Professional Inspection Services Ltd v Jokhan General Contractors Ltd ((in Receivership))
| Jurisdiction | Trinidad & Tobago |
| Judge | Alexander |
| Judgment Date | 04 August 2020 |
| Neutral Citation | TT 2020 HC 217 |
| Court | High Court (Trinidad and Tobago) |
| Docket Number | CLAIM NO CV2014-01858 |
| Date | 04 August 2020 |
IN THE HIGH COURT OF JUSTICE
(Sub Registry, San Fernando)
Master Alexander
CLAIM NO CV2014-01858
And
And
For the Claimant/Judgment creditor: Mr Sawh instructed by Ms Ashti Maharaj
For Receiver-Manager: Mr Michael Quamina instructed by Ms Jewel-Ann Troja
For the Garnishee: Ms Tanya Carter
This court found itself engaged with garnishee proceedings, more particularly, on whether it should pronounce the provisional attachment of debts order made on January 23, 2019 as a final order. The issue that troubled it, specifically, was whether the provisional order made on January 23, 2019 could be made final in circumstances where a receiver-manager was appointed under a debenture after the registration of a judgment granted against the defendant (now ‘judgment debtor’)?
The historical context that gave rise to this issue must be set out briefly before exploring the law. The root order was made on January 20, 2017, by Charles J who, in granting summary judgment against the judgment debtor, struck out its defence pursuant to Part 26.2(c) on the ground that it had disclosed no ground for defending the claim (‘Justice Charles’ order’). By Justice Charles’ order, the judgment debtor was required to pay to the claimant (now ‘judgment creditor’):
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(i) The sum of two million, four hundred and eighty two thousand, six hundred and twenty three dollars and eighty two cents ($2,482,623.82);
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(ii) Interest on the sum of two million, four hundred and eighty two thousand, six hundred and twenty three dollars and eighty two cents ($2,482,623.82) at a rate of 5% from May 28, 2014 to January 01, 2017;
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(iii) Costs of the application in the sum of seven thousand, five hundred dollars ($7,500.00) and prescribed costs of the claim up to the second stage in Appendix C in the sum of one hundred thousand, seven hundred and twenty two dollars and fifteen cents ($100,722.15).
After this order was granted, no step was taken by the judgment debtor to satisfy the judgment debt On March 09,2017, the judgment creditor registered Justice Charles' order with the Registrar General. After registration, the judgment debt remained unpaid and the judgment creditor took no step to enforce it. Almost a year after judgment was granted, the receiver-manager was appointed by Deed of Appointment dated February 02, 2018 to manage the affairs of the judgment debtor company. The debenture-holder appointed the receiver-manager pursuant to the enforcement of security powers under the debenture. This in effect crystallized the charge.
On December 19, 2018, about ten and a half months after the appointment of the receiver-manager, the judgment creditor applied to this court for an attachment of debts order in respect of debts owed to the judgment debtor by the garnishee, Republic Bank Limited. At this point, the sums held by the garnishee were standing to the account of and in the name of the receiver-manager of the judgment debtor and counsel for the judgment creditor insisted on its entitlement to garnish same. It was felt that an inter partes hearing was necessary to bring resolution to this matter so this court granted a provisional order on January 23, 2019: see Part 51.3 CPR.
At the hearing for pronouncement of the final order, the receiver-manager disputed the entitlement of the judgment creditor to the debts it sought to attach; and objected to the pronouncement of a final attachment of debts order. In opposition, counsel for the judgment creditor maintained that the judgment creditor was entitled to a final order in respect of the debts held by the garnishee. Stiffly resisting a release of the provisional order, counsel asserted that he had authorities to support his position and invited the court to pronounce the final order. This contest would turn, therefore, on whether the final order could be made in present circumstances where the receiver-manager was appointed under a debenture, after the registration of the judgment.
