RHS Energy Ltd (In Liquidation) v The Companies Act 2014 [2020] IEHC 82 (24 February 2020)

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JUDGMENT of Mr. Justice Quinn delivered on the 24th day of February, 2020

1. The applicant seeks an order pursuant to section 842 of the Companies Act 2014 (“the

Act”) disqualifying the respondent from being appointed or acting as a director or other

officer of any company for such period as may be determined by the court. The applicant

seeks in the alternative, a declaration pursuant to section 819 of the Companies Act 2014

restricting the respondent from being appointed or acting as a director or other officer of

any company for a period of five years, unless that company meets the requirements of

2. The application is grounded on an affidavit sworn by the applicant on 9 July 2018.

Replying affidavits were sworn by the respondent on 4 and 25 March, 2019, to which the

applicant has himself replied, in supplemental affidavits sworn on 19 March 2019 and 4

3. In the applicant’s grounding affidavit, he identifies a number of matters of concern in

relation to the manner in which the respondent conducted himself regarding the affairs of

the company. These relate to such matters as an absence of books and records,

inappropriate treatment of employees when the company ceased trading, issues arising

from the taking of deposits from customers at a time when the company was said to be

insolvent, concerns relating to unaccounted for turnover, VAT anomalies arising from

sales invoices, lack of cooperation with the applicant following his appointment, and

difficulties which the applicant says he encountered in tracing assets of the company.

4. An unusual feature of this case is that the company traded for a period of only three or

four months, the cessation having occurred in dramatic circumstances which I shall

describe below. The company had a very short total lifespan. It was incorporated on 10

November 2016, and ordered by the court to be wound up on 24 April 2017.

5. Another unusual feature is the series of events which occurred in the days immediately

6. On 10 November, 2016, the company was incorporated. On 14 November 2016, the

company entered into a series of agreements with a company called ES Energy Saving

Systems Limited (“ES”) whereby it acquired the assets undertaking and business of ES

7. The directors and shareholders of ES were a Mr. Michael Keane and Mr. James Gorham. It

is said that as part of the November 2016 Transaction, the respondent and the wives

respectively of Mr. Keane and Mr. Gorham became the shareholders of the company.

8. The business of the company was the installation of energy efficient heating equipment in

residential homes. By the November 2016 Transaction the company acquired the

inventory, stock and equipment of ES, together with customer lists, the trading name

“Let’s Talk Solar”, vehicles computers and associated equipment, printers, telephones,

intellectual property, customer database and work in progress. The agreement also

provided for the transfer of staff, and provided that certain identified trade debts of ES

totalling €130,374 would be assumed by the company. The consideration payable under

the asset purchase agreement was €128,000 payable by 24 monthly instalments of

9. On 14 November 2016, the company also entered into a short term business letting

agreement with ES for the use of the trading premises known as Energy House, Lough

Sheever Corporate Park, Mullingar, for a term from 14 November 2016 to 14 May 2017 at

10. On 18 November 2016 there was executed an Option Agreement conferring on the

company the option to acquire the premises at Mullingar for a consideration of €220,000

11. At some date after the start of February 2017, ES was itself placed in liquidation.

12. Following the entry into these transactions the company commenced its trade from the

13. Mr. Keane took up a position as installations manager although it appears that he

performed that role through a company owned and controlled by him or his wife, namely

14. Relations between the respondent and Mr. Keane deteriorated in January 2017 and,

according to the respondent, an unusual event occurred on 30 January, 2017, which on

the respondent’s account had a fatal effect on the business of the company. The

respondent says that on that day, Mr. Keane and Mr. Gorham attended at the premises in

Mullingar accompanied by their accountant, Mr. Malachy Stevens. He says that they

informed him that the directors and shareholders of ES had been advised that it was

appropriate to set aside the November 2016 Transaction. He says that they claimed that

the transaction was a “set up” and reference was made to provisions of the Act, including

15. The respondent says that on that date he was required to vacate the property. Mr. Keane

and Mr. Gorham arranged to have the locks changed and he was excluded from attending

16. Mr. Keane informed the staff that he was taking charge and made arrangements to have

17. On 31 January, 2017, the company’s solicitors, Messrs Larkin Tynan Nohilly, wrote to ES

and to Mr. Keane and Mr. Gorham. By this letter they informed them that the transactions

of November 2016 were valid and that the company intended to apply to the High Court

