James Dolman & Company Ltd (in liquidation), Re

THE JUDGE: This is the trial of a conjoined set of proceedings brought effectively by the liquidator of James Dolman & Company Limited. The first proceedings are brought under Part 7 in which the company itself is the claimant and the second proceedings are brought in the name of the liquidator pursuant to his powers under the Insolvency Act and in respect of causes of action that are technically vested in him rather than the company.

So far as material the claims that survive at the commencement of the hearing today are only those against Mrs Daphne Elizabeth Treanor in both sets of proceedings, though there was an unresolved question in respect of claims against Mr Steven Treanor. All other claims have been compromised on the basis of consent orders which have now been signed by all the other parties, save the claims against Mr Kevin Price which were stayed by order some time ago and in respect of which I refused an application to lift the stay.

So far as Steven Treanor is concerned no claim is now pursued against him. The liquidator has previously offered to discontinue those claims on terms there be no order for costs. Mr Steven Treanor had not, until today, agreed those terms but he has now attended the trial and confirmed to me that he agrees that order. So in respect of him the order will be that the claims are dismissed and there be no order for costs.

The claims against Daphne Treanor involve the alleged receipt by her of £56,000 paid without any consideration by the company, James Dolman & Company Limited. I should briefly say in relation to that company that Mrs Treanor was not a director or officer of that company, nor was she, according to the evidence, in any way involved in its day to day operations. She is the wife of Mr John Treanor, who was not himself a director of the company, and she is the mother of Mr Simon Treanor, who was a named director together with his wife, Judith Treanor.

It is pleaded that a total of four cheques were paid from the company’s bank account to Daphne Treanor and that there was no consideration for such payments. In her defence Mrs Treanor, somewhat ambiguously, seems to accept that the payments were made but then puts the liquidator to proof that they were made at the time and in the amounts that he pleads. Mrs Treanor has never filed any evidence of her own in relation to these pleadings and she has not appeared at the trial today.

Mr Saxton has appeared and verified his witness statements. Those witness statements show payments of four amounts totalling £56,000 made from the company’s bank account pursuant to cheques which are made out to a D Treanor. One of them was thought to be made out to P Treanor, but it appears that that was simply a badly written D and that particular cheque can be traced to a receipt in the bank statements acknowledged by Mrs Treanor herself. I am satisfied therefore that the company did make payment of £56,000 and that it was made to Mrs Daphne Treanor.

So far as the claim against Mrs Treanor is concerned it is necessary to consider the causes of action separately in each of the two sets of proceedings. I will deal first, because it seems to be more straightforward, with the claim brought by the liquidator. This is on the basis that it is alleged that these payments were transactions at an under value, there being no consideration for them. Mrs Treanor has not formally defended the insolvency application. She has filed a defence in the Part 7 application and I take it that the arguments that she puts forward there are also intended to be considered in relation to the insolvency application.

In that defence she (as I said, somewhat ambiguously) accepts that she received the payments. She denies that any of them were received by her in the knowledge of any impropriety on behalf of the company and she alleges that there was consideration for them. In relation to the first payment of £15,000, she says that it was repayment of a loan previously made by her to the limited company and in relation to the other payments that they are said to have been repayment of monies owed by the limited company to her son, Simon Treanor, which Simon Treanor had asked the company to pay to her. There is no formal evidence from Mrs Treanor in relation to either of those matters.

So far as the alleged loan by her to the company is concerned there are references in solicitors’ correspondence to that loan which is said to have been made in either December 1997 or January 1998. It is apparent from the Companies House records that have been produced that the company which at that date was trading under the name James Dolman & Company Limited is a company which is now called Excelsior End Limited, and on the evidence it ceased trading and changed its name in March 2001. It is apparent from the Companies’ House records that it was dissolved on 6^th November 2001. Accordingly any loan which Mrs Treanor may have made, as to which there is no evidence, could only have been made to the company now known as Excelsior End Limited. There is no evidence that the present James Dolman & Company Limited took over or became responsible in any way for repayment of any such loan and there is therefore no evidence to support the contention by Mrs Treanor that £15,000 was paid to her in consideration of that loan.

