Re Money Markets International Stockbrokers Ltd

• Jurisdiction: Ireland
• Judgment Date: 20 July 1999
• Date: 20 July 1999
• Docket Number: [1999 No.32 Cos]
• Court: High Court

High Court

[1999 No.32 Cos]

Re Money Markets International Stockbrokers Ltd.

In the matter of Money Markets International Stockbrokers Limited (in liquidation), and in the matter of the Companies Acts, 1963 to 1996

Gill Hess

Applicant

and

Tom Kavanagh, Respondent

Cases mentioned in this report:-

Barlow Clowes International Limited (in liquidation) v. Vaughan [1992] B.C.L.C. 910.

Devaynes v. Noble, Clayton's case (1816) 1 Mer. 572.

Re Diplock's Estate, Simpson and Others v. Lilburn [1948] 2 All E.R. 429 C.A.

Re Hallett's Estate, Knatchbull v. Hallett (1880) 13 Ch.D. 696.

Re Registered Securities Limited [1991] 1 N.Z.L.R. 545.

Shanahans Stamp Auctions Limited v. Farrelly [1962] I.R. 386.

Company - Winding up - Equity - Funds held in trust - Tracing - Fund in company current account mixed with other funds - Method of distribution of available funds in case of deficiency - Whether rule in Clayton's case to apply - Whether equitable principles require distribution on pari passu basis to investors.

Notice of motion.

The facts have been summarised in the headnote and are fully set out in the judgment of Laffoy J., infra.

The applicant issued a notice of motion on the 17th May, 1999, seeking an order directing the respondent to complete the contract entered into on the applicant's behalf on the 15th February,1999, for the purchase of shares or, in the alternative, to repay the sum paid by him to the company in respect of the contract on the 18th February, 1999. A replying affidavit and a supplemental affidavit were filed by the respondent.

The motion was heard by the High Court (Laffoy J.) on the 16th July, 1999.

The company was a stockbroker and a member of the Irish Stock Exchange. The applicant instructed the company on the 15th February, 1998, to buy a specified number of shares and the company on the same day confirmed the purchase and advised the amount due and the date for settlement, the 22nd February, 1998. The applicant paid the amount due on the 18th February. On the 19th February, the company's membership of the stock exchange was suspended. A court order for the winding-up of the company was made on the 15th March. A further court order was made on the 19th March, requiring the company, in order to enable the default rules of the stock exchange to take effect, to give the stock exchange access to the books and records of the company and to furnish such information as would be required to identify the parties to any unsettled contracts on the stock exchange so that these contracts could be completed.

The applicant was notified of the name of the counter party to his contract and he was later requested by that party to complete the contract by paying the full amount due. The applicant then brought this application seeking to have the respondent, who was the official liquidator of the company, directed to complete the contract on the applicant's behalf, or, in the alternative, to repay the sum paid by the applicant to the company in respect of the contract.

At the time of the hearing of the applicant's motion the investigations of the respondent had identified a deficit in the accounts of clients' funds, but the respondent had at that time a separate application pending in which he sought directions on a number of matters which could affect the final conclusion as to whether or not there would be a deficit. The applicant's motion was heard on the assumption that there would be a deficit.

It was agreed between the parties that the company was in a fiduciary relationship to the applicant and that the funds transferred by the applicant to the company were held as trust funds. These funds were mingled with trust funds of other clients and probably also with company funds because the company at times put some of its own funds into client accounts to cover deficits.

Held by the High Court (Laffoy J.), in granting the alternative relief sought, 1, that, since the applicant, uniquely amongst the client creditors, transferred prior to the settlement date, the monies in issue to the current client account of the company for the specific purpose of paying the sum due in respect of the share purchase transaction to enable that purchase to be completed, and since the company was not able to use the money to complete the transaction since it had been suspended from membership of the stock exchange before the settlement date, the applicant had a better equity than the other client creditors in relation to the monies represented by the balance on the current account.

2. That, the equities not being equal, equitable principles did not require that the applicant be subjected to pari passu distribution under which he would be treated in the same way as other clients who had equitable claims against the funds.

3. That, whether the rule inClayton's case was applicable or not in determining entitlement to the monies represented by the balance on the current account, the applicant was entitled to the repayment of the entirety of the monies transferred by him to the company account since the details of that account showed the whole of his monies to be still in the account.

Obiter dictum:In relation to the first relief sought, the liquidator had no power to complete the purchase transaction since the company agency had terminated on the making of the winding up order.

Cur. adv. vult.

Laffoy J. 20th July, 1999

The application

On this application the applicant, Gill Hess, seeks an order directing the official liquidator of Money Markets International Stockbrokers Limited ("the company") to complete a contract entered into on the applicant's behalf, or, in the alternative, to repay the sum of £293,740.90 to the applicant to enable him to complete the contract in person.

The facts

The facts which give rise to the application are not in dispute.

The company carried on business in the State as a stockbroker and was an authorised member of the Irish Stock Exchange. The applicant was a client of the company and prior to the 15th February, 1999, the company carried out a number of purchase and sale transactions for the applicant but no sums were due by the applicant to the company nor by the company to the applicant in respect of those transactions at that date.

On the 15th February, 1999, the applicant instructed the company to purchase 23,000 shares in Allied Irish Banks plc. on his behalf. On the same day the purchase was confirmed, the applicant was advised that the settlement date was the 22nd February, 1999, and that the total amount due by him to complete the transaction, including stamp duty and commission, was £293,740.90. On the 18th February, 1999, the applicant directed his bank, the branch of Bank of Ireland in Skerries, Co. Dublin, to transfer £293,740.90 to the company's account. On the 18th February, 1999, the sum in question was transferred and was credited to the company's current account number 72164080 with Ulster Bank Limited.

On the 19th February, 1999, the Irish Stock Exchange suspended the right of the company to transact business on the Exchange. By order of this Court dated the 15th March, 1999, the company was wound up and Tom Kavanagh was appointed official liquidator for the purpose of the winding-up. By further order of this Court made on the 19th March, 1999, on the application of the Irish Stock Exchange Limited and with the consent of the Central Bank and the official liquidator, it was ordered that the company give the Stock Exchange and its authorised officials access to the books and records of the company and furnish to the Stock Exchange such...