Vol 8 (2011) - Issue 1

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Gray and others v G-T-P Group Limited: Re F2G Realisations Limited (in liquidation) [2010] EWHC 1772 (Ch)

Introduction

The recent decision of Vos J in Gray and others v GT- P Group Limited: Re F2G Realisations Limited (in liquidation) considered whether an English law floating charge was exempt from the registration requirements of s. 395 of the (then applicable) Companies Act 1985 (the '1985 Act') for the reason that it came within the scope of the registration exemptions set out in the Directive on Financial Collateral Arrangements 2002/47/EC (the 'Directive') which was implemented in the UK by the Financial Collateral Arrangements (No. 2) Regulations 2003, SI 2003, 3226 (the 'Financial Collateral Regulations' or 'Regulations').

This case is of importance to practitioners as it is the first English law decision which provides some guidance on the scope of the registration exemptions of the Financial Collateral Regulations, in particular whether an English law floating charge would come within the scope of these registration exemptions.

Background and facts F2G Realisations Limited ('F2G') was a retailer of laminated flooring and G-T-P Group Limited ('GTP') provided payment card related processing services to F2G. Amounts paid by F2G’s customers using store debit cards would be paid into an account held by GTP with the Royal Bank of Scotland. F2G and GTP entered into a declaration of trust dated 22 June 2006 (the 'Declaration of Trust') setting out the terms on which the monies in the account held by GTP (the ‘Trust Account’) were to be dealt with. Pursuant to the Declaration of Trust, GTP, as trustee, would hold the monies in the Trust Account on trust for F2G, as beneficiary. GTP agreed to transfer the monies, at the request of F2G, to F2G and such payments would be made by GTP 'without any withholding, deduction or set-off'. The Declaration of Trust also contained provisions which stated that, upon the occurrence of certain specified events (each a 'Trigger Event'), GTP was entitled to exercise rights of set-off and withdraw from the Trust Account sums which were properly due to it. The Trigger Events included, inter alia, (i) F2G’s failure to comply with its payment obligations in respect of services provided by GTP; and (ii) the insolvency of F2G. Crucially, the Declaration of Trust was not registered as a charge under s. 395 of the 1985 Act.

In September 2006, F2G and GTP entered into a services agreement setting out the terms on which GTP would provide certain trade card services to F2G’s customers (the 'Services Agreement'). The Declaration of Trust governed the treatment of any payments which were to be processed by GTP pursuant to the Services Agreement.

F2G went into administration on 21 July 2008. The administrators of F2G (the 'Administrators') terminated the Services Agreement and sought repayment from GTP of the monies which were standing to the credit of the Trust Account. It appears that it was agreed that a sum of GBP 15,000 plus VAT should be paid by the Administrators to GTP in respect of a termination fee for the termination of the Services Agreement on the basis that the remainder of the monies in the Trust Account would be paid over to the Administrators.

GTP were seeking to exercise their rights of setoff under the Declaration of Trust for the following amounts against the sum to be paid to the Administrators: (i) unpaid sums for operating fees prior to the administration; (ii) three months lost revenue resulting from the termination of the Services Agreement without notice; and (iii) the termination fee referred to above.

On 21 July 2009 the administration of F2G became a liquidation pursuant to Schedule B1 of the Insolvency Act 1986 (as amended). The liquidators made an application to the court seeking first a declaration that the Declaration of Trust is void against the liquidators as an unregistered floating charge and secondly an order for the payment to the liquidators of the sums standing to the credit of the Trust Account.