JD O'Brian Ltd ((in Liquidation))

JurisdictionIreland
CourtHigh Court
JudgeMs. Justice Finlay Geoghegan
Judgment Date25 March 2011
Neutral Citation[2011] IEHC 113
Date25 March 2011

[2011] IEHC 113

THE HIGH COURT

[No. 719 COS/2009]
[No. 720 COS/2009]
[No. 721 COS/2009]
J.D. Brian Ltd (In Liquidation) & Ors, In Re
IN THE MATTER OF J.D. BRIAN LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF J.D. BRIAN MOTORS LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF EAST COAST CAR PARTS LIMITED (IN LIQUIDATION)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

COMPANIES ACT 1963 S280

COMPANIES ACT 1963 S285(7)

COMPANIES ACT 1963 S285

COMPANIES ACT 1963 S285(1)

COMPANIES ACT 1963 S220

HOWARD & ORS v CMRS OF PUBLIC WORKS IN IRELAND 1994 1 IR 101

CRILLY v T & J FARRINGTON LTD & O'CONNOR 2001 3 IR 251

INTERPRETATION ACT 2005 S5

COMPANIES ACT 1963 S285(7)(B)

COMPANIES ACT 1963 S2

HOLIDAIR LTD, IN RE 1994 1 IR 416

YORKSHIRE WOOLCOMBERS ASSOCIATION LTD, IN RE; HOULDSWORTH v YORKSHIRE WOOLCOMBERS ASSOCIATION LTD 1903 2 CH 284

GOODE & GULLIFER GOODE ON LEGAL PROBLEMS OF CREDIT & SECURITY 4ED 2008 126

EVANS v RIVAL GRANITE QUARRIES LTD 1910 2 KB 979

INTERVIEW LTD, IN RE 1975 IR 382

GRIFFIN HOTEL CO LTD, IN RE 1941 CH 129 1940 4 AER 324

COMPANIES ACT 1929 S78 (UK)

COMPANIES ACT 1929 S264 (UK)

COMPANIES (CONSOLIDATION) ACT 1908 S107

COMPANIES (CONSOLIDATION) ACT 1908 S209

COMPANIES ACT 1963 S98

COMPANIES ACT 1929 S264(4)(B) (UK)

LEWIS MERTHYR CONSOLIDATED COLLIERIES LTD, IN RE (NO 1) 1929 1 CH 498

LEWIS MERTHYR CONSOLIDATED COLLIERIES LTD, IN RE (NO 2) 1929 1 CH 589

COMPANIES ACT 1929 S264(4) (UK)

CHRISTONETTE INTERNATIONAL LTD, IN RE 1982 1 WLR 1245 1982 3 AER 225

COMPANIES ACT 1948 S94(1) (UK)

COMPANIES ACT 1948 S319(5) (UK)

COMPANIES ACT 1963 S285(8)

INSOLVENCY ACT 1985 (UK)

BRIGHTLIFE LTD, IN RE 1987 CH 200 1987 2 WLR 197 1986 3 AER 673

PERMANENT HOUSES (HOLDINGS) LTD, IN RE 1989 5 BCC 151 1988 BCLC 563

COMPANIES ACT 1985 S196 (UK)

STEIN v SAYWELL 1969 121 CLR 529 1969 HCA 16

COMPANIES ACT 1961 S292(4) (NEW SOUTH WALES, AUSTRALIA)

COMPANIES ACT 1961 S196 (NEW SOUTH WALES, AUSTRALIA)

INSOLVENCY LAW & PRACTICE: REPORT OF THE REVIEW COMMITTEE (1981-82, CMND 8558) PARA 1578

INSOLVENCY ACT 1986 (UK)

GOUGH COMPANY CHARGES 2ED 1996 232

KEENAN BROS LTD, IN RE 1985 IR 401

WOGANS (DROGHEDA) LTD, IN RE; JENKINS v HILL SAMUEL (IRL) LTD 1993 1 IR 157

SEALY CASES & MATERIALS IN COMPANY LAW 7ED 2001 422

KEANE COMPANY LAW 4ED 2007 251

COURTNEY THE LAW OF PRIVATE COMPANIES 2ED 2002 1212-1213

ILLINGWORTH v HOULDSWORTH & ANOR 1904 AC 355

COMPANIES ACT 1963 S99

COMPANY LAW

Floating charges

Crystallisation - Fixed charges - Priority of preferential debtors - Automatic crystallisation - Effect of crystallisation - Debentures - Winding up - Whether "automatic crystallisation" of floating charge valid in this jurisdiction - Whether preferential debts continue to have priority if floating charge already crystallised at commencement of winding up - In re Griffin Hotel Co Ltd [1941] 1 Ch 129 not followed; In re Permanent Houses (Holdings) Ltd [1988] BCLC 563, Stein v Saywell (1969) 121 CLR 529, In re Brightlife Ltd [1987] Ch 200, In re Keenan Bros Ltd. [1981] 1 IR 401 and In re Wogan's (Drogheda) Ltd. [1993] 1 IR 157 followed - Companies Act 1963 (No 33), ss 2, 220, 285(1) & 285(7) - Interpretation Act 2005 (No 23), s 5 - Priority determined (2009/719, 720 & 721Cos - Finlay Geoghegan J - 25/3/20110 [2011] IEHC 113

In re JD Brian Ltd (in liquidation)

Facts: In 2005, a Company executed a debenture in favour of a Bank as security for present and future borrowings. In 2009, the Bank served a notice pursuant to clause 10 of the debenture on the Company. There were some preferential debts due to the Revenue Commissioners by some or all of the Companies. The Official Liquidator sought declarations and directions arising out of purported crystallisation of floating charges created by each of the Companies in favour of the Governor and Company of the Bank of Ireland. The issue arose as to the proper construction of s. 285(7) Companies Act 1963, as amended and the validity of so-called "automatic crystallisation" of a floating charge in this jurisdiction.

