Bloxham & Companies Act, [2017] IEHC 664 (2017)

Docket Number:2012 291 COS




JUDGMENT of Mr. Justice David Keane delivered on the 3rd November 2017


  1. Kieran Wallace (‘the liquidator’) is the official liquidator and administrator of Bloxham. Prior to entering provisional liquidation on 31 May 2012, followed by official liquidation on 25 June 2012, Bloxham was a limited partnership operating a well-known and long-established stock broking and investment services business.

  2. George Maloney (‘the receiver’) is the receiver and manager appointed on 19 October 2012 by Danske Bank AS trading as National Irish Bank (‘the bank’) under seven different debentures, each of which had been granted by one of seven separate unlimited companies. Each of those seven companies (‘the corporate partners’) was controlled and directed by a different general partner in Bloxham (‘the individual partners’) and each was a general partner in Bloxham in its own right. Each individual partner had sold his partner’s interest in, or partner’s share of, Bloxham’s business to the corporate general partner under his control.

  3. The liquidator and the receiver are in dispute in the winding up of the partnership and the liquidator seeks the Court’s directions. The dispute concerns whether the effect of the said debentures is to give the bank security over certain of Bloxham’s assets, as the receiver contends or merely over the partnership interest of each of the corporate partners in those assets, as the liquidator asserts.

  4. Differently put, the question is whether the said debentures entitle the receiver on behalf of the bank to claim first priority over certain Bloxham assets as the property, cumulatively, of the corporate partners or merely entitle the receiver to each corporate partner’s share in any residue of Bloxham’s assets, after the payment of all debts and liabilities and the repayment of the firm’s capital, on the basis that each of the corporate partners holds no more than a partner’s share or interest in Bloxham.


    i. the 2001 partnership agreement

  5. Bloxham was a limited partnership within the meaning of that term under the Limited Partnerships Act 1907 (‘the 1907 Act’). Prior to a restructuring that took place in 2011, Bloxham had seven general partners - the individual partners - and one limited partner - FBD Securities Limited (‘FBD’), operating under a partnership agreement dated 29 January 2001, as amended by a further agreement dated 19 October 2006 (‘the 2001 partnership agreement’).

  6. Clause 2.4 of the 2001 partnership agreement stipulated:

    ‘The premises referred to [in Dublin, Limerick and Cork] and all other lands and premises for the time being occupied by [Bloxham] with all equipment, furniture and other fittings for the time being used for the practice of [Bloxham] and [Bloxham’s] name and goodwill will be assets of [Bloxham] and will accordingly belong to the [p]artners in the proportions in which they are for the time being entitled to share the [n]et [p]rofits…, and no [p]artner will have any separate interest in such assets.’

  7. Under clause 15.1.6 of the 2001 agreement, none of the general partners could, without prior approval by special resolution, ‘[a]ssign, mortgage or charge his share in the [p]artnership or any part thereof’.

  8. Clause 27.3 of the 2001 agreement was careful to state:

    ‘This agreement may not be released, discharged, supplemented, amended, varied or modified in any manner except by instrument in writing signed by each of the parties hereto.’

    ii. 2011 restructuring

  9. In 2011, the partnership was restructured in a quite complicated way, designed: (a) to allow the individual partners to pay less tax on the profits they extracted from it; (b) to enhance the personal debt repayment capacity of the individual partners on the borrowings each had incurred to fund the partnership through the increased proportion of the profits thus available to each after tax; and (c) to enhance the pension provision available to the partners.

  10. The method chosen to achieve this aim was the creation of a new partnership to include the corporate partners - each controlled and directed by a different individual partner - through the execution of a new partnership agreement. The idea was to route the new partnership’s profits through the corporate partners, where they would be liable to the lower rate of corporation tax, instead of paying them out directly to the individual partners, who would each be liable to pay income tax on them at a significantly higher rate. The payment of less tax on those profits would leave a greater portion of them available for the repayment of the personal borrowings incurred by the partners to fund the partnership. It would also mean that each of the corporate partners could then establish a director’s pension fund, with greater tax relief on contributions for both the corporate partners, as employers, and the individual partners, as directors, than would be available to the individual partners on the contributions of each to a personal private pension fund.

