The High Court has made absolute a garnishee order sought by Response Engineering Limited over about €220,000 owed to Caherconlish Treatment Plant Limited by Limerick County Council. The money was due for work on a water treatment plant and was being held by the Council pending resolution of competing claims.
Response had obtained judgment against Caherconlish on 1 February 2010 for €225,351 plus costs. It later obtained a conditional garnishee order over the Council payment. AIB plc argued that it had priority because Caherconlish’s solicitor had undertaken in 2006 to lodge specified Council payments into the company’s AIB account, in connection with an overdraft facility.
The central issue was whether the undertaking created a security over book debts that required registration under section 99 of the Companies Act 1963. AIB’s interest had not been registered. The court first held that the Council payment was a book debt: it arose from services Caherconlish had provided in the course of its business.
The judge then considered whether the undertaking was an assignment of the debt to AIB or security for the company’s borrowing. In the circumstances of the bank-client relationship, Caherconlish was presumed to retain an equity of redemption unless the documents clearly showed that the debt had been sold or assigned. The undertaking’s reference to “irrevocable instructions” to lodge the cheques did not displace that presumption. The judge concluded it was security, not an assignment.
The court declared the undertaking void against any creditor of Caherconlish because the charge over its book debts had not been registered as required by section 99(2)(e). This resolved the priority issue against AIB’s claimed security.
AIB separately argued that making the garnishee order absolute was discretionary and would be inequitable because its advances had helped Caherconlish continue trading, indirectly benefiting Response. The judge said special circumstances would generally be needed to refuse relief to a judgment creditor that had met the required proofs. AIB could have protected its position by registering the undertaking, and there was no contractual or quasi-contractual relationship between AIB and Response making Response’s application inherently inequitable.
The court therefore made absolute the garnishee order sought by Response. The judgment addressed the competing claim to the Council-held payment; it did not state that the funds had already been paid to Response.