Re P.M.P.A. Garages Ltd (No. 2)

• Jurisdiction: Ireland
• Judgment Date: 01 January 1992
• Date: 01 January 1992
• Docket Number: [1984 No. 2333P; 1984 No. 2331P and 1985
• Court: High Court

High Court

[1984 No. 2333P; 1984 No. 2331P and 1985 No. 6233P]

In re P.M.P.A. Garages Ltd. (No. 2)

In the matter of P.M.P.A. Garage (Longmile) Ltd., P.M.P.A. Garage (Carrick) Ltd., P.M.P.A. Car Leasing Ltd. and in the matter of the Companies Acts, 1963-1986 (No. 2)

In re P.M.P.A. Garages Ltd. (No. 2)

P.M.P.A. Garage (Longmile) Ltd., P.M.P.A. Garage (Carrick) Ltd., and P.M.P.A. Car Leasing Ltd.

Applicants

and

Private Motorists Provident Society, Notice Party

Cases mentioned in this report—

Ashbury Railway Carriage and Iron Company Ltd. v. Richie (1875) L.R. 7 H.L. 653.

Bell Houses Ltd. v. City Wall Properties Ltd. [1966] 2 Q.B. 656; [1966] 2 W.L.R. 1323; [1966] 2 All E.R. 674.

Brougham v. Dwyer (1913) 108 L.T. 504.

Breckinridge Speedway Ltd. v. The Queen (in the right of Alberta)(1967) 64 D.L.R. 2d 488.

Baroness Wenlock v. River Dee Company (1885) 10 App. Cas. 354.

City of Camberwell v. Cooper [1930] V.L.R. 289.

Re Coltman (1881) 19 Ch.D. 64.

East Cork Foods v. O'Dwyer Steel [1978] I.R. 103.

Re K.L. Tractors Ltd. (1961-62) 106 C.L.R. 318.

Rolland v. La Caisse d'Economie Notre Dame de Quebec [1895] 24 S.C.R. 405.

Sinclair v. Brougham [1914] A.C. 398; [1914] W.N. 73.

Company - Objects - Memorandum of association - Registered society lending monies to associated companies within a group - Loans guaranteed by other companies within the group - Registered society prohibited by statute from lending money to persons or entities who were not members of the registered society - Associated companies were not members of the registered society - Whether an action lay against the borrowers for the recovey of monies the lending of which was ultra vires the powers of the lender - Whether guarantor of loans is obliged to repay monies the lending of which to the borrower was ultra vires the powers of the lender.

Equity - Ultra vires loan - Whether recoverable from borrower - Form of action for recovery of monies lent ultra vires - Whether lender can recover by way of an action in rem - Whether lender entitled to recover in an action for monies had and received on basis that it would be unconscionable and unjust to allow borrower to retain the monies.

Notice of Motion.

By notices of motion dated the 6th February, 1989, the first and second applicants, P.M.P.A. Garage (Longmile) Ltd. (in receivership and liquidation) and P.M.P.A. Garage (Carrick) Ltd. (in receivership and liquidation), each applied for an order pursuant to s. 280 of the Companies Act, 1963, for

• (1) directions of the High Court as to whether the Private Motorists Provident Society was entitled to be admitted as a creditor of the companies in the sum of

  • (a) £2,000,000 on foot of a guarantee dated 30th December, 1980.

  • (b) £3,058,782 on foot of a guarantee dated 31st December, 1981.

  • (c) £3,000,000 on foot of a guarantee dated 31st December, 1982.

(2) directions as to the company's entitlement to claim contribution against co-sureties.

By notice of motion dated 20th July, 1989, the third applicant, P.M.P.A. Car Leasing Ltd. (in receivership and liquidation) applied for an order in identical terms.

All motions were heard by the High Court (Murphy J.) on the 1st and 2nd February, 1990. It was held inter alia that the execution of the guarantees was intra vires the powers of the companies but that the lending of the monies by the registered society was ultra vires its powers. (See [1992] 1 I.R. 315)

The proceedings were adjourned for the purpose of hearing argument as to whether (i) an action could lie for the recovery of monies which had been loaned where the lending of those monies was ultra viresthe powers of the lender and (ii) whether a guarantor was obliged to repay monies the lending of which was ultra vires the powers of the lender.

The matter was further heard by the High Court (Murphy J.) on the 8th and 9th of April, 1991. The facts have been summarised in the headnote and are set out in the judgment, infra.

The present proceedings arose out of a decision of the High Court (Murphy J.) [See[1992] 1 I.R. 315]. The applicant companies (in receivership and liquidation) had sought the directions of the High Court as to whether a registered society (the Private Motorists Provident Society) was entitled to be admitted as creditor in their respective liquidations on foot of guarantees executed by the applicants guaranteeing the repayment of loans made to companies within the P.M.P.A. group. Most of the associated companies had drawn a promissory note in favour of the registered society in respect of the loans.

