Matheson


News and Insights

Print this page

Search News & Insights


Second Judgment in Belgard Motors Case - Priority to Preferential Creditors Regardless of Crystallis

AUTHOR(S): Niamh Counihan, Julie Murphy-O’Connor, Tony O’Grady
DATE: 15.07.2011

Ms. Justice Finlay Geoghegan, in her second judgment in the Belgard Motors case (Re JD Brian Limited (In Liquidation)(and related companies)) delivered on 11 July 2011, held that a notice served on foot of a clause in a debenture which indicated that the bank in question could, by notice in writing, convert a floating charge to a fixed charge over all the property and assets of the company subject to the floating charge if, in the bank’s sole judgment, the property and assets concerned were in jeopardy, was not sufficient to convert the floating charge into a fixed charge.

Ms. Justice Finlay Geoghegan, drawing upon the reasoning of the Supreme Court in Re Keenan Brothers ([1985] IR 401), concluded that this was the case on the basis that there was nothing in the debenture which restricted the entitlement of the company to deal with or dispose of stock in trade or use the proceeds of book debts or cash at bank following the notice.

The judgment is of particular significance as clauses of this type are extremely common in debentures taken by Irish banks and appear to have been accepted as effective by the English courts (Re Brightlife [1987] Ch 200). Both the Official Liquidator and the bank in question have indicated to the court that they intend to appeal the matter, this hearing having taken place against the backdrop of a decision dated 25 March 2011, in which Ms. Justice Finlay Geoghegan ruled that even if such crystallisation notice were effective, it did not have the effect of granting the floating chargeholder priority over the claims of preferential creditors.

Click here to read our Client Update on the first judgment in the Belgard Motors case.

BACK TO LISTING

Matheson Snapshot


About cookies on our website

Following a revised EU directive on website cookies, each company based, or doing business, in the EU is required to notify users about the cookies used on their website.

Our site uses cookies to improve your experience of certain areas of the site and to allow the use of specific functionality like social media page sharing. You may delete and block all cookies from this site, but as a result parts of the site may not work as intended.

To find out more about what cookies are, which cookies we use on this website and how to delete and block cookies, please see our Which cookies we use page.

Click on the button below to accept the use of cookies on this website (this will prevent the dialogue box from appearing on future visits)