18. Further letters were exchanged between the parties and ultimately on 7 February 2017

19. The proceedings were issued by the company against ES, Mr. Keane and Mr. Gorham. The

company sought an injunction restraining trespass, and injunctions to restrain the

defendants from interfering with the business of the company, including but not limited

to, interfering with relations with employees, customers or suppliers, soliciting customers

or employees, interfering with the daily operation of the business and interfering with the

remittal of sales receipts from its agents or servants. The company also sought damages

for breach of the November 2016 agreements, trespass, tortious interference with

20. A replying affidavit was sworn in the injunction proceedings by Mr. Michael Keane on 8

February, 2017 supporting the assertion that the November 2016 Transaction should be

set aside. He pointed out that, contrary to the statements to this effect in the transaction

documents ES had not obtained legal advice in respect of the transaction. He said that he

had been advised by ES’s solicitors that the provisions of the agreement may not be

honoured by a liquidator of ES in circumstances where it provided for taking only certain

existing trade debts and not all of the trade debts and that this may constitute a ground

21. Mr. Keane exhibited a minute of a meeting of the EGM of ES on 3 February 2017 at which

a resolution was passed to the effect that “all legal agreements executed by or on behalf

of the company on the 18th day of November 2016 be and are hereby rescinded”.

22. Mr. Keane said that steps were being taken to place ES in liquidation and he believed also

that a liquidator would be required to apply to the High Court to pool the assets of ES

with the assets of the company and that “the liquidation of [ES] will trigger the liquidation

23. Finally, Mr. Keane stated that his main concern had been for employees who had

transferred and that his wife had “personally paid the wages of all employees last week

and that I will personally be paying the wages of the employees this week…”

24. Mr. Keane said that the company had little or no assets in the jurisdiction and that its

solvency is to be questioned in circumstances where it had mixed its trading activities

with those of ES which he said was “shortly to go into liquidation”.

25. From the limited papers exhibited regarding the injunction proceedings, there is a lack of

clarity as to what ultimately transpired in relation to the injunction. The respondent says

in his replying affidavit in these proceedings that the injunction was granted by the High

Court and upheld by the Court of Appeal. However, the injunction was ultimately

discharged on 27 April 2017 and the company never thereafter regained possession of the

property at Mullingar. The respondent complains that following his appointment the

applicant did not take the necessary steps to maintain the injunction and pursue the

proceedings, despite the respondent having pointed out to him the advantages of the

injunction, the central purpose of which he claims was to protect and preserve assets of

26. In these proceedings, the respondent refers throughout to the events of 30 January,

2017, as the “hijack” of the company. He says that the actions of ES and of Mr. Keane

and his associates had the effect of not only trespassing and interfering with the conduct

of the business of the company, but also of expropriating the assets and the records of

the company and his access to employees. This description of those events by him is at

27. The plenary proceedings which were commenced by the company on 7 February 2017

would, if pursued to a trial, have depended for their determination on the fundamentals of

the validity of the November 2016 Transaction which was contested by ES and by Messrs

Keane and Gorham. Those proceedings were never pursued to trial, and although the

matters complained of in those proceedings are at the centre of the respondent’s

opposition to these proceedings, this Court is not being invited to and could not in this

application adjudicate on the validity of the November 2016 Transaction. I shall return

later to the impact this matter has on the determination of the application.

28. On 28 February, 2017, a statutory demand was served on the company by a creditor. On

23 March, 2017, a petition was presented for the winding up of the company. On 24 April,

2017, an order was made for the winding up of the company and the appointment of the

29. There is a degree of uncertainty and controversy as to when exactly the company ceased

trading. It seems clear that the staff were at least laid off if not actually made redundant

in or around 2 February 2017. The applicant claims that one of the failures on the part of

the respondent was to regularise the redundancy of staff by issuing formal notices of

termination, which had the effect he claims that they were unable at that time to claim

30. The applicant says that following his appointment he was unable to identity and secure

assets and records of the company. He says he visited the company’s trading premises at

Mullingar to find that the premises had been “stripped, and that there were no assets or

books or records there”. He says that he made a number of attempts to contact the

respondent in the days following his appointment and none of his calls were answered.

31. The applicant says that on information received by him from an ex-employee, he was

given to believe that the respondent had removed the company’s assets outside of the

jurisdiction to Northern Ireland and this led to a series of events on 27 April, 2017.

