The Supreme Court has allowed an appeal in the liquidation of the Bell group of companies, ruling that the United Kingdom agency which paid certain employee debts can claim preferential status for those payments under section 285(6) of the Companies Act 1963.
The judgment, delivered by Mr Justice Fennelly on 18 March 2010, concerned more than 200 former employees based in the UK, including one in Northern Ireland. After the group collapsed, the UK agency paid claims for wages and other employment entitlements under an EU insolvency directive. Some payments related to debts that would have ranked as preferential in the Irish liquidation. Redundancy and minimum notice payments were not part of the priority claim.
The liquidator asked the High Court to admit the agency as a preferential creditor for qualifying payments. The High Court rejected that request, while accepting that the agency could prove as a creditor. The Port of Waterford, representing the unsecured creditors, opposed preferential treatment. The liquidator appealed with the agency’s support.
The Supreme Court said the issue was the agency’s priority, not its right to reimbursement. It was not disputed that the agency could prove as an unsecured creditor for sums that included payments corresponding to employee claims. The court found that the agency had been legally required to pay liabilities for which the companies were primarily responsible.
Section 285(6) gives a person who pays certain employee debts out of money advanced for that purpose a right to priority to the extent the employees’ own preferential claims have been reduced. The court considered objections that the agency had not “advanced” money, that it paid employees directly rather than from a larger fund, and that payment had to precede the winding-up. It rejected those arguments, reading the provision in light of its purpose and finding no requirement for an intermediary, a separate fund or payment before winding-up.
The court held that the agency was entitled to appropriate priority under section 285(6), and allowed the appeal. It directed that an order be made under paragraph D of the liquidator’s notice of motion, returnable on 11 July 2005. The judgment does not specify the amount ultimately payable or determine the agency’s claim as to any particular sum; the payments remain subject to adjudication as a creditor in the liquidation.