The High Court has ruled that a heating systems supplier is entitled to trace certain resale proceeds in the liquidation of BHT Group Limited and receive them ahead of ordinary creditors.
Mr Justice Michael Peart delivered judgment on 2 April 2014 in an application by Unitherm Heating Systems Limited against Kieran Wallace, the company’s official liquidator. The dispute concerned €93,907.65 owed for goods BHT had resold before the liquidator’s appointment. A separate €13,853.49 payment had already been made for identifiable goods still at BHT’s premises when its assets were sold.
Unitherm argued that BHT acted as its agent when reselling the goods and held the relevant proceeds on trust. The liquidator argued that the proceeds of sale clause created a charge that had to be registered under section 99 of the Companies Act 1963. Since it was not registered, he said, Unitherm was an ordinary creditor without priority.
The court considered the contract and how the companies did business. Unitherm prepared customer quotations and set the prices; BHT received an agreed discount. The goods were stored separately and remained identifiable. Unitherm also provided commissioning and warranties. The judgment noted a 60-day credit period and a contractual requirement to place resale proceeds in a separate account, which BHT did not maintain.
The judge concluded that, on these particular facts, the relationship was one of principal and agent and the resale clause did not create a registrable charge. The relevant trust covered the amount due to Unitherm under its invoice to BHT, after the agreed discount, rather than the full price paid by end users. The judgment said the company’s discount effectively represented its commission.
The court held that the liquidator was obliged to hold for Unitherm the qualifying resale proceeds received by BHT, whether as examiner or liquidator, and pay them in priority to ordinary creditors. Unitherm could trace those proceeds under equitable principles despite their having been mixed with other money. The judge rejected the argument that the practical difficulty or cost of identifying sales should defeat the claim.
The judgment determined the parties’ rights and the basis for tracing. It did not set out a perfected payment order: the judge said he would hear the parties on the precise terms needed to give effect to the conclusions.