Background
Any disposition of a company’s property made after the commencement of its winding up, without the approval of the liquidator, is void. In a 2001 case (Re Industrial Services Company (Dublin) Ltd 2 I.R.118), the High Court held that the transfer by an account bank of monies from an in-credit account of a company in liquidation to third parties constituted a disposition and the bank could be liable to repay the value of such transfers despite not being aware of the winding up order for the Company.
This onerous position for account banks and other third parties was addressed in the Companies Act 2014 by the enactment of Section 602 (3) of that Act. This section provides that a person effecting a disposition subsequent to a company’s winding up will not be liable unless that person had actual notice, rather than mere constructive notice, of that winding up.
Case
In MB Refrigeration and Air Conditioning Ltd (In Liquidation) -v- Allied Irish Banks Plc IEHC 753 the liquidator of the company brought an application seeking a declaration that certain transactions carried out on the company’s AIB bank account without sanction of the liquidator after the commencement of the company’s winding-up constituted “dispositions” of the company’s property and were void pursuant to the provisions of the Companies Act 1963. The liquidator further sought an order requiring AIB to repay the value of those transactions plus interest.
The liquidator sought to rely on the provisions of the 1963 Act which required AIB to have only constructive notice of a winding-up. AIB requested that the application proceed pursuant to the Companies Act 2014.
Acknowledging that Section 602 (3) of the Companies Act 2014 sought to resolve certain issues arising from the decision in Re Industrial Services Company (Dublin) Ltd 2 I.R. 118, the Court exercised its discretion under the transitional provisions of the Companies Act 2014 and held that the matter was to be decided based on the new 2014 Act.
Decision
The Court held that any payments made by AIB from the company’s in-credit bank account from the date of the commencement of the winding-up up to the date AIB became aware and had actual notice of the winding-up were valid. Accordingly AIB was not liable to repay the value of any such payments.
Payments made on and from the date AIB had actual notice of liquidation were held to be void and AIB was ordered to repay to the liquidator the value, including interest, of all such payments.
Interestingly, the High Court did not order the repayment of any sum paid to AIB as a preferential creditor where the liquidator was satisfied that AIB would in any event have received such payment as part of the liquidation proceeds.
Contributed by Craig Sowman
