Re McInerney Homes Ltd and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 17 February 2011
• Neutral Citation: [2011] IEHC 61
• Court: High Court
• Date: 17 February 2011

[2011] IEHC 61

THE HIGH COURT

[No. 475 COS/2010]

McInerney Homes Ltd & Ors, In Re

IN THE MATTER OF McINERNEY HOMES LIMITED IN EXAMINATION (UNDER THE COMPANIES (AMENDMENT) ACT 1990 )

AND,

IN THE MATTER OF McINERNEY HOLDINGS PUBLIC LIMITED COMPANY IN EXAMINATION (UNDER THE COMPANIES (AMENDMENT) ACT 1990 )

AND,

IN THE MATTER OF McINERNEY CONSTRUCTION (HOLDINGS) LIMITED IN EXAMINATION (UNDER THE COMPANIES (AMENDMENT) ACT 1990 )

AND,

IN THE MATTER OF McINERNEY CONTRACTING LIMITED IN EXAMINATION (UNDER THE COMPANIES (AMENDMENT) ACT 1990 )

AND

IN THE MATTER OF McINERNEY CONTRACTING DUBLIN LIMITED IN EXAMINATION (UNDER THE COMPANIES (AMENDMENT) ACT 1990 )

AND,

IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

MCINERNEY HOMES LTD & ORS, IN RE UNREP CLARKE 24.9.2010 2010 IEHC 340

MCINERNEY HOMES LTD & ORS, IN RE UNREP CLARKE 10.1.2011 2011 IEHC 4

MCINERNEY HOMES LTD & ORS, IN RE UNREP CLARKE 21.1.2011 2011 IEHC 25

HANAFIN v MIN FOR JUSTICE 1996 2 IR 321

MCKENNA v AN TAOISEACH (NO.2) 1995 2 IR 10

TRAFFIC GROUP, IN RE 2008 3 IR 253

DELLWAY INVESTMENT LTD & ORS v NATIONAL ASSET MANAGEMENT AGENCY (NAMA) & ORS UNREP 1.11.2010 2010 IEHC 364

DELLWAY INVESTMENT LTD & ORS v NATIONAL ASSET MANAGEMENT AGENCY (NAMA) & ORS UNREP 3.2.2011 2011 IESC 4

COMPANY LAW

Examinership

Scheme of arrangement - Refusal of confirmation - Revisiting - New information -Approach on revisiting judgment - Whether new materials led to different conclusion on existence of unfair prejudice - Prospect of loans going into NAMA - Likelihood of loans going into NAMA - Consequences of loans not being acquired by NAMA - Position of participating institutions - Whether participating institutions would do better in NAMA valuation than under proposed scheme of arrangement - Position of non-participating institution - Whether non-participating institution would do better than under proposed scheme of arrangement - Whether scheme of arrangement unfairly prejudicial -- Re McInerney Homes [2010] IEHC 340, (Unrep, Clarke J, 24/9/2010); Re McInerney Homes [2011] IEHC 4, (Unrep, Clarke J, 10/1/2011); Re McInerney Homes [2011] IEHC 25, (Unrep, Clarke J, 21/1/2011); Hanafin v Minister for Environment [1996] 2 IR 321; McKenna v An Taoiseach (No 2) [1995] 2 IR 10; Re Traffic Group [2008] 2 IR 253; Dellway v National Asset Management Agency [2010] IEHC 364, (Unrep, Divisional Court, 1/11/2010) and Dellway v NAMA [2011] IESC 4, (Unrep, SC, 3/2/2011) considered - Confirmation refused (201/475COS - Clarke J - 17/2/2011) [2011] IEHC 61

Re McInerney Homes

Facts This is the fourth written judgment of this court arising out of these proceedings. In a judgment from 24/09/10 an examiner was appointed by the court. On 10/01/11 the proposed scheme of arrangement was not confirmed on the basis that it was unfairly prejudicial to the Banking Syndicate. Subsequently on 28/01/11 this court reopened matters on the limited basis of the possibility of certain loans going into NAMA. The only issue in this case was the extent to which a view as to the possibility or probability of the Bank of Ireland and Anglo Irish loans going into NAMA might affect an assessment of whether it could be said that the Banking Syndicate (comprising those two banks and KBC) was unfairly prejudiced. If the aforementioned loans went into NAMA the Banking Syndicate would then consist of NAMA and KBC with KBC having an approximate 26% share in the companies' liabilities. Consequently, subsidiary issues arose regarding whether NAMA was likely to proceed with the long term receivership model proposed by the Banking Syndicate and also as to the position of KBC in the event that NAMA indicated it did not wish to proceed with that long term receivership.

