James Dolman & Company Ltd (in liquidation), Re

Payments made by a company for no consideration may constitute transactions at an undervalue where the statutory requirements are satisfied. Where the recipient is connected with a director, insolvency may be presumed under the Insolvency Act 1986. The court may order restoration of the company’s position by repayment with interest.

A recipient’s liability for knowing receipt depends on receipt of trust property, payment in breach of trust, and sufficient knowledge making retention unconscionable. Unjust enrichment may also justify restitution where the recipient was enriched at the company’s expense without good consideration. A change-of-position defence must be established by the recipient with evidence.

The liquidator brought conjoined proceedings concerning four payments totalling £56,000 made by James Dolman & Company Limited to Mrs Daphne Treanor. The liquidator’s claim alleged transactions at an undervalue. The separate Part 7 claim alleged knowing receipt of money paid in breach of trust and unjust enrichment.

Mrs Treanor was not a director or officer of the company but was the mother of Simon Treanor, a director. She asserted that the payments represented repayment of loans, but provided no evidence. The central issues were whether the payments had consideration, whether the insolvency provisions were satisfied, and whether the restitutionary claims were made out.

1. Transactions at an undervalue. The court found that the company had paid Mrs Treanor £56,000 and that no consideration had been shown. The alleged repayment of a loan to Mrs Treanor was unsupported, and there was no evidence that the company in liquidation had assumed liability for any earlier loan to a differently named company. There was also no evidence that Simon Treanor had asked the company to repay his alleged loans by paying his mother.
2. The payments were made within two years before the onset of insolvency. Mrs Treanor was connected with the company because she was an associate and relative of Simon Treanor, a director, within sections 240 and 435 of the Insolvency Act 1986. The requirements of section 238 were therefore satisfied. The appropriate restoration order was repayment of £56,000 with interest from receipt.
3. Knowing receipt. The directors must be taken to have known that the payments lacked consideration. The surrounding circumstances, including the company’s family control and the absence of any credible reason for the payments, supported the inference that Mrs Treanor knew the payments lacked a proper basis and that it would be unconscionable for her to retain them. The knowing-receipt claim was established.
4. Unjust enrichment. Mrs Treanor had been enriched at the company’s expense without good consideration, and the enrichment was unjust for the same reasons. Her assertion that she had changed her position was unsupported by particulars or evidence, so the defence failed.
5. Judgment was therefore given for repayment of £56,000 with interest in both proceedings, subject to no double recovery and credit for sums paid.