Station Motors Ltd v Aib
| Jurisdiction | Ireland |
| Judge | Miss Justice Carroll |
| Judgment Date | 22 November 1984 |
| Neutral Citation | 1985 WJSC-HC 707 |
| Docket Number | No. 656 Sp/1983 |
| Court | High Court |
| Date | 22 November 1984 |
1985 WJSC-HC 707
The High Court
Between:
and
Citations:
BANKRUPTCY (IRL) AMDT ACT 1872 S53
CLAYTONS CASE 1816 1 MER 572, (1814–1823) 35 AER 1
COMPANIES ACT 1948 S319(4) (UK)
COMPANIES ACT 1963 S281(1)
COMPANIES ACT 1963 S284(6)
COMPANIES ACT 1963 S285(3)
COMPANIES ACT 1963 S285(6)
COMPANIES ACT 1963 S286(1)
COMPANIES ACT 1963 S399
CORRAN CONSTRUCTION CO LTD V BOI FINANCE LTD 08.09.76 1976/1/212
F P & C H MATTHEWS LTD, IN RE 1982 1 AER 338
M KUSHLER LTD IN RE 1943 2 AER 22
PATRICK & LYON LTD, IN RE 1933 1 CH 786
PEAT V GRESHAM TRUST LTD 1934 AC 252
PRIMROSE BUILDERS LTD IN RE 1950 2 AER 334
RAMPGILL MILL LTD IN RE 1967 1 AER 56
Synopsis:
COMPANY
Winding up
Creditors - Fraudulent preference - Bank account - Lodgments - Company's overdraft guaranteed by director - Lodgments of #23,000 made by director between decision to wind up and date of winding up - Intention of director to prefer bank and reduce his guarantee liability - Whether bank entitled to priority in regard to company's wages payments made from overdrawn account - Whether moneys advanced for the payment of wages - No wages account - Whether rule in Clayton's Case applied to lodgments - Companies Act, 1963, ss. 285, 286 - (1983 No. 656 Sp. - Carroll J. - 22/11/84).
Station Motors Ltd. v. Allied Irish Banks
Judgment of Miss Justice Carrolldelivered the 22nd day of November, 1984.Mary P. O' Donoghue Registrar
There are three issues arising in this case:
1. Whether lodgments by the plaintiff ("the Company") to its account with the defendant ("the Bank") between the 15th September, 1980 (when the directors decided to call a creditors"meeting with a view to a creditors" voluntary winding-up) and the 3rd October, 1980, (when the company actually went into liquidation) constituted a fraudulent preference within the meaning of Section 281 (1) of the Companies Act 1963.
2. Whether the Bank have a valid preferential claim under Section 284 (6) in respect of moneys paid by the company for wages during the four months prior to the 3rd October, 1980, out of its account with the Bank which was no an overdraft sanctioned by the Bank.
3. If so, whether the rule in Claytons Case applies.
The facts are as follows:
The company was incorporated on the 10th March, 1977. Mr. William Murphy together with his wife effectively controlled the operation and existence of the company. The company's Bank account was guaranteed by Mr. Murphy. On the 24th January, 1980, the Bank sanctioned an increase in overdraft to £30,000 to be guaranteed by Mr. & Mrs. Murphy. The company's overdraft increased, despite protest by the Bank, to£78,116–08 on the 16th June, 1980. On that date the Bank obtained a joint and several letter of guarantee from Mr. & Mrs. Murphy for the obligations of the company up to £75,000 with interest. Between the 16th June, 1980 and the 17th September, 1980, a total of £199,209–48 was credited and£187,649–65 was debited to the current account of thecompany.
On the 15th September, 1980, the directors of the company (including Mr & Mrs Murphy) passed a resolution that an extraordinary general meeting of the company be held on the 3rd October, 1980 at 10.30 a.m. to consider and if thought fit to pass the following resolution:
"That is has been proved to the satisfaction of this meeting that the company cannot by reason of its liabilities continue its business and that it is advisable to wind-up the same and that accordingly the company be and is here by wound-up voluntarily and that P.P. Carty FCA"of Haughey Boland and Company, 60/62 Amiens Street, be nominated liquidator for the purpose of such winding-up."
Mrs Murphy was instructed to convene a meeting of creditors for 11 a.m. on the 3rd October, and John Tobin was instructed to compile a full statement of the position of the company's affairs with a list of creditors and estimated amount of claims to be laid before the meetings on the 3rd October.