Held by Clarke J. in refusing to confirm the proposed scheme of arrangement: That the Court ought to be careful not to allow either party to re-litigate matters which had already been fully heard and determined. The only matter it was proper for this Court to revisit was the NAMA related matter based on the suggestion that there was now evidence of a likelihood of the loans going into NAMA. For the purposes of these proceedings, the court had to take the Banking Syndicate's position on the long term receivership model as being the case. The Banking Syndicate had, in previous proceedings produced a prima facie case that the receivership model would achieve results approximating to a current value of €50,000,000. It was appropriate to conduct an assessment of the issues on the basis that there was a significant degree of likelihood that the relevant loans would be acquired by NAMA, because if NAMA chose not to acquire those loans then the prejudice to the Banking Syndicate would be exactly the same as that which led the court to hold (in the confirmation judgment) that the scheme of arrangement was unfairly prejudicial. Unfortunately, NAMA failed to give any indication as to what course of action it proposed to adopt in the event that the loans were acquired by it. On that basis and having regard to the assessment regarding the proposed long term receivership contained within the confirmation judgment, the court had to conclude that NAMA was likely to view the long term receivership model as being more economically valuable than a short or medium term sale of the companies properties. There was nothing in the new materials to change the court's view that KBC was unfairly prejudiced by the proposed scheme of arrangement.

Reporter: L.O'S.

1 JUDGMENT of Mr. Justice Clarke delivered the 17th February, 2011

1. Introduction

2 2 1.1 This examinership process has been one of the most hard fought in recent times. As evidence of that fact it is only necessary to note that this is the fourth written judgment which I have had to deliver during the course of the process. In addition, there were a number of oral rulings. Terms are used in this judgment with the same meaning as in the previous judgments.

3 3 1.2 When McInerney first sought the protection of the court by the appointment of an examiner, that application was strongly resisted by the Banking Syndicate. For reasons set out in a judgment delivered on the 24 ^th September, 2010, Re McInerney Homes and the Companies Acts [2010] IEHC 340 ("the appointment judgment"), I was persuaded that it was appropriate to appoint an examiner. However, I took the unusual step of requesting the examiner to report back at an early stage on certain questions which seemed to me to be important for the purposes of deciding whether there was, in truth, any realistic prospect of an acceptable scheme of arrangement being brought forward for the rescue of McInerney. Arising from that, and subsequent, interim reports of the examiner a number of further contested hearings took place at which the Banking Syndicate opposed a continuation of the examinership. However, it seemed to me, for reasons which I addressed in oral rulings given on each such occasion, that it was appropriate to allow the examinership to continue as it seemed to me that there continued to be a realistic possibility of the examiner being able to produce a scheme which might, arguably, be capable of confirmation.

4 4 1.3 In passing I should note one matter concerning one of the interim rulings to which I have referred. I did note, in the course of one such ruling, that I was not persuaded that anything had changed sufficiently so as to lead me to discontinue the examinership. I have noted that some commentators have suggested that it might be inferred from those comments that the onus had shifted to those opposing examinership (in this case the Banking Syndicate) to establish that there was not a prospect of survival rather than the traditional jurisprudence which makes it clear that it is for a company or other petitioner seeking examinership to establish that the relevant company or companies has such a prospect of survival. I should simply note that no such change in the jurisprudence was applied. The reason for the comments to which I have referred stemmed from my view that the onus of establishing a reasonable prospect of survival which rested on McInerney at the initial appointment hearing had been discharged. An examiner had been appointed. In those circumstances it seemed to me that it would only be appropriate to bring the examinership to an early end if it became clear that the examinership could not be successful. It was in the unusual circumstances of this examinership, where I was called on to review the continuation of the examinership during its course, that it seemed to me to be appropriate to continue with the examinership unless it had been shown that matters had changed sufficiently to allow a conclusion to be reached to the effect that the examinership would not succeed.

5 5 1.4 Be that as it may, the examiner ultimately presented his proposals in the form of a scheme of arrangement. The Banking Syndicate opposed the confirmation of that scheme. For reasons set out in a judgment delivered on the 10 ^th January, 2011, Re McInerney Homes and the Companies Acts [2011] IEHC 4 ("the confirmation judgment"), I was persuaded that the scheme of arrangement proposed was unfairly prejudicial to the Banking Syndicate and refused to confirm the scheme on that basis. The matter was put in some four days later for the purposes of making orders (including questions which were anticipated as possibly arising in the event that McInerney should wish to appeal). However, when the matter came back before the court counsel for McInerney invited me to revisit the confirmation judgment on the basis of what was said to be new information. For the reasons set out in a further as yet unreported judgment delivered on the 28 ^th January, 2011, Re McInerney Homes and the Companies Acts (Unreported, High Court, Clarke J., 28 ^th...