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COMPANY LAW Directors Statutory Duties
In Ireland, company directors must act in good faith, honestly and reasonably and in the interests of the company. They must also have regard to “the interests of the company’s employees in general, as well as the interests of its members”. As we set out below, there are serious implications where directors choose to ignore these duties.
Company directors are obligated by statute to always act in the best interests of the company, and this includes the company’s employees as well as its shareholders. Failure to do this will often result in the director being disqualified from holding office for lengthy periods.
The High Court issued one of its longest disqualifications in a recent case (Kirby v Rabitte). In this case the director of the company kept no books or records, and the court drew the conclusion that the company was engaged in illegal activity. The court took a serious view of this and ruled a 14 year and three month disqualification on the director.
The court, in reaching its decision, took into consideration the need to protect the public from directors who have a history of leaving creditors unpaid, in this case the Revenue Commissioners.
In general, a core element in such cases is whether the director acted ‘in good faith’ . If a director can demonstrate to the court that they were indeed acting in ‘good faith’ then it is unlikely such proceeding would succeed.
A plaintiff was involved in a minor road traffic accident at the traffic lights junction on the Stillorgan Dual Carriageway near the Radisson Hotel. The plaintiff claimed that she suffered whiplash injuries when the defendant’s Land Rover car collided with the rear of her Audi car while she was stationary at the traffic lights. In the €60,000 claim, the plaintiff alleged that she had been shocked and distressed by the collision. She told the court that she had no intention of taking a case against the defendant until she was advised by her doctor that she had suffered whiplash injuries to her neck and shoulders and required medication for pain. The defendant, in his defense, told the court that his car had rolled forward a few yards into the defendant’s car causing damage to her bumper for which he paid her just under €1,000 for a replacement bumper. Photographs were produced in court taken by a private investigator showing the plaintiff carrying out activities without showing any sign of difficulty, these included carrying shopping bags and easily getting into and out of her car. On the photos being produced, the plaintiff agreed that the person in the pictures was indeed her. The defendant, having paid for the replacement bumper, was flabbergasted when the summons was served on him. The judge found the evidence of the defendant was detailed and credible and that all the evidence demonstrated that the accident was minor. The judge further stated that the case smacked of opportunism in what looked like an overstated injury following a minor accident. The case was dismissed with costs awarded to the defendant. This case shows the risks in taking these types of accident cases to court. The plaintiff in this case, instead of being awarded money for whatever injury she actually incurred, was left with no award and a court order to pay the legal costs of both sides in the case which will run to several thousand Euros. Collins v Tansey Dublin Circuit Court 12 May 2023.
Benson Fuel Ltd is a small family business involved in the distribution of liquid gas in south Wexford and Wexford town under a contract with Flogas Ireland Ltd. It has been a long-standing business relationship under contract which was renewed from time to time. Flogas sought to terminate the contract under the terms of the last agreement entered between the parties as it wanted to establish a new direct distribution model. Flogas claimed that upon the expiry of a written agreement, in September 2021, the contractual relationship between the parties ended. After that they claimed that they would transact business between each other on an “orders placed basis”. Flogas claimed that there was no obligation on it to give any notice of termination at all and, alternatively, a nine-month notice period given to Benson was reasonable in all the circumstances. Benson sought from the High Court an injunction restraining the termination of the alleged agreement pending the full hearing of its case. Flogas opposed the application. Benson has two full-time employees, David Benson and his nephew, Alan Benson jnr. The business was set up by Alan Benson snr in and around 1978 and has been distributing propane and LPG in the south Wexford area since about 1982. Benson was a profitable company and there was no suggestion that it had failed to perform its obligations as exclusive distributors. The arrangement with Flogas accounts for about two-thirds of Benson’s revenue. David Benson believes the company would have to enter liquidation if the distribution arrangement with Flogas is terminated. Flogas and Calor Gas hold 90% of the market and it would be difficult to find an alternative supplier, it was submitted to the court. The judge considered whether damages would prove an adequate remedy should the plaintiff succeed in its action or whether an injunction was merited at this stage. The judge did not think there was any basis, in the absence of any detail of significant financial loss, to conclude that the undertaking as to damages (if it loses the case) provided by Bensons was worthless. Benson’s undertaking as to its ability to pay damages had to be of substance. The judge ruled that he was satisfied Benson had established a serious issue to be tried. In his decision on the injunction, the judge ruled that the balance of convenience supported the grant of an injunction for a short period restraining the defendant from terminating the existing arrangements pending the trial of the action. Benson Fuels Limited v. Flogas Ireland Limited [2023] IEHC 214.
