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1. This is an application by the Liquidator of La Moselle Limited (hereinafter referred to as "La Moselle" ) and Rosegem Limited (hereinafter referred to as "Rosegem" ) pursuant to Section 150 of the Companies Act 1990 for a declaration from this Court restricting the Respondent for a period of 5 years from acting as a director of any company (other than one that meets the requirements of Section 150(3) of the Companies Act, 1990.

2. The insolvent companies to which the restriction provisions of Section 150 apply are those companies referred to in Sections 149 and 154 of the 1990 Act (being the sections comprised in Chapter 1 of Part VII of that Act).

3. It is clear from Sections 149 and 154 of the Companies Act, 1990, that the insolvent companies to which Section 150 applies are not just companies wound up by the Court but also insolvent companies wound up voluntarily and those over whose assets a Receiver has been appointed. In Business Communications Limited v. Keith Baxter and Colm Parsons (unreported, 21st July, 1995), Murphy J. observed (at page 5 of his judgment) that, while the provisions of Section 150(1) are mandatory in their language, the Act does not in fact impose on any particular party the obligation of bringing before the Court an application for the restriction of a director of a company to which Sections 149 and 154 apply. He noted that:-

4. The Court's directions in windings-up by the Court has resulted in Section 150 applications being pursued in almost all such cases; however, it must be said that only a handful of cases of insolvent companies in receivership or voluntarily wound-up, have come before the Courts on an application under Section 150 of the Companies Act, 1990. Having regard to the large volume of insolvent companies which are wound up voluntarily, the injustice envisaged by Murphy J. still remains unredressed, whereby directors of such companies are permitted to avoid the sanction of Section 150 of the Companies Act, 1990, by the fortuitous circumstance of a voluntary winding-up, or indeed a receivership.

5. Quite apart from the injustice that results from the failure to restrict directors whose conduct merits restriction, there is also the factor that the primary purpose of the Section 150 restriction is the protection of the public from persons who, by their conduct, have shown themselves unfit to hold the office of, and discharge the duties of, a director of a company and, in consequence, represent a danger to potential investors and traders dealing with such companies. Where far more insolvent companies are wound up voluntarily than are wound up by the Court, it is clear that the purpose of Section 150 cannot be fully achieved in the absence of a statutory obligation cast on the liquidators (of insolvent companies wound up voluntarily) and on receivers of insolvent companies to bring before the Courts applications under S 150 of the 1990 Act where the conditions stipulated by Section 149 of that Act are met.

6. As appears clear from Section 150, the Court is obliged to restrict a director unless he brings himself within one of the three exceptions set out in sub-section (2). In the present case I am only concerned with the first such exception. As is clear from the wording of sub-section (2)(a), there are three hurdles that a director has to surmount:-

7. In considering the meaning of the word "responsibly" Murphy J. said in Business Communications Limited v. Keith Baxter and Colm Parsons , supra:-

8. As Murphy J. noted, the simple fact that a business fails is not evidence of a lack of responsibility nor indeed is it evidence of dishonesty. But there may well be circumstances where a business will fail due to a lack of business probity or indeed sheer incompetence (without actual dishonesty or non-compliance with the principal features of the Companies Acts) such as to amount to such a want of responsibility as to permit a restriction under Section 150, sub-section (1), of the Companies Act, 1990.

9. In England and Wales there is no directly comparable legislation to the restriction provisions of Section 150: However, Section 300 of the Companies Act, 1985 in England and Wales does provide for the disqualification of directors where their conduct makes them "unfit to be concerned in the management of a company" . In the case of Re. Lo-Line Motors Limited, 1988, B.C.L.C. 698, Brown-Wilkinson V.C. said at page 703:-

10. The conduct referred to by Brown-Wilkinson VC. is similar to the conduct identified by Mr Justice Murphy, namely, that a director, broadly complying with his obligations under the provisions of the Companies Acts and acting with a degree of commercial probity during his tenure as a director of the company, will not be restricted on the grounds that he has acted irresponsibly.

