The High Court has ruled that a receiver appointed over Latzur Limited was appointed under a fixed charge, meaning funds available in the receivership are to be distributed to secured creditor Chelsey Investissements SA rather than preferential creditors led by the Revenue Commissioners.
Mr Justice Mark Sanfey’s judgment resolves a dispute about the effect of a 2012 debenture and the company’s unsuccessful examinership in 2013. Receiver Ken Fennell had asked the court for directions before distributing about €1.4 million, before receivership costs and expenses, and concluding the receivership.
The judge found that the debenture automatically converted its floating charge into a fixed charge when a petition was presented for an examiner or court protection was sought. That event occurred on 8 October 2013, when Latzur petitioned the High Court for an interim examiner. The charge then de-crystallised during the examinership, allowing the company and examiner access to the assets, and became fixed again when court protection ended without a rescue scheme.
The court rejected Revenue’s argument that such a conversion was incompatible with examinership or amounted to an unlawful attempt to realise the security. It found no evidence that Chelsey had restricted the company’s use of assets during the protection period.
The judge separately found that a decision by Latzur’s sole member to seek an examiner did not trigger a different automatic-conversion clause. That clause required a meeting and resolution, and the court said it could not rewrite the parties’ wording to fit the procedure for a single-member company.
The judge also considered Chelsey’s November 2013 notice purporting to convert the charge. He found that the notice had been served, despite not following the debenture’s specified method, because evidence from both the person who delivered it and the person who received it was uncontested. The service defects were not fatal. The judge said the notice would have crystallised the charge if his primary finding on automatic conversion were wrong.
The court concluded that the receiver was appointed under a fixed charge and that, under the law applicable at the time, the funds available to him should go to Chelsey. The judgment did not set out the final form of the order: the parties were given 14 days to make brief written submissions on its precise terms.