Claim to have Cognotec receiver discharged rejected

A HIGH Court judge has rejected claims that a receiver appointed by Barclays Bank to an Irish information technology company employing 60 people must be discharged.

Cognotec Ltd, Ely Place, Dublin 2, had claimed receiver Kieran Wallace should be discharged because, it alleged, the bank’s security over loans made by it of some $10 million was void due to the late filing of documents in the Companies Office in 2006.

In opposing the application, the receiver argued the relevant statutory declaration was filed just a day late and the bank was unaware of that until a security review was undertaken in October 2007.

Paul Sreenan SC, for Mr Wallace, argued all the other measures required by Section 60 of the Companies Act were adhered to and the “oversight” by solicitors in failing to file the statutory declaration within the 21-day period specified by the Act should not lead to the transaction being voided.

The important thing was the shareholders of Cognotec Ltd (CL) had approved the loan transaction and the directors of the company had made the required statutory declaration, he said.

Barclays had in 2006 provided some $12.5 million credit facilities to Cognotec Holdings Ltd, the parent company of the Cognotec group, secured by charges over the assets and undertaking of Cognotec Holdings, Cognotec Ltd and Cognotec Ireland.

The bank claimed, from 2007, the Cognotec group was unable to keep an agreed repayment schedule.

It then appointed Mr Wallace receiver and he began efforts to sell the business.

In proceedings over $10 million of the Barclay’s loans, Mr Justice Brian McGovern yesterday ruled the late filing of the statutory declaration did not mean Mr Wallace’s appointment was invalid.

He accepted evidence Barclays did not have actual notice of the breach of the time requirements for filing the relevant documents in the Companies Office.

Any failure to deliver the statutory declaration within the time only taints the validation procedure and becomes relevant if the bank had actual notice, he ruled.

The judge described as “unusual” the circumstances surrounding the purported holding by directors of Cognotec Ltd of a board meeting in Jerusalem on March 19th last to void the security.

The evidence concerning this meeting was “unsatisfactory and incomplete”, the judge said.

The issues raised by the receiver about the motives of the directors of the company and of Syndicated Investments Ltd, a shareholder in Cognotec, in seeking to void the Barclays loan transaction would be “of serious concern” if established in evidence, he added.