Quinns of Baltinglass Ltd v Smith
 IEHC 460
THE HIGH COURT
Property & Conveyancing – S.74(3) of the Land & Conveyancing Law Reform Act, 2009 – Indebtedness – Agricultural produce – Defrauding creditors – Intention to fraud
Facts: The plaintiff sought a declaration that the conveyance by the first defendant to the second defendant of a quantity of grain or of the entitlement to the monies due in respect of the sale of that grain to the notice party was void and contrary to s.74 (3) of the Land and Conveyancing Law Reform Act 2009. The plaintiff contended that despite a court order, the first name defendant had failed to pay the outstanding amount due to the plaintiff and incorporated a new company with a view to frustrate the claims of the plaintiff. The first defendant contended that the new company was incorporated on the advice of his accountant to create an entity with a good credit rating and to set up a business for his children.
Mr. Justice David Keane granted the relief sought by the plaintiff. The Court held that the transfer by the first defendant to the second defendant of a quantity of grain was void as it was made with the intention of defrauding the plaintiff, as the creditor and the plaintiff had been prejudiced by the said conveyance. The Court noted that the first named defendant was not setting up a business for his children but was attempting to transfer the assets of existing business into a new entity that would continue to benefit his family at the expense of his creditors. The Court noted that there was no doubt that the necessary or probable result of the first defendant's action in transferring the ownership of the grain concerned for no consideration was to defeat or delay his creditors.
In this plenary action, the plaintiff (“Quinns”) seeks a declaration that the conveyance by the first defendant, Mr Smith, to the second defendant (“Nujmij”) of a quantity of grain, or of the entitlement (as a chose in action) to the monies due in respect of the sale of that grain to the notice party, is void as a fraudulent disposition, contrary to s. 74(3) of the Land and Conveyancing Law Reform Act 2009 (“the 2009 Act”).
Quinns is a grain and agricultural merchant in Baltinglass, County Wicklow. The first defendant and his wife are tillage farmers who reside in Portarlington, County Laois. The second defendant is a private limited company. Its directors were, at the material time, the first defendant and his wife. They are also the only shareholders in the company, having each subscribed €1 for one of its two issued shares. Indeed, the company's name is a composite word derived from the first three letters in reverse order of the forename of the defendant's wife (“June”), followed by the three letters in reverse order of the defendant's own forename (“Jim”), hence “Nujmij”. The company was incorporated on 19 July 2012.
On 24 August 2012, Glanbia plc (“Glanbia”) applied successfully to be joined as a notice party to the proceedings. It did so because, on or about 2 July 2012, Glanbia Foods Ireland Limited, a constituent company within the Glanbia plc group of companies, entered into an agreement with Nujmij for the purchase and sale, respectively, of 400 tonnes of grain. 397 tonnes of grain were subsequently delivered to Glanbia, in respect of which, as of 24 August 2012, Glanbia owed Nujmij the sum of €65,369.26 under the terms of that agreement. Glanbia provided a solemn undertaking to hold that sum pending the determination of these proceedings.
By Order of the Master of the High Court made on 12 October 2010 in summary proceedings entitled “ Quinns of Baltinglass Limited, plaintiff, and Jim Smith, defendant, Record No. 2010/953S”, the plaintiff obtained liberty to enter judgment against the first defendant in the sum of €292,632.69, together with interest. By Order of this Court, made on 22 November 2010, de Valera J dismissed the first plaintiff's appeal against the Master's Order. An Order of Execution in the sum of €315,209.50 issued on 5 May 2011. A certificate of the registry of that judgment in that sum issued on 23 June 2011.
The plaintiff's first witness was Mr Liam Quinn, the managing director of Quinns. Mr Quinn gave evidence to the following effect.
Quinns is a family owned concern in the business of agriculture supply that has been in operation since 1936. It has more than 4,000 farmer customers, many of whom represent families that have been dealing with Quinns for generations.
