Re, Coombe Importers Ltd

• Jurisdiction: Ireland
• Judge: Mr Justice Peter Shanley
• Judgment Date: 01 January 1999
• Neutral Citation: [1998] IEHC 12
• Docket Number: [1990 No.
• Court: High Court
• Date: 01 January 1999

[1998] IEHC 12

THE HIGH COURT

No. 12513 p/1990

IN RE COOMBE IMPORTERS LTD

IN THE MATTER OF COOMBE IMPORTERS LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990.

Citations:

COMPANIES (AMDT) ACT 1990

SOCIAL WELFARE (CONSOLIDATION) ACT 1981 S120

COMPANIES ACT 1963 S285

FINANCE ACT 1968 S8

FINANCE ACT 1968 S11

SOCIAL WELFARE (CONSOLIDATION) ACT 1981 S10(4)

SOCIAL WELFARE (COLLECTION OF EMPLOYMENT CONTRIBUTIONS BY THE COLLECTOR GENERAL) REGS 1989 SI 298/1989 ART 6(1)

SOCIAL WELFARE (CONSOLIDATION) ACT 1981 S120(2)

SOCIAL WELFARE (CONSOLIDATION) ACT 1981 S120(4)

SOCIAL WELFARE (CONSOLIDATION) ACT 1993 S301

SOCIAL WELFARE (CONSOLIDATION) ACT 1993 S302(2)

SOCIAL WELFARE (CONSOLIDATION) ACT 1993 S16(1)

SOCIAL WELFARE (CONSOLIDATION) ACT 1993 S16(2)

SOCIAL WELFARE (CONSOLIDATION) ACT 1993 S16(3)

SOCIAL WELFARE (CONSOLIDATION) ACT 1993 S16(5)

SOCIAL WELFARE (CONSOLIDATION) ACT 1993 S16(4)

Synopsis

Company

Winding up; preferential debts; whether claim of revenue commissioners entitled to super-preferential status; remuneration paid to employees without PRSI deductions; whether PRSI sums have super-preferential status; s.120 Social Welfare (Consolidation) Act, 1981; s.285 Companies Act, 1963 Held: Super-preferential status cannot be afforded to sums which ought to have been deducted by employer( High Court: Shanley J.28/01/1998)- [1999] 1 IR 492

Coombe Importers Ltd., In re

1 JUDGMENT of Mr Justice Peter Shanley delivered the 28th January, 1998.

2 Coombe Importers Limited was wound up by the Court on the 28th day of November, 1990. The company has previously been under the protection of the Court pursuant to the provisions of the Companies (Amendment) Act, 1990.In this application, Thomas Grace, the Official Liquidator of the company, seeks directions of the Court as to whether a particular claim of the Revenue Commissioners is entitled to super-preferential status pursuant to Section 120 of the Social Welfare (Consolidation) Act, 1981or, alternatively, whether the claim is only entitled to preferential status pursuant to Section 285 of the Companies Act, 1963.

3 Brian Jenkins, a Chartered Accountant, had been appointed Examiner of the company. Within a week of his appointment it became apparent to him that there were certain irregularities in the company in relation to the payment of wages: the wages put through the wages book did not tally with the wages in the cheque journal. It is common case that what in fact occurred is that monies were paid to employees of the company prior to its winding up without deduction of PAYE or PRSI. These payments were disclosed by the Examiner's staff to the Revenue Commissioners and, in due course, on the 22nd October, 1990, estimates were raised by an Inspector of Taxes pursuant to Sections 8 and 11 of the Finance Act, 1968(as amended). There was no appeal by the company against these estimates within thirty days following receipt of the estimates, and, in consequence, the Revenue Commissioners contend that the sum of £12,811.03 assessed in accordance with the estimates is to be regarded as a super-preferential claim in the winding up. The estimates are in respect of PRSI due in respect of the monies paid to employees where, as I have already stated, there was no deduction of either PAYE or PRSI.

STATUTORY PROVISIONS

4 The Social Welfare (Consolidation) Act, 1981specified the sources of monies which would fund the benefits payable out of the Social Insurance Fund. Section 10, in particular, provided for employment contributions to be paid by employed contributors and their employers: Section 10(4) of the 1981 Act, provided as follows:-

"An employer shall be entitled subject to and in accordance with regulations to recover from an employed contributor the amount of any contribution paid or to be paid by him on behalf of that contributor and, notwithstanding anything in any enactment, regulations for the purposes of this sub-section may authorise recovery by deductions from the employed contributors remuneration, but any such regulation shall provide that:-"

(a) where the employed contributor does not receive any pecuniary remuneration either from the employer or from any other person, the employer shall not be entitled to recover the amount of any such contribution from him, and

(b) where the employed contributor receives any pecuniary remuneration from the employer the employer shall not be entitled to recover any such contribution otherwise than by deductions."

5 Regulations such as were envisaged by Section 10(4) of the 1981 Act were made by the Minister for Social Welfare on the 9th November, 1989. These regulations were the Social Welfare (Collection of Employment Contributions by the Collector General) Regulations, 1989(Statutory Instrument 298 of 1989). Article 6(1) of the Regulations provided as follows:-

"An employer shall, on making any payment of reckonable earnings to an employed contributor, deduct from the earnings -"

(a) The amount of any employment contribution due by the contributor in respect of that payment of reckonable earnings, or

(b) where the said amount cannot at the time of making such payment be ascertained, the amount reasonably believed by the employer to be so due"

6 Section 120(2) of the Social Welfare (Consolidation) Act, 1981, provided as follows:-

"Any sum deducted by an employer from the remuneration of an employee of his in respect of an employment contribution due by the employer and unpaid by the employer in respect of such contribution shall not form part of the assets of a limited company in a winding up under the Companies Act 1963, and in such a winding up a sum equal in amount to the sum so deducted shall, notwithstanding anything in that Act be paid to the social insurance fund in priority to the debts specified in Section 285 (2) of that Act."

7 Section 120(2) of the 1981 Act is the original basis for the claim of the Revenue Commissioners to be entitled to a super-preferential status in respect of the estimated PRSI. sums. Section 120(4) of the 1981 Act provided as follows:-

"Full proof of a debt to which priority is given by this Section shall not be required except where required by or under the Act of 1889 or the Companies Act, 1963."

" The Act of 1889" is a reference to the Preferential Payments in Bankruptcy...