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Coombe Importers Ltd., Re [1998] IEHC 12; [1999] 1 IR 492 (28th January, 1998)
THE
HIGH COURT
1990
No. 12513 p
IN
THE MATTER OF COOMBE IMPORTERS LIMITED (IN LIQUIDATION)
AND
IN THE MATTER OF THE COMPANIES ACTS 1963 TO 1990.
JUDGMENT
of Mr Justice Peter Shanley delivered the 28th January, 1998
.
1. Coombe
Importers Limited was wound up by the Court on the 28th day of November, 1990.
The company has previously been under the protection of the Court pursuant to
the provisions of the Companies (Amendment) Act, 1990. In this application,
Thomas Grace, the Official Liquidator of the company, seeks directions of the
Court as to whether a particular claim of the Revenue Commissioners is entitled
to super-preferential status pursuant to Section 120 of the Social Welfare
(Consolidation) Act, 1981 or, alternatively, whether the claim is only entitled
to preferential status pursuant to Section 285 of the Companies Act, 1963.
2. Brian
Jenkins, a Chartered Accountant, had been appointed Examiner of the company.
Within a week of his appointment it became apparent to him that there were
certain irregularities in the company in relation to the payment of wages: the
wages put through the wages book did not tally with the wages in the cheque
journal. It is common case that what in fact occurred is that monies were paid
to employees of the company prior to its winding up without deduction of PAYE
or PRSI. These payments were disclosed by the Examiner's staff to the Revenue
Commissioners and, in due course, on the 22nd October, 1990, estimates were
raised by an Inspector of Taxes pursuant to Sections 8 and 11 of the Finance
Act, 1968 (as amended). There was no appeal by the company against these
estimates within thirty days following receipt of the estimates, and, in
consequence, the Revenue Commissioners contend that the sum of £12,811.03
assessed in accordance with the estimates is to be regarded as a
super-preferential claim in the winding up. The estimates are in respect of
PRSI due in respect of the monies paid to employees where, as I have already
stated, there was no deduction of either PAYE or PRSI.
STATUTORY
PROVISIONS
3. The
Social Welfare (Consolidation) Act, 1981 specified the sources of monies which
would fund the benefits payable out of the Social Insurance Fund. Section 10,
in particular, provided for employment contributions to be paid by employed
contributors and their employers: Section 10(4) of the 1981 Act, provided as
follows:-
"An
employer shall be entitled subject to and in accordance with regulations to
recover from an employed contributor the amount of any contribution paid or to
be paid by him on behalf of that contributor and, notwithstanding anything in
any enactment, regulations for the purposes of this sub-section may authorise
recovery by deductions from the employed contributors remuneration, but any
such regulation shall provide that:-
(a) where
the employed contributor does not receive any pecuniary remuneration either
from the employer or from any other person, the employer shall not be entitled
to recover the amount of any such contribution from him, and
(b) where
the employed contributor receives any pecuniary remuneration from the employer
the employer shall not be entitled to recover any such contribution otherwise
than by deductions."
4. Regulations
such as were envisaged by Section 10(4) of the 1981 Act were made by the
Minister for Social Welfare on the 9th November, 1989. These regulations were
the
Social
Welfare (Collection of Employment Contributions by the Collector General)
Regulations, 1989
(Statutory Instrument 298 of 1989). Article 6(1) of the Regulations provided
as follows:-
"An
employer shall, on making any payment of reckonable earnings to an
employed
contributor, deduct from the earnings -
(a) The
amount of any employment contribution due by the contributor in
respect
of that payment of reckonable earnings, or
(b) where
the said amount cannot at the time of making such payment be
ascertained,
the amount reasonably believed by the employer to be so
due"
"Any
sum deducted by an employer from the remuneration of an employee of his in
respect of an employment contribution due by the employer and unpaid by the
employer in respect of such contribution shall not form part of the assets of a
limited company in a winding up under the Companies Act 1963, and in such a
winding up a sum equal in amount to the sum so deducted shall, notwithstanding
anything in that Act be paid to the social insurance fund in priority to the
debts specified in Section 285 (2) of that Act."
Section
120(2) of the 1981 Act is the original basis for the claim of the Revenue
Commissioners to be entitled to a super-preferential status in respect of the
estimated PRSI. sums.
Section 120(4) of the 1981 Act provided as follows:-
Full
proof of a debt to which priority is given by this Section shall not be
required
except where required by or under the Act of 1889 or the Companies Act, 1963."
