Bank has priority claim over liquidated stockbrokers assets
A bank is entitled to a priority claim over the shares of the partnership which formed the now liquidated Bloxham stockbroking firm, the High Court ruled.
Mr Justice David Keane said under a restructuring of 2011, each of Bloxham's corporate partners held no more than a partnership interest in Bloxham and "none held any any vested ownership interest" in any portion of those assets.
He was giving a decision in a dispute between a liquidator and a receiver over whether Danske Bank had security over certain partnership assets or merely over the partnerships' interest in those assets.
Danske had advanced loan facilities to Bloxham, which was a limited partnership of seven individual partners and one limited partner, FBD Securities, to fund the 2011 restructuring.
Bloxham was wound up in June 2012 on the petition of the partners because it was in breach of requirements to hold a minimum regulatory capital of €5.6m
Kieran Wallace was appointed official liquidator and administrator.
In October that year, George Maloney was appointed receiver and manager by Danske under seven different debentures which had been granted by one of seven different companies. Each of those seven companies, or corporate partners as they now were, were controlled by the indivdual partners.
While a liquidator is concerned with all the creditors of a company, a receiver usually acts for one particular creditor, such as a bank, as was this case.
A dispute arose between the liquidator and receiver over the winding up of the partnership and the liquidator then sought the High Court's directions on the matter.
The receiver contended the effect of the seven debentures was to give Danske security over certain Bloxham assets while the liquidator argued it was merely over the partnership interest of each corporate partner in those assets.
The 2011 restructuring was complicated, Mr Justice Keane said.
It involved the sale of each partners' interest to the corporate partnership which would provide for the payment of less tax on profits, enhance the partners' personal repayment capacity on previous borrowings, and enhance their pension provisions, he said. Bloxham assets included premises in Dublin, Limerick and Cork.
The debentures executed in September 2011 in favour of Danske identified the charge over assets as being the "all the company's rights, title, and interest that it has or may be entitled to in the assets of the partnership", including the goodwill in the partnership itself.
Mr Justice Keane found each of the corporate partners, after the 2011 restructuring, had "no vested interest whatsoever" in any part of Bloxham's assets which were capable of being charged (by the bank on foot of the debentures).
Any other conclusion would be inconsistent with the principle that "no one gives who does not possess", he said.
The benefit of the partnership interest was the only asset capable of being charged in favour of Danske by the corporate partners in 2011 or subsequently, he said.