Re Ladbrokes (Ireland) Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Cregan
• Judgment Date: 17 June 2015
• Neutral Citation: [2015] IEHC 381
• Court: High Court
• Docket Number: [2015 No. 159 COS]
• Date: 17 June 2015

[2015] IEHC 381

THE HIGH COURT

Cregan J.

[2015 No. 159 COS]

IN THE MATTER OF LADBROKES (IRELAND) LIMITED

AND

IN THE MATTER OF LADBROKES LEISURE (IRELAND) LIMITED

AND

DARA PROPERTIES LIMITED

(AS RELATED COMPANIES WITHIN THE MEANING OF SECTION 4 (5) OF THE COMPANIES (AMENDMENT) ACT 1999

AND

IN THE MATTER OF THE COMPANIES (AMENDMENT) ACT 1990 (AS AMENDED) THE 'ACT'

Company – S. 4 (5) of the Companies (Amendment) Act 1999 – Review of decision of examiner – test of reasonableness – Locus standii – S. 532 (9) of the Companies Act 2014

Facts: The applicant sought an order for directing the Examiner of the respondents being the companies to provide the commercial sensitive information to the applicant who was a bona fide potential investor in a bidding process. The respondents and the Examiner contended that the applicant being a prospective bidder had no locus standi to maintain the application as he was not an interested party under s. 532 (9) of the Companies Act 2014.

Mr. Justice Cregan refused to grant an order to the applicant directing the Examiner to provide the requisite information. The Court held that the acts and omissions on behalf of the Examiner appointed for the benefit of the companies would only be challenged on the ground of it being absurd and unreasonable that no prudent man would have thought of doing those. The Court held that the Examiner by withholding the information for maintaining the commercial interests of the companies had acted as per the law and hence, its decisions could not be reviewed merely because that information would have benefited the applicant. The Court observed that the applicant had the locus standi to maintain the application under s. 532 (9) of the Companies Act 2014 as the applicant being an assignee of the rental debt that the companies owed and having paid some amount of the same became the creditor of the Companies and hence assumed the title of an interested party within the ambit of the said section of the Companies Act 2014.

JUDGMENT of Mr. Justice Cregan delivered on the 17th day of June, 2015

Introduction

1 The issue which arises in this application is whether an Examiner is obliged to provide sensitive commercial information to a bona fide potential investor who has been admitted to phase two of a bidding process, where that interested bidder maintains that it needs that commercial information to enable it to make a proper bid or investment proposal, to the Examiner, in respect of the company.

The company in Examinership

2 On 21st April, 2015, the High Court made an order appointing Ken Fennell as interim Examiner of Ladbrokes (Ireland) Ltd, Ladbrokes Leisure (Ireland) Ltd and Dara Properties Ltd. Mr. Fennell's appointment as Examiner was confirmed by order of the High Court dated the 1st May, 2015.

3 The petition states that the companies are members of the Ladbrokes group of companies, which is one of the world's leading online and betting companies and provides both in- store and interactive betting services and a variety of online betting games including roulette, online poker and online bingo. The company employs a total of 840 employees with an average of four to five employees per shop.

4 At para. 8 of the petition, it states that one of the companies has 191 leasehold stores held under 195 leases and that another company seeking Examinership has fifteen leasehold stores held under sixteen leases. In para. 41 of the petition it states that, at present, 196 betting shops are trading under the Ladbrokes name in Ireland. The petition also states at para. 42 that 'The companies operate principally through these betting shops. While an online gambling business is operated in the Irish market using the Ladbrokes brand, this business is operated through the main group website and its revenues and liabilities are processed through another company in the group. The companies do not share in the revenues for the online business nor are they required to fund its liabilities.' It is clear therefore that the betting shops are crucial to the Ladbrokes business model. Indeed, already in this Examinership numerous applications for repudiations of leases have been considered and granted by the court.

5 The petition also states that it is the view of the management of the companies that approximately 60 stores may have to close and that there are 34 stores which are no longer open (where costs continue to be paid by the companies) and that repudiation applications may need to be brought. The companies also believe that the balance of its stores are potentially viable but that the high cost of rents has had a significant effect on the ability of the companies to trade successfully in these stores. The petitioner believes that it will be necessary to negotiate improved lease terms and significant rent reductions with landlords (see paras. 75 to 78 of the petition).