In his affidavit Mr. Herlihy on behalf of the Bank said that on the 17th September, 1980, Mr. Carty (then the proposed liquidator) and Mr and Mrs Murphy assisted the Bank in identifying wages cheques paid between the 16th June, 1980, and the 17th September, 1980, (totalling£,32,519–11). He said the Bank was told of a proposedcreditors" meeting for winding-up and also that a wages account was opened on that day at the request of Mr & Mrs Murphy and MrCarty.
Mr Carty in a supplemental affidavit denied that he assisted in identifying wages cheques or that he requested with Mr and Mrs Murphy that a wages account be opened.
On the 18th September, 1980, advertisements appeared in the newspapers concerning the creditors" meeting.
On the 30th September, 1980, the wages account was debited with the said sum of £32,519–11 and the company's current account was credited in thelike sum. Between the 17th September, 1980, and the 3rd October, 1980, a further sum of £4,348–72 was debited to the wages account for wages.
Between the 15th September, 1980, and the 3rd October, 1980, lodgments were made to the company's account totalling £23,278–13.During the same period six cheques totalling £8,057–38 were honoured by the Bank. One of them was payable to Mr. Murphy in the amount of £2,730 and was drawn on the 16th September. The other five totalling £5,327–38 were drawn prior to the 15th September. Mr. Herlihy said that these cheques were paid following representations made by Mr. Murphy. During the same period four cheques totalling £2,321–20 were presented but were nothonoured.
With the exception of Mr. Carty's disavowal in relation to identifying wages cheques and requesting a wages account to be opened, these facts are not in issue.
Mr. Murphy was represented at the hearing by Mr. Nesbitt who said he did not wish to adduce evidence. The matter was heard on affidavit.
In relation to the first issue the relevant Section is Section 286 (1) of the Companies Act 1963which provides:
"Subject to sub-section (2)" (which is not relevant here) "any conveyance, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company within six"months before the commencement of its winding-up which, had it been made or done by or against an individual within six months before the presentation of a bankruptcy petition on which he is adjudged a bankrupt, would be deemed in his bankruptcy a fraudulent preference, shall in the event of the company being wound up be deemed a fraudulent preference of its creditors and be invalid accordingly."
Also relevant in Section 53 of the Bankruptcy (Ireland) Amendment Act 1872 as amended by Section 399 of the Companies Act 1963and set out in the 11th Schedule to that Act which provides:
"Every conveyance or transfer of property or charge thereon made, every payment made, every obligation incurred and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own moneys, in favour of any creditor or of any person in trust for any creditor, with a view to giving such creditor, or any surety or guarantor for the debt due to such creditor, a preference over the other creditors, shall, if the person making, taking, paying or suffering the same is adjudged bankrupt on a bankruptcy petition or a petition for arrangement, presented within six months after the date of making, taking, paying or suffering the same, be deemed fraudulent and void against the assignees or trustees"of such bankrupt; but this section shall not affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the bankrupt."
The payments which are queried are the lodgments made after the 15th September, 1980.
It is common case that the onus is on the liquidator to establish a dominant intention to prefer one creditor over another (see CorranConstruction Company Limited .v. Bank of Ireland Finance Limited1976 No. 118 Sp McWilliam J. delivered the 8th September, 1976.
Since this is a company managed and run by Mr. Murphy it is Mr. Murphy's intention which falls to be considered. There is no direct evidence here by Mr. Murphy as to what his intention was. Nevertheless the Court is not precluded from drawing an inference of an intent to prefer.
The case of Re M. Kushler Limited 1943 2 All England Reports 22 deals with the following points:
1. The phrase "with a view to giving such creditor a preference" means that the intention to préfer must be the dominant intention which actuates the payment (per Lord Greene M. R. at page 24).
2. It is not enough to prove that there was actual preferment from which an intention to prefer can, with hindsight, be inferred. TheLiquidatormust prove an intention to prefer at the time the payment is made (per Goddard L.J. at page 28).
3. Where there is no direct evidence of intention, there is no rule of law which precludes a Court from drawing an inference of an intention to prefer, in a case where some other possible explanation is open (per Lord Green M.R. at page 26).
Also in relation to the absence of direct evidence as to intention, Lord Greene M.R. says at page 27
"-........it does not seem to me that he (i.e. Lord Tomlin in Peat .v. Gresham Trust Limited 1934 A.C. 252) could have meant that in every case where there is no direct evidence you are bound to say the onus is not discharged on the grounds that there may have been another explanation. Of course there may have been other explanations. One can scarcely imagine a case of circumstantial evidence where it would not be possible to say that there...
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