The High Court has ordered Noel Conway to pay €121,580 to the liquidator of Le Chatelaine Thudichum Limited, finding that the transfer of the company’s stock and cash to him deprived the company and its creditors of assets.
Mr Justice Roderick Murphy gave judgment on 11 November 2008. The company, which operated a Spar outlet in premises at Ratoath, Co Meath, was insolvent when it handed control of the premises back to Mr Conway on 10 April 2006. At the handover, he took €9,500 in cash and stock valued at €112,080.
The liquidator sought declarations that the transfer was a fraudulent preference under section 286 of the Companies Act 1963, as amended, or alternatively a fraudulent disposition under section 139 of the Companies Act 1990.
The court dismissed the fraudulent preference claim. It found that managing director Mr Thudichum intended the assets to be distributed equitably among creditors, working with Mr Conway and the company’s accountant. But the plan had not been communicated to them by the time of the transfer. The judge nevertheless found that Mr Thudichum’s dominant intention was to make the proposed arrangement happen, and attributed that intention to the company. The liquidator had not proved that the dominant intention was to prefer Mr Conway over other creditors.
On the alternative claim, the judge found that the stock and cash belonged to the company. Mr Conway had argued that title to goods bought from supplier BWG/Spar remained with him until the company reimbursed him. The court rejected that argument, finding no basis to extend the supplier’s reservation-of-title clause to the dealings between Mr Conway and the company, and no sufficiently clear basis to imply such a term into their arrangement.
The court also rejected Mr Conway’s argument that he had taken the assets through a landlord’s distress for unpaid rent. The statutory process for distress had not been followed, and the handover was voluntary. Nor could a vendor’s lien give him priority over other creditors.
The judge found that the disposition deprived the company and its creditors of assets to which they were entitled. In calculating the order, he considered €21,368 in net credit-card payments that Mr Conway had inadvertently allowed to be credited to the company’s bank account after the handover. The company was not entitled to retain that benefit, and Mr Conway could claim for it in the liquidation. The order requires payment of the value of the transferred cash and stock, less that amount. Mr Conway may also claim in the liquidation for the unpaid BWG/Spar invoices and the credit-card payments.