Revenue and Customs v Royal Bank of Scotland Plc

Revenue and Customs v Royal Bank of Scotland Plc

RBS, by receiving proceeds from assets subject to a floating charge pursuant to arrangements requiring its consent and participation, took possession for the purposes of section 196 Companies Act 1985 and section 175 Insolvency Act 1986, and is subject to the statutory obligation to satisfy preferential debts out of those proceeds. Sums received under post-liquidation assignments of book debts not subject to the charge at the time of assignment are not caught by the statutory provisions.

Parties
Claimant/respondent: Her Majesty’s Commissioners for Revenue and Customs; Defendant/appellant: Royal Bank of Scotland PLC
Jurisdiction
England and Wales
Judgment Date
29 November 2007
Procedural Posture
Civil Appeal / Appeal From High Court Preliminary Issue Determination
Outcome
Appeal dismissed; cross-appeal dismissed; declarations set aside; preliminary issue answered in favour of the Commissioners.
Legal Topics
Floating Charges, Preferential Creditors, Debenture Enforcement, Liquidation Priorities
Insolvency Law Banking Law Company Law Floating Charges Preferential Creditors Debenture Enforcement Liquidation Priorities

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Parties

Her Majesty’s Commissioners for Revenue and Customs

Claimant/respondent

Royal Bank of Scotland PLC

Defendant/appellant

Procedural Posture

Civil Appeal / Appeal From High Court Preliminary Issue Determination

Legal Issues

  1. 1 Whether receipt by RBS of proceeds from assets subject to a floating charge constituted 'taking possession' under section 196 Companies Act 1985
  2. 2 Whether section 196 Companies Act 1985 and section 175 Insolvency Act 1986 applied to sums received by RBS
  3. 3 Whether RBS was entitled to retain sums received under post-liquidation assignments

Ratio Decidendi

RBS, by receiving proceeds from assets subject to a floating charge pursuant to arrangements requiring its consent and participation, took possession for the purposes of section 196 Companies Act 1985 and section 175 Insolvency Act 1986, and is subject to the statutory obligation to satisfy preferential debts out of those proceeds. Sums received under post-liquidation assignments of book debts not subject to the charge at the time of assignment are not caught by the statutory provisions.

Court Disposition

Appeal dismissed; cross-appeal dismissed; declarations set aside; preliminary issue answered in favour of the Commissioners.

Orders

  • Declarations made by the judge set aside.
  • There is a real prospect that the Commissioners will succeed in establishing that section 196 Companies Act 1985 and section 175 Insolvency Act 1986 apply to the facts.