32. The applicant says that following his unsuccessful efforts to locate the respondent, he

received information that the company had been trading from a location within the

premises of Kingspan in Newry, Northern Ireland. He says that he attended there on 27

April 2017 and was told that although the respondent had been negotiating for a period of

time to rent office space adjacent to a factory there, these arrangements had not come to

fruition and instead the applicant was informed that the respondent had rented a room at

33. The applicant says that when he arrived at the Mourne Court Hotel he inquired at

reception if any rooms had been booked in the name of the company or of the

respondent. The receptionist informed him that a meeting room had been booked in the

respondent’s name and directed the applicant to that room. The applicant says that

entering that room he saw a number of people, some of whom he says that he knew to

be ex-employees of the company, working at laptops. He announced that he was looking

for the respondent who then identified himself to him. The respondent said that he had

been looking to speak to the applicant and suggested that they leave the room to discuss

34. In these discussions the respondent said that assets of the company had been taken by

“his former business partners in ES Energy Saving Systems Limited”. He denied that he

had been involved in the removal of any assets from the company’s premises.

35. The applicant says that he informed the respondent that unless he was willing to assist

with the voluntary return of assets to the company, he would bring the matter to the

attention of the Police Service of Northern Ireland whose nearest office was only 300

36. The applicant then describes a series of further encounters during which he overheard the

respondent speaking with a Mr. Joe Carroll, a former employee of the company, at which

the applicant says they were discussing what versions of events they would present to the

applicant as to why they either were not in possession of assets of the company or why it

37. Ultimately, after a number of further conversations the respondent brought the applicant

to a lock up unit in Newry where it was revealed that there were retained at that location

two company vans, along with certain office furniture and stock of the company. The

applicant then arranged for these items to be taken away for realisation by him as

38. Apart from the tangible assets such as vans, office equipment and company stock, the

applicant says that he was not afforded any access to books and records of the company

39. The respondent says that the events of 30 January, 2017, or, the “hijack”, had the effect

of depriving him and the company of access to critical trading assets which were seized

40. The respondent’s account of the events of 27 April, 2017, is entirely different to that of

the applicant. He says that insofar as any of the assets of the company were still in his

possession when he met the applicant on 27 April, they had been brought to these

locations by him only as a method of protecting against any further expropriation of

assets by Mr. Keane and his associates. He says that the persons working in the room at

the Mourne Court Hotel were not, with the exception of one person, Joseph Carroll,

employees of the company. He says that the others in the room were residents of Newry,

had never been to Mullingar, and had never worked for the company.

41. The respondent claims that after the liquidator was appointed he had been available if the

applicant had sought to make contact with him. He says that the reason the applicant had

difficulty accessing company assets, books and records, including computerised records,

was that all assets of material value had been removed by Mr. Keane as part of the

42. The respondent says that it was his strategy after the “hijacking” to move the business of

the company to Newry as part of a link up of Kingspan, with whom he had a good

relationship. He says that he believed that it was within his remit to move assets in

circumstances where he believed that he was acting “honestly and reasonably” in what he

says that were “the best interests of the stakeholders and customers who had paid

43. The respondent says that his initial move in early February had been to set up a new call

centre, employing Joseph Carroll, and using a room at the Carrigdale Hotel in Co. Louth

from which he had started successfully, he says, selling product. He then says that as he

did not have the readily available cash with which to pay Mr. Carroll, he agreed to give

Mr. Carroll the two vans which were the property of the company. He says that this was

necessary in order to “get the company working again” and that in any event the vans

were old, sign written, dented, rusty and scruffy. He said that the company at that stage

had no further use for them, as they would be using Kingspan – approved installers.

44. The respondent says that there was nothing sinister therefore about the activities at the

Mourne Court Hotel and that when Mr. Carroll gave directions to the location of the lock

up premises at Newry and they arrived at that location and found the vans there the

respondent claims to have been surprised to find also the office furniture and other items.

45. I now turn to the individual headings of complaint relied on by the applicant in these

46. As early as 19 April, 2017, an advertisement for jobs appeared on a digital “jobs board” in

47. The respondent says that in March he had commissioned the Newry job centre to

advertise for call centre staff in Newry for “RHS”. He says that although there were

applicants, none were interviewed and after the company ceased trading these

48. The respondent says that he renewed the instruction to the Newry job centre on 19 April,

2017. He says this was intended for a different company owned by him in the U.K. but

says that the job centre simply did not change the name on the relevant website.

