BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

Jersey Unreported Judgments


You are here: BAILII >> Databases >> Jersey Unreported Judgments >> 1998/7 - Viscount v PSD and Barrett [1998] UR 7 (14 January 1998)
URL: http://www.bailii.org/je/cases/UR/1998/7.html
Cite as: [1998] UR 7

[New search] [Contents list] [Context] [Printable version] [Help]


ROYAL COURT

(Samedi Division)

14 January 1998

Before: F C Hamon Esq, Deputy Bailiff

and Jurats Myles and Potter

In the matter of PSD Enterprises Limited (en Désastre)

And in the matter of Miss Phyllis Eileen Barrett

And in the matter of article 17 of the Bankruptcy

(Désastre) (Jersey) Law 1990, as amended

 

Advocate J G P Wheeler for the Viscount

Miss P E Barrett represented herself

 

JUDGMENT

 

THE DEPUTY BAILIFF: In this representation the Viscount acting in the désastre of PSD Enterprises Limited (PSD) calls upon the beneficial owner of that company and one of its directors Miss Phyllis Eileen Barrett (Miss Barrett) to repay the sum of £25,234 which it is alleged she paid herself in preference to the other creditors of the company. In this action Miss Barrett represented herself and we heard evidence from a Viscounts Officer and from Mr Wojciechowski a senior manager at Deloitte & Touche.

The preference that it is claimed that Miss Barrett procured is within the meaning of Article 17 of the Bankruptcy (Désastre)(Jersey) Law 1990. That Article states that (subject to the Article)

"where a debtor in respect of whose property a declaration has been made has at the relevant time ... (b) given a preference to any person, the Viscount may apply to the Court for such order as the Court thinks fit for restoring the position to what it would have been if that debtor had ...... given that preference."

The Article goes on to say that

"a debtor gives a preference to a person if:

(b)the debtor:-

(i)does anything, or

(ii)suffers anything to be done, which has the effect of putting that person into a position which, in the event of a declaration being made in respect of the debtor’s property, will be better than the position he would have been in if that thing had not been done".

And then the Article says at sub-paragraph 4:

"The Court shall not make an order under this Article in respect of a preference given to any person unless the debtor who gave it was influenced in deciding to give it by a desire to produce in relation to that person the effect (referred to above)".

Of course the debtor must either be insolvent at the time that the alleged preference is entered into or must become insolvent in consequence of the preference.

The importance of the article is that there must be a desire to produce the effect mentioned in sub-paragraph 4. It is not enough to satisfy an intention to prefer. We might have had some difficulty in interpreting this sub-paragraph had it not been for the fact that a relevant part of the Insolvency Act 1986 (in identical terms to our subsection) replaces S44(1) of the Bankruptcy Act 1914 (which is in any event an Imperial Statute with effect in this jurisdiction). That part of the 1986 Act was interpreted in Re MC Bacon Ltd. (1990) BCLC 324.

In deciding the case, Millett J said this (at 335) of the language of S239:

"It involves at least two radical departures from the old law. It is no longer necessary to establish a dominant intention to prefer. It is sufficient that the decision was influenced by the requisite desire. That is the first change. The second is that it is no longer sufficient to establish an intention to prefer. There must be a desire to produce the effect mentioned in the subsection."

Millet J goes on to say that there must have been a desire to produce the effect mentioned in the subsection that is to improve the creditors position where the English Statute has substituted (and we have adopted) "desire" for "intention". Millett J says this (at 235):-

"Intention is objective, desire is subjective. A man can choose the lesser of two evils without desiring either".

The desire must have actually influenced the decision to enter into the transaction but Millett J went on to say (at 336):

"It (the subsection) requires only that the desire should have influenced the decision. That requirement is satisfied if it was one of the factors which operated on the minds of those who made the decision. It need not have been the only factor or even the decisive one. In my judgment it is not necessary to prove that, if the requisite desire had not been present, the company would not have entered into the transaction. That would be too high a test."

So we must look at the transaction and decide whether the company was motivated by proper commercial considerations or was desirous of improving the creditor’s position in the event of its own insolvency.

PSD is a company incorporated in Jersey. On 24 June 1991 Miss Barrett was appointed by Mr B Madagan as his alternate director but she was appointed a director in her own name on 1 July 1992. By 6 May 1993 Miss Barrett was signing herself as Managing Director. That position was confirmed in an apparently acrimonious board meeting held on 9 January 1995.

