Director cleared of pay breach

A director of a wound-up courier company who paid himself €1,700 a month, as salary, at a time when the firm was unable to pay its debts had not breached company law, the High Court ruled.

The liquidator of FF Couriers, with a registered office in North Strand, Dublin, sought a declaration under company law that William Day made around €10,000 in payments at a time when the firm was unable to pay other debts due.

Mr Day said the payments were to him as salary for his job in the company and were his only source of income to provide for his family.

He believed at the time the firm would overcome its difficulties and said he had put €60,000 of his own money into the company.

The liquidator claimed the payment constituted a fraudulent preference with a view to giving Mr Day, as a creditor of the firm, preference over other creditors.

This was in contravention of Section 286 of the 1963 Companies Act, it was claimed.

Mr Justice Max Barrett ruled the evidence before the court was sufficient to overcome the presumption required under law to show the salary payments to Mr Day involved a fraudulent preference to him as a creditor over other creditors.

These were modest payments handed over in a constant fashion every month which pointed to the truth of Mr Day’s evidence that they were intended as the ongoing payment of “his relatively modest monthly salary”, the judge said.

They were not, for example, suspicious “scatter gun” payments of large amounts to achieve quick repayment of monies owed to FF Couriers by Mr Day, he said.

However, a careful application of the “sometimes quite draconian provisions” of our company law is required, if directors are not to lose their good name, by way of an “untempered adjudication” in a matter such as this, he said.