and records of the company.
(c)  Failed to act in the interests of the creditors of the company and, in particular, of the Revenue. 
There are serious and unanswered questions by the Respondent concerned what advice and/or facility may have been given concerning the transfer of one of  the companies main assets and the role the Respondent may have had in the involvement of Anne Carey and Carol O’ Sullivan (the latter a stated one time employee of Dr. Grimes) in the company and their non-compliance with the Order of 1st October 1997 of Moriarty J.  However, I prefer to rest my decision on the elements (a) to (c) above having regard to the terms of the section. 

In the instant case the Respondent submits that the decided cases in England relate to directors (in equivalent type disqualification statutory provisions) and that is so, but the reasoning in the cases can be applied by analogy to any of the categories of persons referred to in Section 160. in La Moselle Clothing Limited (In Liquidation) & Rosegem Limited {In Liquidation) -v- DJavell Soualhi (unreported 11th May 1998, Shanley J.) cited with approval the judgment of Browne-Wilkinson V.C. in Re Lo-Line Motors Limited 1988 BCLC 689 at p.703 as follows:
“What is the proper approach to deciding whether someone is unfit to be a director? The approach adopted in all the cases to which I have referred is broadly the same.  The primary purpose of the section is not to punish the individual, but to protect the public against the future conduct of companies by persons whose past record as directors of insolvent companies has shown them to be a danger to creditors and others.  Ordinary commercial misjudgment is in itself not sufficient to justify disqualification.  In the normal case the conduct complained of must display a lack of commercial probity, although I have no doubt that in the extreme case of gross negligence or total incompetence, disqualification could be appropriate."
In that case regard was had to the conduct of the Respondent as a director and no other (p.703 of the report) and it was held that the word "director" in the UK Statute included a person who is de facto acting as a director even though not appointed as such (p.706 D of the report); and per Browne-Wilkinson: 
"I can see no reason why Parliament should have intended that the decision to disqualify should turn on the validity of the appointment."
The Respondent in the instant case acted de facto as a liquidator and as such obtained control and possession of the books and records of the company and failed not innocently or simply irresponsibly in regard to same, but so partially as to be in disregard to the interests of the creditors and in particular the Revenue.  While the role of the liquidator, receiver and examiner can be
distinguished one" from the other - each permit of a degree of autonomy that is distinguishable from that of auditor, director or officer. 

Taking all the factors together in this case I am satisfied that the Respondent's conduct in the past indicates that he cannot be trusted to act as a liquidator, receiver or examiner in such a way as not to be a risk to creditors.   In my judgment he is unfit to be concerned with the management of a company.  The fact that the evidence is related only to one company and that there is no evidence of any repetition of the conduct (earlier enumerated from (a) to (c) above) is taken into account. 

In this case I rose on one occasion to permit the Respondent time for reflection after his first broadside in response as (i) above to the case of the Applicant.  Despite this facility and an opportunity overnight to consider the presentation of his case, he continued in a vein as to betoken a total disregard in his conduct complained of.  He sought to justify his conduct and belittle its gravity and consequences.  I was left with the clear impression that Dr. Grimes deliberately acted as he did to frustrate the Applicant in even attempting to do his duties.  This is not a case of commercial misjudgment or mere irresponsibility. 

I have considered all that has been urged by the parties on a consideration of the decision in Re Sevenoaks Stationers (Retail) Limited on the range or period of disqualification.  In my judgment this case falls within the middle band of the scale of gravity and in my judgment seven years disqualification is the appropriate period for which the Respondent is prohibited from being concerned in the management of a company as liquidator, receiver or examiner for breaches of his duty when holding himself out as liquidator and purporting to act as a liquidator of the company.

Considerable debate arose on the hearing as to the special status of a revenue debt.  I have considered the dicta of Hoffman J. (as he then was) in Re Dawson Print Group Limited [1987] BCLC 601 at 604-605 and of Peter Gibson J. (as he then was) in Re Bath Glass Limited [1988] BCLC 329 at 333 which were approved by the Court of Appeal in Re Sevenoaks Stationers Retail Limited which considered the dictum of Sir Nicholas Browne-Wilkinson V.C. in Lo-Line Electrical Motors [1988] 2 All E.R. 692 at 697-698.  I do not consider it necessary to pronounce on the special nature of Revenue debts.  I content myself to note that the legislature has laid down those debts, the payment of which is to have priority in a winding up.  That is for present purposes sufficient indication of their special nature.  The "slight difference of judicial approach to Crown debts" adverted by Dillon L.J. in the Sevenoaks case ultimately led to "enquiries from the Inland Revenue to see what prejudice there may be to the employees and no trace of any prejudice had been found."  In the instant case no proven prejudice has been given.  This may possibly be explained {a full and detailed appreciation can only emerge when the Applicant has the complete books and records of the company) in the report of the Official Liquidator/Applicant ("EPC 2" p.33/4).

Throughout my consideration of this application I have borne in mind in order of date the dictum of Browne-Wilkinson V.C. in the Lo-Line Motors case that "the primary purpose of the  section is not to punish the individual but to protect the public against the future conduct of persons whose past record (as director) of insolvent company has shown them to be a danger to creditors and others ... and that ordinary commercial misjudgment in itself is not sufficient to justify disqualification" and if Murphy J. in Business Communications Limited -v- Baxter:
"Protection to potential creditors has been amplified by provisions, which require 'directors' to make and preserve appropriate records to enable them to manage the business of a company in a competent fashion." (Emphasis added)
By analogy the same test applies'to those who hold themselves out as liquidators.  I am satisfied that the Respondent acted in gross dereliction of his duty, in serious breach of commercial morality (as described by Hoffman J. in Re Dawson Print)- his actions were reckless and in disregard of ordinary business ethics and were not mere oversight or misjudgment - his acts were quite deliberate. 
The Respondent may on the following two conditions being fully complied with act as an auditor, director or secretary of a company:-
l.	That he has such professional qualifications as are necessary or required by law so to do.
2.	That at no stage or time whatever is he to have possession, custody or control of the seal of the company or any of its books or records of any kind whatsoever, so however he is entitled to have access to such books and records only as are necessary to enable him to discharge his legal obligations. 
Furthermore and in addition to the foregoing, that in respect of his acting as a director, he may only so act in respect of a company whose constitution and management provide for a board of directors of three or more persons.  These are the terms and conditions I see fit to impose to protect the public and at the same time permit the Respondent to make a livelihood. END OF JUDGMENT