49. The applicant’s evidence is that the business name Let’s Talk Solar was still registered in

the name of the company and yet was being used in an advertisement for employees, as

of the time of the applicant’s appointment, and in the weeks prior to the applicant’s

appointment, being times when the respondent claims that he no longer had access to

the assets and personnel required for trading the business of the company.

50. The respondent offered an explanation that this trading name was now being used by a

company of a similar name incorporated in the UK. No verification was provided for this

explanation, and the balance of the evidence is to the effect that at a time when the

company had ceased trading, the respondent was deploying this asset either for his own

benefit or for the benefit of another company being promoted by him.

Ascertainment and retrieval of assets following liquidator’s appointment

51. The respondent’s explanation for the events in the days immediately following the

appointment of the applicant is almost entirely dependent on his own account of what he

describes as the “hijack” of 30 January, 2017, and he refers to the grounds on which the

injunction was sought. He attaches all responsibility for the difficulty of access to assets to

others, notably Mr. Keane and his associates. This court cannot determine the merits of

the issues which were the subject of the plenary proceedings. However, even taking his

account of the “hijack”, the respondent cannot escape the obligation, as the sole

remaining director at the time of the appointment of the applicant, for the safe custody of

assets and records and the return of those assets to the liquidator immediately following

his appointment. In his replying affidavits, there is at a minimum an acknowledgement

that certain of the assets which were located in the lock up premises near Newry were in

fact assets of the company. In relation to the trucks, albeit that they had a limited value,

he acknowledged that his “purpose” was to make them available to Mr. Carroll in lieu of

wages. Of particular note in relation to this item is that this explanation was offered only

as an alternative after he had initially indicated that he had no further information as to

52. The applicant says that books and records of the company were not made available to

him on his appointment. He emphasised that as a director it is the respondent’s

responsibility to maintain and protect the company’s books and records prior to the

appointment of a liquidator and that he has failed to carry out this task.

53. The respondent identifies other parties as responsible for this issue.

54. Firstly, he says that a person Wiola Mazurek, who he describes as a “part qualified

accountant” who had been employed as an accountant in ES was responsible for all the

books and records. Inconsistently with this, he says that when the company acquired the

“Transferred as an employee to RHS and retained the title of accountant, but I took

away the responsibility for keeping all the books and records and the payroll except

for issuing invoices in accordance with the RHS procedure 002 for invoicing and

55. The respondent says that Ms. Mazurek kept the sales ledger of the company on a

computer on her desk and accessed it from a laptop “that she took home occasionally”.

56. Secondly, the respondent also says that all the other books and records including the

payroll, VAT and PAYE accountability and calculations were kept and carried out by

Michael Dolan & Company, Chartered Accountants, an external firm based in Ferbane, Co.

Offaly, and a sister business of that practice, Handy Dolan Consultants. The respondent

says that his instructions to Ms. Mazurek and to Messrs Dolan were to have weekly

meetings to pass over all relevant sales information and copy invoices. The respondent

then says that after the events of 30 January 2017, he was informed by Messrs Dolan

that “Due to excuses by Wiola they had had no weekly meetings with her during January

2017”. He says that he was totally unaware that the weekly meetings were not happening

because he was concentrating on sales installations and procurement and he refers to this

discovery as a “serious lapse of governance by both Wiola and the accountants”.

57. The respondent then says that apart from certain sales ledger invoices which have been

available to the applicant, “the remaining books and records were with the chartered

58. Throughout the affidavits of the respondent, the dominant theme in relation to books and

records, both hard copy and electronic, is that they were the responsibility of others,

whether Ms. Mazurek, or Messrs Dolan. In taking this approach the respondent ignores

the fundamentals of the duty to ensure that adequate accounting records of the company

59. Section 281 of the Act confers on the company the obligation to maintain adequate

accounting records. Sections 286 and 609 impose sanctions – criminal and civil

respectively – on directors where they fail to take reasonable steps to secure compliance

with section 281. In the context of both of these sections, the Act affords a defence in

circumstances where a director establishes that he has taken all reasonable steps to

secure compliance with section 281 or 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 those sections were complied with and was in a position to

discharge that duty. Nowhere in the replying affidavits does the respondent proffer

evidence that such a regime was in place. If anything, the persistent references to the

role of Ms. Mazurek, Mr. Keane and the external auditors reveal, at its most benign, a

level of delegation without the attendant supervision or control of a director which

amounts to an abandonment of responsibility for compliance with this duty.

