The High Court declared invalid a transaction that reduced a company’s debt to its director by €840,000 in exchange for the company’s 40% beneficial interest in a Malahide home, finding it was a fraudulent preference made shortly before the company went into liquidation.
In a judgment delivered on 20 June 2012, Ms Justice Laffoy found the company was unable to pay its debts when the transaction was recorded on 21 July 2007 and when its winding up began on 31 July 2007. The defendant, Patrick McNamara, was a director and therefore a connected person under the relevant legislation. The court held that he had not produced sufficient evidence to rebut the presumption that the transaction favoured him over other creditors.
The company had used €751,928 towards the purchase of the Malahide property, and a 2002 declaration of trust acknowledged its 40% interest. The court also found that the required company approval for a transfer to McNamara had not been shown: proposed meeting minutes and resolutions dated 15 December 2006 were unsigned, and there was no evidence the meetings took place. The purported transaction was therefore voidable under company law as well as invalid under the fraudulent-preference provision. The court declared the company remained the beneficial owner of 40% of the property. It did not order partition or sale at that stage, adjourning that part of the claim generally with liberty to re-enter.
For a property in Glasgow, the court declared the company the beneficial owner and ordered McNamara to transfer his legal interest and procure the transfer of his mother Margaret MacNamara’s legal interest. The judgment recorded that she was named with him as proprietor in the Scottish land search. The liquidator was given leave to take appropriate steps in Scotland to register the company as proprietor.
The court also ordered accounts and inquiries into the €142,500 proceeds from the sale of an apartment in Spain. The money had been paid to McNamara by bank draft. Although he said he later paid it to the company, he identified no particular deposit, and the court could not find that the proceeds had been transferred to it. The company’s separate claim concerning the Spanish property’s 20% interest was no longer pursued after McNamara provided a bank draft for 20% of its market value before the hearing.
The court dismissed McNamara’s counterclaim for €41,726 as a claim to be recovered through the liquidation, and rejected his claim for an indemnity over separate Wyeth proceedings. In a separate restriction application heard alongside the case, the court ordered that he be barred from acting as a company director or secretary for five years. The judge said the conduct found in the main proceedings was irresponsible and had exacerbated the company’s insolvency.