Re Wogan's (Drogheda) Ltd; Jenkins v Hill Samuel (Ireland) Ltd

JurisdictionIreland
JudgeFINLAY C.J.
Judgment Date01 January 1993
Neutral Citation1992 WJSC-SC 607
CourtSupreme Court
Docket Number[S.C. No. 76 of 1992]
Date01 January 1993
JENKINS v. HILL SAMUEL BANK (IRL) LTD
IN THE MATTER OF WOGAN'S (DROGHEDA) LIMITED
(UNDER THE PROTECTION OF THE COURT)

BETWEEN

BRIAN JENKINS
Applicant

and

HILL SAMUEL BANK (IRELAND) LIMITED
Appellant

1992 WJSC-SC 607

Finlay C.J.

Hederman J.

McCarthy J.

O'Flaherty J.

Egan J.

76/92

THE SUPREME COURT

Synopsis:

COMPANY

Debenture

Assets - Charge - Fixed charge - Book debts - Construction of contract - Subsequent events irrelevant - Lender's power to designate bank account - Omission to designate relevant account - Fixed charge created - (76/92 - Supreme Court - 10/4/92)

|Jenkins v. Hill Samuel Bank (Ireland) Ltd.|

CONTRACT

Terms

Construction - Debenture - Subsequent events - Irrelevance - Charge - Book debts - Lender's power to designate bank account - Account not designated - Fixed charge created - (76/92 - Supreme Court - 10/4/92) - [1993] 1 I.R. 164

|Jenkins v. Hill Samuel Bank (Ireland) Ltd.|

WORDS AND PHRASES

"Fixed charge"

Debenture - Terms - Construction - Subsequent events - Irrelevance - Charge - Book debts - Lender's power to designate bank account - Account not designated - Fixed charge created - (76/92 - Supreme Court - 10/4/92) - [1993] 1 I.R. 164

|Jenkins v. Hill Samuel Bank (Ireland) Ltd.|

Citations:

ARMAGH SHOES LTD, IN RE 1982 NILR 59

KEENAN BROS LTD, IN RE 1985 IR 401

WHITWORTH STREET ESTATES LTD V MILLER 1970 AC 583

1

JUDGMENT delivered on the 10th day of April 1992by FINLAY C.J. [NEM DISS]

2

This is an appeal by Hill Samuel Bank (Ireland) Limited ("the Bank") against an order made by Denham J. on the 5th March 1992 on a motion brought to the High Court by Brian Jenkins ("the Examiner"), who was appointed Examiner of Wogan's (Drogheda) Limited by order of the High Court of the 13th January 1992.

3

In that motion the Examiner sought a declaration that the Bank did not, by virtue of clauses 4D(iv) and 5B of their debenture given on or about the 18th April 1991 by the Company, possess a fixed charge over the Company's book debts and/or other debts and receivables. The notice of motion also sought certain ancillary declarations. The order of the High Court made by Denham J. was to the effect that the court declared that the Bank does not by virtue of the said debenture possess a fixed charge over the book debts of the Company.

4

Against that decision the Bank has appealed to this Court.

The decision in the High Court
5

Denham J. in the High Court, having reviewed the relevant provisions of the debenture, with which I will later deal, set out the matter in the following terms:

"The net issue for this Court to decide is whether a floating charge or a fixed charge has been created over the book debts as set outabove."

6

1. The fact that the deed specifically states that it is a"fixed" charge is not conclusive. See Re Armagh ShoesLimited 1982 NILR, 59; and Re Keenan Brothers Limited 1985, IR 401.

7

2. This debenture clearly intended to create a charge. To come within the ambit of In re Keenan Brothers Limited it must meet all of the criteria therein. One of the critical factors therein was the requirement of a specific bank account designated by thelender."

8

The learned judge having quoted from a part of the judgment of McCarthy J. in Keenan Brothers Limited, then continued as follows:

"Thus from the point of view of the decision in the Keenan case it is an essential requirement that there be a special bank account. Yet what do we find in this debenture? No such special bank account is specifically created. In clause 5B it is set out that an account"may be designated" by the lender. This creates a situation where the respondent has the power to set up a special bank account."

9

3. I am satisfied that even though there are restrictive provisions set out in the deed in relation to the charge they are not such as tocreate a fixed charge without the establishment of the specific bankaccount.

10

4. The restrictions set out in the deed (e.g. not entitled to create mortgage charges etc. as set out in paragraph 5A; not entitled to deal with its book debts otherwise than by getting in and realising the same in the ordinary and proper course of business as set out in 5B) are not such as to bring it within the Keenan Brothers decision without the establishment of the designated bank account.

11

5. The deed created a floating charge. However, a discretion, power, was given to the lender/respondent. This floating charge could be converted into a fixed charge on the designation by the lender/respondent of a specified bank account as set out in pargagraph5B.

12

6. To determine the exact situation here, one takes the steps envisaged by Mr. Justice McCarthy in Keenan Brothers at page 421 where he said:

13

"It is not suggested that mere terminology itself, such as using the expression "fixed charge", achieves the purpose; one must look, not within the narrow confines of such terms, not to the declared intention of the parties alone, but to the effect of the instruments whereby they purported to carryout that intention, did they achieve what they intended or was the intention defeated by ancillary requirements?"

14

It appears to me that applying the above, and in order to ascertain what the legal character of the charge is, the Court must look at whether or not the discretion to designate the said specific bank account wasexercised."

15

The learned trial judge consequently deemed admissible evidence that such an account had not been specified from the date of the debenture up to the date of the appointment of the Examiner and that upon consideration of that evidence, which was not challenged, and having regard to the other relevant terms of the debenture, the learned trial judge was satisfied that the charge created over the book debts was a floating charge only, and made the declaration accordingly.

Submissions on appeal
16

On behalf of the Appellant it was submitted that the fundamental principle which is applicable to theconstruction of this debenture, which is a contract between the parties, is that which is common to the construction of all contracts, namely, that the intention of the parties is to be interpreted as evidenced by the terms of the contract itself, and that evidence of the conduct of the parties subsequent to entering into the contract is inadmissible to aid in its construction. It was, therefore, submitted that the learned trial judge in the court below erred in having regard to the evidence at all that a specified account pursuant to the clauses contained in the debenture had not been designated. Secondly, it was submitted in the alternative that...

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