The High Court has refused a liquidator’s application for a declaration that monthly payments to FF Couriers Limited director William Day amounted to fraudulent preferences. Mr Justice Max Barrett found that the evidence overcame the statutory presumption that the payments were intended to favour Mr Day as a creditor over the company’s other creditors.
The application concerned payments of €1,710.15 a month made to Mr Day between June and December 2013. FF Couriers entered liquidation on 4 January 2014. The payments had been accounted for as coming from loan money previously advanced to the company, including money lent by Mr Day. The liquidator argued that they were repayments to Mr Day as a creditor, rather than salary paid to him as a director.
Section 286 of the Companies Act 1963 provides for certain payments made before liquidation to be treated as fraudulent preferences. Because Mr Day was a director, he was a connected person under the provision. The court said the statutory presumption applied to the payments, which fell within the two-year period before liquidation, unless the contrary was shown.
Mr Day told the court in an affidavit that he understood the payments to be salary and relied on his job as his only source of income to support himself and his family. He said he expected the company to overcome its difficulties, had not received his salary for the final month, and was also owed several hundred euros in expenses. He said he had put €60,000 into the company and lost it, and could not afford to pay the roughly €10,000 at issue. The judgment records that he had already been ordered to pay €1,000 towards the liquidator’s costs.
Asked how the payments had been accounted for, Mr Day said he did not know and wished the company accountant had been present. The judge considered this an honest response. He found that the regular, modest monthly payments supported Mr Day’s account that they were understood and intended as salary, rather than a series of large payments made to quickly repay a loan.
The judge noted suggestions in the evidence that tax liabilities relating to the salary may not have been fully paid, but said that any such failure did not show that the payments were made with a view to preferring Mr Day as a creditor. He concluded that the company’s accounting did not reflect the practical reality of the payments.
The court was not satisfied to grant the declaration sought. The judgment does not record an order requiring repayment of the disputed payments.