The High Court has ordered John McGinley to repay €102,100 to the liquidator of Leo Getz Trading Limited, finding that the effect of five cash repayments was to prefer him over creditors owed tax. The court dismissed the liquidator’s claim that the payments were fraudulent preferences under section 286, but ordered repayment under section 139 of the Companies Act 1990.
The judgment, delivered by Mr Justice Peter Charleton on 11 July 2014, concerned a company that traded in classic cars and was wound up on 6 July 2009 on a Revenue Commissioners petition. The company had an unpaid Revenue debt of about €688,000 and liabilities showing insolvency of more than €1.1 million.
Official liquidator George Kennington sought recovery of repayments made to McGinley, the brother of the company’s only director, Kevin McGinley. The five cash payments at issue were €7,000 in October 2007, €5,000 in January 2008, €16,500 in February 2008, €45,000 in April 2008 and €29,500 in May 2008. The judgment records the total as €102,100.
The court accepted evidence that the company was insolvent by the time relevant repayment duties applied. But it found the liquidator had not proved that the dominant purpose of the cash payments was to prefer McGinley over other creditors, as required for a section 286 claim. The pattern of lending and repayment supported the view that the company repaid working capital to keep further loans available from McGinley.
Under section 139, the court considered the effect of the payments rather than requiring proof of that intention. It found the repayments had the effect of preferring McGinley over the repayment of taxes owed to the central fund, and ordered him to pay €102,100 to the liquidator for the benefit of the liquidation.
The liquidator also challenged the transfer of a Ferrari Testa Rossa and an Aston Martin Vanquish S to McGinley on 2 March 2009. The judgment records purchase prices of €50,000 and €125,000 respectively, and attributed values at transfer of €40,000 and €110,000. Charleton J found that some of the money McGinley advanced was probably for sourcing cars for his collection, and that it would not be just and equitable to order repayment for these vehicles. They were later sold by McGinley for a combined €117,000, according to the judgment.