The High Court ruled that Gerry Bredin Hardware Ltd, which was in liquidation, owned and was entitled to possess a €700,000 insurance settlement cheque, subject to legitimate claims against the money. It did not decide the directors’ precise share, if any, of the settlement.
Mr Justice Ryan delivered the judgment on 29 November 2011 in proceedings concerning the company, which had operated a hardware business in Ennis, Co Clare. The business premises were leased from its directors, Gerry and Ailish Bredin. A fire in November 2007 severely damaged the building and destroyed stock, fixtures and fittings.
The company claimed more than €3 million under an insurance policy and received an interim payment of about €1.39 million in February 2008. A later dispute over the balance was settled. On 4 November 2010, insurers issued a €700,000 cheque payable to the company and AIB Bank, crossed “a/c payee only”. The company was insolvent, but no liquidator had yet been appointed. The company’s solicitors negotiated the cheque through their client account, retained €40,000 and paid the remaining €660,000 to the directors personally.
The liquidator challenged that payment. Under an earlier court order, the issue at this hearing was whether the €700,000 was the company’s property. The liquidator argued that the cheque was payable to the company and should have been lodged to its account. The directors argued that they were entitled to the settlement proceeds for their interests as landlords, relying on an apportionment prepared by the company accountant, Martin Lynch.
The judge found Lynch’s analysis flawed in principle and in practice. He said it relied on unsupported assumptions and arbitrary allocations, including attributing part of the fixtures and fittings payment and business interruption allowance to the directors. The judgment also said that treating €325,391 in directors’ loans or advances as a credit to them in the apportionment improperly preferred those claims over other unsecured creditors.
The judge observed that, even using Lynch’s method with adjustments, the figures would indicate €389,000 due to the company from the €700,000, though he said there was no reliable basis for fixing the beneficial shares. He considered it probable that some of the final payment belonged to the company and some to the directors, but said the evidence did not allow the court to determine the proportions.
The court concluded that the company owned and was entitled to possession of the insurance money, subject to legitimate claims. It said the directors’ claim should have been made through a proper process that recognised the company’s insolvency, and that their claim remained open. The court did not determine the directors’ exact entitlement or make a final apportionment of the €700,000 in this judgment.