It cannot be said often enough that injuries alone will not be compensated in any court. A plaintiff must establish negligence on the part of the defendant and that this directly caused the injuries complained of. In a recent High Court case, a student suffered injuries having been thrown by a horse which ‘bucked ‘and threw her to the ground. However, the plaintiff lost her case as she failed to establish that the equestrian centre had placed her on an unsuitable horse, without any prior warning, and was therefore negligent. The student was an experienced rider and that day she was riding a horse called Mocha when it unexpectedly bucked and threw her to the ground. She suffered back injuries as a result and sued the equestrian centre. In short, the plaintiff claimed that she had been given a horse with a known propensity for bucking and was not warned in advance and was therefore placed in danger. The plaintiff student tried to rein in the horse when Mocha started bucking and claimed that Mocha did not obey but instead sped up and veered left throwing her off. A witness for the plaintiff blamed the accident on the horse and not the rider. The defendant stated in evidence that the accident was due to rider error and not because the horse was unsafe or had a poor temperament. The High Court found in this case that two sets of experts were basically disagreeing with each other as to who was culpable. The chief issue here was whether Mocha had a propensity to buck which the plaintiff should have been warned about. The court accepted the defendant’s evidence that a bucking horse would not have been used by the riding centre. In addition, several of the riding centre’s staff attested to Mocha’s good temperament and confirmed no issues had arisen in the past with her. The court also found that the plaintiff’s witness evidence was less than satisfactory and in some areas was inconsistent. The riding centre had not followed up with this witness after he had commented in court on Mocha’s propensity to buck. The court dismissed the plaintiff’s claim finding that the defendants could not be held liable for the horse bucking. The court favored evidence given on behalf of the riding centre, that the horse did not have any known propensity to buck and there seemed little evidence to suggest that Mocha was not a suitable horse for the rider. Allen v Clonshire Equestrian Centre [2023] IEHC 10.
Under the old system, where a plaintiff suffered multiple injuries, each of his injuries was assessed and added together. Under the new regime, according to the personal injury guidelines, a sum is awarded for the major injury and an uplift is then awarded to reflect any lesser or other injuries. The object is to ensure that the overall award is proportionate. A recent High Court case, in December 2022, showed how the new guidelines were implemented where the plaintiff still received a generous sum in compensation despite fears that awards would be less than adequate under the new system. The plaintiff was rear ended by a van and basically claimed two types of injury. Firstly, his shoulder injury required surgery following complaints the plaintiff made of intermittent pain and difficulty with lifting and sleeping. Several months later, he was still complaining of discomfort and received a course of steroid injections. Secondly, the plaintiff complained about psychological problems affecting his mental health. His work, social and sporting activities had all been severely affected. He was diagnosed with a depressive illness some years after the accident. The Plaintiff’s legal team put a value of € 60,000 on his shoulder injury and € 20,000 for his psychiatric issues. The insurance company for the defendant offered far less for his shoulder injury and only € 5,000 for his psychiatric injuries as they described that as a minor disability. The Court found the plaintiff was honest in describing his injuries. It accepted that surgery had helped him, but the plaintiff continued to suffer pain, discomfort and limitation and it appeared these symptoms would be permanent. His swimming activity had been almost totally cut short. The court awarded him €55,000 for his shoulder injury and € 20,000 for his psychiatric injury. They attributed €50,000 for pain and suffering to date and € 25,000 for pain and suffering into the future. Special damages were added to the general award of € 75,000. McDonnell v Upton Foods Ltd [2022] IEHC 680
