Sammon Contracting Ireland Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice Allen |
| Judgment Date | 30 March 2020 |
| Neutral Citation | [2020] IEHC 173 |
| Docket Number | [2018 No. 137 COS] |
| Court | High Court |
| Date | 30 March 2020 |
IN THE MATTER OF SAMMON CONTRACTING IRELAND LIMITED
AND IN THE MATTER OF SAMMON CONTRACTING GROUP LIMITED
AND IN THE MATTER OF MICHEÁL SAMMON WOODCRAFT LIMITED
AND IN THE MATTER OF THE COMPANIES ACT, 2014
[2020] IEHC 173
Allen J.
[2018 No. 137 COS]
THE HIGH COURT
Remuneration – Outlay – Legal costs – Applicant seeking the approval and payment of the remuneration and outlay and legal costs of an examiner – Whether the evidence supported the claims
Facts: Mr McAteer, by notice of motion issued on 17th December, 2018 and originally returnable for 28th January, 2019, applied for orders pursuant to s. 554 of the Companies Act 2014 determining the remuneration and outlay of the examiner of Sammon Construction Ireland Ltd (SCIL) in the amount of €153,750 and of Micheál Sammon Woodcraft Ltd (MSWL) in the amount of €36,900; and measuring the costs of the solicitors for the examiner of SCIL at a total of €91,922.97, inclusive of VAT and outlays, and of MSWL at €12,300. The notice of motion asked that the official liquidator be at liberty to retain and pay over the sums claimed for remuneration, outlay and costs, and the s. 529 expenses, as and when funds became available. In anticipation of an issue as to priority, the motion asked for a determination of the priority in which the liabilities were to be paid. The application was served on the official liquidator of the companies and on Randelswood Holdings Ltd as the creditor which would be immediately affected by the examiner’s claims. It was resisted by Randelswood on a number of grounds.
Held by the High Court (Allen J) that s. 554 clearly distinguishes between the expenses incurred by an examiner, on the one hand, and liabilities incurred by the company which, if certified, are to be treated as expenses properly incurred by the examiner, on the other. He held that the remuneration, costs and expenses of the applicant were to be paid in priority to the claim of the notice party in respect of liabilities incurred by the companies during the period of protection and certified by the examiner pursuant to s. 529. He held that the notice party’s complaint that the examinerships were unnecessarily prolonged had not been made out. He held that, in the circumstances of the case, the fact that the non-trading parent company was brought under the protection of the court at the same time as the trading subsidiaries did not add to the work and expense of the examinerships and it was not necessary or appropriate that any part of the work should be apportioned to the parent company. He held that the onus was squarely on the applicant as a fiduciary to justify his claim by reference to the extent of the work done and the nature, complexity and value of that work to the companies, from whose assets his remuneration, costs and expenses were to be paid; the solicitors may not be fiduciaries, but they were nevertheless also required to justify their claim for fees. He did not believe that the information which had been put before the court was sufficient; the summaries which had been prepared showed generally the nature of the work the subject of the claims, but it was not possible to discern the necessity, or value of much of that work. Specifically, he found that the summaries did not demonstrate that a good deal of the work was related to the examinership. He was not satisfied that the evidence supported the claims in full, but he would allow the applicant an opportunity to put before the court such further evidence, if any, as he wished.
Allen J held that if it was thought that the evidence which was before the court was sufficient to justify the claims in full elsewhere and the applicant was satisfied to nail his colours to the mast, he would rule on the claims by reference to the evidence which he had. He would invite the solicitors for the applicant to indicate to his registrar and to the solicitors for Randelswood, by e-mail, within two weeks, whether they wished to file further evidence and, if so, the time within which that was proposed to be done. If and when that was done, he would invite the solicitors for Randelswood to indicate a time within which they proposed to respond. He held that both parties would have liberty to apply in the same manner.
Judgment approved.
This is an application pursuant to s. 554 of the Companies Act, 2014 for the approval and payment of the remuneration and outlay and legal costs of an examiner. The motion also raises an issue as to the relative priority of the examiner's remuneration, outlay and costs, and liabilities of the companies which were certified by the examiner in accordance with s. 529 of the Act of 2014.