So far as the alleged repayment of loans to Simon Treanor is concerned again there is no evidence from Mrs Treanor herself either as to the existence of any such loans or any request by Simon Treanor that they be discharged by making payment to her.

Simon Treanor did file evidence in relation to the case against him. He alleged that he had made a number of loans to the company but his case and his evidence was that insofar as payments were made to him by the company they were in discharge of the loans which he had previously made to the company. At no point in his evidence does he suggest that he requested that any monies be paid to his mother or that, indeed, in any other way monies were paid by the company to his mother in satisfaction of amounts paid to him.

I am satisfied therefore on the evidence that it has not been shown that there was any consideration for the payment of the £56,000 by the company to Daphne Treanor.

That is not quite the end of the matter as far as section 238 is concerned. However, the other relevant formalities are dealt with in Mr Dean’s skeleton argument. The payments were made within the period of two years prior to the onset of insolvency, that date being 23^rd October 2003. At the time when the payments were made it is to be presumed that the company was insolvent because Mrs Treanor was at that point connected with the company within the definitions set out in section 240 and section 435 of the Insolvency Act. That connection was because she is an associate of Simon Treanor, who was a director. She is an associate because she is his relative, being his mother, or lineal ancestor as the term is used in section 435.

I am satisfied therefore that the requirements necessary to be shown under section 238 are made out and that it is appropriate that the order I should make for restoring the position is that she should repay that amount to the company, with interest from the date on which she received it. That would be sufficient to dispose of the claim against her it seems to me.

I should, however, I think formally deal with the Part 7 claim because it is made in separate proceedings. There two causes of action are pleaded against her. The first being that the court should impose a constructive trust upon her by reason of her knowingly having received monies paid in breach of trust by the directors of the company. Secondly, an order should be made on a restitutionary basis that she had been unjustly enriched by the receipt of the monies which she has received and that it would be unconscionable for her to retain those monies.

So far as knowing receipt is concerned it is necessary first to show that those monies were paid in breach of trust by the directors. The findings that I have made are that the company made those payments without any consideration. It must be taken, it seems to me, that the directors, Simon Treanor and Judith Treanor, were aware that there was no consideration for those payments. There is certainly no evidence to suggest that they thought that there was any good consideration for those payments. Accordingly in my view it is established that those payments were made in breach of trust by the directors at the time.

So far as knowledge of that on Mrs Treanor’s part is concerned there is, of course, no direct evidence as to her state of mind. It must be inferred from the surrounding transactions. I asked Mr Saxton, the liquidator, the question why he thought it should be taken that she knew that the payments were made to her without consideration, to which his answer was that he thought it inconceivable that somebody should receive £56,000 from a company without asking questions about it.

I think in fact that does reflect the reality here. This is a company that was controlled by members of the Treanor family. The evidence shows amply in the case of the other defendants that it was operated in a manner in which they caused it to make payments to themselves and to their relatives freely, effectively as if the money contained in the company was their own. It is, I think, inconceivable that Mrs Treanor was not aware that they were paying themselves and other relatives large amounts from that company and it is, I think, to be inferred from the fact that she has not produced any credible evidence of a good reason for payment to her that she was aware that the company did not have any such good reason. As to whether it is unconscionable that she should retain those monies it seems to me that that is also to be inferred from the same facts and she has not put forward a good reason why she should have been paid those monies nor any positive reason why she should retain them. In my judgment therefore the case based on knowing receipt of monies paid in breach of trust is made out.

Similarly, as far as restitution is concerned payment to Mrs Treanor without good consideration and in circumstances in which there was no credible reason for it means that she has been enriched at the company’s expense. That enrichment is unjust for the same reasons, no credible reason having been put forward for making the payment. In her defence Mrs Treanor asserted that she had changed her position in reliance on receipt of the funds. She gave no particulars as to the respect in which she had changed her position and there is, as I have said, no evidence from her sufficient to make out that defence. The onus would be on her to make it out. She has not done so and in my view therefore it would be appropriate to make an order on a restitutionary basis as well.

So for those reasons briefly stated in my view there should also be an order in the Part 7 proceedings that Mrs Treanor should repay £56,000 to the company, with interest from the date on which she received it. There will not, of course, be a double recovery. Credit will be given in each action for any amount paid by Mrs Treanor.