The recent judgment in MB Refrigeration and Air-conditioning Limited (in liquidation) –v- Allied Irish Bank Plc  has clarified what constitutes “notice” of the liquidation of a company for creditors and banks alike.
In this case the liquidator sought recovery of money paid out of a company’s bank account after it went into liquidation. The liquidator sought a declaration that the bank was on notice of the company’s liquidation from the date of the advertisement and that any payments from the company’s account from that date should be reversed in accordance with the provisions of the Company’s Act 1963. The liquidator relied on the provisions of the 1963 Act because he was appointed at a time when it was the relevant legislation, and that is when all of the transactions took place. The 1963 Act provides that once there is constructive notice of a liquidation, such transfers should be reversed.
The Petition to wind up the company was filed on 13 August 2013 and the advertisements were placed on 22 August 2013. The liquidator argued that because the bank was on constructive notice of the liquidation of the company from the date of the advertisements on 22 August, all transfers from the company’s account after that date should be reversed.
The enactment of the 2014 Act has changed this position and provides that such a transaction can only be reversed where there is actual notice that a company was being wound up. However the liquidator argued that the Court should rely on the transitional provisions of the 2014 Act which allowed the Court to “make whatever order it thinks appropriate for ensuring the smooth transition procedure under this Act”.
AIB argued that it was not on actual notice of the liquidation of the company until it was actually served with a copy of the Court order winding up the company on 18 September 2013, and so any payments from the company’s account up to that date were validly made.
The Court held that the provisions of the 2014 Act applied and the appropriate notice was actual notice. The Court held that the payments made up until the bank received actual notice of the liquidation were valid and only thereafter should be reversed. The Court also made the interesting and practical order that payments made to preferential creditors even after the bank received actual notice of the liquidation should not be reversed. This was on the basis that the preferential creditor should be the ultimate beneficiary of such payments.
Banks will only be on notice of the liquidation of a company and the obligation to preserve company accounts when they are actually served with confirmation that the company has been placed in liquidation and not on the date of the advertisement of the petition.
The issue of notice of a liquidator’s appointment has often been a source of dispute amongst liquidation stakeholders and this decision provides welcome clarity for liquidators as well as banks.