60. The applicant notes that redundancy claims were made by employees as of 2 February,

2017, but that company’s payroll records were poor and staff were not supplied with

P45’s. He says therefore that redundancy entitlements and other entitlements on

termination such as arrears of holiday pay, payment in lieu of notice or arrears of wages

61. The respondent says that as a consequence of the events of 30 January, 2017, he had no

alternative but to make staff redundant or at least lay them off. He said that in

circumstances where the assets and trade of the company were “hijacked” funds would

not be available to pay staff and the decision to lay them off was taken in order to curtail

further debts being incurred which he believes to have been an honest and reasonable

62. That explanation may have had some force were it not for the inconsistent assertion he

makes that while formal redundancy notices and paperwork were not attended to, Mr.

Keane had by that time moved to take over the business of the company and therefore

employees would have transferred under “TUPE rules” (Protection of Employees (Transfer

63. This is another aspect of the case where a definitive finding would depend on which

version of the events of 30 January, 2017, is accepted. It seems to the court however

that whether the employees transferred to another business were “hijacked” and

transferred out of the company or whether the respondent simply believed that it would

be improper to continue their employment by reason of the company’s inability to trade

after the “hijacking”, the processing of statutory notices and certificates to enable

employees to reclaim redundancies and arrears of statutory entitlements were never put

in place. The excuse proffered by the respondent that he was forcibly removed from

access to books and records, including payroll information, does not, it seems to me,

afford a credible justification for failure to ensure that such statutory information was duly

64. The applicant says that the decision of the respondent to initiate on behalf of the

company an application for an injunction was made at a time when there was a serious

doubt as to the ability of the company to meet the undertaking as to damages.

65. In the affidavit grounding the application for the injunction, which was sworn on 7

“I say that I am prepared to give an undertaking as to damages on behalf of the

plaintiff if required for the purposes of the interlocutory injunctions sought.”

66. The applicant says that in giving this undertaking at a time when the company knew or

ought to have known “that it was entirely unlikely to be in a position to meet any such

undertaking, the company, at the direction of the respondent, did not comes before the

67. The applicant’s concern as to the propriety of giving such an undertaking is focussed, not

on the substantive matters complained of in those proceedings, but on the trading and

financial status of the company when the undertaking was given. The substantive matters

which were the subject of the proceedings have never been the subject of a final

determination by a court of law and prima face the respondent appears to have been

taking measures to restrain what he characterised as unlawful measures being taken to

destroy the business of the company. I shall return to this issue, but I am not prepared to

find that the commencement of those injunction proceedings, including the giving of the

undertaking, was so inappropriate a measure as to, of itself, justify the making of the

68. The applicant refers to instances of the company receiving deposits from customers or

potential customers on a series of dates when it ought to have been clear to the

respondent that the company was at the very least in financial difficulty, and unable to

69. He refers in particular to a series of deposit payments made between 27 January 2017 (a

deposit of €2,500 made by a Mr. Niall O’Connor) through to dates in March 2017.

70. In fact, the evidence exhibited by the applicant refers to deposits paid by customers from

as early as 29 November 2016 and the applicant has exhibited correspondence from

these customers protesting that they had been unable to contact the company to secure

either return or the deposit or that the relevant installation would be made.

71. The respondent put forward a variety of explanations in relation to this issue. In relation

to the earlier deposits, he says that the relevant installations would have been made were

it not for the intervention of Mr. Keane on 30 January 2017. In respect of deposits made

after that date, he says that insofar as the installations were not made the deposits were

directed to be paid to the company’s bank account and therefore ought to have been

available to the liquidator. He says that there was no intention or action on his part to

take those deposits without being able to make the installations, and that the deposits

may have been capable of being returned were it not for the freezing of the company’s

72. The liquidator has exhibited the correspondence from the relevant customers and the

company’s bank statement showing the payment of certain of these deposits from time to

time, and thereafter payments made out of the relevant account. Therefore, it is clear

that insofar as installations were not delivered matching deposits made, no measures

were taken to ensure that such funds would be available for return to the relevant

73. Whatever the merits of the events of 30 January, 2017, it is clear that at a time when the

business of the company had been, to put it at its very least, disrupted by those events

and when there was at the very least serious uncertainty as to the ability of the company

74. The respondent asserts that the company was still solvent in March and that payments

were being lodged to the bank account which was ultimately frozen.

