New Look Retailers (Ireland) Ltd v The Companies Act, 2014

• Jurisdiction: Ireland
• Judge: Mr. Justice Denis McDonald
• Judgment Date: 14 October 2020
• Neutral Citation: [2020] IEHC 514
• Docket Number: [2020 No. 272 COS]
• Court: High Court
• Date: 14 October 2020

IN THE MATTER OF NEW LOOK RETAILERS (IRELAND) LTD AND IN THE MATTER OF THE COMPANIES ACT, 2014

[2020] IEHC 514

Denis McDonald

[2020 No. 272 COS]

THE HIGH COURT

Appointment of an examiner – Jurisdiction – Companies Act 2014 s. 509 – Company seeking the protection of the High Court under Part 10 of the Companies Act 2014 – Whether the appointment of an examiner was necessary

Facts: New Look Retailers (Ireland) Ltd (the Company), by petition presented on 28th August, 2020, sought the protection of the High Court under Part 10 of the Companies Act 2014. The following parties opposed the petition: (a) BVK Elektra 2 Liffey Phase 1 ICAV, the landlord of the unit occupied by the Company at Liffey Valley Shopping Centre, Clondalkin, Dublin 22; (b) INT INV Limited Partnership I, the landlord of the unit occupied by the Company at Fairgreen Shopping Centre, Mullingar, County Westmeath and also landlord of the unit occupied by the Company at CastleWest Shopping Centre, Ballincollig, County Cork; and (c) Davy Target Investments, the landlord of the unit occupied by the Company at Navan Town Centre, County Meath. The hearing of the petition took place over two days commencing on 29th September, 2020. There were a number of issues debated at that hearing. However, the principal focus of the debate was on two issues. In the first place, there was disagreement between the parties as to whether the Company could be said to satisfy the statutory test set out in s. 509 of the 2014 Act as to inability to pay debts. The second issue centred on the discretion of the court. Counsel for the opposing landlords argued, on a number of grounds, that, even if the court concluded that the statutory test for inability to pay debts was satisfied, the petition should nonetheless be dismissed in the exercise of the court’s discretion under s. 509.

Held by McDonald J that it was entirely premature to consider the appointment of an examiner to the Company. He found that the Company had failed to demonstrate that the appointment of an examiner was necessary. He was of the view that it was entirely inappropriate that the s. 509 jurisdiction should be invoked when there was an alternative and obvious route available to the Company to seek to deal with its landlords, namely negotiation.

McDonald J held that, in the exercise of the court’s discretion under s. 509, he would refuse to accede to the petition.

Petition dismissed.

JUDGMENT of Mr. Justice Denis McDonald delivered on 14th October, 2020

Introduction

1 In these proceedings New Look Retailers (Ireland) Ltd (“ the Company”) has, by petition presented on 28th August, 2020, sought the protection of the court under Part 10 of the Companies Act, 2014 ( “the 2014 Act”). On the day the petition was presented, an application was made on an ex parte basis to Barrett J. for the appointment of an Interim Examiner. By his order made on that date, Barrett J. acceded to the appointment of Mr. Ken Fennell of Deloitte as Interim Examiner of the Company and he fixed 16th September, 2020 as the hearing date for the petition. By the same order, Barrett J. directed that the Revenue Commissioners and a number of landlords of properties occupied by the Company should be served with the proceedings. Subsequently, on 16th September, 2020 the petition was listed for hearing before me. On that occasion, I was satisfied that all of the directions given by Barrett J. had been complied with. I was also informed that the following parties were opposing the petition:

(a) BVK Elektra 2 Liffey Phase 1 ICAV, the landlord of the unit occupied by the Company at Liffey Valley Shopping Centre, Clondalkin, Dublin 22;

(b) INT INV Limited Partnership I, the landlord of the unit occupied by the Company at Fairgreen Shopping Centre, Mullingar, County Westmeath and also landlord of the unit occupied by the Company at CastleWest Shopping Centre, Ballincollig, County Cork; and

(c) Davy Target Investments, the landlord of the unit occupied by the Company at Navan Town Centre, County Meath.

2 On 16th September 2020, I was informed that the parties had agreed that the hearing of the petition should be adjourned to 29th September, 2020 in order to allow the exchange of further affidavits and written submissions to take place. In those circumstances, I made an order continuing the appointment of the Interim Examiner and the protection of the Court up to and including 29th September, 2020 and I gave directions for the delivery of affidavits and submissions.

