Disturbed children were sent to units operated by a private security company over which health boards had no control, the High Court heard yesterday.
Mr Justice Kelly said it was "profoundly disturbing" that he was never told by health boards, when making orders at their request, that he was committing children to the care of a private company about which he knew nothing.
He regarded this to be "serious non-disclosure" of information.
While there were references to "Secureways" and "Community Children's Centres" in reports to the court late last year, he had read these as the names of places and was "horrified" to discover he had been sending children to places in which the health boards' only involvement was visits by social workers.
"I have been misled for some considerable time regarding this," he said.
Secureways Ltd set up by Mr Derek Nally, a former presidential candidate and a former general secretary of the Association of Garda Sergeants and Inspectors, operated until last January several units in Co Wicklow which catered for children sent by health boards, including children who were the subject of High Court orders.
Mr Justice Kelly heard another company, Community Children's Centres (CCC), had been operating the units since last January and had a number of common directors with Secureways.
The first inkling he had of this situation arose yesterday when he noticed, in small print, the name Secureways Ltd on the bottom of a fax cover sheet, the judge said.
Mr Felix McEnroy SC, for the South Western Area Health Board, said he understood the matter had been aired in court previously.
The judge adjourned the matter to today to get further information. He was dealing with the case of a 13-year-old boy who escaped from a unit operated by CCC last Sunday and allegedly stole and crashed the centre's minibus.
The child, who was not seriously injured, was treated in hospital and was discharged on Tuesday to a different unit operated by CCC.
The boy, a victim of sexual abuse, had been placed with CCC for some months because there was no appropriate place for him.
The judge said he had "grave misgivings" about returning the boy to the CCC centre but would send him there and would deal with the situation again today.
Earlier, in evidence, Mr Gary Kiernan said he was a qualified social worker and director of childcare with CCC.
It employed 32 staff, including qualified social workers and childcare workers, and the only security staff were those working with the 13-year-old boy. He understood these were gardai and were reference-checked.
Mr Patrick Dunne, assistant chief executive of the Northern Area Health Board with responsibility for implementing childcare strategy, said he was recently appointed, and did not have full information.