Re P.M.P.A. Garages Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 01 January 1992
• Neutral Citation: 1991 WJSC-HC 2314
• Court: High Court
• Docket Number: [1984 No. 2333P; 1984 No. 2331P and 1985,No. 2333P/1984
• Date: 01 January 1992

1991 WJSC-HC 2314

THE HIGH COURT

No. 2333P/1984

No. 2331P/1984

No. 6233P/1985

PMPA GARAGE

IN THE MATTER OF P.M.P.A. GARAGE (LONGMILE) LIMITED (INRECEIVERSHIP AND IN LIQUIDATION)

AND

IN THE MATTER OF P.M.P.A. GARAGE (CARRICK) LIMITED (INRECEIVERSHIP AND IN LIQUIDATION)

AND

IN THE MATTER OF P.M.P.A. CAR LEASING LIMITED (INRECEIVERSHIP AND IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963TO 1986

Citations:

ROLLED STEEL PRODUCTS (HOLDINGS) LTD V BRITISH STEEL CORPORATION & ORS 1986 CH D 246

SCOTTISH CO-OPERATIVE WHOLESALE SOCIETY LTD V MEYER 1959 AC 324

HALSBURY'S LAWS 4ED V20 PARA 162

BUCHANAN LTD & ANOR V MCVEY 1954 IR 89

INDUSTRIAL & PROVIDENT SOCIETIES ACT 1893

INDUSTRIAL & PROVIDENT SOCIETIES ACT 1893 S40

INDUSTRIAL & PROVIDENT SOCIETIES ACT 1893 S38

INDUSTRIAL & PROVIDENT SOCIETIES ACT 1893 S39

HALSBURY'S LAWS 4ED VOL 35 PARA 1105

SINCLAIR V BROUGHAM 1914 AC 398

Synopsis:

AGENCY

Agent

Document - Execution - Authorisation - Group of companies - Indebtedness of companies - Repayments - Mutual guarantees - Guarantee executed by parent company - Liability of subsidiary - (1984/2333 P - Murphy J. - 4/3/91) [1992] 1 I.R. 315 [1992] ILRM 337

|In re P.M.P.A. Garage (Longmile) Ltd.|

COMPANY

Acts

Authorisation - Informality - Group of companies - Member - Indebtedness of members - Repayments - Mutual guarantees - Guarantee executed by parent company - Liability of subsidiary - Consideration for accepting liability - (1984/2333 P - Murphy J. - 4/3/91) - [1992] 1 I.R. 315 - [1992] ILRM 337

|In re P.M.P.A. Garage (Longmile) Ltd.|

COMPANY

Document

Execution - Method - Agent - Authorisation - Group of companies - Guarantee executed by parent company - Whether subsidiaries liable - (1984/2333 P - Murphy J. - 4/3/91) - [1992] 1 I.R. 315

|In re P.M.P.A. Garage (Longmile) Ltd.|

CONTRACT

Guarantee

Form - Validity - Document - Execution - Authorisation - Consideration - Parent company and subsidiaries - Parent executing guarantee - Whether subsidiaries bound - Common directors - Friendly society - Powers - Loans made ~ultra vires~ society - Industrial and Provident Societies Act 1893, ss. 38–40 - (1984/2333 P - Murphy J. - 4/3/91) [1992] 1 I.R. 315 [1992] ILRM 337

|In re. P.M.P.A. Garage (Longmile) Ltd.|

FRIENDLY SOCIETY

Powers

Exercise - Validity - Loans - Borrowers - Restriction - Provision of security - Loans made ~ultra vires~ society - (1984/2333 P - Murphy J. - 4/3/91) - [1992] 1 I.R. 315 - [1992] ILRM 337

|In re P.M.P.A. Garage (Longmile) Ltd.|

WORDS AND PHRASES

"Personal property"

Friendly society - Loans - Authorisation - Borrowers - Restricted class - Provision of security - Statutory requirements - Repayment guaranteed by borrower and others - Whether loan advanced on security of personal property - (1984/2333 P - Murphy J. - 4/3/91) - [1992] 1 I.R. 315 - [1992] ILRM 337

|In re P.M.P.A. Garage (Longmile) Ltd.|

WORDS AND PHRASES

"Security of ... personal property"

Friendly society - Loans - Authorisation - Borrowers - Restricted class - Provisions of security - Statutory requirements - Repayment guranteed by borrower and others - (1984/2333 P - Murphy J. - 4/3/91) - [1992] 1 I.R. 315 - [1992] ILRM 337

|In re P.M.P.A. Garage (Longmile) Ltd.|

1 Judgment of Mr. Justice Murphydelivered the 4th day of March 1991

2 The crucial document in this case is an instrument dated the 31st day of December 1982 and described as a "Guarantee". It is addressed to the "Private Motorists Provident Society Limited" (which was generally known, and to which I will refer, as "the P.M.P.S.") and was executed by 12 different companies one of which was the above named P.M.P.A. Car Leasing Limited (to which I will refer as "Car Leasing"). Another of the executing companies was P.M.P.A. Garage Division Limited (to which I will refer as "Garage Division").