75. In support of the claim that the company was still solvent when receiving deposits, the

76. The respondent says that the principal asset still available to the company even at the

time when the liquidator was appointed was the option to purchase the property at

Mullingar which he says was worth in net terms over €100,000. The applicant says that it

was wholly unrealistic to believe that he as liquidator would be in a position to fund the

payments necessary under this option in the speculation that the property could be

realised for an excess over its encumbrances and money mentioned by the respondent.

77. The reference to draft accounts prepared by Messrs Dolan is a reference to a set of draft

financial statements for the company, apparently prepared by Messrs Dolan & Company,

78. The document exhibited is described as draft “Management Accounts for the period

ending 31 December 2017”. Reliance is placed on this document by the respondent in

that he states that it shows a projected gross profit for the year ended 31 December 2017

in the sum of €1,888,588, yielding a net profit after administrative expenses of €807,973.

79. This document is a draft. It bears no signature and no information is provided as to when

or by whom it was created. No direct evidence was proffered as to the provenance of

these “Draft Management Accounts” or when they came into existence. They are

therefore of no assistance in the context of understanding the solvency or otherwise of

the company in the period immediately prior to the appointment of the applicant.

80. The applicant exhibits an extract from a sales ledger covering the period from 16

November, 2016, through to 2 February, 2017. He says that based on his investigations

of lodgements made to the company’s bank account during that period there is a shortfall

of some €558,206.45 and that this discrepancy has not been explained.

81. On this issue the respondent again refers to the firm of chartered accountants having

been “running this and ensuring compliance with VAT rules”. He says that much of the

discrepancy would be accounted for by reference to installations made or delivered by the

company pursuant to orders which had previously been placed with ES and that there was

82. The respondent says that he believes that the figure referred to by the applicant is

excessive and that the cash deficit that he can best calculate is in the order of €100,000.

83. The respondent again attributes responsibility for this discrepancy to everyone else

involved in the company expect except himself. He says that Ms. Mazurek was responsible

for arranging that payments from sales would be paid to discharge accounts of ES, and to

discharge certain revenue debts owed by the company, and that the applicant had not

recognised these as costs which ES was obliged to discharge pursuant to the November

2016 Transaction. He then asserts that the unaccounted for turnover was a lower amount

of €100,000 and attributes this “misappropriation” to the conduct of Ms. Mazurek and Mr.

84. The respondent places reliance on the fact that he had instructed that Ms. Mazurek to

work with the external accountants Messrs Dolan to implement an invoicing procedure

and a form of “weekly audit” by Messrs Dolan. The premise of this reliance is the

proposition that by doing so he did not need to concern himself with the supervision of

sales and due application of receipts. He acknowledges that significant cash receipts were

unaccounted for but attributes responsibility to Messrs Dolan and Ms. Mazurek. Again, this

is to ignore his overall responsibility as the sole director of the company.

85. The applicant says that after the November 2016 Transaction the company continued to

raise invoices using the VAT number of ES. He says that this was inappropriate and a

breach of VAT law. He says that included in the sales turnover listings provided to him in

respect of the company were an extensive number of invoices referenced not in the name

of customers but in the name of “ES Energy” and that these in fact corresponded to sales

86. The respondent makes no meaningful attempt to explain why the ledger sales invoices

would include sales made by ES, other than to refer again to the November 2016

Transaction and to state that a parallel trade was being undertaken, pursuant to the

company’s obligations to honour orders which had been placed with ES. Even taking this

explanation at its best having regard to the terms of those agreements, this would not

explain why the sales ledgers of the company would include sales properly attributable to

ES or why such a large number of items within the sales ledger are referenced “ES” in

87. Under this heading the applicant refers to the events of 27 April, 2017, when he met with

the respondent at Newry. He exhibits also certain email correspondence exchanged

88. It appears that the respondent emailed the applicant after their meeting on that day

identifying what he described as assets which would assist the liquidator in his

realisations. He referred the liquidator to the option to purchase the building at Mullingar

which would have required the liquidator to source a buyer for the property, exercise the

option and make a payment of, he says, €90,000 to ES Energy, which would have

89. He refers also to payments which were lodged in the account of ES at Bank of Ireland, in

respect of cheques payable to “Let’s Talk Solar”, suggesting that the culpability in this

90. The respondent referred the applicant to the existence of the injunction proceedings,

informing him that he ought to pursue that matter so that those responsible for depriving

the company of its trading assets could be “brought to account”.

