The High Court has refused to give the English Insolvency Service and Northern Ireland’s Department of Employment and Learning preferential status in the liquidation of Bell Lines Limited and related companies, while confirming that their claims as creditors for payments to employees are not disputed.
In a judgment delivered on 28 April 2006, Ms Justice Dunne said the agencies could not use subrogation or restitution to obtain the priority Irish law gives to specified categories of debt. That priority, she held, depended on express statutory authority.
The liquidator, David Hughes, sought orders concerning payments made by the agencies to employees of the companies based in the UK. The judgment records that 209 employees were based there. After the European Court of Justice ruled in 1999 that the relevant UK guarantee institutions were responsible for claims by employees working in a member state branch, the agencies paid amounts for wages, holiday pay and pensions, as well as redundancy and minimum notice.
The liquidator argued that payments covering debts listed in section 285 of the Companies Act 1963 should carry preferential status in the Irish liquidation. He relied on the wording of that section, EU Directive 80/987/EEC and principles of subrogation and recoupment. He submitted that denying priority would benefit the general body of creditors at the agencies’ expense.
The Port of Waterford, a notice party, opposed preferential status. Its counsel argued that Irish law gives priority only where legislation provides for it, and pointed to statutory provisions that expressly transfer employee rights and preferential status to the Irish Minister when payments are made under the Irish scheme.
Justice Dunne agreed that the statutory scheme was decisive. She said section 285 prioritised specified debts and that the identity of the creditor was crucial. The legislation expressly provided for certain forms of statutory subrogation, including for qualifying advances to pay wages and for the Irish Minister, but made no equivalent provision for guarantee institutions from outside Ireland.
The judge rejected the argument that equitable subrogation or recoupment could elevate the agencies’ claims above ordinary unsecured claims. She also said the English decision in Re Downer did not assist: it concerned payment of rent as an expense of a liquidation, rather than the grant of preferential status.
The court refused the relief sought on the agencies’ preferential status. Their entitlement to claim in the liquidation for sums paid to employees was not in dispute. The judgment said the liquidator’s separate request concerning French creditors was unnecessary to decide; it did not determine that request.