The High Court has refused the Revenue Commissioners’ application for orders concerning the payment of preferential debts in the receivership of Beggasa Limited, which operated the Shannon Oaks Hotel and Country Club in Portumna, County Galway.
Revenue argued that receivers Aengus Burns and Paul McCann breached section 440 of the Companies Act 2014 by using €57,905.67 from assets subject to the company’s floating charge to repay part of a bank loan before paying preferential creditors. The company’s outstanding PAYE/PRSI and VAT liabilities were accepted as preferential debts.
The receivers said the loan funded costs and expenses of the receivership. The court found that the bank’s facility had provided €234,589.33, applied to expenses including insurance, property maintenance, utilities, security and receivers’ fees. The receivers repaid €208,570 from asset realisations. The loan was secured on assets under a separate debenture relating to property mortgaged by Cosmo Flood.
Justice David Keane held that the company debenture specifically treated receivership borrowings as a receivership expense, distinct from the company’s secured borrowing. Section 440 gave preferential debts priority over claims for principal or interest under the debenture, but did not displace the prior ranking of proper receivership costs and expenses. The court therefore rejected Revenue’s claim that the loan repayment breached section 440.
Revenue also raised concerns about how receipts and expenses had been apportioned between fixed and floating charge assets, including an allegation that floating-charge proceeds may have been used for fixed-charge costs. The receivers disputed those complaints. The judge said the accounting dispute could not be resolved on the affidavits before him, and that Revenue had not shown the unfair prejudice required for directions under section 438. A creditor must establish prejudice before seeking directions, rather than use the procedure to search for evidence of it. Revenue could ask focused questions, which the receivers said they remained willing to answer.
The court refused all reliefs sought in the motion, including declarations of breach, an order requiring payment to preferential creditors and an order determining the amount due. It directed the parties to seek agreement on any issues arising, including costs; if they disagreed, they were to submit short written submissions within 14 days.