The High Court has refused directions sought by the Revenue Commissioners to reclassify assets of A-Wear Limited, which was in receivership, while leaving open the possibility of a new, more focused application supported by further evidence.
Mr Justice Tony O’Connor delivered the judgment on 18 March 2016 in proceedings under section 316 of the Companies Act 1963. The Revenue sought to have assets across 11 categories treated as subject to a floating charge. The classification mattered because the judgment said Revenue could have priority over assets subject to a floating charge in the circumstances set out in section 98.
A-Wear and related companies granted security over assets under a 2007 debenture in favour of Ulster Bank Ireland. Hilco Capital Ireland later became security trustee. The court said the central issue was whether the bank had a contractual right to control A-Wear’s book debts and revenues. The debenture restricted A-Wear from charging or disposing of assets covered by fixed charges without consent, while allowing ordinary-course dealings with assets under a floating charge.
The judge said the Revenue, which was not the receiver, had to establish that the receiver’s actions were incorrect and that any injustice arose from misapplication of insolvency law and affected an established right.
The court accepted the receiver’s classification of several categories as fixed-charge assets. These included credit card receipts of €118,910.05, debtors of €339,535.78, gift voucher proceeds of €13,733.25, an insurance rebate of €25,029.10, redundancy rebates of €27,033.62 and a cancelled Revenue bank draft of €90,779.53. It said the debtors were book debts and A-Wear could not dispose of them without Ulster’s consent. The bank draft fell within the debenture’s provisions covering instruments and was not shown to be an asset that changed in the ordinary course of business.
The receiver had already accepted that a €59,381.66 balance taken over on appointment was subject to a floating charge, so the court said that category was no longer in issue. The parties also agreed that the sale of stock fell within the floating charge. No dispute remained over a €186,902.22 inter-account transfer after the receiver’s affidavits explained it was covered by separate charge documents.
For a €103,532.33 cash lodgement collected by Brinks, the court said there was insufficient evidence to determine that the receiver’s decision was wrong. It also declined to direct a different classification for €28,595.74 in PayPal payments, citing the lack of sufficient admissible evidence about the arrangements and the nature of the payments. The court said the standard PayPal agreement before it could not be considered in the circumstances.
The specific directions sought were refused. The Revenue may bring a new application focused on what evidence can be produced, if it establishes a basis for doing so. The judgment said applicants must provide relevant evidence and that focused questions to a receiver should be answered candidly.