Queensway Systems Ltd & Ors v Walker & Anor

P. Girolami QC IN THE MATTER OF THE COMPANIES ACT 1985 AND IN THE MATTER OF THE INSOLVENCY ACT 1986 AND IN THE MATTER OF QUEENSWAY SYSTEMS LIMITED (IN LIQUIDATION) ____________________

(1) In and after March 2001 the Company was unable to pay Customs the VAT it owed and was unable to pay its debts as they fell due; the period from the declaration of the dividend onwards was therefore a relevant time for the purposes of section 240 Insolvency Act 1986;

(2) The setting-off of the �147,208.76 against the dividend had the effect of putting Mr and Mrs Walker in a better position than they would otherwise have been in the event of winding up, since in the winding up the dividend entitlement and the obligation to repay the �147,208.76 would not be set off against each other under rule 4.90 of the Insolvency Rules 1986. I was referred to Manson v Smith [1997] 2 BCLC 161 and Re a company (No 1641 of 2003) [2004] BCLC 210.

(3) The Company was presumed, unless the contrary was shown, to have been influenced by an intention to prefer under section 239(6) Insolvency Act 1986; and Mr and Mrs Walker could not show the contrary.

(1) The sums in question had been paid out to or for the benefit of Mr and Mrs Walker in accordance with the practice which had prevailed throughout the Company's trading history; in the past, sums so paid out were treated in the Company's annual accounts as joint loans; and the sums making up the �147,208.76 were recorded in a single joint directors' loan account in the Company's books. The fact that they were so recorded should therefore lead to the conclusion that the Mr and Mrs Walker were jointly liable for the entirety of the �147,208.76.