Farmers who wish to sow winter crops would buy seed and other inputs (fertiliser, herbicides and fungicides) in September or October. Some would pay in cash but most would purchase on credit with a view to discharging their accounts after the harvest.
Mr Quinn dealt with Mr Smith's account personally. They did business from 2004 onwards. Each year the account was reconciled and, when there was a surplus, Mr Smith was provided with a cheque for the balance. In 2009, there was a shortfall. Mr Smith told Quinns that he would provide it with a quantity of wheat or barley to that value but never did so. Eventually, Quinns took summary proceedings and obtained the judgment already described.
In September 2011, Mr Smith delivered grain to Quinns to the value of €54,677.09. No further payment has ever been forthcoming.
Quinns' judgment against Mr Smith has been registered as a mortgage on certain lands owned by him but most, if not all, of those lands were already the subject of prior charges in favour of various financial institutions.
Quinns sought execution of their judgment by the Laois County Sherriff but, by letter dated 26 April 2012, the Order was returned marked “ nulla bona”.
To the best of Mr Quinn's knowledge and belief, Mr Smith continues to farm at least 1,600 acres of land, growing cereals as a tillage farmer. Mr Quinn sought to enter into an agreement with Mr Smith to purchase further grain from him subject, of course, to a deduction for the outstanding judgment debt, but Mr Smith failed to engage with Quinns in that regard.
On 20 August 2012, Mr Quinn received an anonymous letter, together with certain enclosures, to the effect that Mr Smith had incorporated Nujmij and was delivering grain to Glanbia in the name of that company, with a view to frustrating the claims of his existing creditors. On the following day, 21 August 2012, Quinns sought and obtained a Mareva injunction against the defendants in respect of the dissipation of the proceeds of the sale by them of any agricultural produce other than to discharge Mr Smith's indebtedness to Quinns. That Order was slightly amended on 7 September 2012, to permit the payment by Mr Smith of certain farm and household bills and outgoings. By Order made on 19 September 2012, Glanbia was directed to retain the sum of €65,000 due to Nujmij, pending the determination of these proceedings.
In cross-examination, counsel for the defendants put three principal matters to Mr Quinn. The first was that Mr Smith's grain or other produce was his to do with as he might wish. Mr Quinn accepted that this was so, save that he did not believe Mr Smith was entitled to benefit his own family by seeking to avoid his lawful debts. The second proposition put to Mr Quinn was that Quinns should have sought relief against Mr Smith under the Debtors Ireland Act or the Enforcement of Court Orders Act, rather than through execution by the County Sherriff or by way of the present proceedings. Mr Quinn indicated that he was not aware of any such obligation. The third matter put was that weather conditions had adversely affected cereal crop yields in 2012. Mr Quinn accepted that. Indeed, Quinns' second witness was Dr Nicholas Bielenberg, an expert agricultural consultant and farmer. Dr Bielenberg acknowledged that the 2012 harvest was beset by difficulties, but expressed the view that, on a conservative estimate, Mr Smith would have harvested between 4,482 and 4,490 tonnes of grain from the 1,660 acres of land that, by his own account, he had under tillage that year.
The third witness called by Quinns was Pauline Murray, a book-keeper with that company. Ms Murray stated that she has been with Quinns for almost 37 years and was familiar with Mr Smith's account. She confirmed that the sum currently outstanding on that account was then, in round figures, €352,000. Ms Murray was not cross-examined. That concluded the plaintiff's evidence.
The defendants called a single witness, Mrs June Smith.
Mrs Smith is a farmer by occupation. She is a director of Nujmij. She stated that, in acting in that capacity in respect of the transaction at issue, it was not her intention to defraud anyone.
Under cross-examination, Mrs Smith acknowledged that she is an experienced business woman. She stated that the company Nujmij was incorporated on the advice of the couple's accountant, having been discussed between them over the preceding months. Mrs Smith stated that the couple's purpose in establishing the company was twofold: first, to create an entity with a good credit rating; and second, to set up a business for their...
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