3 The hearing of the petition subsequently took place over two days commencing on 29th September, 2020. There were a number of issues debated at that hearing. However, the principal focus of the debate was on two issues. In the first place, there was disagreement between the parties as to whether the Company could be said to satisfy the statutory test set out in s. 509 of the 2014 Act as to inability to pay debts. The second issue centred on the discretion of the court, Counsel for the opposing landlords argued, on a number of grounds, that, even if the court concluded that the statutory test for inability to pay debts was satisfied, the petition should nonetheless be dismissed in the exercise of the court's discretion under s. 509.

4 In addition, for the reasons explained below, I asked the parties to address me on the evidence in relation to where the centre of main interests of the Company lies. Having regard to the obligations placed on the court by Article 4 of the EU Recast Insolvency Regulation (Regulation (EU) 2015/848) ( “the Regulation”) it is incumbent on me to address, as a preliminary issue, whether the court has jurisdiction pursuant to Article 3 of the Regulation and, if satisfied that the court has such jurisdiction, to specify the grounds on which the jurisdiction of the court is based. If satisfied that the court has jurisdiction under Article 3, I will then address whether this is a case in which, in accordance with the provisions of Part 10 of the 2014 Act, it would be appropriate for the court to appoint an examiner to the Company. In undertaking that inquiry, I must first of all address whether the statutory conditions for the appointment of an examiner are met. If I am satisfied that the statutory conditions are met in this case, I must then consider any discretionary factors that arise.

Background

5 Before attempting to address these issues, it may be helpful, at this point, to briefly describe the Company and the nature of its business.

6 According to the evidence before the court, the Company is part of a UK based group comprising New Look Retail Holdings Ltd ( “the parent”) and its subsidiaries of which the Company is one. The group first began trading in the United Kingdom in 1969. The group expanded into Ireland in 2003 when the Company was incorporated on 20th August, 2003. The first New Look store was opened in Dún Laoghaire, County Dublin. It currently operates 27 stores in Ireland all of which are held under long leases. There are stores in Counties Donegal, Galway, Mayo, Wicklow, Waterford, Wexford, Westmeath, Meath, Kerry, Kildare, Dublin, Carlow, Tipperary, Cork, and Limerick. All of the outlets trade under the brand name “New Look” which is owned by another group company namely New Look Ltd. Although the retail outlets once also stocked menswear, the Company now trades exclusively in women's fashion with part of its business made up of concessions operated in-store offering a range of products including women's fashions, homeware and accessories on the basis of a commission rate paid by the relevant concession to the Company.

7 The Company employs a total of 475 employees with 431 of these employed on a part time basis and 44 employed on a full-time basis. The board of the Company comprises four members, two of whom are based in England and two in Ireland. The Company's registered office is at 3 Burlington Road, Dublin 2.

8 The affidavit evidence before the court describes the business model of the Company. While the Company carries out all of the in-store retail operations in Ireland, it relies on the parent for the provision of significant services including property management, financial control, distribution and warehousing logistics, support and development of computer systems, marketing and brand support and customer relations. In addition, all of its stock (other than concession stock) is supplied by the parent under the New Look brand. The Company does not benefit from any website sales as the website newlook.com is owned and managed by the parent.

9 The petition discloses that the parent has had its own financial difficulties. On 21st March, 2018, the creditors of the parent approved a creditor's voluntary arrangement ( “CVA”) under the Insolvency Act 1986 (U.K.) in the United Kingdom which was aimed at reducing the extent of its store portfolio and correcting what is described in the petition as “the over-rented (i.e. being locked into rents that were higher than market rent) position in which many of the UK stores found themselves”. Subsequently, in May 2019, the group underwent a restructuring in which the shares of New Look Ltd were sold to New Look Bonds Ltd, a wholly owned subsidiary of the parent. Ownership of the parent was acquired by certain of the group's bondholders. The petition states that the effect of the restructuring was to remove approximately £1 billion of liabilities from the group's balance sheet. Notwithstanding these restructurings, a further CVA was proposed in respect of the parent on 26th August, 2020 (which was two days prior to the presentation of the petition in these proceedings). As discussed further below, the CVA has subsequently been approved by the creditors of the parent.

The case made in the petition for the appointment of an Examiner

10 Insofar as the Company is concerned, the petition explained that, while the Company had made...