The Court of Appeal has ruled that the receiver of Latzur Limited was appointed under a floating charge, not a fixed charge, after rejecting three earlier dates on which creditor Chelsey Investissements SCA argued the charge had crystallised.
The ruling concerns a dispute between Chelsey and the Revenue Commissioners over the priority of their claims to funds held by receiver Ken Fennell. Revenue argued that its preferential claims could take priority over Chelsey’s claim if the receiver had been appointed under a floating charge.
Chelsey said the charge had become fixed on 3 October 2013, when Latzur’s sole member decided in writing that the company should seek an examiner; on 8 October, when the examinership petition was presented; or on 23 November, when Chelsey sent a notice seeking to convert the floating charge to a fixed charge.
The court upheld the High Court’s conclusion that the written decision on 3 October did not meet the wording of the debenture’s automatic crystallisation clause. It also ruled that the charge did not crystallise on 8 October. The court said that crystallisation during examinership protection would have deprived Latzur of the use of its assets and was barred by section 5(2)(d) of the Companies (Amendment) Act 1990.
The court held that the November notice did not crystallise the charge either, because the same statutory protection prevented Chelsey from taking action to crystallise it during the examinership. It agreed with the High Court that the notice had been effectively served in Canada, despite not being sent by a method specified in the debenture. That service finding did not change the outcome.
The High Court had concluded that the charge re-crystallised when court protection ended on 28 November 2013. The Court of Appeal rejected that conclusion: once de-crystallised, the charge had resumed its floating status, and the debenture contained no provision making it fixed again when protection ended.
The court said the charge crystallised only when Fennell was appointed receiver on 28 November 2013. It proposed a declaration under section 438 of the Companies Act 2014 that his appointment over Latzur’s assets and undertaking was on foot of a floating charge. The parties could make submissions on the final form of the order. The court also indicated provisionally that Revenue should receive its costs in the High Court and on appeal, subject to any further submissions.