Re The Leinster Contract Corporation, Ltd

• Jurisdiction: Ireland
• Judgment Date: 20 July 1903
• Date: 20 July 1903
• Court: Chancery Division (Ireland)

IN RE THE LEINSTER CONTRACT CORPORATION, LTD.

Chancery Division

— Insolvent Company — Secured and unsecured creditors — Priorities — Judgment creditor — Bankruptcy rule —

In re LengELR [1895] 1 Ch. 652.

In re Maggi; Winehouse v. WinehouseELR 20 Ch. D. 545.

In re RichardsELR 11 Ch. D. 676.

In re Withernsea Brickworks CompanyELR 16 Ch. D. 337.

Moore v. SmithIR [1895] 1 I. R. 512.

Re WhitakerELR [1901] 1 Ch. 9.

Scott v. MurphyUNK 13 L. R. Ir. 10.

Smith v. MorganELR 5 C. P. D. 337.

Whitaker's CaseELR [1901] 1 Ch. 9.

VOL. 1.] CHANCERY DIVISION. of exactly the same profits, and in exactly the same way. If that is so, it would be a very curious result if, of two dividend warrants sent to a shareholder on the same day—one for preÂference, and one for ordinary, shares in the same form—and payÂable out of the same fund, one should be barred by non-payment of arrears after six years, and the other should not be barred till after the lapse of twenty years. That result can only be arrived at by clear words in the contract, which is embraced in the share certificate incorporating the deed of partnership and the Articles of Association. In my opinion, there being a debt due to the shareholder when profits are declared, and there being a contract under seal, and therefore a specialty contract, the claim in this case is not barred. Solicitors for the liquidators : Hayes 4. Son. Solicitors for Thomas Leonard : D. T. Fitzgerald. R. W. L. IN RE THE LEINSTER CONTRACT CORPORATION, LTD. Companies Acts—Insolvent Company—Secured and unsecured creditors—PriÂorities—Judgment creditor—Bankruptcy rule—Judicature Act, 1877 (40 - 41 Viet. c. 57), sect. 28, sub-sect. 1. In the compulsory winding up of an insolvent Company in the Court of Chancery, under the Companies Acts, 1862 and 1867, the effect of section 28, sub-section 1, of the Judicature Act, 1877, is that the rules of bankruptcy as to secured and unsecured creditors shall prevail, and consequently judgment creditors of a Company in liquidation, who had taken no active steps to enforce their securities, are not entitled to be paid in priority to the ordinary creditors of the Company. THE Leinster Contract Corporation (Limited) was being comÂpulsorily wound up, under an order of the Right Hon. the Master of the Rolls, under the Companies Acts, and it appeared from the Chief Clerk's certificate that the assets of the Company were insufficient for the payment of its debts and liabilities and the costs of winding up. 518 THE IRISH REPORTS. [1903. • M. B. The opinion of the Judge was asked for by the liquidator on 1903. this question, viz. Whether the judgment creditors of the Corn- LEInf"s'reBa pany were entitled to be paid in priority to the ordinary creditors CONTRACT of the Company, or whether the judgment creditors and the CORPORATION ordinary creditors were entitled to be paid their respective debts in equal priority. Jefferson, for the liquidator : The question arises on the construction of sect. 28, sub-sect. 1,. of the Judicature Act, 1877. We contend that the bankruptcy rules have no application as regards the rights of creditors inter se : Smith v. Morgan (1) ; In re Maggi ; Winehouse v. Winehouse (2) ; Scott v. Murphy (3). Re Whitaker (4) is a decision that in England the bankruptcy rule, that voluntary creditors are to be paid pan passu with those for value, should be applied in the administration of insolvent estates in , the Chancery Division. That decision would seem to overrule the previous practice, so far as England is concerned, and to overrule the two cases of Smith v. Morgan (1), and In re Maggi; Winehouse v. Winehouse (2). The rule in Ireland has been so long in existence that this Court will not follow a mere practice decision in England, when it is at variance with the rule which has been adopted in this country for over a quarter of a century. Moore v. Smith (5) shows this, for the decision of our Court of Appeal is still followed in this country, although it is at variance with In re Leng (6), which was a decision of the English Court of Appeal, and is in direct conflict with Moore v. Smith (5). At any rate, in the winding-up of an insolvent company, judgment creditors are payable in priority to simple contract creditors : In re Withernsea Brickworks Company (7); In re Richards (8) ; Buckley on Companies, pp. 418, 419. In the grammatical construction of sect. 28, sub-sect. 1, the judgment of Fry, J., In re Naggi; Winehouse v. Winehouse (2), was clearly right, and this was recognised in...