Re Hughes

• Jurisdiction: Ireland
• Judgment Date: 01 January 1970
• Date: 01 January 1970
• Docket Number: [1361/166]
• Court: High Court

[1361/166]

In re Hughes

In the Matter of JOSEPH N. HUGHES. a Bankrupt

Bankruptcy - Solicitor - Client account - Special fund - Moneys of clients lodged to credit of account - Amount of money in account at adjudication insufficient to satisfy claims of clients whose moneys had been lodged in account - Payment by solicitor of own money into account immediately before adjudication - Irish Bankrupt and Insolvent Act, 1857 (20 & 21Vict., c. 60), s. 267 - Solicitors Act, 1954 (No. 36 of 1954), s. 68.

Motion on Notice.

Joseph N. Hughes, a solicitor, was adjudicated a bankrupt on the 17th November, 1958, and his property vested in the Official Assignee pursuant to s. 267 of the Irish Bankrupt and Insolvent Act, 1857. During the course of the bankruptcy certain claims of the bankrupt's clients against the bankrupt's client account with the Munster and Leinster Bank Limited were admitted and the sum of those claims exceeded the sum standing to the credit of that account at the date of the adjudication. Several of those claimants had been indemnified by the Incorporated Law Society of Ireland which, accordingly, became entitled to be subrogated to the rights of such claimants pursuant to the provisions of s. 21 of the Solicitors (Amendment) Act, 1960. On the 11th February, 1963, the High Court (Budd J.) appointed the Official Assignee to be trustee of the moneys standing to the credit of the client account pursuant to the provisions of s. 25 of the Trustee Act, 1893. By order of the High Court (Kenny J.) made on the 17th July, 1967, in the bankruptcy proceedings, the Official Assignee was given leave to issue a motion on notice for the purpose of obtaining directions in relation to the application of the trust moneys in the client account. Notice of the Official Assignee's motion was issued on the 17th October, 1967, and was entitled in the matters of the bankruptcy, of the Solicitors Acts, 1954 and 1960, and of the Trustee Act, 1893. The claim of Bridget Hughes, a notice party, was not satisfied by the Incorporated Law Society of Ireland prior to the hearing of the motion of the Official Assignee.

A solicitor was adjudicated bankrupt prior to the enactment of s. 32 of the Solicitors (Amendment) Act, 1960. Shortly before his adjudication the solicitor had paid £863 of his own moneys into the client account which he had with his bank. In the bankruptcy proceedings claims against the client account, by clients whose moneys had been lodged in that account by the solicitor, were proved and they exceeded the sum standing to the credit of that account at the date of adjudication. At the hearing of a motion brought in the High Court by the Official Assignee in whom the property of the bankrupt had vested, it was

Held by Kenny J., 1, that the sum of £863 must be treated on the same basis as the other moneys remaining in the client account, because the only possible inference from the facts was that the solicitor had intended the lodgment to be a replacement pro tanto of moneys that he had withdrawn wrongfully from the client account.

In re Hallett's Estate: Knatchbull v. Hallett (1880) 13 Ch.D. 696 and James Roscoe (Bolton) Ltd. v. Winder[1915] 1 Ch. 62 considered.

2. That the solicitor's rights in respect of the moneys remaining in the client account had vested in the Official Assignee subject, primarily, to the equities of clients founded on the lodgment of their moneys in that account.

In re Nolan and Stanley, Bankrupts [1949] I.R. 197 considered.

3. That the moneys remaining in the client account should be applied in satisfying proved or admitted claims arising from lodgments in the client account, and that the claims arising from the most recent lodgments were to have priority.

Rule in Devaynes v. Noble [Clayton's Case] (1816) 1 Mer. 572 applied.

Cur. adv. vult.

Kenny J. :—

Section 66 of the Solicitors Act, 1954, provides that regulations made with the concurrence of the Chief Justice shall make provision about the opening and keeping by solicitors of accounts at banks for clients' moneys. Section 67, sub-s. 1, provides that a banking company shall not, in connection with any transaction on an account of a solicitor kept with them or with another banking company (other than an account kept by a solicitor as trustee for a specified beneficiary), incur a liability or be under an obligation to make inquiry or be deemed to have knowledge of a...