The High Court dismissed an application by Tucon Process Installations Ltd, in voluntary liquidation, seeking a declaration that three payments totalling €23,894.50 belonged to its creditors. Mr Justice Tony Hunt held that the company lacked standing to apply under the statutory provisions it relied on. He also concluded that the payments had not been shown to have an effect amounting to fraud and that no repayment order was warranted.
The application concerned payments of €1,947 on 25 April 2012, €3,769 on 27 April and €18,178.50 on 30 April, made electronically by third-party debtors into Tucon’s current account with the Bank of Ireland at its O’Connell Street branch in Limerick. The account was overdrawn by €40,400.78 on 20 April, when Tucon’s directors passed a resolution to seek a creditors’ voluntary liquidation.
The liquidator’s evidence was that a former director informed the bank on 23 April of the planned liquidation and that a creditors’ meeting was advertised for 4 May. The liquidator asked the bank on 4 May to rule off Tucon’s accounts and hold subsequent credit transfers in trust. The bank said it followed that direction from then on, but argued that the three earlier payments were received lawfully in the ordinary course of business.
The judge said the relevant provisions allowed an application by a liquidator, creditor or contributory, but not by the company itself. Tucon had declined the bank’s proposal during the proceedings to substitute the liquidator as applicant. The court therefore found the company had no standing under the provisions invoked in its application.
On the merits, the judge considered the claim under section 139 of the Companies Act 1990. He explained that the provision concerns company property disposed of in a way that has the effect of perpetrating fraud; it does not require proof of an intention to defraud. However, ordinary payments through a current account do not, without some additional impropriety, amount to a fraudulent disposition merely because the company is insolvent or the bank’s overdraft is reduced.
The court found no evidence that either the company or bank had directed or managed the three payments, or that they were outside the ordinary operation of the account. The creditors’ voluntary winding up became operative only when the required resolution was passed at the 4 May meeting. The bank’s prior notice of the planned meeting did not, by itself, require it to stop ordinary account transactions before then.
The application was dismissed both for lack of statutory standing and because the company had not proved that the bank’s receipt of the payments had an effect amounting to fraud. The judge made no further order or direction under section 280 of the Companies Act 1963.