"The
Act of 1889"
is a reference to the Preferential Payments in Bankruptcy (Ireland) Act, 1889,
and, for the purposes of this application, is of no relevance. The question of
the admission to proof and of the value of the claim by the Revenue
Commissioners arose before the Assistant Examiner of the High Court and, in the
absence of agreement between the parties, namely, the Revenue Commissioners and
the Official Liquidator, was referred to the High Court for its determination.
At this stage, it is worth noting that as a matter of law all debts and claims
which are admitted to proof must be valued at the date of the commencement of
the winding up. In this particular case the date of commencement of the
winding up is the 28th November, 1990.
5. The
Social Welfare (Consolidation) Act, 1993, repealed the Social Welfare
(Consolidation) Act, 1981 save part VI of that Act which is not relevant to the
issues that arise in this matter. The 1993 Act contains the following somewhat
obtuse provision, namely, Section 301 of that Act which provides as follows:-
"The
continuity of the operation of the law relating to the matters provided for in
the repealed enactments shall not be affected by the substitution of this Act
for those enactments, and -
(a) so
much of any enactment or document (including enactments contained in this Act)
as refers, whether expressly or by implication, to or to things done or falling
to be done under or for the purposes of, any provision of this Act, shall, if
and so far as the nature of the subject matter of the enactment or document
permits be construed as including, in relation to the times, years or periods,
circumstances or purposes in relation to which the corresponding provision in
the repealed enactments has or had effect, a reference to, or, as the case may
be, things done or falling to be done under or for the purposes of, that
corresponding provision;
(b) so
much of any enactment or documents (including repealed enactments and
enactments and documents passed or made after the commencement of this Act) as
refers, whether expressly or by implication, to, or to things done or falling
to be done under or for the purposes of, any provision of the repealed
enactments shall, if and so far as the nature of the subject matter of the
enactment or document permits, be construed as including, in relation to the
times, years or periods, circumstances or purposes in relation to which the
corresponding provision of this Act has effect, a reference to, or, as the case
may be, to things done or deemed to be done or falling to be done under or for
the purposes of, that corresponding provision.
Section
302(2) of the 1993 Act provided that all instruments made and documents issued
under the repealed enactments or any enactments repealed by the
Social Welfare
(Consolidation) Act, 1981, and in force immediately before the commencement of
that Act other than the provisions of any instruments which were incorporated
in
the Act should continue in force as if made or issued under the 1993 Act.
Accordingly, the Social Welfare (Collection of Employment Contributions by the
Collector-General) Regulations, 1989, are still in force.
"(1) In
this section "the Act of 1889" means the Preferential Payments in
Bankruptcy
(Ireland) Act, 1889.
(2) The
assets of a limited company in a winding up under the Companies Acts 1963 to
1990 shall not include -
(a) any
sum deducted by an employer from such remuneration of
an
employee of his as was paid prior to the winding up in respect of employment
contribution due and unpaid by the employer in respect of such contribution, or
(b) any
sum which would have been deducted from the remuneration of an employee in
respect of an employment contribution for a period of employment prior to a
winding up had such remuneration been paid prior to such winding up,
and
in such a winding a sum equal in amount to the sum so
deducted
and unpaid or which would have been deducted and payable, shall notwithstanding
anything in those Acts be paid
to
the Social Insurance Fund in priority to the debt specified in Section 285(2)
of the Companies Acts, 1963."
6. Subsections
(3) and (5) of Section 16 are not relevant to the issues which I have to decide
in this case but subsection (4) of Section 16 provides as follows:-
"Formal
proof of a debt to which priority is given by this Section shall not be
required except by or under the Act of 1889 or the Companies Act, 1963
.
As
is apparent from the foregoing, there is a distinct correspondence between
Section 120(2) of the 1981 Act and
Section 16(2)(a) of the 1993 Act. It is
equally clear that
Section 16(2)(b) does not have any corresponding provision
in the 1981 Act.
THE
LIQUIDATOR'S SUBMISSIONS
Counsel
on behalf of the Liquidator submits that the payment of wages without deduction
of PRSI cannot lead to a claim for super-preferential status in respect of the
PRSI sum, as that status depends on a physical deduction by the employer of the
employee's employment contribution. He contends that
Section 120(2) of the
1981 Act and
Section 16(2)(a) of the 1993 Act clearly only catch as
super-preferential
"any
sums deducted by an employer"
.
