High Court of Ireland Decisions

1. H. Williams (Tallaght) Limited went into receivership on the 22nd September, 1987. The Receiver was appointed on behalf of the holders of a debenture secured by a floating charge. In accordance with the provisions of Section 98(1) of the Companies Act, 1963, the Receiver in respect of assets coming into his hands upon realisation of the property subject to the floating charge treated the Revenue Commissioners as preferential creditors in relation to certain debts of the company in respect of PAYE and PRSI. Having paid the preferential debts, the Receiver had sufficient assets in his hands to discharge the entire debt of the debenture holders and he had therefore no further function to perform. But on the 1st July, 1991 the company went into liquidation. The Revenue Commissioners are claiming to be a preferential creditor under Section 285 of the Companies Act, 1963 in respect of a Corporation Tax liability of the company. The Liquidator argues that such a preferential claim cannot be permitted in that, as he submits, it was never intended that the same creditor could make a preferential claim in a receivership and claim preference again in a subsequent liquidation. He maintains that Section 98 of the 1963 Act when read in conjunction with Section 285 ought to be construed as precluding such a double preference as he might describe it. The Liquidator further submits that even if he is wrong in that view, the claim by the Revenue Commissioners is out of time and is statute barred.

2. These two issues now come to be determined by this Court on foot of an application for directions by the Liquidator and an order of Mr Justice Murphy that the matter be specially set down for hearing on foot of pleadings delivered by both sides. I now propose to deal with each of the two issues in turn.

3. The argument of the Official Liquidator is neatly summarised in paragraph 9 of the points of claim. That paragraph reads as follows:

4. No authority has been cited in support of the argument of the Official Liquidator and I can find no basis for his submission in the wording of Section 98. The relevant part of that section reads as follows:

5. The debts in respect of which priority is to be given are the same debts as would be given preferential treatment under Section 285 but that is really the only link between the two sections. There is nothing in Section 98 which in any way suggests that once a particular preferential creditor has been paid his preferential debt in the receivership, he cannot subsequently make a claim in respect of a preferential debt if the company goes into liquidation. There could well be a situation where a company would go into receivership on foot of a debenture secured by a floating charge and the Receiver succeeds in paying in full the debenture holder after first discharging the preferential debts and the company does not go into liquidation for many years afterwards. Is it to be said that notwithstanding the mandatory requirements of Section 285 the Official Liquidator is to ignore these in respect of a creditor who has already been treated as a preferential creditor in the earlier receivership? Such a proposition would seem to me to be quite unsustainable. Section 285(2) provides that in a winding-up "there shall be paid in priority to all other debts" certain categories of debts which are set out in the section and which include "all assessed taxes, including income tax and corporation profits tax, assessed on the company up to the 5th April next before the relevant date and not exceeding in the whole one year's assessment". Although as I have already mentioned there is no authority in point, Counsel for the Official Liquidator has referred me to United Bars Limited (in Receivership) v. Revenue Commissioners 1991 1 IR 396. In his judgment in that case but in a totally different context, Mr Justice Murphy expressed the view that the only purpose of Section 98 should be to equate the rights of preferential creditors in a receivership with those in a liquidation, not to improve on those rights. But I do not think that that passage in Murphy J.'s judgment lends any support to the argument of the Official Liquidator in this case. What was at issue in the United Bars case was whether assets realised by a receiver on foot of a fixed charge as distinct from a floating charge were to be used for the purposes of discharging preferential creditors. Murphy J. decided that he should follow the clear English case law to the effect that they should not. He relied on In Re: Lewis Merthyr Consolidated Collieries 1929 Ch. 498 and In Re: G.L. Saunders Limited (in Liquidation) 1986 1 W.L.R. 215 . Although he was following English authorities he expressed the view that there were undoubtedly arguments both ways. But one strong point in favour of the view taken by the English Courts was that in a liquidation preferential creditors have no right to preferential payment out of assets the subject matter of a fixed charge but only out of assets the subject matter of a floating charge and he doubted whether it could have been intended that preferential creditors claiming under Section 98 could be held to be in a better position, that is to say, entitled to the claim priority out of assets realised from a fixed charge. That is the context in which equality came into play but in my view it has no relevance to the arguments in this case. I am satisfied, therefore, that if it is not statute barred the priority claim of the Revenue Commissioners in respect of the Corporation Tax is well founded.

6. I now turn to the statute bar question. Again the argument of the Official Liquidator is neatly summarised in paragraph 12 of the points of claim. That paragraph reads:-

7. The precise wording of Section 285(14) is as follows:

8. A statutory time limit cannot be extended by a Court unless the statute permits such an extension. That obvious principle does not really require authority and is, I think, accepted