It would appear from the minute book of the company that at some time (the minute is not dated, is unsigned and merely starts with the words "Meeting re-convened two days later") a decision was made in these terms:

"Eventually it was agreed to pay a starting salary of £20,000 p.a. plus car and expenses and confirms Eileens appointment as Managing Director".

During the period between 1 December 1994 and 5 January 1995, Miss Barrett withdrew cash from PSD of at least £26,984 which she claims was arrears of salary.

On 13 April 1995 the company was declared en désastre by its landlord.

The Viscount argues before us that at the date of the declaration en désastre PSD had assets valued at £37,342.81 and liabilities (being claims lodged in the désastre) in the total sum of £167,021.05. This sum comprises claims from third party creditors of £89,051.56 and a claim by Miss Barrett in the amount of £77,969.49 of which £1,750.00 is a priority claim for unpaid wages. The Viscount does not accept that Miss Barretts claim is admissible in the désastre in total and in particular takes issue as to a claim for £45,000.00 in respect of the purchase of shares in PSD by a Mr B. Madagan from Miss Barrett which is not a claim sustainable against PSD.

As at the declaration of the désastre, the financial position of PSD shows a net excess of liabilities over assets of £129,678.24 or £84,678.24 excluding the £45,000.00 claim by Miss Barrett referred to in the previous paragraph hereof.

As at 1 December 1994 PSD had assets totalling in value £68,951.70 comprising stock and fittings at £52,829.21, debtors (namely an insurance claim) of £11,180.41 and cash at the bank of £4,942.08. At the same date PSD had liabilities of £137,628.74 comprising £44,229.23 due to third parties and the balance being claimed by Miss Barrett. In addition, PSD was due to pay rent on 25 December 1994 amounting to £8,035.50 for the quarter ending on 25 March 1995 together with a premium of £3,000.00 and was also liable in December for staff wages (other than Miss Barrett) of £2,960.03. The liabilities of PSD to third parties falling due in December therefore totalled £55,224.76.

PSDs takings in the month of December (a month of traditionally high retail sales) amounted to £46,956.16. This amount, together with the balance of cash of £4,942.08 (giving a total of £51,898.24) would have been insufficient to repay third party liabilities falling due in December 1994 of £55,224.76.

During the period from 1 January 1995 to 31 March 1995 the takings of PSD in its business amounted to £33,689.61 and liabilities rose to £164,253.63. Third party creditors rose from £44,229.23 to £89,051.56. The quarters rent referred to above was not, in fact, paid until 15 March 1995 i.e. ten days before the next quarters rent became due for payment.

The burden of proof is on the Viscount. Miss Barrett takes exception to the valuation of H.W.Maillard & Son Ltd which did not include many valuable items such as mirrors, carpets and light fittings extant on the rented premises; to the fact that many of the debts detailed by Mr Wojciechowski of Deloitte & Touche only became due and a liability as a result of the désastre. Furthermore, she says, there is the potential settlement of an insurance claim which Miss Barrett says could have been settled for £32,000 at some stage. The insurance claim followed a fire at the companys premises on 3 and 4 October 1993. We cannot see how Deloitte & Touche could have reached any other conclusion than it did. From the figures produced to us the company had a net excess of liabilities over assets of £84,799.53p at 1 December 1994 and as the law states, the question of insolvency is "the inability of a debtor to pay his debts as they fall due".

At a meeting on 10 January of Something Special Limited (which was PSD by any other name) Miss Barrett told the meeting (the other directors were Brian Madogan and David Brockdorf) that the company "needs a cash injection of £60,000" but had "very little funds in the banks - £1,200 approximately".

We would say in passing that Miss Barrett makes some serious allegations against her two fellow directors and it may be that they manoeuvred the company into a position of bankruptcy. That is not for us to conjecture.

Suffice it to say that we are satisfied that the test in the law is fulfilled and although the order is perhaps academic because Miss Barrett is herself "en désastre" we make the order requested by the Viscount accordingly.

AUTHORITIES

Bankruptcy (Désastre) (Jersey) Law 1990: Article 17

Insolvency Act 1986

Bankruptcy Act, 1914

Re: MC Bacon, Ltd. (1990) BCLC.324

Re Exchange Travel (Holdings) Ltd (in liq) (No 3) [1996] 2 BCLC 524


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/je/cases/UR/1998/7.html