Re Laragan Developments Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 31 July 2009
• Neutral Citation: [2009] IEHC 390
• Docket Number: [No. 149 COS/2009]
• Court: High Court
• Date: 31 July 2009

Laragan Developments Ltd, In Re

[2009] IEHC 390

IN THE MATTER OF LARAGAN DEVELOPMENTS LIMITED IN EXAMINATION (UNDER THE COMPANIES (AMENDENT) ACT 1990 ) AND IN THE MATTER OF THE COMPANIES ACT 1990 AS AMENDED

[2009] IEHC 390

[No. 149 COS/2009]

THE HIGH COURT

COMPANY LAW

Examinership

Group of companies - Subject company one of group of companies - Scheme of arrangement - Objection by creditors - Unfairness - Lack of disclosure - Deposit creditors - Effect of scheme on deposit creditors -Litigation misconduct -Inaccuracy in independent accountant's report -Personal guarantee - Effect of personal guarantees - Relationship between holding company and subject company not sufficiently âÇÿarms length' -Undertaking - Whether company âÇÿundertaking' for purposes of the act - Whether company could properly be subject of examinership - Whether inaccuracies sufficiently significant to refuse approval of scheme of arrangement -Whether scheme of arrangement fair in all circumstances - Whether concerns of creditors adequately addressed - Re Traffic Group Ltd [2008] 3 IR 253, Re Wogan's (Drogheda) Ltd (Unrep, Costello J, 7/5/1992) and Re Selukwe Ltd (Unrep, Costello J, 20/12/1991) considered - Companies (Amendment) Act 1986 (No 25) s 17 - Companies (Amendment )Act 1990 (No 27) s 2, 18, 24m & 25A - Scheme not approved (2009/149COS - Clarke J - 31/7/2009) [2009] IEHC 390

In Re Laragan Developments Ltd

COMPANIES (AMDT) ACT 1990 S18

COMPANIES (AMDT) ACT 1990 S24

COMPANIES (AMDT) ACT 1986 S17

TRAFFIC GROUP LTD, IN RE 2008 3 IR 253 2008 2 ILRM 1 2007/58/12501 2007 IEHC 445

WOGANS (DROGHEDA) LTD, IN RE UNREP COSTELLO 7.5.1992 1992/9/2889

SELUKWE LTD, IN RE UNREP COSTELLO 20.12.1991 1992/4/1028

COMPANIES (AMDT) ACT 1990 S25A(1)(C)

Mr. Justice Clarke

2 1.1 The company named in the title to these proceedings ("Laragan") successfully petitioned for the protection of this Court under the provisions of the Companies (Amendment) Act, 1990 (as amended) ("the Act") in March of this year. On foot of an initial application, Paul McCann ("the Examiner") was appointed as an interim Examiner on the 27^th March, 2009. Later on the 22^nd April, 2009, the appointment of the Examiner as such was confirmed by this Court.

3 1.2 In accordance with s. 18 of the Act, the Examiner prepared proposals for a Scheme of Arrangement which, having been the subject of the various meetings of members and creditors required by the provisions of the Act, was presented to the Court. The Examiner's report in that regard, which had annexed to it a copy of the relevant proposals, was dated the 26^th June, 2009.

4 1.3 Thereafter, having presented his report, under s. 24 of the Act, to the court, I fixed Tuesday the 7^th July for the conduct of a hearing in relation to whether the Scheme of Arrangement should be approved with or without modifications. I should, at this stage, draw attention to the fact that counsel on behalf of the Examiner, quite properly and most helpfully, drew my attention, at the time when the report was initially presented, to the fact that there had been a significant amount of opposition to the scheme voiced by creditors, at at least some of the creditor meetings conducted to consider the scheme. Amongst the points which I was told had been raised were concerns based on the relatively short period of time which the creditors had had, in their view, available to them to consider the scheme. With that in mind, counsel suggested that a reasonably lengthy period might be provided prior to the commencement of the confirmation hearing. It was for that reason that what is, perhaps, an unusually long period elapsed between the presentation by the Examiner of the s. 18 report containing the proposed Scheme of Arrangement to the court and the commencement of the substantive hearing under s. 24 in respect of confirmation of that scheme.

5 1.4 In addition, I gave directions at the time when the s. 18 report was presented to me, that the Examiner should inform all relevant creditors that any creditor wishing to make objection to the confirmation of the scheme should submit such objection in writing to the solicitors for the Examiner not later than Thursday, the 2^nd July, 2009. My intention in giving that direction was to attempt to ensure that there would be some structure to the confirmation hearing. I was anxious that there would, to the greatest extent possible, be advance notice of the sort of issues which were likely to be raised.