There is a requirement in the rules for the court to be satisfied that service was proper before making any decision at the hearing fixed by the provisional order. At this hearing, the court can discharge or make final the provisional order. It also gives the court the power to issue directions to resolve any dispute between the parties: see Part 51.10 CPR. A dispute having been revealed, the court embarked on an analysis of the relevant legal principles to resolve the issues between the judgment creditor and the receiver-manager. Only upon the resolution of which can this court rule on the application to make the provisional order final.
The relevant principle of law in Halsbury's Laws of England 1 is as follows:
Where judgment is obtained against a company and the judgment creditor serves a third party debt order on a person owing the company a debt which is at the time subject to a floating charge in a debenture, the title of the debenture holder prevails over that of the creditor, even though his receiver is appointed after the service of the order, and the receiver's title prevails even if the third party debt order is made absolute before he is appointed, unless the money has been actually paid over under the order; and, even if debentures are irregularly issued, the rights of the holder, if he had no notice of the irregularity, prevail over those of on execution creditor. The court will not, however, restrain an execution from proceeding or refuse to make a third party debt order unless the debenture holder takes some step to turn his security from a floating into a fixed charge.
In Norton v Yates 2, the court held that:
[T]he true effect of the garnishee order is not to transfer the debt, but to give a right to the garnishee to say to his original creditor, who has now become judgment debtor,
“I am not going to pay you; I must pay the man who has obtained the garnishee order.”If that is the right and true view, then the debt, subject to that order, remains the property of the judgment debtor, and the right of the garnishor under the garnishee order nisi is subject to such rights and equities as already exist over it as the property of the debtor, including this particular debt in regard to which he has obtained a garnishee order.
It proved instructive to set out the facts in Norton to provide the context for that court s ruling. In Norton, a company issued debentures giving a floating security over all its properties; and a receiver was appointed in a debenture-holders' action two days after a judgment creditor of the company had served a garnishee order nisi attaching a debt due to the company. On the question of priority, the court held that the receiver was entitled, as against the garnishor, to payment of moneys for the following reasons:
[W]hen the receiver was appointed, his appointment operated on everything which was the property of the company at the moment of his appointment. As I have already said, this debt, though bound by the garnishee order, was still the property of the company, and therefore the receiver became entitled to receive this debt, subject to such rights as the garnishee might have. But in my judgment the garnishee had no right as against the debenture-holders, because, by virtue of the charge which existed at the date when the garnishee order had been obtained, the debenture-holders had obtained from the Court an order which gave somebody, not the garnishee, the right to receive this debt, namely, the receiver for the debenture-holders.
Another instructive case on point was Robson v Smith 3, where the court opined that the debenture on the facts of that case constituted what it called a “floating security”. In effect, they allowed the company to deal with its assets in the ordinary course of business until the company was wound up or stopped business, or a receiver was appointed at the instance of the debenture-holders. They constituted a charge, but gave a licence to the company to carry on its business. It meant that so long as the debentures remain a mere floating security, or, in other words, the licence to the company to carry on its business has not been terminated, the property of the company may be dealt with in the ordinary course of business as if the debentures had not been given, and any such dealing with a particular property will be binding on the debenture-holders, provided that the dealing be completed before the debentures cease to be merely a floating security. In the premises, the court expressed the view that the holder of a debenture which constitutes only a floating security, in circumstances where the company continues, “carrying on its business, and when no steps have been token to wind up the company or to get a receiver appointed, cannot single out a particular debt due to the company, and require by notice that debt to be paid to him or not to be paid to the company or to those validly claiming through the company.” [emphasis mine] Thus, where a garnishee
order has been obtained against the debtor, the garnishee may safely pay his debt to the judgment creditor without reference to the noticeThe above authorities suggest that a debenture-holder, who has only a floating security, is not permitted to frustrate the payment of debt of the company over to a judgment creditor under an attachment of debts order unless the company ceases to be a going concern or the debenture-holder has intervened by taking some step to crystallise his security. This point was made clear by the...
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