3 In the first (and only) Schedule to the Guarantee there is set out the names of 34 companies including the above named P.M.P.A. Garage (Longmile) Limited and P.M.P.A.Garage (Carrick) Limited (to which I will refer as"Longmile" and "Carrick" respectively). As in the case of the two companies which are parties to these proceedings all or virtually all of the subsidiaries of Garage Division contain the letters "P.M.P.A.", the word "Garage" and a geographical location. The connection of these subsidiary companies to the Guarantee was denoted or indicated by an asterisk close to the place where the Guarantee was executed by Garage Division indicating a reference to the First Schedule for a "List of Subsidiaries". The Guarantee is itself confined to a single page and its terms, insofar as they are material to these proceedings, are asfollows:-

"In consideration of your having at our request agreed to advance and advancing to us sums of money not exceeding at any time in the aggregate the sum of £3,000,000.

We jointly and severally guarantee to you the repayment of all such sums of money advanced by you to us as aforesaid."

4 By Order of the High Court made on the 19th of December 1983 it was ordered that the P.M.P.S. be wound up and that William J. Horgan Accountant be appointed official liquidator thereof. By further Orders of the High Court made on the 28th day of May 1984 it was ordered that Longmile and Carrick should likewise be wound up by the Court and that David B. Deasy be appointed official liquidator for that purpose. On the 29th day of July 1985 a further winding-up Order was made in respect of Car Leasing. Mr. Tom Grace was appointed official liquidator of thatcompany.

5 In a series of letters culminating with one dated the 24th of October 1985 Mr. Horgan in his capacity as official liquidator of the P.M.P.S demanded payment from all of the companies which executed or appeared to subscribe to the Guarantee the moneys due on foot thereof (and earlier guarantees which it is claimed provided additional or cumulative protection for the lender) amounting in total to £3,058,782. Mr. Deasy and Mr. Grace dispute the right of the P.M.P.S. to recover on foot of the Guarantee (either alone or in conjunction with any other guarantee) from Car Leasing, Carrick or Longmile and have sought the directions of the Court in the liquidation of those respective companies as to whether the claims on foot of the guarantee or guarantees should be admitted by them.

6 It is conceded on behalf of Car Leasing, Longmile and Carrick (to whom I may refer together as "the Debtor Companies") that the Guarantee was executed in the manner and to the extent already described. Further, it is necessarily and properly conceded that P.M.P.S. did advance to one or more of the companies purporting to subscribe to the Guarantee (again it may be helpful if I refer to these in general as "the subscribing companies") sums totalling more than £3,000,000 and that the amounts advanced to the individual companies was the subject-matter of a promissory note drawn by the borrower in favour of the P.M.P.S.. All of the promissory notes appear to envisage the payment of interest. In some cases it is expressly provided that the interest should be one and a half per cent per month but in other cases it would appear that no figure was inserted for interest. It appears from the Schedule to a letter writtenby Mr. Horgan to the other liquidators on the 25th of September 1985 that the company to which the most substantial advances were made was P.M.P.A. Oil Company Limited which received £1.3 million. The same Schedule also shows that the amounts advanced to individual "Garage" companies varied from £15,000 to£85,000. None of the Debtor Companies is named in that Schedule as a primary debtor but monies had been advanced and to some of them at an earlier date and repaid.

7 The grounds on which the Debtor Companies dispute liability on foot of the Guarantee may be summarized as follows:-

8 (1) That the execution of the Guarantee was ultra vires each of the Debtor Companies.

9 (2) That any decision by the Board of Directors of any of the Debtor Companies to give such guarantees was to the knowledge of the P.M.P.S. an abuse by such directors of their powers as such.

10 (3) That the Guarantee, if otherwise valid, was not binding on Carrick or Longmile because:-

11 (a) Garage Division had no authority to execute it on theirbehalf.

12 (b) That there was no consideration given to those companies for the granting of the guarantee.

13 (c) That the guarantee was not sealed by either of thosecompanies.

14 (4) That the granting of a series of annual guarantees so far from providing a cumulative security for the P.M.P.S. had the effect of releasing Longmile and Carrick from whatever obligations they might have had as a result of their express execution ofearlier guarantees because the final guarantee (that dated the 31st of December 1982) did not impose an effective obligation on Longmile or and did supersede the guarantees under which they may have had suchobligations.

15 (5) That the loans made by P.M.P.S. were made ultra vires that Society and accordingly could not be recovered or alternatively only the capital without interest was repayable.

16 The Memorandum of Association of all of the Debtor Companies does contain a provision expressed in different forms but authorising to a greater or lesser extent the granting of guarantees by each of the Debtor Companies.

17 Counsel on behalf of the Debtor Companies did not argue that those companies did not have the legal right or power to give guarantees. Having regard to the terms of the respective Memoranda of Association such an argument would be unstateable. For his part Counsel on behalf of the P.M.P.S. did not seek to claim that the provisions in the Memoranda of the Debtor Companies dealing with guarantees constituted "a separate independent object" of any of those companies. Whilst the decision of the Court of Appeal in England in Rolled Steel Products (Holdings) Limited and British Steel Corporation and others...