In his judgment Murphy J. held inter alia that the execution of the guarantees by the associated companies was intra vires their powers but that the lending of those sums was ultra vires the powers of the registered society.

The proceedings were then adjourned to bear argument as to (i) whether an action could lie for the recovery of monies from a borrower where the lending of those monies had been ultra vires the powers of the lender and (ii) whether a guarantor of a loan is obliged to repay monies the lending of which to the borrower was ultra vires the powers of the lender.

In these proceedings it was conceded by the applicant companies that the monies were recoverable as against the borrower, though the basis on which they were recoverable able was disputed. The applicants argued that the monies were recoverable on the basis of either an action in rem, or on a quasi contractual basis by way of an action for monies had and received. It was argued that unless the registered society was entitled to recover the monies on the basis of an action in rem or for monies had and received the applicants could not be liable under the terms of the guarantee. It was contended that the registered society could not recover the monies by way of an action on the promissory notes as the monies in respect of which these notes had been drawn had never been legally "advanced",it being ultra vires the powers of the registered society to lend to the associated companies.

On behalf of the registered society it was argued that the monies were recoverable not only by way of an action in rem or an action for monies had and received. It was argued that those companies within the P.M.P.A. group who signed the promissory notes were bound by their promise to repay the sums loaned to them and that those companies within the group who executed the guarantee likewise promised to repay, and were therefore obliged to repay, the sums of money advanced to the borrowers.

It was not disputed that the ability of the registered society to carry on its business depended on the existence, in directing that the registered society was entitled to be admitted as a creditor, of guarantees executed in respect of the loans due to it.

Held by Murphy J., in directing that the registered society was entitled to be admitted as a creditor, 1, that the registered society was entitled to recover from the associated companies so much of the monies as had been advanced to them by way of an action in rem as the monies made available to those companies had never been validly loaned and therefore remained the property of the registered society.

Sinclair v. Brougham [1914] A.C. 398 considered.

2. That the registered society could recover the monies from the associated companies in an action for monies had and received on the basis that it would be unjust and inequitable to allow the companies to retain the monies.

Sinclair v. Brougham [1914] A.C. 398 and East Cork Foods v. O'Dwyer Steel[1978] I.R. 103 followed.

3. That although a body corporate could not enforce a contract the making of which was ultra vires its powers the other party to such contract cannot rely on such incapacity to defend a claim for the recovery of goods or monies obtained by such party through anintra vires exercise of its own powers where to do so would be unconscionable or unjust.

Re Coltman (1881) 19 Ch.D. 64; Ashbury Railway Carriage and Iron Company v. Richie(1875) L.R. 7 H.L 653; Bells Houses Ltd. v. City Wall Properties Ltd.[1966] 1 Q.B. 207; Brougham v. Dwyer [108] L.T. 54; Re K.L. Tractors Ltd. (1961-62) 106 C.L.R. 318; Breckinridge Speedway Ltd. v. The Queen (in the right of Alberta) (1967) 64 D.L.R. 2d 488; Rolland v. La Caisse d'Economie Notre Dame de Quebec [1895] 24 S.C.R. 405 considered.

4. That though it was ultra vires the powers of the registered society to lend the monies, the associated companies were precluded from relying on such want of authority by way of a defence to an action for their recovery as it would be unconscionable to allow them, and those companies which had guaranteed the repayment of such monies, to benefit by such reliance.

Dictum of Taschereau J. in Rolland v. La Caisse d'Economie Notre Dame de Quebec[1895] 24 S.C.R. 405; dictum of Brett L.J. in Re Coltman(1881) 19 Ch.D. 64 anddictum of Mann J. in City of Camberwell v. Cooper [1930] V.L.R. 289 followed.

Cur. adv. vult.

Murphy J.

As this judgment is supplemental to and must be read with the judgment delivered by me herein on the 4th March last ([1992] 1 I.R. 315) it is unnecessary for me to repeat the history of the matter or to explain the abbreviations which I have adopted. Suffice it to say that I have already held that the purported lending by the P.M.P.S. to different companies within the P.M.P.A. group of sums totalling approximately £3,000,000 was ultra vires the P.M.P.S. I have also decided that the granting of a series of guarantees and in particular the guarantee dated the 31st December, 1982, by the various companies within the P.M.P.A. group was intra vires and that the guarantees in general, and that dated the 31st December, 1982, in particular, were validly and effectively executed by each of the companies purporting to be bound thereby. Insofar as one may be entitled to view the transaction from two separate standpoints it can be said that the purported lending...