The court has ruled that liquidators may pay expenses properly incurred out of assets comprised in a crystallised floating charge in the hands of the receivers at the time of the liquidation in priority to the interest of the floating charge-holder.
In re Leyland Daf Ltd, the court at first instance has followed the reasoning in re Portbase Clothing Ltd [1993] Ch. 388 and Mond & anor v Hammond Suddards (a firm) & anor [2000] Ch.40, so that instead of making payment of the properly incurred expenses of the liquidation out of the assets available for the payment of general creditors, the value of a floating charge has been potentially reduced. It has always been the case that the liquidator could have access to floating charge assets in this way if he was appointed before the receiver, but now the timing of his appointment does not affect the right to this priority.
The implication of this case is that receivers would be well advised to consider distributing wholly or substantially all of the assets comprised in the floating charge before liquidation, subject always to consideration of their duties under s.40 Insolvency Act 1986. The case indicated (though only as a result of a concession by the liquidators) that liquidators will not have recourse to assets already distributed, nor can they make receivers accountable for such assets; they will only have recourse to the assets still held by the receivers at the commencement of the Liquidation.
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