Held by Finlay Geoghegan J. that pursuant to s. 285(7) Companies Act 1963, as amended, that the preferential debts ranked in property to the claim of the Governor and Company of the Bank of Ireland to the funds realised from the assets, subject to the floating charge pursuant to clause 5 of the debenture dated 20 December irrespective of whether or not the floating charge crystallised prior to the commencement of the winding up. Where a debenture expressly provided that a charge could effect a crystallisation of a floating charge over all the assets or some of them, the mere fact that the debenture so provided did not itself mean that the service of the notice had the intended effect.

Reporter: E.F.

1

JUDGMENT of Ms. Justice Finlay Geoghegan delivered on the 25th day of March, 2011

2

1. In this application, brought pursuant to s. 280 of the Companies Act 1963 (as amended), the official liquidator of the companies named in the title ("the Companies") and other companies within the Belgard Group, seeks declarations and directions of the court arising out of the purported crystallisation of floating charges created by each of the Companies in favour of the Governor and Company of the Bank of Ireland ("the Bank"). The application raises important issues relating to the proper construction of s. 285(7) of the Companies Act 1963 (as amended) and the validity of so-called "automatic crystallisation" of a floating charge in this jurisdiction. Counsel for the applicant and notice parties made detailed submissions and referred me to a significant number of authorities from other common law jurisdictions and, in particular, England and Wales. Their research indicates that there is no written judgment in this jurisdiction on either issue. I am not aware of any such decision.

3

2. The background facts giving rise to the application are not in dispute. Whilst a number of the companies in liquidation granted similar debentures in favour of the Bank, I only propose referring to that given by J.D. Brian Motors Limited (in liquidation) ("the Company").

4

3. On 20 th December, 2005, the Company executed a debenture ("the Debenture") in favour of the Bank as security for present and future borrowings. The debenture provided, inter alia:

5

2 "4. The Company, as Beneficial Owner hereby charges in favour of the Bank all its undertaking, property and assets, whatsoever and wheresoever both present and future including goodwill and its uncalled capital for the time being with the payment of all moneys hereby secured including interest as aforesaid.

6

5. The Charge hereby created shall as regards the lands described in the Schedule hereto (the "Scheduled Premises") and all estate or interest legal or equitable in all freehold and leasehold property, all profits a prendre, easements, rights of way, rights under covenants, agreements, undertakings and indemnities and rights to compensation, statutory or otherwise, attaching thereto which shall at any time hereafter during the continuance of this security become the property of the Company all present and future proceeds of insurance receivable by the Company, and its goodwill and uncalled capital for the time being be a specific charge and shall as regards the other property hereby charged be a floating security but so that the Company shall not be at liberty to create any mortgage or charge ranking in priority to or pari passu with these presents.

7

10. The Bank, may, at any time, by notice in writing served on the Company, convert the floating charge contained in this Deed into a first fixed charge over all the property, assets and rights for the time being subject to the said floating charge or over so much of the same as is specified in the notice. A notice under this clause may be served by the Bank only if, in the sole judgment of the Bank, the Bank considers that the property, assets and rights described or referred to in the notice are in any way in jeopardy.

8

11. The floating charge contained in this Deed shall in any event stand converted into a fixed charge automatically upon:

9

(a) the filing of a petition for the winding up of the Company;

10

(b) the passing of a resolution for the winding up of the Company;

11

(c) the appointment of a Receiver on behalf of the holders of any debentures of the Company secured by a floating charge;

12

(d) possession being taken of any property by or on behalf of the holders of any debentures of the Company secured by a floating charge."

13

4. On 28 th October, 2009, the Bank served a notice, pursuant to clause 10 of the debenture, on the Company, in which, having referred to the debenture, it stated, in the operative part:

"We now give you NOTICE that we now consider the property, assets and rights which are subject to the floating charge contained in the Debenture are in jeopardy.

We further give you NOTICE that, pursuant to clause 10 of the Debenture, we hereby convert the floating charge contained in the Debenture into a first fixed charge with respect to all property, assets and rights which are subject to such floating charge."

14

5. On 13 th November, 2009, a petition was presented for the winding up of the Company and Mr. Tom Kavanagh was appointed provisional Liquidator. On 7 th December, 2009, an order for the winding up of the Company was made and Mr. Kavanagh was appointed official Liquidator.

15

6. Similar notices were served by the Bank on the other companies within the group and petitions similarly presented and winding up orders made and Mr. Kavanagh appointed both provisional and official Liquidator thereof.

16

7. The total indebtedness of the Companies to the Bank at the date of commencement of the...

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1 cases
  • Re J.D. Brian Ltd ((in Liquidation))
    • Ireland
    • Supreme Court
    • 9 July 2015
    ...1 I.R. 416; [1994] 1 I.L.R.M. 481. Irish Shell and BP Ltd. v. John Costello Ltd. [1981] I.L.R.M. 66. Re J.D. Brian Ltd. (in liquidation) [2011] IEHC 113 &283, [2011] 3 I.R. 244; [2012] 1 I.L.R.M. 27. In re Keenan Bros. Ltd. [1985] I.R. 401; [1985] I.L.R.M. 254, 641; [1986] B.C.L.C. 242. In ......

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