Jackson v Lombard and Ulster Banking Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Costello |
| Judgment Date | 31 January 1992 |
| Neutral Citation | 1992 WJSC-HC 595 |
| Docket Number | [1990 No. 17899P],No. 17899P/1990 |
| Court | High Court |
| Date | 31 January 1992 |
1992 WJSC-HC 595
THE HIGH COURT
BETWEEN:
AND
Citations:
FARRELL V EQUITY BANK 1990 2 IR 549
KEENAN BROS LTD, IN RE 1985 IR 401
COMPANY LAW, PALMER V1 1987 PARA 45-02
Synopsis:
COMPANY
Debenture
Assets - Charge - Fixed charge - Book debts - Other debts - Subsequent cancellation of company's insurance policies - Partial refund of premiums - Equitable assignment of refunds - Refunds paid to assignee - Refunds claimed by debenture holder - Priority of debenture holder - Companies act, 1963, s. 99 - (1990/17899 P - Costello J. - 31/1/92) - [1992] 1 I.R. 94
|Jackson v. Lombard & Ulster Bank Ltd.|
Judgment of Mr. Justice Costello delivered the 31st day January 1992.
The dispute herein arises in this way. A firm called Mahon and McPhillips Limited carried on business as building contractors with a number of associated companies. It and its associated companies borrowed money from the plaintiff bank. In 1985 it secured its indebtedness by issuing in the plaintiff's favour a Mortgage Debenture. The Mortgage Debenture contained a fixed charge over all the "book debts and other debts" of Mahon and McPhillips then and from time to time owing to it. Some years later Mahon and McPhillips borrowed money from the defendant bank for the purpose of paying insurance premiums. Shortly afterwards it got into financial difficulties. The plaintiff bank appointed a receiver under its Debenture. Subsequently Mahon and McPhillips" brokers negotiated a cancellation of the policies and a partial refund of the premiums. The sums obtained (IR£88,136.54 and Stg.£29,021.17) they paid to the defendant bank who claimed them in priority to the plaintiff bank under the terms of its loan agreements with Mahon and McPhillips. This claim is contested by the plaintiffs. So the issue I have to decide is, who is entitled to the refunded premiums, the plaintiff bank or the defendant bank?
The Mortgage Debenture is dated the 24 April 1985. Under it Mahon and McPhillips secured its indebtedness to the plaintiff bank in a number of ways. By virtue of Clause 2.7 it charged:-
"as a first fixed charge all book debts and other debts now and from time to time due or owing to the plaintiff bank, together with all rights and powers of recovery in respect thereof."
In a supplementary term relating to its debts, Clause 4.1 Mahon and McPhillips agreed as follows:-
"Not to transfer, factor, discount, sell, release, license, compound, subordinate, defer or otherwise dispose of or vary the terms of any book or other debts or moneys for the time being due, owing or payable to it nor purport to charge assign or otherwise deal or dispose with the same except by getting in the same in the usual course of trading, but shall pay into an account with such bank or banks as the Trustee may from time to time designate in writing all moneys which it may receive in respect of such debts and if the Trustee requires, promptly execute at such company's own cost a legal assignment to the Trustee in terms specified by the Trustee of all or any of such debts or moneys and any security or documents relating to them or otherwise to negotiate the same to the Trustee but so that nothing in this paragraph shall be taken to affect the validity of the first fixed charge over such debts and moneys which is contained in Clause 2.7."
It is important to bear in mind that the charge on the companies" debts contained in Clause 2.7 is described in the Mortgage Debenture as a "first fixed charge" and that this is in marked distinction to a later charge contained in paragraph 2.9 over all "other the undertaking, assets and property" of the company which is described as a "floating charge". If the charge in paragraph 2.7 is as a matter of law a fixed charge the rights of the parties are materially different to those arising if the charge was a floating charge.
The Mortgage Debenture contained a number of further restrictions on Mahon and McPhillips. By virtue of Clause 4.4 the company was not at liberty
"to create or permit to subsist any mortgage or charge ranking in priority to or pari passu or subsequent to the charges hereby created"
and by paragraph 6.9.I it agreed that it would not borrow or agree to borrow any monies whatsoever or enter into any new arrangments to borrow additional funds secured by existing mortgages or charges.
The Mortgage Debenture was duly registered under section 99 of the Companies Act, 1963.It contained the usual clause permitting the appointment of a receiver (paragraph 8.1). The plaintiff bank exercised this power and validly appointed a receiver on the 14 February 1990.
Mahon and McPhillips entered into three agreements with the defendant bank for the loan of money to enable it pay premiums due by the company to its insurers on a wide variety of different kinds of insurance policies. The first agreement was entered into by the execution of an application form on the 28th June 1989 which was accepted by the bank. The amount of the loan was £365,894.12; the amount of interest payable was £14,269.87 and capital and interest were to be repaid by 11 montly instalments. The second agreement was entered into by the execution of an application form on the same day which was accepted by the bank. The amount of the loan was £83,857.64. The amount of interest payable was £3,270.44 and the capital and interest were to be repaid in 11 monthly instalments. The third agreement was entered into by the execution of an application form on the 24th October 1989 and accepted by the bank. The amount of the loan was £13,340.89. The amount of the interest was £533.63 and it was to be repayable in 11 monthly instalments. Thus under these three agreements (effected by the acceptance of the application forms) Mahon and McPhillips became indebted to the defendant bank in the sum of £481,166.59.
The three agreements were all subject to the same terms. The application forms were Headed "Insurance Premium Loan application". They took the form of a request by the applicant "to open an account in my name and to advance me the loan amount set out below". They go on to state that the account and the loan are to be subject to the terms and conditions "herein and set out overleaf". The purpose of the loan is to enable Mahon and McPhillips to pay the brokers who are named in the form (Messrs. Frank Glennon Ltd.) premiums due in relation to insurance policies which are described as "various". The amount of the premiums is specified (which figure constituted the sum to be lent), as is the interest payable and the amount and number of the monthly instalments.
The form contained the following undertakings, authorisation...
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