Micheál Sammon Woodcraft Limited (“ MSWL”) was incorporated on 29th July, 1997 and carried on a manufacturing business in the construction industry.
Sammon Construction Ireland Limited (“ SCIL”) was incorporated on 11th August, 2009 and carried on the business of building contractor. Sammon Contracting Group Limited (“ SCGL”) was incorporated on 21st July, 2009 and became the parent company of MSWL and SCIL.
For a good number of years the businesses prospered. By 2018 SCIL and MSWL, between them, had about 200 employees. SCIL had a number of valuable contracts, notably a contract from Inspired Spaces (Ireland) Limited, which was a joint venture between a large U.K. construction company, Carillion plc, and a Netherlands infrastructure fund called DIFCO, for the construction of five schools and an institute of further education, called the SB 5 contract.
The SB 5 contract was central to the business of SCIL. The business of MSWL was to supply SCIL. SCGL was the holding company for SCIL and MSWL. It did not trade and had no employees.
In January, 2018 Carillion plc went into liquidation owing the Sammon Group companies €8 million, which it could not pay. SCIL tried to keep the work going on the SB 5 sites but failed.
On 5th April, 2018 the directors of SCIL, SCGL and MSWL presented a petition to the High Court for the appointment of an examiner over the three companies. By order of that date the companies were granted court protection and Mr. Michael McAteer of Grant Thornton was appointed interim examiner.
The petition for the appointment of an examiner was based on an independent expert's report of Mr. Thomas McDonald of JPA Brenson Lawlor who expressed the view that, subject to a number of conditions, the companies had a reasonable prospect of survival as a going concern. Those conditions included the availability of funding from a third party funder to fund the companies during the period of the examinership, and material achievement of projected cash flows during the period of protection of up to 100 days. A company called Randelswood Holdings Limited (“ Randelswood”) which is associated with a property developer called McGrath Group, was interested in investing in the companies and had provided a letter of comfort confirming support of a total of €2.15 million: €1.85 million for SCIL and €300,000 for MSWL. The cash flows projected that this funding would be drawn down in the first 50 days or so of the period of protection.
The petition which was presented on 5th April, 2018 was made returnable for 16th April, 2018. On 13th April, 2018 Mr. McAteer wrote an interim examiner's report for the court, summarising the work he had done to date, giving his initial assessment of the companies' prospects and his opinion on the prospects of survival. Mr. McAteer reported that in his opinion the companies had a reasonable prospect of survival subject, inter alia, to the continued support of employers and key sub-contractors and the receipt of funds in line with the projected cash flows. By then, he had issued s. 529 certificates for borrowings from Randelswood by SCIL of €525,000, and by MSWL of €105,000.
On 16th April, 2018 the court approved the appointment of Mr. McAteer as examiner.
On 8th May, 2018 Mr. McAteer presented to the High Court his examiner's report dated 3rd May, 2018 in which he reprised the circumstances in which he had come to be appointed and summarised the position in relation to the several contracts which had been on hand at the time of the independent expert's report. The completion of the SB 5 contracts had been put out to tender by the employer and while SCIL had not directly tendered, it had an agreement with one of the tenderers that if the contract was awarded to it, the work would be subcontracted to SCIL.
By the time of the examiner's report some of the SCIL's contracts had been terminated by the employers. The termination of those contracts had given rise to material change in the cash flows and Mr. McAteer duly noted that in his report. The terminations, however, were not expected to affect the companies' prospects of survival. Mr. McAteer continued to hope that a scheme of arrangement could be formulated, put to, and agreed by the creditors. In the case of each of SCIL and MSWL the report noted that the McGrath Group was reviewing its position with regard to additional funding.
Throughout May, 2018 the examiner continued to engage with potential investors.
One of the key elements in the companies' prospects of survival, and one of the conditions identified in the independent expert's report, was the ability of SCIL to secure the remaining work on the SB 5 contracts, and this was the focus of much of Mr. McAteer's work. However, there were repeated delays in the award of the contract for the completion of the work. On 31st May, 2018 the Dutch infrastructure fund, DIFCO, informed Mr. McAteer that it could not confirm when a decision would be made on the award of the contract and on the following day the principal potential investor in the companies, BAM, informed Mr. McAteer that its interest was now limited...
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