A former director of a firm that had a €300 million deficit prior to being wound up in 2014 has lost his appeal aimed at overturning an order restricting his ability to act as a company director or secretary for a five-year period.
Cork solicitor Fergus Appelbe was one of three directors of Alvonway Investments Limited, whose loans were acquired by the National Asset Management Agency (Nama) in 2011.
Alvonway, incorporated in January 2005, was among a number of companies owned and operated by Celtic Tiger property baron Joe O’Donovan, who consented to a 2020 restriction order in lieu of a disqualification.
The company’s primary asset was Wilton Shopping Centre in Cork, which was purchased in 2004 for €124 million.
High Court order upheld
In a judgment given by Ms Justice Mary Faherty on Tuesday, the Court of Appeal (COA) upheld the High Court’s October 2020 order against Mr Appelbe, which restricted him from acting as a director or secretary of a company for a five-year period unless the company meets particular requirements set out in the Companies Act 2014.
The High Court’s Mr Justice Michael Quinn said in July 2020 that payments made to Mr O’Donovan and his accountants in August 2013 without Nama’s prior approval were effected by Mr O’Donovan without the knowledge of the other two directors.
The payments, totalling €450,000, made from the company’s current accounts appeared to be the principal impetus for the orders sought by liquidator Ken Fennell, Ms Justice Faherty noted.
A director since the firm’s inception, Mr Appelbe had argued before the High Court that he had “little knowledge” of what was happening in the company during August 2013 because he was excluded when Nama became involved.
Serious duties of a director
Mr Justice Quinn said Mr Appelbe seemed to misunderstand the serious duties of a director and seemed to believe he could avoid a restriction order simply by showing he was unaware of the particular transactions.
In the “absence of any evidence of Mr Applebe’s actions at any time during his tenure as a director”, the judge said he could not find he had acted responsibly in relation to the affairs of the company.
Mr Justice Quinn noted that the company at all times kept proper books and records and compiled with its filing obligations and discharging of liabilities owed to the Revenue Commissioners.
He declined an application to place a director restriction on Brendan O’Brien, who was appointed a director of Alvonway in October 2010, when the firm was already heavily indebted to Anglo Irish Bank. Mr Justice Quinn found Mr O’Brien had acted honestly and responsibly in relation to the affairs of the company.
Brevity
In his appeal, Mr Appelbe asserted that the judge erred in making the restriction order in the absence of the liquidator having made a case for him to answer. That absence, he submitted, explains the brevity of his submissions to the court in response to the liquidator’s application.
Ms Justice Faherty said the fact that from 2011 onwards Nama was in control and liaised only with Mr O’Donovan did not absolve Mr Appelbe from his director obligation to keep himself apprised of the company’s affairs.
She said he cannot now assert “with any credibility” that he did not know or suspect the company was in serious financial difficulty from at least 2011 and that this should have led him to be more assiduous in his approach to his duties.
There was, in essence, a “total failure” on his part to provide information from which the High Court judge could derive he had fully informed himself of the affairs to meet his director obligations, Ms Justice Faherty continued.
In those circumstances, the High Court judge had no choice but to make the restriction order as there was no evidence upon which he could find Mr Appelbe acted responsibly at any time, she said.
Ms Justice Faherty noted that Mr Appelbe’s honesty was not in issue in the restriction application and that a finding of dishonesty was not made against him.
Ms Justice Caroline Costello and Mr Justice Robert Haughton indicated their agreement with the decision.
