The High Court has found that €200,000 received by Varko Limited was held on trust for the estate of Charlotte McCoy and is not available for distribution in the company’s voluntary winding up. The court has not yet made the consequential orders: Mr Justice Gilligan said he would hear submissions on what steps should follow.
The finding arose from an application by McCoy’s executors under section 21(10) of the Companies Act 1963. The application concerned money advanced to Varko, a call-centre business, from a €371,000 mortgage secured against McCoy’s home in Kinsale. The judgment records that the company’s directors accepted that €200,000 of the mortgage proceeds benefited Varko and had agreed that the sum would be repaid to McCoy.
The judgment summarises evidence that McCoy, who was partially sighted, said she did not know about or consent to the 2008 mortgage and received no benefit from it. An agreement made in July 2010 recorded that she had put the property into joint names with her son, James McCoy, to help raise business capital, without intending to transfer beneficial ownership, and that the capital was to be repaid. These matters are described in the judgment as evidence and agreed background; the court’s conclusion was that the way the mortgage was obtained was unconscionable and that unfair advantage had been taken of her.
Varko entered voluntary liquidation on 24 November 2010. The judgment records that the company had an overall deficit of about €1.41 million, and that its business assets and goodwill were later sold to Tacketdale Limited for €68,400. The liquidator’s solicitor said there was no money available to pay unsecured creditors and argued that the evidence did not establish a trust or permit the money to be traced. The court noted that the company and its advisers knew of the liquidation when an earlier case brought by McCoy proceeded before the Master of the High Court, but that the Master was not told of it.
In that earlier proceeding, judgment was entered for €200,000 plus interest against James McCoy and Varko, and for a separate sum against James McCoy. In the present application, Justice Gilligan concluded on the balance of probabilities that the €200,000 was held by Varko on trust for McCoy and, after her death, formed part of her estate. He ruled that it was outside the pool available for distribution in the winding up. The judgment ends by reserving the question of appropriate steps and orders for further submissions.