Cisti Gugan Barra Teoranta (in Examinership)

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 21 July 2008
• Neutral Citation: [2008] IEHC 251
• Docket Number: [128 COS/2008]
• Court: High Court
• Date: 21 July 2008

Cisti Gugan Barra Teoranta

IN THE MATTER OF CISTI GUGAN BARRA TEORANTA (IN EXAMINERSHIP)

AND

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2006

[2008] IEHC 251

[128 COS/2008]

THE HIGH COURT

COMPANIES (AMDT) ACT 1990 S18

COMPANIES (AMDT) ACT 1990 S24

COMPANIES (AMDT) ACT 1990 S24(3)

COMPANIES (AMDT) ACT 1990 S25

COMPANIES (AMDT) ACT 1990 S24(4)

COMPANIES (AMDT) ACT 1990 S24(5)

COMPANIES (AMDT) ACT 1990 S24(6)

COMPANIES (AMDT) ACT 1990 S24(4)(c)(ii)

COMPANIES (AMDT) ACT 1990 S24(8)

COMPANIES (AMDT) ACT 1990 S26

COMPANIES (AMDT) ACT 1990 S24(9)

COMPANIES (AMDT) ACT 1990 S5

COMPANIES (AMDT) ACT 1990 S24(7)

JUDGMENT of

Ms. Justice Finlay Geoghegan

delivered the 21stday of July, 2008

1 Cisti Gugan Barra Teoranta ("the Company") presented a petition for the appointment of an Examiner on 1^st April, 2008. Mr. Kieran Wallace was appointed as Examiner ("the Examiner") on 10^th April, 2008, having been so appointed on an interim basis on 3^rd April, 2008. The Examiner presented his report under s. 18 of the Companies (Amendment) Act, 1990 ("the Act"), on 25^th June, 2008, with Proposals for a Scheme of Arrangement which had received substantial support at meetings of creditors and shareholders.

2 The Examiner, in his report, recommended that the court confirm the Proposals for the Scheme of Arrangement in accordance with s. 24 of the Act. In his recommendation to the court, he stated, "I am satisfied that the implementation of the Proposals will facilitate the survival of the Company and the whole of its undertaking as a going concern and that such survival is in the best interests of the Creditors and Members as a whole".

3 The Examiner's report was set down for consideration by the court, pursuant to s. 24 of the Act, on 1^st July, 2008.

4 At the confirmation hearing on 1^st July, 2008, I formed the view that I was then unable to confirm the Proposals by reason of the conditionality of the investment forming part of the Proposals, and adjourned the hearing, with certain directions, until 3^rd July, 2008. At the resumed hearing, I was satisfied to confirm the Proposals subject to certain modifications.

5 During the course of the two hearings, I indicated orally in court the reasons for which I formed the view that I could not confirm the Proposals at the first hearing, the directions which I gave, and the changed circumstances which enabled me confirm the Proposals on 3^rd July, 2008. As the principal issue which arose in this application is similar to one which had previously arisen in another examinership and in respect of which I did not give any recorded judgment, and as it appears to be one which may arise again, I indicated that I would issue a written judgment setting out the reasons already given orally. This is that judgment.

6 The Proposals presented by the Examiner at para. 5.1 state that, "the Company and the Investor haveconditionally [emphasis added] agreed to make the sum specified therein available by way of equity or loan at the discretion of the Investor". It was further provided that a minimum amount would be made available within seven days after the date of confirmation of the Proposals by the court. A minimum amount was to be made available by way of subscription for shares to enable the redemption of the Redeemable Preference Shares in the Company in accordance with the Proposals.

7 The conditionality was that the making of the investment by the Investor was subject to certain pre-conditions. As is normal, it was subject to a pre-condition that the court would confirm the Proposals. No difficulty arises from such a pre-condition. However, the Investor's obligation to invest was also made subject to a number of other pre-conditions expressed to continue until the date upon which investment would be made and after confirmation by the court of the Proposals. One such condition was that there be"no material adverse change in the trading position of the company".

8 The pre-conditions in the Proposals were reflective of conditions contained in an agreement entered into by the Company, the Investor, the Examiner and the ordinary shareholders of the Company on 18^th June, 2008 ("the Investment Agreement"). The Investment Agreement was produced to the court in the course of the first hearing.

9 At the first hearing, I indicated that I did not consider that I should confirm the Proposals whilst the making of the investment remained subject to pre-conditions, other than the confirmation by the court of the Proposals. The reasons for which I took this view are as follows. Section 24 (3) gives the court jurisdiction "as it thinks proper" subject to the provisions of ss. 24 and 25 to "confirm, confirm subject to modifications, or refuse to confirm the proposals".

10 Section 24 (4) then provides:

"The court shall not confirm any proposals,"

(a) unless at least one class of members and one class of creditors whose interests or claims would be impaired by implementation of the proposals have accepted the proposals, or

(b) if the sole or primary purpose of the proposals is the avoidance of payment of tax due, or

(i) the proposals are fair and equitable in relation to any class of members or creditors that has not accepted the proposals and whose interests or claims would be impaired by implementation, and

(ii) the proposals are not unfairly prejudicial to the interests of any interested party.

(c) unless the court is satisfied that-

11 At the initial hearing, I was satisfied of the requirements of paras. (a) and (c) (i) above were met and that para. (b) did not apply. However, the court must also be satisfied that the Proposals are not unfairly prejudicial to the interests of any interested party.

12 In accordance with s. 24 (5) and (6), when the court confirms the Proposals, they become binding on all members affected by the Proposals, on the Company, and also on the creditors and any other person liable for all or any part of the debts of the Company. As is normal, the creditors were each to receive only a percentage of the debts then due by the Company to the creditors. If the court confirms the Proposals, then the debt due by the Company to each creditor is reduced to the amount specified in the Scheme of Arrangement. The Act does not make the Proposals binding on any person such as the Investor whose investment is intended to enable the Company meet its commitments under the Scheme of Arrangement and provide it with working capital so as to facilitate the Company's survival as a going concern.

13 It appeared to me that it was not appropriate that the court should exercise its discretion to confirm Proposals which would have the effect of reducing the liability of the Company to its creditors unless, on such confirmation by the Court, there are binding arrangements in place for the investment or other provision of monies to the Company to enable it meet its obligations under the Scheme of Arrangement, and have the working capital which the Examiner has considered necessary to facilitate the...