6 The companies in this Examinership had a turnover in 2014 of approximately €415 million. The companies also employ approximately 840 employees and have approximately 200 shops or outlets. This Examinership is therefore, by any measure, an Examinership of some significance.

The Applicant

7 The Applicant, Boylesports, is an interested bidder for the companies. Founded in 1982, Boylesports has developed into a business with a turnover of €1 billion in 2014. It employs more than 1,700 employees across 208 shops. Its growth has been achieved organically and by acquisition. As Mr. Michael Bent the Chief Financial Officer of Boylesports stated in his first affidavit 'Boylesports has a successful record of buying and integrating other businesses, including in recent years Celtic Bookmakers, (where 100 jobs were saved) and William Hills 15 Irish outlets (acquired with the saving of 65 jobs). Boylesports has grown each of the acquired businesses and continues to invest in each of the relevant locations'. Indeed Boylesports say that an acquisition of the companies would be a significant transaction which could not responsibly be undertaken without some level of due diligence of the companies affairs.

Chronology of events

8 One of the complaints made by Boylesports is that 'there has been a notable contrast between the pace of this Examinership generally and the deadlines imposed on bidders'. The chronology of events in this regard is as follows:

- 21st April 2015 - Ken Fennell appointed as interim Examiner.

- 1st May 2015 - Examiner confirmed.

- 10th May 2015 - 19 days after his appointment, Examiner advertises seeking expressions of interest.

- 19th May 2015 - 28 days after his appointment, Examiner issues his process letter formally beginning the bidding process. This letter set a deadline of three days later for receipt of indicative offers.

- 22nd May 2015 - Deadline for receipt of indicative offers. Boylesports submit a substantial indicative offer.

- 27th May 2015 - Five days later, the Examiner responded to indicative offers. The Examiner admits three companies to phase two of the bidding process. These companies are Ladbrokes UK Ltd (the parent company of the companies in the Examinership), Boylesports and a third unnamed company. The Examiner imposed a deadline of Thursday 4th of June, 2015 – eight days later – for the submission of final offers.

- 28th May 2015 - One day into the eight day period the Examiner allows Boylesports access to the data room.

- 29th May 2015 - Boylesports, having reviewed the information in the data room, immediately became aware that none of the key information was available to it. It instructed its solicitors, Ronan Daly Jermyn, to write immediately to Matheson (solicitors for the Examiner) on 29th May, 2015.

- 30th May 2015 - Certain information about litigation involving the companies, together with the petition papers and the independent accountant's report was added to the data room.

- 1st June 2015 - Examiner's solicitors reply to Boylesports solicitors. No real concessions were offered to Boylesports. It was invited to continue its due diligence with a view to submitting a bid by the deadline of 4th June, 2015 and, if needs be, to renew its request for an extension when that deadline was reached.

- 2nd June 2015 - Boylesports issue and serve the current application, made returnable to 3rd June, 2015.

- 3rd June 2015 - Court directions re. exchange of affidavits and legal submissions.

- 12th & 16th June - Hearing of court application.

The investment process

9 Mr. Ken Fennell, the Examiner, stated in his affidavit that following his appointment as Examiner he received a number of expressions of interest with regard to potential investment in the companies. He also stated that the granting of court protection to the companies generated a significant amount of publicity and prompted an initial expression of interest from Boylesports. For completeness, the Examiner on 10th May, 2015 advertised in the Sunday Business Post for expressions of interest in investing in the companies. Mr. Fennell set out the steps he took to structure the investment process. On 19th May, 2015 he sent out the 'process letter,' the confidentiality letter/non disclosure agreement and the information memorandum to all parties who had expressed an interest in investing in the companies. These documents specified the procedure and timing for the progress of their proposals. A preliminary, non- binding, written offer was required to be submitted by 22nd May, 2015 (i.e. three days later).

10 Following the issue of the phase one letter, the Examiner received four offers - three of which were selected to enter phase two of the process. As part of phase two of the process, three parties were invited to submit a final offer no later than 5pm on Thursday 4th June, 2015.

11 Having received four preliminary non binding written offers...