Supreme Court Rules On Belgard Motors Case

Author:Ms Julie Murphy-O'Connor, Brendan Colgan, Niamh Counihan, Libby Garvey, Niall Horgan, Patrick Molloy, Peter O'Brien, Tony O'Grady, William Prentice, Chris Quinn and Alma Campion


The Supreme Court, in a judgment delivered today, in J.D. Brian Motors Limited, trading as Belgard Motors, (In Liquidation) (and related companies) allowed the appeal of the Official Liquidator, Tom Kavanagh of Deloitte, to set aside two declarations made by Ms Justice Finlay Geoghegan in the High Court in two separate judgments in 2011.

Belgard Motors March 2011 Belgard Motors July 2011


Ms Justice Finlay Geoghegan had ruled that, under s.285(7)(b) of the Companies Acts 1963, preferential debts must be discharged from funds realised from assets subject to a floating charge in priority to debts due to the beneficiary of that floating charge, irrespective of whether or not the floating charge crystallised by virtue of a notice of crystallisation served prior to the commencement of winding up.  She had also found that the notice served was not sufficient to convert the floating charge into a fixed charge as the relevant security document did not expressly provide for a restriction on dealing with the relevant assets consequent on notice being served.

Supreme Court decision

The Supreme Court ruled that the intention of the parties to the security document was that, by serving the notice, the companies would be restricted from using the assets, previously the subject of the floating charge, and that it was, therefore, converted into a fixed charge.

The Supreme Court concluded, contrary to the reasoning employed by the High Court, that a clause in the security document whereby the company covenanted to carry on the business in a proper and efficient manner was not incompatible with the interpretation of the provisions in relation to crystallisation.

The Supreme Court also found, based on a decision of the...

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