Kenneth Stephen Chalk (Administrative Receiver of Cil Realisations Ltd) v Neville Barry Kahn & Nigel Steven Hill (Joint Liquidators of Cil Realisations Ltd)
| Jurisdiction | England & Wales |
| Judgment Date | 29 February 2000 |
| Judgment citation (vLex) | [2000] EWHC J0229-6 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CH NO. 7887 of 1999 |
| Date | 29 February 2000 |
[2000] EWHC J0229-6
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon. Mr Justice Hart
CH NO. 7887 of 1999
In The Matter of The Insolvency Act 1986 and In The Matter of Cil Realisations Ltd. (In Administrative Receivership and In Liquidation)
Andrew THORNTON appeared for the Applicant instructed by Messrs. Norton Rose
Hearing date: 16th February 2000
This is the official judgment of the court and I direct that no further note or transcript be made.
This is an application by the administrative receiver ("the receiver") of CIL Realisations Limited ("the company") seeking directions pursuant to section 35 of the Insolvency Act 1986. The issue is as to how a sum of £231,609.43 standing to the credit of accounts held by the company with its bankers should now be dealt with by the receiver.
The receiver was appointed (originally jointly with another who has since resigned) on 5 th May 1995 under the terms of a debenture ("the debenture") dated 18 th April 1994 given by the company to N.B.D. Bank ("the Bank") . On 19 th March 1997 the company went into creditors' voluntary liquidation. The business and assets of the company had been sold in June 1995 (by one of the joint receivers) and the proceeds used to repay the Bank in full. The sum of £231,609.43 represents the proceeds of certain book debts of the company which were paid into its current account at the Maidenhead branch of Midland Bank ("Midland Bank") and which, at the date of the receivership, were held as to £9657.33 in a deposit account at that branch and as to the balance in the current account.
Section 40 of the Insolvency Act 1986 provides, so far as material, as follows:
"Payment of debts out of assets subject to floating charge
(1) The following applies, in the case of a company, where a receiver is appointed on behalf of the holders of any debentures of the company secured by a charge which, as created, was a floating charge.
(2) If the company is not at the time being wound up, its preferential debts (within the meaning given to that expression by section 386 in Part XII) shall be paid out of the assets coming to the hands of the receiver in priority to any claims for principal or interest in respect of the debentures.
(3) Payments made under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors."
In Re Pearl Maintenance Services Ltd [1995] BCC 657, C arnwath J held that the receiver's duty to preferential creditors under section 40(2) did not cease merely because the debenture-holder was satisfied, but that he remained under a duty to meet the claims of preferential creditors so far as could be done out of floating charge assets. In the present case the amount of receivership preferential creditors are some £234,269.07 and the amount of liquidation preferential creditors is nil. Unless the disputed monies are held to be the subject of a floating charge, the receivership preferential creditors will be left to a pari passu distribution with other unsecured creditors of the company. If they are held to be the subject of a floating charge they will recover in full (subject to the question of costs) .
The issue before me is thus, as it was in Re PearlMaintenance Services Ltd, one which arises as between the preferential creditors in the receivership on the one hand and the liquidators on the other. The application is made by the receiver (representing for this purpose the receivership preferential creditors) with the liquidators as respondents. The liquidators, however, chose not to be represented at the hearing. I have, therefore, heard argument only from Mr Thornton on behalf of the receiver.
The question turns on whether the relevant provisions of the debenture created, at their inception, a fixed or a floating charge over the relevant assets. I need only refer to the following for the purposes of this judgment:
"3 Charges
3.1 Fixed Charge The Company…charges to the Bank by way of first fixed charge…as a continuing security for the payment and discharge of the Secured Obligations the following assets, both present and future, from time to time owned by the Company or in which the Company may from time to time have an interest:
(a) [Properties]
(b) [Plant and Machinery]
(c) [Securities]
(d) Debts: all books and other debts, revenues and claims, whether actual or contingent, whether arising under contracts or in any manner, whatsoever and whether originally owing to the Company or purchased or otherwise acquired by it including, without limitation any amount from time to time standing to the credit of any bank or other account with the Bank or with any other person and all things in action which may give rise to any debt, revenue or claim……
3.2 Floating Charge: The Company as beneficial owner hereby charges to the Bank by way of first floating charge as a continuing security for the payment and discharge of the Secured Obligations its undertaking and all its property, assets and rights whatsoever and wheresoever both present and future, other than any property and assets from time to time effectively charged by way of legal mortgage or fixed charge or assignment pursuant to clause 3.1 or otherwise pursuant to this Deed….
3.3 Restrictions on dealings with Charged Assets: The Company hereby covenants that it will not without the prior consent in writing of the Bank:
(a) Dispose of, or create or attempt to create or permit to subsist or arise any Encumbrance on or over, the Debts or any part thereof or release, set off or compound or deal with the same otherwise than in accordance clause 5.1(a)
……."
I interpose that "Debts" were defined (unless the context otherwise required) as the assets of the Company described in Clause 3.1(d) .
"3.4 Credit Balances: The Company irrevocably and unconditionally agrees that if there shall from time to time be any credit balance on any of its accounts with the Bank, the Bank shall have the absolute right to refuse to permit such credit balance to be utilised or withdrawn by the Company whether in whole or in part if at...
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