91. Reference was also made to certain other bank accounts into which funds of the company

had been lodged by Mr. Keane and Ms. Mazurek and to potential claims for damages and

compensation against Mr. Keane, including a claim that Mr. Keane was starting up a

business again in breach of a two – year exclusion provision in the November 2016

contracts or in breach of a non – compete clause which he had entered with the company.

92. A predominant feature of this correspondence, as with many of the other claims made by

the respondent, is the suggestion that every other person associated with the business of

the company was responsible for the insolvency of the company and for the difficulty of

realising valuable assets, again ignoring his duties as the sole director of the company.

93. The applicant replied to the respondent with a number of queries and says that he

94. This correspondence led ultimately to a further communication from the respondent on 2

June, 2017. The respondent stated that he had been unwell, and he purported to provide

more information regarding assets and their whereabouts. Again, however, the

respondent said that he had been unable to exercise authority or responsibility in relation

to assets of the company after the events of 30 January, 2017, and that following those

events he had “made the very reasonable and correct decision to move them to a safe

location which has proved to be in the interests of the creditors”. He continued: “you have

subsequently been told where the remaining assets are. If you are expecting me to be

responsible for the recovery of company data. I cannot accept that. Since obtaining

access to the office after the injunction was put in place, I have made no attempt to

check any data, records etc remaining as it was clear from the lack of assets remaining on

the evening of re-entry that all the data, records and key asset had been removed.”

Again, the recurring and predominant theme is to fix Mr. Keane and his associates with

95. In the notice of motion, the liquidator seeks an order of disqualification under section 842

or in the alternative a restriction order under section 819. In his grounding affidavit he

says that in all of the circumstances referred to by him in the affidavit

“It is appropriate that I seek both Mr. Palmer’s disqualification and ask that the

court holds him personally liable for the debts of the company.”

96. That statement is made in a very general fashion without identifying which aspects of the

respondent’s conduct would justify declarations of personal liability for the debts of the

company. Nor does the liquidator identify anywhere which provision of the Companies Act

2014 he would invoke to fix the respondent with personal liability for the debts of the

97. Although seeking a disqualification order the liquidator states in his conclusion that he

believes that the respondent has not demonstrated that he acted either honestly or

responsibly in the management of the company, which is the lower test referable only to

restriction applications. This conclusion is repeated in his second and third affidavits.

98. Unhelpfully, the applicant does not, either in the notice of motion or in the grounding

affidavit, identify which of the subsections of section 842 are relied on for a

disqualification order. During the hearing the applicant’s solicitor indicated that the

grounds being invoked were sub-sections 842 (b) and (d). Section 842(b) relates to

breach of duty and section 842(d) concerns conduct rendering a person “unfit to be

99. Much of the narrative relied on by the respondent to resist the making of any orders in

this application concerns the actions taken by ES and by Messrs Keane and Gorham in

100. The applicant states that in applying for the injunction the company did not come before

the court with clean hands, particularly in giving an undertaking for damages when the

respondent knew or ought to have known that it was unlikely to be in a position to meet

“Having crystallised the company’s redundancy obligations as well as the other

substantial liabilities that had been booked in the company’s name, there was never

“the court was not advised of the fact that the company’s staff had been made

redundant and as such would not be in a position to continue to trade. This fact

appears to have been withheld from the court for reasons unknown to me”.

101. Although the applicant expresses his view that the injunction proceedings were

inappropriate, this concern appears to derive from the giving of the undertaking in the

prevailing circumstances. Importantly, he does not say that the plenary action

commenced was wholly without merit or that the grounds on which the injunction was

102. The narrative of the dispute between the company and the respondent on the one hand

and Messrs Keane and Gorham on the other hand is unusual. The affidavits exchanged at

the interim injunction stage are likely to reflect only a part of the true narrative of all the

matters in dispute between the respective principals. Whilst the unilateral “rescission”

actions of Messrs Keane and Gorham were clearly aggressive, it seems to me that for the

respondent to lay all of the blame for the misfortunes of the company and for his inability

as a director of the company to be in a position to deliver assets and books and records of

