Colleary not at fault over Usit collapse - court
The chief executive and driving force of the Usit student travel group, Gordon Colleary, did not behave irresponsibly during the collapse of the company in 2001 and should not be restricted as a director, the High Court has decided. Emmet Oliver reports.
In his judgment, Mr Justice Michael Peart said there was considerable evidence that Mr Colleary and other directors devoted considerable energy and effort to address the pressing problems of the company during 2001.
The liquidator of the company, Ray Jackson, brought proceedings under Section 150 of the Companies' Act to have Mr Colleary restricted from acting as a director or secretary of a company for five years. Mr Jackson describes the manner in which the company conducted its business as "casual", particularly for a firm of its size.
Mr Justice Peart says it was acceptable for a liquidator to use the benefit of hindsight and say things should have "been looked at differently", but the court must decide whether director acted honestly and responsibly.
"It does not mean that decisions taken turn out later to have been the right decisions. What is at issue is whether it was irresponsible to have taken the decision at the time," states the judgment.
"That irresponsibility implies some element of recklessness or culpable want of care on the part of a director, which in the present case, is absent," it adds. Mr Justice Peart made these comments when considering whether the company was trading while insolvent.
Mr Justice Peart said it was perfectly acceptable for companies to seek to remedy their situation. "To attempt to trade out of difficulty is not an irresponsible act," states the judgment.
In several affadavits, Mr Colleary directly blames the September 11th tragedy for the ultimate collapse of the company. This has been contested by Mr Jackson, who states that the directors could have acted differently.
Mr Jackson states strongly that there were problems at the various Usit companies, regardless of September 11th. "There was already by that date a substantial net asset deficit and operating losses and that these were significant and known to the directors," is how Mr Jackson's position is described.
Mr Jackson claims board minutes show that there was concern about the finances of the companies since the beginning of 2000. He claims that when Mr Colleary went looking for an equity investor in July 2000, reference was made in a company profile to the lack of profitability and continuing operating losses at the company.
Mr Jackson also claims that NIB ended up being owed about €4.6 million after cheques drawn on associated Usit companies could not be honoured by the bank later on. Mr Colleary says he had no reason to think that when the cheques were written they could not be honoured.
Mr Justice Peart however agrees with Mr Colleary that September 11th was crucial.
He points out that Usit aimed to acquire 60 per cent of the shares in US student travel company, CTS (it already owned the remainder), on September 4th, but funding towards this purchase was withdrawn by Ulster Bank on September 12th and this left Usit strapped for cash.
Mr Justice Peart said only for September 11th, the Usit group might have survived. For his part Mr Colleary is recorded as saying he has "lost his life's work".