Re Chipboard Products Ltd ((in Liquidation))
| Jurisdiction | Ireland |
| Judge | Mr. Justice Barr |
| Judgment Date | 20 October 1994 |
| Neutral Citation | 1994 WJSC-HC 2266 |
| Docket Number | [1984 No. 3716P],no. 3716P/1984 |
| Court | High Court |
| Date | 20 October 1994 |
1994 WJSC-HC 2266
THE HIGH COURT
AND
Citations:
MERCANTILE LAW (AMDT) ACT 1856 S5
STATE GUARANTEES ACT 1954 S2
STATE GUARANTEES ACT 1954 (AMDT OF SCHED) ORDER 1981 SI 348/1981
STATE GUARANTEES ACT 1954 (AMDT OF SCHED) ORDER 1983 SI 266/1983
MCCAIRNS (PMPA) PLC, IN RE 1992 ILRM 19
HALSBURYS LAWS OF ENGLAND 4ED V16 PARA 890
HIGHLAND FINANCE V SACRED HEART COLLEGE 1993 ILRM 260
BANK OF IRELAND FINANCE V DALY 1978 IR 79
STATE GUARANTEES ACT 1954 S6(1)
MERCANTILE LAW (AMDT) ACT 1856
STATE GUARANTEES ACT 1954 S2(1)
Synopsis:
CONTRACT
Guarantee
Guarantor - Debt - Payment - Recoupment - Remedy - Subrogation - Company being scheduled body - Company's debt to bank paid by guarantor pursuant to statutory power - Guarantor's claim to be subrogated to rights of bank - Right to subrogation enforced notwithstanding security obtained by guarantor - (1984/3716 P - Barr J. - 20/10/94)- [1994] 3 IR 164
|In re Chipboard Products Ltd.|
EQUITY
Subrogation
Minister - Guarantor - Company - Debt - Payment - Company being scheduled body - Company's debt to bank paid by guarantor pursuant to statutory power - Guarantor's claim to be subrogated to rights of bank - Right to subrogation enforced notwithstanding security obtained by guarantor - (1984/3716 P - Barr J. - 20/10/94)- [1994] 3 IR 164
|In re Chipboard Products Ltd.|
INTEREST
Rate
Creditor - Claim - Minister - Statute - Power - Guarantee - Debt of scheduled body - Payment of debt of company guaranteed by Minister - Principle sum repaid to Minister - Whether Minister entitled to compound interest - (1984/3716 P - Barr J. - 20/10/94)- [1994] 3 IR 164
|In re Chipboard Products Ltd.|
MINISTER OF STATE
Powers
Exercise - Debt - Payment - Guarantee - Performance - Payment of debt of scheduled body guaranteed by Minister - Principal sum repaid to Minister - Minister's claim to payment of compound interest - Claim to be subrogated to rights of company's creditor - (1984/3716 P - Barr J. - 20/10/94)- [1994] 3 IR 164
|In re Chipboard Products Ltd.|
WINDING UP
Creditor
Claim - Basis - Guarantee - Performance - Debt of company to bank discharged by guarantor - Guarantor's claim to be subrogated to rights of bank - Whether guarantor entitled to be paid interest after commencement of winding up - Guarantor's claim not made as creditor proving in the winding up - Minister's statutory power to guarantee debt of scheduled body - Rate of interest payable to guarantor - Mercantile Law Amendment Act, 1856, ss. 2, 5 - State Guarantees Act, 1954, ss. 2, 4, 6 - (1984/3716 P - Barr J. - 20/10/94)- [1994] 3 IR 164
|In re Chipboard Products Ltd.|
Judgment delivered the 20th day of October, 1994 by Mr. Justice Barr
This matter comes before the court in response to an application by the liquidator of Chipboard Products Limited ("the company") for directions regarding the following issues:-
(a) Is the Minister for Finance ("the Minister") entitled to claim any sum for interest after 10th May, 1984 (the date of presentation of the Petition herein) he having omitted to rely upon a security outside the liquidation and having permitted the receiver appointed thereunder to be discharged without the claim of the Minister having been discharged in full?
(b) Is the Minister precluded from claiming by way of subrogation on foot of the security granted, by the company to the Bank of Ireland, by virtue of the Minister having sought and obtained separate security from the company?
(c) Is the Minister entitled to claim compound interest having regard to:
(1) the provisions of the State Guarantees Act, 1954, and
(2) the general principles applicable to a surety's right of indemnity?
(d) Is the Minister entitled to any sum in respect of interest after 20th September, 1988, being the date upon which the receiver paid the Minister the sum of £1,157,054.28?