11. Thus it seems to me that in determining the "responsibility" of a director for the purposes of Section 150(2)(a) the Court should have regard to:-

12. These criteria necessarily overlap: for example a failure to keep proper books of account may directly contribute to the company becoming insolvent and may be caused by the incompetence of a director. But not all situations of a want of responsibility will result from a breach of obligations imposed by the Companies Acts; for example, a director's inability to see the "writing on the wall" (e.g. an inability to see from a perusal of the company's management accounts that the company was trading while insolvent) may result from sheer incompetence and justify a restriction (see Re: Continental Assurance Co. of London Plc, Secretary of State and Industry -v- Burrows 1997 1 BCLC 48, where an inability to read and understand the statutory accounts of a company was considered a ground for disqualification of a director). Equally, a director who takes excessive sums from the company by way of drawings for salary without regard to the financial state of health of the company may be said to have acted without commercial probity although he did not necessarily fail to comply with his obligations under the Companies Acts 1963 - 1990.

13. Apart from satisfying the Court that he as a director acted honestly and responsibly, the director must also satisfy the Court that there are no other reasons why it would be just and equitable to restrict him from acting as a director of a company. It is to be noted that acting honestly and responsibly relates to "the conduct of the affairs of the company" and arguably such bears no relation to any period after the commencement of a winding-up or receivership of the particular company where the person may not be involved any further in the conduct of the affairs of the company. That the director must satisfy the Court that the there is no other reason why it would be just and equitable to restrict the director, allows the Court to take into account, in my view, any relevant conduct of the director after the commencement of the winding-up or the receivership (for example, any failure to co-operate with the liquidator or receiver) in deciding whether or not to make an Order under Section 150, sub-section (1), of the Companies Act, 1990.

14. La Moselle was incorporated on 3rd April, 1984; Rosegem was incorporated on the 13th November, 1987. Both companies had their registered offices at 15 Castle Market, Dublin 2. 99 of the 100 issued shares in La Moselle were owned by Mr Soualhi who also was the beneficial owner of the shares in Rosegem. He was also a Director of both of these companies. La Moselle was a wholesaler of ladies and children's clothing which was mostly sourced in Portugal. Of the retailers to whom La Moselle sold its clothing, some 65% of it was sold to retail companies owned and controlled by Mr Soualhi. Rosegem was such a company: It operated a retail shop at the G.P.O. Arcade in Dublin, where it rented premises from a subsidiary of An Post. In the clothing and fashion industry there are two seasons: firstly, there is the Spring and Summer seasons stretching from March to August; then there is the Autumn and Winter season stretching from September through to February. La Moselle financed the purchases of its clothing by entering into an agreement with a company called Cambridge Confirming Limited, a finance house (hereinafter referred to as "CCL" ), who from 1989 onwards agreed to discharge the liabilities of La Moselle at each month end to La Moselle suppliers, providing La Moselle's liabilities to CCL were discharged at each year end. Initially, the arrangement between La Moselle and CCL was that CCL would allow La Moselle a facility of up to £250,000.00 per season. In June, 1993, with rumours of difficulties in CCL, that facility was reduced by agreement between Mr Soualhi and CCL to £165,000.00 per season. This according to Mr Soualhi adversely affected his business and he had to close down two of his shops in Galway and Limerick. These were shops operated by two companies owned and controlled by Mr Soualhi: The first of the companies was called Cougar Styles Limited and the second of the companies was called Ballyclover Limited.

