Re Frederick Inns Ltd

• Jurisdiction: Ireland
• Judgment Date: 01 January 1991
• Date: 01 January 1991
• Court: High Court

(H.C.)

In re Frederick Inns Ltd

Excess payments to Revenue Commissioners - Group of companies in liquidation - Sums owed to Revenue Commissioners - Nature of relationship between holding company and subsidiaries -Whether payments made to Revenue Commissioners exceeding tax liability ultra vires -Gratuitous reduction or alienation of companies' assets - Whether insolvency affected capacity of companies to make payments - Whether breach of duty owed to general creditors - Whether action for money had and received lay.

The first three named companies operated licensed public houses and were wholly owned subsidiaries of the fourth named company, Motels Ltd. which was in turn the holding company for a considerable number of other companies in the Belton Group. A liquidator was appointed to Motels Ltd. on 15 December, 1986, and to the other three named companies on 30 March, 1987. Applications by way of motions for directions were brought by the liquidator of these companies challenging the validity and effect of a series of payments and related transactions which had taken place in the six months immediately preceding the commencement of the winding up and which arose out of the sale of the licensed premises operated by the first three named companies. By June, 1986, the Revenue Commissioners had claimed that they were owed a sum of approximately £2.8 million by the Belton Group of companies of which these companies were part. The three licensed premises, which were the only assets of substance belonging to the companies concerned, were sold and a total sum of £1.2 million was paid to the Revenue Commissioners by the four companies out of the proceeds of sale. It was admitted that this sum had been appropriated by the commissioners in reduction of the tax liabilities not only of the four companies involved in the proceedings before the court but also of six other companies in the group which were subsidiaries of Motels Ltd. and the payments were apportioned between the companies in the group on a rateable basis. The validity of these payments and related transactions was challenged by the liquidator as being ultra viresthe payor companies insofar as it was contended that the payments had effected a gratuitous reduction or alienation of the companies' assets and had been made when the companies were insolvent. The payments made to the Revenue Commissioners by the first three named companies did not exceed their respective tax liabilities but only a...