Irish Commercial Society Ltd (in Liq.) v Plunkett (No 2)

JurisdictionIreland
JudgeMr. Justice Costello,Mr. Justice Lynch
Judgment Date15 June 1988
CourtHigh Court
Docket NumberNo 2277P/1984,No. 1085P (Court 6)/1984,[1984 No. 2277P]
Date15 June 1988

1987 WJSC-HC 823

THE HIGH COURT

No. 1085P (Court 6)/1984
IRISH COMMERCIAL SOCIETY LTD
IN THE MATTER OF IRISH COMMERCIAL SOCIETY GROUP LIMITED (IN
RECEIVERSHIP AND IN LIQUIDATION)
IRISH COMMERCIAL FINANCE LIMITED (INLIQUIDATION)
IRISH COMMERCIAL SOCIETY LIMITED (INLIQUIDATION)

AND

IRISH SAVINGS BUILDING SOCIETY (IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963TO 1986

Citations:

INDUSTRIAL & PROVIDENT SOCIETIES (AMDT) ACT 1978 S36

CENTRAL BANK ACT 1971 S2

INDUSTRIAL & PROVIDENT SOCIETIES (AMDT) ACT 1978 S5

COMPANIES ACT 1963 PART III

COMPANIES ACT 1963 S2

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

TEMPANY V HYNES 1976 IR 101

MURPHY V REVENUE COMMISSIONERS 1976 IR 15

STEADMAN V STEADMAN 1976 AC 537

SCF FINANCE V MASRI 1986 1 AER 40

UDT V KIRKWOOD 1966 1 AER 968

GAVIN LOWE V FIELD 1942 IR 610

ARCHBOLDS (FREIGHTAGE) LTD V SPANGLETT LTD 1961 1 QB 374, 1961 1 AER 417, 1961 2 WLR 170

STEWART V ORIENTAL FIRE & MARINE INSURANCE 1985 QBD 988

HALSBURY'S LAWS 4ED V6 PARA 26

HALSBURY'S LAWS 4ED V6 PARA 27

HALSBURY'S LAWS 4ED V6 PARA 30

HALSBURY'S LAWS 4ED V6 PARA 41

HALSBURY'S LAWS 4ED V6 PARA 69

HALSBURY'S LAWS 4ED V9 PARA 425

HAROLD WOOD BRICK CO LTD V FERRIS 1935 KB 198

WYLIE CONVEYENCING PARA 12.13

CONLON V CARLOW CO COUNCIL 1912 2 IR 541

MURRAY V MURRAY 1939 IR 317

GORRINGE V LAND IMPROVEMENT SOCIETY 1899 1 IR 142

WYLIE CONVEYANCING PARA 19.02

MORLEY V MORLEY 25 BEAV 253

JUDICATURE (IRL) ACT 1877 S28(6)

FRY ON SPECIFIC PERFORMANCE

WHITECROSS POTATOES V COYLE UNREP FINLAY 23.02.78 1978/3

BENNION STATUTORY INTERPRETATION 1984 P303

MAXWELL INTERPRETATION OF STATUTES 12ED P137

ANSON ON CONTRACT 26ED P352

WYLIE JUDICATURE ACTS P62

FISHER V BRIDGES 3 E & B 642

Synopsis:

REAL PROPERTY

Alienation

Conveyance - Absence - Inference from facts - Dealings between parent company and its subsidiary - ~See~ Company, receiver - (1984/1085 P - Lynch J. - 12/2/87)

