The Gazette 1978

GAZETTE

NOVEMBER 1978

ratified must have purported to act for the principal; secondly, at the time the act was done the agent must have had a competent principal; and thirdly, at the time of the ratification the principal must be legally capable of doing the act himself'. This left the second of the defendant's contentions to be dealt with, namely that the whole transaction was voidable under Section 60 of the Companies Act. This Section, with one exception, prohibits a company from financing, by either direct or indirect means, the purchase of its own shares (Sub- section (1)) and also provides (Sub- section (14) that a transaction in breach of the prohibition is voidable at the instance of the company against any person, whether a party to the transaction or not, who has notice of the facts which constitute the breach. In the High Court the defendant had contended that as the purpose for which the loan was to be used (and was in f a c t u s e d) was in contravention of Section 60 and that the plaintiff knew of this, the transaction was accordingly voidable at the instance of the company against the plaintiff under subsection (14). The defendant relied on several matters which would constitute constructive notice, principally (a) the failure of the plaintiff, until almost a year after the loan negotiations which occurred in 1973, to inspect or get a copy of the relevant folio which would have shown that the defendant was registered as owner since 1967; (b) that in the details supporting the loan application the estimate for stamp duty on the underlying transaction was calculated at 1% (appropriate to a transfer of shares and totally inconsistent with a transfer of property having the value of the defendant's lands and the hotel premises erected on them); and, (c) that planning permission had been granted to the defendant for development of part of the lands in 1972. The plaintiff had denied that it knew the loan proceeds were to be used for the purchase of the shares of the defendant company or that it knew, when making the advance, that the defendant already owned the lands in question and contended that it understood the loan moneys were to be used in purchasing and developing the lands. The matters specified by the defendant constituted

constructive notice which had no application to a commercial transaction. In the High Court, McWilliam, J. had been referred to, and expressed himself in agreement with, a passage from the judgment in Manchester Trust v. Furness [1895] 2 QlB. 539 in which, at page 545, Lindley, LJ. said — "As regards the extension of the equitable doctrines of constructive notice to commercial transactions, the courts have always set their faces resolutely against it. The equitable doctrines of constructive notice are common enough in dealing with land and estates with which the court is familiar, but there have been repeated protests against the introduction into commercial transactions of anything like an extension of these doctrines and the protest is founded on perfect good sense. In dealing with estates in land title is everything, and it can be leisurely investigated; in commercial transactions possession is everything and there is no time to investigate title; and if we were to extend the doctrine of constructive notice to commercial transactions we should be doing infinite mischief and paralysing the trade of the country". However, McWilliam, J. had felt that there must be some limit to the extent to which a person "may fail to accept information available to him or fail to make inquiries normal in his line of business so as to leave himself in the position that he has no notice . . . " . On the facts of the case the High Court .considered that the plaintiff had reached such a limit (of ignoring facts and failing to pursue enquiries) as would justify the Court in holding that the plaintiff "should have had notice of the purpose for which the money was to be applied". Held (per Kenny, J.) (2) reversing the decision of the High Court that the criteria applied and matters relied upon by the trial judge in reaching his conclusion as regards notice for the purpose of subsection (14) of Section 60 were the criteria of constructive notice. The distinction between actual notice and constructive notice must not be blurred. What the defendant had to prove, and the onus was on it to do so, was that the plaintiff had, at the time it lent the money, notice of the fact that the loan proceeds were to be used in

financing the purchase of the defendant company's own shares. The notice referred to in the subsection is actual notice and not constructive notice. There was nothing in the evidence to suggest that the plaintiff or any of its officials knew that any part of the advance was to be applied to the purchase of shares in the defendant company and what they did not know did not lead to a conclusion that they must have inferred that the money was to be applied for that purpose. Notice subsequently received was irrelevant. The Supreme Court therefore discharged the order of the High Court and made an order directing the defendant forthwith on service of the order to deliver possession of the lands in question to the plaintiff or its nominee. Bank of Ireland Finance v. Rockfldd Limited — Supreme Court (per Kenny J., with O'Higgins, CJ., Henchy, J. Griffin and Parke, JJ.) — Unreported — 28 July 1978. FAMILY LAW 1. Adoption Act 1952, Section 40 with Section 3, not unconstitutional by tracing Mood relationship of an illegitimate child through the mother only and by giving authority over the movement and placing of that child to the natural mother, or a relative of hers, only. 2. There are rights to free movement within the State, and to free movement outside the State through the provision of a passport, subject to public order and the common good of the State and to international agreements existing at any given time. These rights existed equally to the legitimate and the flleghnate and provisions of the Adoption Act denying their availability to an i l l e g i t i ma te c h i ld we re unconstitutional. The first named prosecutor was an Irish citizen aged twenty-two years and unmarried. In October, 1977 she gave birth to a baby girl, S.D., of whom she stated in her affidavit that the second-named prosecutor, R.D., was the father. The first-named prosecutor did not at present intend to mar ry the second-named prosecutor, who was a Nigerian national studying in this country and resident since November 1975. The