  11. The liquidator has exhibited, as a representative sample, the restructuring transaction documentation involving one of the individual partners, as well as a copy of the new partnership agreement.

    iii. sale of each partner’s interest or share in the business of Bloxham

  12. The first such document is a letter of offer dated 10 June 2011, from one of the individual partners to the proposed corporate partner under his control. In it, the relevant individual partner offers to sell his interest in or share of the business of Bloxham (as a going concern) together with its goodwill, property and assets, other than its capital. The accompanying terms of that offer define the assets for sale to include the individual partner’s ‘interest in or share of’:

    (a) the goodwill of the business;

    (b) the customer, supplier, employee and financial information of the business;

    (c) the intellectual property rights of the business;

    (d) both the benefit and the burden of the pending contracts, engagements and orders of the business;

    (e) the miscellaneous assets, computer systems and other chattels situated in the individual partner’s place of business or used by the individual partner in connection with the business.

    (f) the book debts of the business.

    (g) all of the other property to which the individual partner is entitled or in which he has an interest in connection with the business and cash in hand and at the bank but excluding the individual partner’s interest in the capital of Bloxham represented by cash on deposit on an account or accounts of Bloxham.

  13. The following paragraph of the terms of that offer is headed ‘Liabilities.’ It states that the proposed corporate partner ‘shall assume the [individual partner’s] share of the creditors, accruals and bank overdraft of the [b]usiness.’

  14. The next document is a minute, dated 28 June 2011, of a meeting of the directors of the proposed corporate partner. It records that those directors (being the relevant individual partner and one other person) resolved to accept the relevant individual partner’s offer on the terms proposed (including the provision of a large portion of the consideration for the sale in the form of shares in the company) and to cause the company to enter an agreement to become a general partner in Bloxham. It is common case that each of those steps was subsequently taken on behalf of each of the proposed corporate partners.

  15. Thus, the letter of offer (‘the offer to sell’) and the accompanying terms and conditions (‘the terms’) furnished to each proposed corporate partner by each individual partner together comprise the sale and purchase contract in respect of each individual partner’s share or interest in the business of Bloxham (‘the sale and purchase agreement’).

    iv. loan facility obtained by each of the corporate partners to finance the restructuring

  16. A further material document is the loan facility offer letter, dated 20 January 2011, from the bank to the proposed corporate partner concerned. The letter states that the purpose of the loan is to fund the cash element of the acquisition by that company of the individual partner’s interest in the partnership and to discharge in full that individual partner’s existing indebtedness to the bank in respect of his prior funding of the partnership. As security, in addition to the provision of a personal guarantee from the individual partner concerned in respect of all of the obligations of the company to the bank and the assignment to the bank of the benefit of a life insurance policy on the individual partner in the full amount of the facility, the company was to execute a debenture over all of its assets and its undertaking, including a specific first legal charge or assignment over the company’s right to receive money from Bloxham.

    v. the 2011 partnership agreement

  17. The individual partners, the corporate partners and FBD, as a limited partner, executed a new limited partnership agreement (‘the 2011 partnership agreement’) on 9 August 2011. Paragraph 3.1 of that agreement states:

    ‘All leases or tenancy agreements in respect of premises occupied by and for the purposes of [Bloxham] and all other assets of every character and nature of [Bloxham] may be held in the names of one or more persons (who need not be a [p]artner) and each such asset not held in the names of all the [p]artners shall be held by the person(s) in whose name(s) it stands in trust for the [p]artners and upon the condition that if so required by the [p]artners it shall be assigned or transferred into the names of all the [p]artners or such of them as the [p]artners shall decide. Any liabilities arising for any person(s) in whose name(s) is held any lease or tenancy agreement or other commitment entered into for the purposes of...

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