Vantive Holdings Ltd -v- Companies Acts,  IEHC 408 (2009)
|Docket Number:||2009 450 COS|
|Party Name:||Vantive Holdings Ltd, Companies Acts|
THE HIGH COURT 2009 No. 450 COSIN THE MATTER OF VANTIVE HOLDINGS AND IN THE MATTER OF VILLEER DEVELOPMENTS AND IN THE MATTER OF PEYTOR DEVELOPMENTS AND IN THE MATTER OF CARRAGH ENTERPRISES LIMITED AND IN THE MATTER OF PARLEZ INTERNATIONAL LIMITED AND IN THE MATTER OF MORSTON INVESTMENTS LIMITED AND IN THE MATTER OF ROYCETON AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009
JUDGMENT of Mr. Justice Cooke delivered on the 24th day of August, 2009
The following are the reasons for the decision of the court on the present application as briefly indicated at the conclusion of the arguments on Friday, 21st August, 2009.
In view of the impression that might be given by the representation on this application of a large number of interested parties, including the major creditors, the employees of the petitioning companies and of other companies in the wider group, together with the vigorous opposition expressed by one of the principal secured creditors to the application, it is important to emphasise the limited purpose of this hearing and the sole issue that is now before the court. This is the adjourned hearing of the application made to the court ex parte on 14th August, 2009 upon the presentation of the petition in accordance with O. 75 A, r. 4 (4) of the Rules of the Superior Courts for directions as to the proceedings to be taken in relation to the petition. In the majority of cases, such an application is dealt with immediately and directions given as to the service and advertising of the petition and the fixing of a date for its hearing. Thus, the only issue to be decided by the court at this point is whether this petition should be given a hearing.
In this case, de Valera J. adjourned the application because it was a second petition and because of the intervention on that occasion of representatives of both a provisional liquidator who had been appointed to the petitioner and to one of the related companies, Morston Investments Limited, and of ACC Bank plc, which is the principal direct secured creditor of the petitioner and Morston and is indirectly a creditor of other companies in the group. ACC Bank indicated its intention to oppose the petition being heard upon the ground, in effect, that its presentation was an abuse of process because the first petition by the same petitioner had been the subject of a considered judgment of the senior judge of the Commercial Court on 31st July, 2009 (Vantive Holdings v. Companies Acts  I.E.H.C. 384), which was subsequently upheld on appeal. The learned High Court judge rejected that first petition upon the ground, in essence, that it failed to meet the statutory test of s. 2 (2) of the Companies (Amendment) Act 1990 (the "Act of 1990"), as amended, by failing to demonstrate that there was a reasonable prospect of survival of the companies and the whole or any part of the undertaking as a going concern. On appeal that decision was affirmed by a unanimous judgment of the Supreme Court given on 11th August, 2009 (In the matter of Vantive Holdings & ors and in the matter of the Companies Acts 1963 - 2006  I.E.S.C. 68). In these circumstances, de Valera J. considered that the circumstances required further examination before a date for the petition could be fixed.
In those judgments much of the background detail is given of the corporate structure of the companies in the wider group, the interdependence of the companies, the amount due to the major secured creditors, and the charges, guarantees and cross-securities held notably by ACC Bank, together with the recent trading difficulties leading to the current serious insolvency and a likely overall deficit in excess of 1 billion. It is not necessary therefore to repeat much of that information here and this statement of the courts' reasons assumes a knowledge of those judgments where the background history and information remains unchanged since 11th August last. In addition, those judgments cite in detail much of the relevant case law concerning the approach of the court to the criteria governing the appointment of an examiner. Insofar as that is relevant to the limited issue now before the court on the present application, that case law too, will not require reiteration or renewed explanation.
In this second petition, the petitioner and the five related companies which were the subject of the first petition are now joined by Royceton, a further unlimited company in the group which is held as to 50% by Vantive and 50% by Stradbally Investment Company. Royceton too is insolvent and, according to the statement of affairs in the statutory report mentioned later in this judgment, will have a deficit of more than 128 million. Royceton appears to be one of the group companies more actively engaged in trading operations and some of those appearing to support the present petition are employees, creditors or subcontractors of that company. According to the statement of affairs, it is owed 126 million by other companies in the group of which it is estimated only 500,000 might be realisable.
As appears from the judgment of the High Court on 31st July, 2009 the first petition was refused by Kelly J. for the primary reason that he found that the statutory report of the independent accountant, Mr. McGrath,under s. 3 (3A) of the Act of 1990 to be inadequate and unconvincing. The learned judge noted that the property valuations upon which Mr. McGrath's opinion of a prospect of survival was postulated were out of date such that his optimism as to the possibility of a scheme of arrangement leading to a "significant surplus" which would then fund future development, bordered on the fanciful having regard in particular to current conditions in the property market.
Furthermore, in a secondary conclusion, Kelly J. indicated that even if some basis had been shown for a reasonable prospect of survival of the companies, he would have been disinclined to exercise the court's discretion in favour of appointing an examiner. He considered the exercise as presented to be somewhat artificial. It appeared to be designed, in his view, to enhance the value of properties to be realised. Furthermore, of the 650 persons mentioned whose employment was threatened, only 100 or thereabouts were direct employees. The exercise appeared to him to be therefore designed to help shareholders, an objective which was outside the intention of the legislation. Although the judgment refers to a three year business plan, this document was not itself made available to the High Court such that Kelly J.'s appraisal of the statutory test was obliged to rely on the limited information furnished through the contents of the accountant's statutory report.
This latter aspect of the presentation of the first petition received particular attention in the appeal before the Supreme Court and is now one of the crucial features of the opposition by ACC Bank to the hearing of this second petition.
Vantive and Morston, two companies at the apex of the group's corporate pyramid do not themselves carry on any direct construction or development trade but act as conduits through which money borrowed from banks is channelled to other trading companies in the group and repayment of which is invariably secured to the lenders by guarantees from the recipients of those funds backed by charges over assets held in those companies. Two key projects and sites vital to any prospect of survival of the group are those at Sheriff Street/Castleforbes and at East Road in Dublin. The former is vested in the related company, Peytor Developments, and the latter in Villeer Developments. A loan of 62 million from ACC Bank to Vantive is secured by the...
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