Two financial funds and receivers appointed over three Dublin housing developments sought an injunction in the High Court to restrain the alleged owner of the developments from making public confidential financial information about the two financial companies. The plaintiffs sought a temporary injunction restraining the person in possession of the information from using, publishing, distributing or disseminating any information he claimed to have acquired about the financial funds. In 2022 the plaintiffs appointed receivers over three developments owned by Victoria Homes which is the subject of proceedings currently before the High Court. The court was told that the individual sent an email on 14 th April stating ‘the whole Lotus loan book accounting to €110 million'. He claimed the file he had contained the names and personal details of everyone on the Lotus Decalia DAC loan book. His email said it ‘makes great reading’. The defendant claimed that the financial information was sent to him by somebody working for the financial firms. The email was read to the court. The High Court granted the temporary injunction restraining the person from publishing, distributing or disseminating any information he had in his possession about the financial funds. Emerald Sky 11 DAC and Lotus Decalia DAC v Patrick Byrne High Court 19 April 2023
A farmer who received €140,656 under the Scheme and did not include it in his annual tax returns received a Revenue demand for €72,728 which they claimed was a tax liability on the Scheme’s payment. The farmer appealed their demand to the Tax Appeals Commission. It was argued on the farmer’s behalf that the Revenue Commissioners were out of time to issue the amended assessment under tax law which imposes a four-year time limit. The Appeal Commissioners agreed that the Revenue Commissioners were incorrect to issue the demand as it ruled that the assessment was outside the time limits under the Tax Acts and directed that the assessment be reduced to zero. The Appeal Commissioners, on reviewing the facts, were satisfied that the farmer’s tax return for 2011 was ‘complete, accurate and truthful’. It ruled that it was immaterial whether the Scheme’s payment to the farmer was taxable as the Revenue Commissioners were out of time in issuing their amended assessment. The farmer had several land interests during the year of the assessment and in May 2011 incorporated his farming business into a company along with transfers of assets and the herd numbers. In October 2011 he received the €140,656 payment under the Scheme to his bank account and the sum was subsequently transferred to the bank account of the new company. The farmer did not include the Scheme’s payment in hie personal income tax return for 2011 but did include it in corporation tax returns for the year ending May 2012. A Farmer v The Revenue Commissioners Tax Appeal Commission, April 2023.
Some judges dealing with Bankruptcy cases over the years took the view that a Bankruptcy Petitioner brought his action on behalf of all creditors and not just himself and so costs did not necessarily follow even if the petitioner was successful, and the debt was paid. A recent High Court case, in December 2022, in effect overturned this practice and now a debtor must also pay all the costs of a Bankruptcy petition against him even where the debt is paid off at an early stage. In this case the Revenue Commissioners had a judgement against a solicitor and issued a Bankruptcy summons in 2019 to enforce the debt. The Bankruptcy action dragged on for some years and in 2022 the debt was finally discharged but an argument ensued about who should be liable for the costs of the Bankruptcy proceedings to date although the debt itself had been fully paid. The Revenue pointed to a 2011 case, MCR Personnel, where a plaintiff obtained a money judgement and then proceeded to bring a petition to wind up the debtor company. The debt was subsequently paid, and the Petition was withdrawn. It was found here that the debtor company should pay the costs of the proceedings to date even where they were withdrawn following payment. The Court found in the Revenue case that Bankruptcy was clearly a civil proceeding and as such the well-established principle of costs following the event was fully applicable. The judge agreed with the MCR case and said the full payment of the debt owed was an event after which costs should be awarded. As the debt in question had been fully paid then, by any objective standard, the Petitioner had won the day and should be awarded his costs. It should be noted that the court always has a discretion on costs but in future the discharge of a debt will result in a costs order against the debtor even where the Bankruptcy Petition was not fully prosecuted. So, the Revenue recovered their legal costs of the Bankruptcy action as it went through the courts on top of the debt or taxes owed. This would have added a considerable sum to the original taxes owed as the unfortunate debtor now has to contemplate two separate sets of costs on top of the taxes due. It would be helpful if solicitors could bring this to the attention of any clients against whom a Wind-Up petition is brought. Howley (Collector General of Taxes) v Lohan [2022] IEHC 694