(e) Has the Minister waived his entitlement to claim interest on a rateable proportion of the sum of £348,571 since 2nd July, 1987 by virtue of his consent that the entire of that sum should be paid by the receiver to Coillte Teo, notwithstanding that the security of Coillte Teo and the Minister are expressed to rank pari passu?
(f) Has the Minister, by taking charges by way of security against the contingency embodied in the State guarantee, and by relying on same, waived his right to any remedy under the provisions of Section 5 of the Mercantile Law Amendment Act, 1856?
The essential facts, per se, relating to this application are not in dispute and are as follows:-
The company created four charges over its assets. These were to give security for various loans to it and for a contingency liability arising out of guarantees given by the Minister to the Bank of Ireland regarding some of the loans. The relevant details of these charges, loans and guarantees are as follows:-
(a) The first charge was created on 26th May, 1981 in favour of the Minister of Fisheries and Forestry (whose successor in title in now Coillte Teoranta). The charge comprised a fixed charge on the company's land, buildings and fixed plant and a floating charge on all its other assets, save only its book debts which were expressly excluded. The charge was created to secure a loan of £466,000.
(b) The second charge was also created on 26th May, 1981 and was in favour of the Minister. It ranked pari passu with the charge in favour of the Minister for Fisheries and Forestry and comprised a fixed charge on the company's land, buildings and fixed plant and a floating charge on all of its other assets, except its book debts which were expressly excluded. This charge was for the purpose of granting security to the Minister in respect of any sums he might have to pay under a guarantee to be given by him pursuant to Section 2 of the State Guarantees Act, 1954 in favour of the Bank of Ireland ("the bank"). The bank had agreed to grant a term loan of £400,000 to the company on the basis that it was guaranteed by the Minister. By S.I. No. 348 of 1981, the State Guarantees Act, 1954 (Amendment of Schedule) Order, 1981 enacted on 6th October, 1981, the Schedule to the Act was amended to enable a guarantee of the company to be given by the Minister up to the sum of £400,000. Pursuant to this, a guarantee was given by the Minister to the bank for that amount on 31st October, 1981.
(c) The third charge was dated 13th October, 1981 and was created by the company in favour of the bank and comprised a fixed charge on its land, buildings and fixed plant, a fixed charge on movable plant, a fixed charge on book debts (which had been expressly excluded from the previous two charges) and a floating charge. This charge was to secure "the balance which now is or shall for the time being be or become due or owing by the company to the bank....." (Clause 1). The monies thereby secured were subject to interest at the current rate of the bank for the relevant account at the branch at which the account was maintained with a minimum rate of 5 per annum and compoundable with half yearly rests before as well as after judgment (Clause 3).
(d) The fourth charge was dated 11th November, 1983 and was created in favour of the Minister. It was in identical terms to the security referred to at subparagraph (b) above. It was taken by the Minister to cover the guaranteeing by him of a further loan from the bank to the company of £700,000. By S.I. No. 266 of 1983 the State Guarantees Act, 1954 (Amendment of Schedule) Order, 1983, enacted on 6th September, 1983, the Schedule to the Act was amended by inserting the figure £1,100,000 in place of the figure £400,000 inserted in 1981, thereby enabling the Minister to give a guarantee in respect of the second loan by the bank to the company. A guarantee was given by the Minister to the bank for £700,000 on 4th October, 1983 which was to become effective when adequate security was provided by the company to the Minister in respect of any contingent liability arising therefrom. On 11th November, 1983 the Minister wrote to the bank saying that "the company has today provided to the Minister adequate security in the form of a debenture in respect of any contingent liability to the Exchequer arising from the aforementioned guarantee".
The bank had a charge from the company of all the debts due to it. In addition it also had guarantees from the Minister for a substantial part but not all of the debt due to it by the company. The guarantees given by the Minister were called in by the bank on 17th November, 1983. On 23rd November, 1983 the bank claimed principal of £1.1 million together with interest amounting to £27,021.64 (up to 21st November, 1983 with interest continuing at a daily rate of £417.12). A receiver was appointed by the bank on 18th November, 1983. On 17th January, 1984 the Minister sent to the receiver the debentures of 26th May, 1981 and 11th November, 1983 stating that
"Their purpose was to provide security to the Minister against the contingent liability arising on foot of the Minister's statutory guarantee of borrowings of principal and interest by the company from the Bank of Ireland which amount in toto to the sum of £1.1 million approximately".
The Minister paid the bank the full amount of his liability on foot of the guarantees on 2nd February, 1984 in the sum of £1,157,054.28. On that date the Minister wrote to the bank referring to that payment and stated:
"In recovering the monies in this instance, the Minister has decided to rely upon his rights of subrogation under common law to the rights possessed by the Bank of Ireland in respect of the debt to which the State's guarantee relates (after appropriate stamping up of the bank's debenture) in the...
To continue reading
Request your trial