High Court declares certain dispositions after commencement of winding up void

In MB Refrigeration and Air Conditioning Ltd (In Liquidation) v Allied Irish Banks Plc [2016] IEHC 753, High Court, Barrett J, 21 December 2016, the Liquidator of the plaintiff company sought a declaration that certain transactions between 13 August 2013 and 4 October 2013 on a particular AIB account, constituted dispositions of the property of the plaintiff made after the commencement of its winding-up and thus were void pursuant to Section 218 of the Companies Act 1963; and an order requiring AIB to pay to the Liquidator the amount of money involved in those transactions plus interest.

AIB submitted:

  1. following the enactment of the Companies Act 2014, the application ought more appropriately to proceed pursuant to Section 602 of that Act; 
     
  2. the date on which AIB first became aware of the existence of the winding-up application was 18 September 2013;
     
  3. this was not a situation where payments were being paid into an overdraft account so as to reduce an indebtedness of the bank and payments into an account in credit were not a disposition as they did not involve any disposal of assets;
     
  4. the fact of the presentation of the petition of winding-up could not have been, and was not, within the knowledge of AIB, prior to the advertisement of the petition on 22 August 2013;
     
  5. a number of the payments were payments to preferential creditors who would ultimately have been the beneficiaries of such payments in any event; and
     
  6. a substantial number of the payments out appeared to have been payments to third-party trade creditors done in the ordinary course of business and it was a matter for the Liquidator to provide the necessary information as to the identity of the payees and the ostensible purpose for any particular payments.

Decision

The Court agreed that it was appropriated to decide the proceedings in accordance with Section 602 of the Companies Act 2014.  Section 602 provides that, following a winding up, dispositions of the property of the company without the sanction of the Liquidator of the company, or in certain specific circumstances a director, shall, unless the Court otherwise orders, be void.

Section 602(3) provides that nothing in Section 602 makes a person who does an act rendered void by Section 602 liable for same unless it is proved that prior to the person's so doing, the person had "actual notice" that the company was being wound up. The Court was of the view that the use of the term "actual notice" suggested notice of a more express variety than the mere use of the term "notice" by itself would have conveyed. The Court noted that AIB was aware on 18 September 2013, that the Company was being wound up.

Accordingly, the Court held: 

  1. any payment made by AIB from the Company's in-credit bank account from the date of the commencement of the winding-up, up to and including 17 September 2013, was valid and, AIB was not liable for having made any such payments; 
     
  2. any impugned payment made by AIB from the Company's in-credit account on and from 18 September 2013, was void; and all such sums as well as interest from the date of payment of each individual sum to the date of repayment, should be repaid by AIB to the Liquidator, except insofar as any sum was paid by AIB to a preferential creditor of the Company and the Liquidator was satisfied that such preferential creditor would in any event have received such payment as part of the liquidation process.

For further information please contact Paula Mullooly.

Date published: 17 January 2017