Because the sums for wages were paid under the counter, without any
deductions, the unappealed estimate in respect of such sums does not elevate
the estimated sums for PRSI to the status of a super-preferential claim. The
Liquidator also submits that
Section 16(2)(b) is of no assistance to the
Revenue as that subsection relates only to sums which would have been deducted
in respect of pre-liquidation employment had such remuneration been paid, but
where in fact no remuneration was paid. The Liquidator says that this
Subsection deals with a situation where remuneration was to be paid but was, as
I have stated, not in fact paid. In any event, the Liquidator contends that,
as
Section 16(2)(b) of the 1993 Act finds no corresponding provision in the
1981 Act, to apply it to the issue of the admissibility and valuation of a
claim as at the 28th November, 1990 is impermissible being retrospective
application of a statutory provision so as to affect legal rights.
THE
SUBMISSIONS OF THE REVENUE COMMISSIONERS
7. Counsel
on behalf of the Revenue Commissioners contends that as the estimates remained
unappealed, the money for PRSI remains due and owing and attracts
super-preferential status. Counsel for the Liquidator counters this by saying
that, while he concedes the money is due by reason of the unappealed estimates,
it only will have super-preferential status where it can be shown to be within
Section 120(2) of the 1981 Act or Section 16(2)(a) of the 1993 Act. In
addition Counsel for the Revenue submits that Section 16 (2) should be broadly
construed by the Court so as to embrace all sums which are deducted or ought to
be deducted by employers, and that once the Court is satisfied that the company
was obliged to deduct the sum for PRSI, the wording of Section 16(2)(a), or
alternatively, Section 16 (2)(b), is wide enough to catch the sum as a
super-preferential debt.
CONCLUSIONS
8. In
considering whether the sum of £12,811.03 may be regarded as having
super-preferential status, or, alternatively preferential status, the Court
should have regard to the legal position which obtained at the date of
commencement of the winding-up. As at that date, the Social Welfare
(Consolidation) Act, 1981, was in force. Section 120(2) of that Act provided:-
"Any
sum deducted by an employer from their remuneration of an employee of his in
respect of an employment contribution due by the employer and unpaid by the
employer in respect of such contribution shall not form part of the assets of a
limited company in a winding-up under the Companies Act, 1963 and in such a
winding-up a sum equal in amount to the sum so deducted shall, notwithstanding
anything in that Act, be paid to the social insurance fund in priority to the
debts specified to Section 285(2) of that Act."
9. I
am satisfied that Section 120(2) of the 1981 Act, corresponds with Section
16(2)(a) of the 1993 Act: I am also satisfied that Section 120(2) does not
correspond (nor does any other Section of the 1981 Act) with Section 16(2)(b)
of the 1993 Act. Because there is that correspondence between these Sections,
it appears to me that on a construction of Section 301 of the 1993 Act, I am
entitled to look at the
"things
done or falling to be done"
,
while Section 120(2) of the 1981 Act was in force as if such things were done
or fell to be done pursuant to Section 16(2)(a) of the 1993 Act. The effect of
Section 301 of the 1993 Act is, in substance, to continue in force certain
provisions of the 1981 Act, being those provisions with a corresponding
provision in the 1993 Act. Accordingly, whether one looks at Section 120(2)
of the repealed 1981 Act or, alternatively, Section 16(2)(a) of the 1993 Act,
one sees that a condition precedent to the super-preferential status of any sum
is that it be a sum
deducted
by the employer in respect of the employment contribution of the employee which
remains due and owing by the employer. Neither section, in my view, permits of
a construction that super-preferential status can be afforded to sums which
ought
to have been deducted in respect of the employments contribution of an
employee, but were not so deducted. As to Section 16(2)(b) of the 1993 Act, it
appears to me that that section deals with and is restricted to situations
where employees were due remuneration prior to a winding-up but did not receive
such remuneration from their employer. It has no application to the facts of
the present case where employees did receive remuneration from their employer
without deductions being made. For completeness, I should add that if it could
be argued that Section 16(2)(b) of the 1993 Act had any application to the
facts of the instant case, such as to give the sum in issue a
super-preferential status, I would be of the view (there being no corresponding
provision in the 1981 Act) that it could not be invoked retrospectively so as
to impair or affect rights existing in those parties with an interest in the
winding-up of the company as at the 28th November, 1990.
© 1998 Irish High Court
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