The High Court declared that the receiver of Latzur Limited was appointed over the company’s assets and undertaking under fixed security, and that Chelsey Investissements SA could recover a net 20% of its costs from the Revenue Commissioners. The orders were stayed until the appeal period expires and, if an appeal is lodged, until it is determined.
Mr Justice Mark Sanfey delivered the judgment on costs and the form of order on 11 February 2021. The underlying application was brought by receiver Ken Fennell under section 438 of the Companies Act 2014, seeking directions on whether his appointment was supported by a fixed or floating charge. The receiver took a neutral position and agreed to abide by the court’s order; Chelsey and Revenue contested the issue.
In a substantive judgment delivered in November 2020, the court found that the receiver was appointed under a fixed charge. That meant the available funds, stated in the judgment as approximately €1.4 million before receiver costs and expenses, would be payable to Chelsey as fixed charge holder rather than principally to preferential creditors including Revenue.
The costs judgment noted that Chelsey advanced four grounds for establishing fixed security. It succeeded on two: that the charge automatically crystallised when a petition to appoint an examiner was presented, and, alternatively, that a notice of crystallisation served on 23 November 2013 converted the floating charge into fixed security. Revenue succeeded on two other grounds concerning alleged crystallisation upon appointment of the receiver and the effect of a company resolution.
The judge estimated that the issues Chelsey won accounted for 70% of proceedings costs and those Revenue won for 30%. But he reduced Chelsey’s share to 50% in assessing costs, citing the late raising of automatic crystallisation in written submissions and the need for Chelsey to seek permission at the hearing to file two affidavits proving service of the notice. The judge said this had an adverse and disruptive effect on Revenue’s ability to conduct its case, while expressly stating he did not suggest Chelsey had acted improperly.
Revenue was entitled to 30% of its costs, producing a net order in Chelsey’s favour for 20% of its costs. The amount remains to be adjudicated if the parties do not agree. The judgment also declared that the debenture’s automatic-conversion clause was effective and that the converted charges were valid and operative when the receiver was appointed. Alternatively, the 2013 notice was effective to convert the charges. Those orders do not take effect during the stay.