6 1.5 On foot of that direction the Examiner gave the required notice and received a significant volume of correspondence from various creditors. A copy of all relevant correspondence was made available to me in the course of the hearing, together with certain of the records of the company which appeared to the Examiner to be relevant to the respective issues raised by the creditors concerned.

7 1.6 Be that as it may, when the confirmation hearing (under s. 24 of the Act) commenced on the 7^th July, 2009, a significant number of creditors appeared for the purposes of objecting to the confirmation of the scheme, making other complaints about the form of the scheme, and, in some cases, for the purposes of seeking additional information. Some of those who appeared were represented by solicitors (and in some cases counsel). Others appeared themselves. A wide variety of issues were canvassed. It will be necessary to refer to the more important of the points raised in due course.

8 1.7 The hearing of the confirmation application continued for four days. At the close of the hearing, I indicated that I would reflect on the matter and proposed to rule on it in a summary way on the following Tuesday, that is the 14^th July. However, by that day I had not reached firm conclusions on the issues raised and postponed the delivery of my ruling until the 16^th July, to afford me a greater opportunity to consider some of the issues raised.

9 1.8 On the 16^th July, I gave a brief ruling during which I set out the principal reasons why I was persuaded that it was inappropriate to approve and confirm the Scheme of Arrangement. I indicated on that occasion that I would, subsequently, deliver a full reasoned judgment setting out the basis for having reached the conclusions concerned. This judgment is directed to setting out those reasons.

10 1.9 In that context it is appropriate to turn firstly to a brief description of Laragan.

2 2.1 Laragan is a wholly owned subsidiary of Laragan (Holdings) Ltd which in turn is owned by a Mr. Alan Hanly ("Mr. Hanly"), as to 74.33%, and by a Mr. Joseph Albert Hanly, as to the balance. Thus Mr. Hanly controls both Laragan (Holdings) Ltd and Laragan. Mr. Hanly also controls as significant number of other companies which in general terms seem to have been engaged in construction, hotel, and other similar ventures.

3 2.2 It would appear that, during the course of its history, Laragan was never engaged in what might loosely be called independent business. Rather Laragan was employed as a construction company for the purposes of carrying out building works in relation to a variety of developments being conducted either by Mr. Hanly personally, or by other companies under Mr. Hanly's control. At the time when Laragan went into examinership it was involved in three main projects. Firstly, Laragan was involved in a development of houses and apartments at Carrickmines Green in County Dublin ("Carrickmines"). Secondly, Laragan was involved in a housing development at Milner's Square, Santry, Dublin ("Milner's Square") and thirdly, Laragan was involved in a hotel and golf resort at Kilronan Castle in Roscommon ("Kilronan Castle").

4 2.3 Separate bankers had provided funding in respect of each of the three developments concerned. So far as Carrickmines was concerned, the relevant property was owned by Mr. Hanly personally. Bankers to that project were Allied Irish Bank ("AIB"). AIB had funded the project by lending money on the security of the site concerned to Mr. Hanly personally (Mr. Hanly being, of course, the owner of the site). Mr. Hanly then funded Laragan for the purposes of Laragan constructing the development on the site for Mr. Hanly. It will be necessary to explore that relationship in more detail in due course.

5 2.4 A similar arrangement was in place in respect of Milner's Square, although in that case the relevant bankers were Bank of Scotland (Ireland) Limited ("BOSI").

6 2.5 The position in respect of Kilronan Castle was different. It would appear that Kilronan Castle was owned by a number of persons who are described in the s. 18 report as "tax investors". The bankers to that project were Anglo Irish Bank ("Anglo"). Unlike AIB and BOSI (who, as has been pointed out, had lent monies to Mr. Hanly as the owner of the sites in respect of which they were providing funding), Anglo had lent money directly to Laragan.

7 2.6 There is no doubt but that Laragan had become hopelessly insolvent. Indeed it is important to note at this stage that, in the days immediately prior to the application to me to appoint an interim examiner, Laragan was the subject of a winding up petition to this Court which came on for hearing before Laffoy J.. In circumstances which it will be necessary to explore in a little more detail, it would appear that affidavit evidence was filed in respect of that winding up petition, by a senior official of Laragan, which suggested that Laragan was solvent. It would also appear that at the relevant time, Laragan was already considering making an application to be placed under the protection of the court and that the relevant documentation in relation to such an application was under preparation. It is, of course, a pre-requisite to the appointment of an Examiner and the placing of a company under the protection of the court, that the company concerned...