15. The June 1993 agreement which Mr Soualhi entered into with CCL, apart from reducing the facilities provided to La Moselle, also made provision for the clearing by La Moselle of all its liabilities to CCL by the 15th October, 1993. One of the terms of the agreement involved CCL issuing a cheque for £20,000.00 to La Moselle on the 1st August, 1993 and La Moselle in turn issuing a cheque payable to CCL for £50,000.00 on the 31st July, 1993. The La Moselle cheque was stopped by Mr Soualhi: He says it was stopped because CCL had refused to honour their agreement to pay to La Moselle the sum of £20,000. A further La Moselle cheque payable to CCL dated 31st August, 1993 was also stopped by Mr Soualhi. La Moselle did not clear its indebtedness to CCL by the 15th October, 1993, in accordance with its June agreement. Although it entered into a further agreement with CCL for the purposes of clearing up its indebtedness to that company, it failed to do so and on the 17th November, 1994, CCL presented a petition in respect of the sum then due to them of £219,688. On foot of that petition a winding-up Order was made on 6th March, 1995. La Moselle in fact had ceased trading in November, 1994. Rosegem itself had ceased to trade in September, 1994, at which date it was indebted to La Moselle in the sum of £169,602.

16. The statement of affairs of Mr Soualhi in relation to La Moselle was sworn on the 20th April, 1995; it disclosed gross assets of £695,075 with gross liabilities of £487,891, leaving a surplus of £207,184. The gross assets included a claim for damages for breach of contract against CCL valued at £650,000. The statement of affairs of Rosegem which was sworn by Mr Soualhi on the 23rd May, 1996 disclosed no assets and a deficiency of £48,479.26 made up, as to £26,991 unsecured creditors and £21,437 preferential creditors. What is noteworthy about the statement of affairs of each of these companies is that there were no trade creditors.

17. There are audited accounts for La Moselle for the year ending 31st August, 1992. There are management accounts for that company for the years ending the 31st August, 1993, the 31st August, 1994, and the 31st August, 1995. A perusal of the profit and loss accounts of La Moselle for the years 1993, 1994 and 1995 show losses for each of those years of £85,746, £19,156, and £238,054, respectively. For Rosegem management accounts exist for the years 1991 to 1994 and show losses on the profit and loss account of £87,400 for the year 1991, £14,970 for the year 1992, £9,957 for the year 1993 and £25,545 for the year 1994. Viewing each of these companies on a net worth basis, La Moselle's position in 1993 disclosed a net deficiency of £181,572, in 1994 a deficiency of £200,728 and in 1995 a deficiency of £440, 819. For Rosegem the position in 1991 was that there was a net deficiency of £38,310; for 1992, there was a net worth of £49,500; in 1993 there was a net deficiency of £63,237 and in 1994 there was a net deficiency of £88,782. The Liquidator has forcefully expressed his opinion that La Moselle continued to trade and to supply Rosegem at a time when Mr Soualhi clearly knew that La Moselle and Rosegem were both insolvent companies. In particular, he suggests that La Moselle so traded from September, 1992 to November, 1994, when Mr Soualhi knew that it was insolvent and that even when it ceased to trade in November, 1994 no efforts were made by Mr Soualhi to wind-up the company. Apart from this aspect of matters the Liquidator also draws the Courts attention to a number of other matters which he says establish that Mr Soualhi acted irresponsibly, if not dishonestly. The other matters to which he draws attention are:-

18. Paragraph 8 of that Affidavit states as follows:-

19. Against this series of allegations Mr Soualhi says:-

20. He did not refer to or produce letters from An Post Solicitors dated 29th September, 1994 and 13th October, 1994, the latter of which stated:-

21. Judgment was in fact obtained by Arcade Property Company Limited against

22. Rosegem on the 15th November, 1993. In his Affidavit of 8th October, 1997, Mr Soualhi says (at paragraph 3):-

23. On the 7th September, 1993, the Solicitor for An Post wrote to Mr Soualhi claiming payment of £44,475.92 and threatening proceedings to recover that sum and also stated in the letter that "proceedings will be issued against you company without further notice" .

24. In conclusion, I have no doubt whatsoever that Mr Soualhi traded at a time when he knew that Rosegem and La Moselle were insolvent. I am quite satisfied that he used monies due to the Collector-General and CCL to finance his trading activities and his travel. I have little doubt that he was aware that Rosegem and La Moselle could not trade and at the