A mother sued the HSE for injuries sustained by her newborn baby which she claimed arose due to a breach of duty of care owed to her and her baby by the HSE. It was pleaded on behalf of a four-year-old boy that there was a failure to induce labour twice and that he would have escaped injury if he had been delivered sooner. Because this did not happen, he suffers quadriplegic spastic cerebral palsy, he cannot speak and is visually impaired. There were, it was claimed, deficiencies in care provided to his mother leading up to the birth of her son. Tipperary University Hospital apologized for the deficiencies in care and the case against the HSE was settled in the High Court with an interim payment of €4.58 million. The HSE admitted a breach of duty but denied the child suffered injuries as a result. Counsel for the child said that his mother was discharged from the hospital on 22 May 2018. He said the case notes stated the labour ward was busy and the patient was happy to go home, which, he said, suggested operational pressures were the reason for the discharge. It was planned the mother be induced two days later. The HSE admitted that it was in breach of its duty of care in the management of the mother’s pregnancy on different occasions in May 2018, resulting in a failure to induce labour. It further admitted a breach in their duty of care in the management of the mother following the spontaneous rupture of membranes on 24 May 2018. The cause of the boy’s cerebral palsy remained an issue in the case and there will be a review of the case in court in five years. Meaney v HSE High Court 10 March 2023
In April 2020 a postmortem was carried out on Michael Daly Snr of Limerick and returned a verdict of death by natural causes. However, later the medical notes of the deceased were discovered by his son and a second postmortem was carried out. The second coroner, John McNamara modified the findings from death from cardiac failure to cardiac disease on a background of recent bowel cancer, surgeries, infection, sepsis and peritonitis. The coroner’s decision was based on a review of the case by the former State pathologist Prof. Marie Cassidy who was commissioned as an independent witness. On reviewing all the evidence of the medical history of the deceased that on the balance of probabilities, which was the appropriate standard to assess the case on, the coroner was satisfied that the appropriate verdict was one of medical misadventure brought about by the sepsis infection. In the Matter of Michael Daly Snr, Deceased Limerick Coroner’s Court, 9 March 2023.
Award Reversed on Appeal Plaintiff who slipped on ice outside his apartment has € 60,000 award overturned on appeal. The appeal court found the plaintiff had failed to explicitly plead certain claims of negligence and in addition the trial judge had made some incorrect findings. The plaintiff lived in an apartment where his hall door led on to an open air landing from where steps led down to the ground. He left for work early in November 2016 and it had been icy overnight. It was also dark as the light over the plaintiff’s door was broken. He slipped on ice and fell down some steps. He sued the management company. The High Court awarded him €60, 000 damages and found that: 1. The path outside was in the control of the defendants who had a duty to grit these areas. 2.Anti-skid strips should have been fixed to the steps. 3. The faulty light contributed to the problem. However, on appeal, the court found the trial judge was wrong in certain of his findings. The hall door light was never the responsibility of the defendants as it belonged to the plaintiff. The plaintiff had relied on three issues at trial: The lack of lighting, the absence of gritting and securing the steps with anti- skid material. However, although the lighting issue had been pleaded late in the day, the other issues were never actually pleaded at all despite a helpful engineer’s report secured by the plaintiff. The court found this was unacceptable and insisted the parties should provide full and detailed particulars of each allegation making up their claim. The lack of detailed pleadings made it impossible for the defendants to deal with the claims they had to meet based on the pleaded case. The engineer’s report was detailed but the court stated this was no substitute for pleadings and every plaintiff had to properly plead a case they wished to have tried. The report was not conclusive on the benefit of anti-skid matting. As for gritting, the court found that gritting may have avoided the accident but did not mean the defendant was therefore liable for the accident. The defendant was not under a duty to lay grit on the landing. A property management company would have obliged, if asked, but none of the 98 complexes it managed required gritting on its footpaths or steps. It was claimed the management company should have gritted the common areas in advance of bad weather but the court held this was too onerous and an unreasonable duty to fix management companies with. The appeal court found the plaintiff was also bound to take reasonable care for his own safety. The plaintiff had lived there for years and should have anticipated the likely consequences of ice on the landing in very cold weather. He was largely responsible for his own accident. The court allowed the appeal and overturned the earlier award. Ahmed v Castlegrange Management Company limited [2022] IECA 269