103. Where the truth lies as between the positions adopted by the protagonists in that dispute

cannot be determined by this court. Therefore, however implausible may be the

respondent’s reliance on the position taken by the company in those proceedings, in the

absence of a finding that the injunction application was based on a fictitious account, this

court should recognise that the actions of Messrs Keane and Gorham at least contributed

to the deficit and the insolvent liquidation of the company. For this reason I conclude that

104. Section 845 (3) of the Act provides that on the hearing of an application for a

disqualification order the court may as an alternative, “if it considers that disqualification

105. This brings the court to a consideration as to whether the respondent has established that

he acted honestly and responsibly in relation to 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 the section. This requires an analysis of those issues by reference

to the test set out in the seminal judgment of Shanley J. in Re La Moselle Clothing Ltd

[1998] 2 ILRM 345, approved in numerous judgments of the Supreme Court and this

court. The factors identified by Shanley J. to be taken into account were as follows:-

“(a) the extent to which the Director has or has not complied with any obligation

(b) the extent to which his conduct could be regarded as so incompetent as to amount

(d) the extent of the director’s responsibility for the net deficiency in the assets of the

(e) the extent to which the director in his conduct of the affairs of the company has

displayed a lack of commercial probity or want of proper standards.”

106. In Re Tralee Beef and Lamb Limited [2005] 1 ILRM Finlay Geoghegan J. added the further

criteria of considering whether the director had complied with his common law

107. I have already considered all of the areas of concern identified by the applicant, and

(1) The explanations offered for the absence of books and records of account of the

company are all based on attaching responsibility to the employee Ms. Mazurek, the

external accountants Messrs Dolan & Co. and to Mr. Keane. The persistent

narrative on the part of the respondent is that these and other third parties are

responsible to the exclusion of himself for his inability to produce comprehensive

books and records to the applicant. In this regard, he has failed to establish that as

the sole director with ultimate responsibility for such matters he acted responsibly.

(2) The respondent relies on what he describes as a period of “parallel” trade as a

justification for the practice of raising invoices in the name of ES and using its VAT

number. I am not persuaded that this practice was justified by the agreements

(3) I am not satisfied that the respondent has demonstrated he co-operated as far as

could reasonably be expected in relation to the conduct of the winding up. In

particular, the respondent caused the applicant to undertake a “search” for the

respondent and for assets by his visit to Newry on 27 April, 2017, leading

ultimately to the tracing of assets of only very limited value at that location.

(4) The discrepancy between the value of sales recorded in the sales ledger and the

payments received into the company’s bank account, over the limited duration of

the company’s trading is not satisfactorily accounted for. Even on the respondent’s

own account he acknowledged that sums in the order of €100,000 were

unaccounted for but attaches responsibility for this discrepancy to persons other

than himself most notably Ms. Mazurek and the external accountants.

(5) The respondent sought to explain the continued practice of taking deposits from

customers throughout January, February and into March by asserting that the

company was solvent at the time. The evidence proffered to support this

explanation was that the company was “trading well” and that the accountants had

estimated significant profits for the full year 2017, a wholly speculative proposition.

(6) The applicant’s evidence that the trading name “Let’s Talk Solar”, which was a

registered business name of the company, was being used by the respondent for

the benefit of the company itself, was not contradicted by any evidence of the

respondent having acquired rights to the use of the name independent of the

108. Taking into consideration all of the above matters, and the factors identified by Shanley J.

in Re La Moselle Clothing Limited (op. cit.) I have concluded that the respondent has not

demonstrated that he acted honestly and responsibly in relation to the affairs of the

company, or that when requested to do so by the applicant, he has cooperated as far as

could reasonably be expected in relation to the conduct of the winding up. Accordingly, I

shall make a declaration pursuant to section 819(1) that he shall not, for a period of 5

years, he appointed or act in any way, directly or indirectly, as a director or secretary of a

company, or be concerned in or take part in the formation or promotion of a company

unless the company meets the requirements set out in section 819(3).

Result: Judgment in Favour of the Applicant.

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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> RHS Energy Ltd (In Liquidation) v The Companies Act 2014 [2020] IEHC 82 (24 February 2020) URL: http://www.bailii.org/ie/cases/IEHC/2020/2020IEHC82.html Cite as: [2020] IEHC 82

High Court of Ireland Decisions