The High Court has ruled that seven companies which became partners in the Bloxham investment business could charge their partnership interests to a bank, but had no vested ownership in specific Bloxham assets to offer as security.
Mr Justice David Keane gave the ruling on 3 November 2017 in a dispute between Bloxham’s liquidator, Kieran Wallace, and receiver George Maloney. The liquidator had asked the court for directions during the winding up of the limited partnership. The issue was whether debentures granted by the companies secured the bank against Bloxham’s assets themselves, as the receiver argued, or only against each company’s partnership interest.
Bloxham was restructured in 2011. Seven individual partners sold their interests in the business, excluding their interests in its capital, to separate companies under their control. The companies then became general partners. Each company had borrowed from Danske Bank AS, trading as National Irish Bank, and granted it a debenture covering its assets, including its rights and interests in Bloxham assets.
The receiver argued that the coordinated transactions transferred Bloxham’s assets to the companies jointly, giving the bank security over them. The liquidator maintained that the agreements transferred only each individual partner’s share or interest in the partnership. The court found that the agreements’ wording supported the liquidator’s interpretation. It also found no evidence that the partnership’s earlier agreement had been amended in the required manner to permit a transfer of its assets, or that all partners, including limited partner FBD Securities Limited, had agreed to such a transfer.
The court further considered the 2011 partnership agreement, signed after the sales but before the debentures. It provided that assets used in Bloxham’s business were partnership assets and that assets held in other names were held on trust for the partnership. The judge concluded that, even if the companies had acquired any ownership in particular assets under the earlier transactions, the 2011 agreement returned those assets to the partnership.
The court therefore found that, when the companies executed the debentures in September 2011, they had no vested ownership in any part of Bloxham’s assets capable of being charged. They did have partnership interests, and the judgment states that those interests were charged to the bank. The court’s conclusion concerned the nature of the security the companies could grant; it did not determine the bank’s priority over Bloxham’s assets. The judgment identifies no further order.