Latzur Ltd (in receivership) v Companies Act 2014 (Approved) [2020] IEHC 592 (20 November 2020)

Latzur Ltd (in receivership) v Companies Act 2014 (Approved) [2020] IEHC 592 (20 November 2020)

The Court held that the floating charge in the debenture did not crystallise into a fixed charge prior to or upon the appointment of the receiver. The purported notice of crystallisation served during examinership was ineffective, as such action was contrary to the purpose and scheme of examinership legislation. The Court found that Chelsey failed to prove valid service of the notice of crystallisation. Accordingly, the receiver was appointed on foot of a floating charge, and preferential creditors are entitled to priority in the distribution of receivership funds.

Citation
[2020] IEHC 592
Parties
Company: Latzur Limited (in receivership); Receiver/applicant: Ken Fennell; Chargee/secured Creditor: Chelsey Investissements SA; Preferential Creditor/respondent: Revenue Commissioners
Jurisdiction
Ireland
Judgment Date
20 November 2020
Procedural Posture
Application for Directions in Receivership / Judgment on Application for Directions Regarding Distribution of Receivership Funds
Outcome
Application dismissed. Directions given that the receiver was appointed on foot of a floating charge.
Legal Topics
Crystallisation of Floating Charges, Receivership Priorities, Preferential Creditors, Examinership Effects on Security, Automatic and Express Crystallisation, Proof of Service of Notices
Insolvency Company Law Banking and Finance Crystallisation of Floating Charges Receivership Priorities Preferential Creditors Examinership Effects on Security Automatic and Express Crystallisation +1 more

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Parties

Latzur Limited (in receivership)

Company

Ken Fennell

Receiver/applicant

Chelsey Investissements SA

Chargee/secured Creditor

Revenue Commissioners

Preferential Creditor/respondent

Procedural Posture

Application for Directions in Receivership / Judgment on Application for Directions Regarding Distribution of Receivership Funds

Legal Issues

  1. 1 Whether the floating charge in the debenture crystallised into a fixed charge prior to or upon the appointment of the receiver
  2. 2 Whether service of a notice of crystallisation during examinership was valid and effective
  3. 3 Whether automatic crystallisation clauses in the debenture were effective under Irish law

Ratio Decidendi

The Court held that the floating charge in the debenture did not crystallise into a fixed charge prior to or upon the appointment of the receiver. The purported notice of crystallisation served during examinership was ineffective, as such action was contrary to the purpose and scheme of examinership legislation. The Court found that Chelsey failed to prove valid service of the notice of crystallisation. Accordingly, the receiver was appointed on foot of a floating charge, and preferential creditors are entitled to priority in the distribution of receivership funds.

Court Disposition

Application dismissed. Directions given that the receiver was appointed on foot of a floating charge.

Orders

  • Receiver to distribute receivership funds in accordance with the priority of preferential creditors under s.98(1) of the Companies Act 1963.
  • Chelsey not entitled to priority as a fixed charge holder.