|In re Irish Commercial Society Group|

COMPANY

Receiver

Assets - Vesting - Lands - Failure to convey - Section 36 of the Act of 1978 forbids an "investment trust company" to accept or hold deposits, and identifies such company as one whose main business consists of the investment of its funds in securities - Section 5(1) of that Act forbids an industrial and provident society to accept deposits - A parent company owned a subsidiary company which was an industrial and provident society that had accepted deposits - In 1978 the deposit moneys accepted by the subsidiary formed a large part of the finance available to the parent company - The subsidiary was obliged by the Act of 1978 to cease accepting deposits and to repay the deposits received by it not later than 15/11/83 - In 1979, 1982 and 1983, the parent company issued a series of bonds for the purpose of raising funds to replace the finance which had been made available by the subsidiary - With each issue of bonds, a trust deed was executed by the parent company whereby a floating charge was created, in favour of a trust company, upon the assets of the parent company, and the trust company was given power to appoint a receiver of those assets - The terms and interest rates of the bonds issued by the parent company matched those of the deposits which had been received by the subsidiary - On 1/2/84 the trust company appointed a receiver of the assets of the parent company and, shortly afterwards, the High Court ordered that the parent company and the subsidiary be wound up and appointed a liquidator of each company - The extent of the assets of the parent company which vested in the receiver upon his appointment was the subject of a dispute between the receiver and the liquidator - The validity of the receiver's appointment was also disputed by the liquidator on the grounds that it had been made pursuant to a deed which was tainted by illegality arising from unlawful acceptances of deposits by the parent company (which was alleged to have been an investment trust company) in the guise of purchase moneys received from the sale of bonds - Held, on an examination of the facts, that the parent company had been an investment trust company at the time of the bond issues in 1979 and 1982, and that it may have been such at the time of the 1983 bond issue - Held that it was necessary, therefore, to decide whether the parent company had contravened the provisions of s.36 of the Act of 1978 - Held that the issues of bonds by the parent company in those years had been lawful transactions which did not contravene the provisions of s.36 of the Act of 1978 - By several written agreements the subsidiary agreed to transfer to the parent company, for valuable considerations, several specified mortgages, lessors" interests and loans but the agreements were not to be performed until a date to be agreed - No conveyances or assignments were executed by the subsidiary pursuant to those agreements but the several purchase prices were paid by the parent company to the subsidiary - Held that the equitable estates in those properties had vested in the parent company prior to the appointment of the receiver - The receiver claimed that a second group of mortgages and loans had vested in the parent company, and he relied on various entries in the bank accounts and the books of account of the two companies - Held that the second group had not vested in the parent company - Held that there was evidence that a third group of properties had been acquired by the subsidiary for the parent company as its agent, and that the third group had vested in the parent company - Held, accordingly, that the receiver had been validly appointed and that the properties which had vested in the parent company had vested in the receiver upon his appointment - Held that the parent company had not been an investment trust company at the time of its third issue of bonds - Industrial & Provident Societies (Amendment) Act, 1978, ss.5, 36 - (1984/1085 P - Lynch J. - 12/2/87)

|In re Irish Commercial Society Group|

WORDS AND PHRASES

"Deposits"

Acceptance - Prohibition - Investment trust company - Company issued bonds - Moneys received from sale of bonds - Held that moneys so received were not deposits within the meaning of s.36 of Act of 1978 - ~See~ Company, receiver - Industrial & Provident Societies (Amendment) Act, 1978, ss.5, 36 - (1984/1085 P - Lynch J. - 12/2/87)

|In re Irish Commercial Society Group|

1

Judgment of Mr. Justice Lynchdelivered the 12th day of February 1987.

2

This is a motion brought by the Receiver Mr. John Donnelly against the Liquidator Mr. David Hughes of Irish Commercial Society Group Limited (hereinafter called the Group Company) to determine whether certain mortgages, loans and leased assets are the property of the Group Company and captured in the receivership by virtue of the documents under which the Receiver was appointed to be Receiver or whether they are the property of one or other of the Group Company's subsidiaries or former subsidiaries and therefore not so captured, namely Irish Commercial Finance Limited (hereinafter called the Finance Company), Irish Commercial Society Limited (hereinafter called the Commercial Society) and Irish Savings Building Society (hereinafter called the BuildingSociety).

3

The Notice of Motion is dated the 2nd of July 1985 but as a result of the complexity of the matters which appeared to be in issue between the Receiver and the Liquidator the Court directed the delivery of pleadings between them. Pleadings were accordingly delivered comprising a claim on behalf of the Receiver dated the 30th of June 1986, a defence on behalf of theLiquidator dated the 12th day of November 1986 a Notice for Particulars on behalf of the Liquidator dated the same date, a reply thereto dated the 21st of November 1986, a letter on behalf of the Liquidator giving further particulars dated the 18th December 1986, a letter for particulars on behalf of the Receiver dated the 17th December 1986 (these letters crossing in the post), a reply on behalf of the Liquidator dated the 14th of January 1987, a letter on behalf of the Receiver dated the 12th of January 1987 and a reply thereto on behalf of the Liquidator dated the 14th of January 1987.

4

These pleadings and documents delivered between the Receiver and the Liquidator raise quite a number of issues which broadly speaking resolve into two main issues. The first is whether the transactions pursuant to which the Receiver was purported to be appointed Receiver were tainted with illegality so that such transactions and appointment are null and void. That issue of illegality in itself involves two separate questions: (1) whether the Group Company was at the time when certain bonds were issued by it an Investment Trust Company and (2) if it was an Investment Trust Company whether the issues of the bonds were null and void as a sham attempt to circumvent the prohibition in Section 36 of the Industrial and Provident Societies (Amendment) Act 1978of accepting or holding deposits by an Investment Trust Company. If the issue of illegality should be determined in favour of the Receiver then the second main question arises which is as to whether in fact such mortgages, loans and leased assets were effectively assigned to the Group Company.

5

I propose to deal with the issues in the order in which they have been set out above but as the two questions involved in the issue of illegality are to some extent inextricablybound together they must be dealt with to some extent together.

6

The facts relevant to the issue of illegality are as follows.

7

The Commercial Society is an Industrial and Provident Society. Prior to 1978 the Commercial Society held £4,402,217 deposited with it for periods of three months, six months, eleven months and five years. By virtue of Section 5 of the Industrial and Provident Societies (Amendment) Act 1978the Commercial Society was required to repay all such deposits and to cease...

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