Farrell v Equity Bank Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Lynch
• Judgment Date: 01 January 1990
• Neutral Citation: [1988] IEHC 17
• Docket Number: [1987 No. 1137 Sp.],No. 1137Sp/1987
• Court: High Court
• Date: 01 January 1990

FARRELL v. EQUITY BANK LTD

IN THE MATTER OF BRIAN TUCKER LIMITED (IN VOLUNTARY

LIQUIDATION)

AND IN THE MATTER OF SECTION 280 OF THE COMPANIES ACT

1963

BETWEEN

PEARSE FARRELL LIQUIDATOR OF BRIAN TUCKER LIMITED (INVOLUNTARY LIQUIDATION)

PLAINTIFF

AND

EQUITY BANK LIMITED

DEFENDANT

[1988] IEHC 17

No. 1137Sp/1987

THE HIGH COURT

Synopsis:

WORDS AND PHRASES

"Book debts"

Insurance - Premiums - Payment - Policies - Cancellation - Refunds - Money advanced to company to provide funds for payment of company's insurance premiums - Money advanced prior to commencement of winding up of company - Insurance cover cancelled after commencement and portion of premiums refunded by insurer - Conflicting claims of liquidator and lender - ~See~ Company, charge - (1987/1137 Sp - Lynch J. - 13/12/88)

|Farrell v. Equity Bank Ltd.|

COMPANY

Charge

Registration - Necessity - Books debts - Insurance premiums - Refund - Company borrowed money from defendants to pay company's insurance premiums - Subsequent liquidation of company and cancellation of policies - Repayment by insurer of proportionate part of sum paid as premiums - Conflicting claims of plaintiff liquidator and defendants to sum repaid by insurer - On 3/6/86 the company asked the defendant bank to advance #42,842 to the company to enable it to pay the premiums on the company's insurance policies - That sum was paid to the company by the defendants after the company had signed on 5/6/86 an irrevocable letter of authority authorising the company's insurance brokers to pay to the defendants, so long as any part of the said advance remained unpaid to the defendants, any moneys received by the brokers on foot of those policies - That letter instructed the insurance brokers to cancel, if the defendants should so request, the existing cover afforded by the insurance policies - The letter also instructed the brokers, in the event of the policies being terminated, to "hold to the order of Equity or, if Equity shall so request, to remit to Equity any part of the premium which may be refunded"; in the letter the company acknowledged that the company had no right to receive any refunded premium in priority to Equity - The conditions of the advance made by the defendants stipulated that, on the passing of a resolution for the winding up of the company, the outstanding balance of the sum advanced would become payable to the defendants on demand, and that the defendants would be entitled to terminate the company's insurance cover and "to take possession of such part of the premium as may be refunded by the Insurance Company" - The said conditions conferred on the defendants the right to apply any refunded portion of the said premiums first on defraying the total sum for the time being payable by the company to the defendants and, secondly, in applying any surplus to the credit of the company - The conditions precluded the company from assigning or charging the said policies of insurance without the previous consent of the defendants - The company paid the current premiums with the money so advanced by the defendants - The covers provided by the said policies were cancelled after the commencement of the winding up of the company, and the company's insurers paid to the insurance brokers #14,167.37 being the refunds payable in respect of the said premiums received by the insurers - The plaintiff, as liquidator of the company, applied to the High Court pursuant to s. 280 of the Act of 1963 for the determination of the conflicting claims of himself and the defendants to the sum so refunded - Held that the said power to take possession of the refunded portion of premiums, and the other provisions of the said conditions, created a charge on the refunds as they became payable - Held that the rights conferred on the defendants in relations to possible refunds of part of the premiums paid by the company did not constitute a charge on the book debts of the company and, accordingly, was not a charge which required to be registered in accordance with the terms of s. 99 of the Act of 1963: ~Paul & Frank Ltd. v. Discount Bank (Overseas) Ltd.~ [1966] 2 All E.R. 922 considered - Held that the company's insurance brokers were trustees of the moneys so refunded for the defendants by virtue of the terms of the said letter of authorisation and the conditions of the said advance, until the entire of the moneys so advanced to the company by the defendants had been repaid - Held, accordingly, that the defendants had a claim to the sum so refunded superior to that of the plaintiff - Companies Act, 1963, s. 99 - (1987/1137 Sp - Lynch J. - 13/12/88)

|Farrell v. Equity Bank Ltd.|

Citations:

COMPANIES ACT 1963 S280

COMPANIES ACT 1963 S275

COMPANIES ACT 1963 S99(2)(e)

COMPANIES ACT 1963 S99(1)

PALMER'S COMPANY LAW 1987 P739 PARA 46–06

PAUL & FRANK LTD V DISCOUNT BANK (OVERSEAS) LTD 1966 2 AER 922

BRITISH EAGLE INTERNATIONAL AIRLINES LTD V COMPAGNIE NATIONALE AIR FRANCE 1975 2 AER 390, 1975 1 WLR 758

CARRERAS ROTHMANS LTD V FREEMAN MATTHEWS TREASURE LTD 1984 3 WLR 1016, 1985 CH 207

KEENAN BROTHERS, IN RE 1985 IR 401, 1985 ILRM 641

MACGILLIVRAY ON INSURANCE 8ED P408 PARA 101

GLOW HEATING LTD V EASTERN HEALTH BOARD 1988 IR 110

DEMPSEY V BANK OF IRELAND UNREP SUPREME 06.12.85 1985/7/1943

GOFF COMPANY CHARGES 1978 P291

BYRNE V ALLIED IRISH BANKS 1978 IR 446

1 Judgment of Mr. Justice Lynchdelivered the 13th day of December1988.

2 This is an application by the liquidator of the above named Brian Tucker Limited (the Company) for a determinationpursuant to section 280 of the Companies Act 1963as to who is entitled to receive part premiums refunded by various insurers on the cancellation of policies of insurance with them respectively before the expiration of the respective periods of insurance for which the premiums were paid. The moneys to pay such premiums had earlier been advanced by the Defendant Equity Bank Limited (Equity) to the Company on terms which Equity claim give Equity a prior right to receive such refunds until the whole of their advance has been repaid. The liquidator contests such claim by Equity and in turn claims to be entitled to the said refunds for distribution in the course of theliquidation.

THE FACTS

3 The Company was incorporated on the 22nd of March 1968. On the 24th of October 1986 a resolution was passed at an extraordinary general meeting of the members of the Company that the Company be wound up and the Plaintiff (the liquidator) be appointed liquidator for the purposes of such winding up.

4 On the 3rd of June 1986 the Company had applied in writing to Equity for a cash advance to enable the Company to pay its insurance brokers the premiums due in respect of the Company's insurance policies as set out in a renewal account furnished by the brokers to the Company on the 3rd of June 1986 in the total sum of £42,842. This sum was duly advanced by Equity to the Company and the Company signed an irrevocable letter of authority prior to the advance dated the 5th of June 1986 to its brokers authorising the brokers to pay over to Equity any moneys received by the brokers on foot of such policies so long as any part of the said advance remained outstanding and unpaid.

5 The application to Equity for the cash advance (called...