Re Mount Wolseley Hotel and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Keane
• Judgment Date: 29 April 2014
• Neutral Citation: [2014] IEHC 253
• Court: High Court
• Date: 29 April 2014

[2014] IEHC 253

THE HIGH COURT

[No. 189 COS/2014

Mount Wolseley Hotel Golf & Country Club & Ors, In re

IN THE MATTER OF MOUNT WOLSELEY HOTEL, GOLF AND COUNTRY CLUB

AND IN THE MATTER OF THE COMPANIES ACTS 1963 -2009

AND IN THE MATTER OF LISMARD PROPERTIES AND IN THE MATTER OF THE COMPANIES ACTS 1963 -2009

AND IN THE MATTER OF LISMARD ENTERPRISES AND IN THE MATTER OF THE COMPANIES ACTS 1963 -2009

(AS RELATED COMPANIES WITH THE MEANING OF SECTION 4(5) OF THE COMPANIES (AMENDMENT) ACT 1990 )

COMPANIES (AMDT) ACT 1990 S2

COMPANIES (AMDT) ACT 1990 S4

COMPANIES (AMDT) ACT 1990 S4(5)(E)

COMPANIES (AMDT) ACT 1990 S3

COMPANIES (AMDT) ACT 1990 S5(2)

COMPANIES (AMDT) ACT 1990 S2(2)

TUSKAR RESOURCES PLC, IN RE 2001 1 IR 668 2001/24/6394

GALLIUM LTD T/A FIRST EQUITY GROUP, IN RE 2009 2 ILRM 11 2009/22/5449 2009 IESC 8

COMPANIES ACT 1990 S26

COMPANIES (AMDT) ACT 1990 S24

VANTIVE HOLDINGS & ORS, IN RE 2010 2 ILRM 156 2009/57/14475 2009 IESC 68

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

MCSWEENEY DISPENSERS 1 LTD & ORS, IN RE UNREP CLARKE 21.12.2011 2011/33/9142 2011 IEHC 494

SLYNE PROPERTIES LTD & ORS, IN RE UNREP MCGOVERN 11.2.2010 2010/47/11941 2010 IEHC 37

COMPANIES (AMDT) ACT 1990 S18

Company law – Debt repayment– Appointment of examiner – Petitioners seeking the appointment of an examiner to companies – Whether companies have a reasonable prospect of survival as a going concern

Facts: The petitioners, Mount Wolseley Hotel Golf and Country Club (MW), Lismard Properties and Lismard Enterprises are unlimited companies. The current directors are three members of the Morrissey family. The hotel business was developed with finance provided by the Bank of Ireland. That borrowing was the subject of cross-guarantees by the other two companies. Their outstanding debt to the Bank is acknowledged to be unsustainable. The Bank served 24 hour repayment demands, appointing a receiver over the companies” assets. MW petitioned for the appointment, pursuant to s.2 of the Companies (Amendment) Act 1990, of an Examiner to MW and to Lismard Properties and Lismard Enterprises as related companies under s.4. The Bank, as the companies” largest creditor, opposes the petition on the grounds that there is insufficient evidence before the High Court to allow it to be satisfied that the companies have a reasonable prospect of survival as a going concern, that the petition has been presented at the instigation of the Companies” shareholders with the principal aim of protecting their shareholding and, for that reason, the Court should look upon it with disfavour, and that the key purpose underpinning the Act, namely the preservation of viable enterprise and the protection of jobs, is not engaged on the facts of this case, since Bank of Ireland”s intention to conduct a trading receivership of the Companies” assets creates no immediate risk to the enterprise concerned or to the jobs associated with it. The directors of MW prepared turnover, earnings and profit projections and the independent accountant held that each company has a reasonable prospect of survival as a going concern subject to certain conditions. The interim examiner Mr Lawler”s report asserted that since his appointment he received expressions of potential investment interest and an increase in turnover. The Bank contended that this evidence was insufficient to establish a reasonable prospect of survival as a going concern. Mr Morrissey, a director of each of the companies, averred that they did not hold any legal or beneficial interest in Mount Wolseley House, the point being significant because it contends that the House is integral to the hotel business. A further controversy between the parties concerned the extent to which the receivership initiated by the Bank may affect the prospects of the survival of the business as a going concern as an alternative to examinership.

Held by Keane J that the Bank”s argument could not succeed; the High Court was not equipped at this point in the process to assess the level of investment that may be forthcoming in the context of any proposed scheme of arrangement or the extent to which any such arrangement would be fair and equitable to the interests or claims of the Bank. Keane J held that these issues can only be resolved in the context of a s.24 hearing. Referring to Re Vantive Holdings [2010] 2 ILRM 156, Keane J was satisfied that the petitioners have met the test that the companies have a reasonable prospect of survival as a going concern. Keane J held that the petitioners” contention that the active cooperation of the owners of the House is necessary to the continuing viability of the hotel business and that such cooperation is contingent on the continued involvement of the companies in the business, does not enhance the prospects of a successful examinership, nor does it undermine the independent accountant”s opinion. Applying Re McSweeney Dispensers 1 Limited [2011] IEHC 494, Keane J held that the appropriate time to assess the competing benefits of a trading receivership and an examinership is when the detail of a scheme of arrangement is available.

Keane J confirmed the appointment of Mr Lawler as Examiner pursuant to s.2 and directed that he furnish his separate reports in respect of each of the companies in accordance with the terms of s.18

Judgment approved.

1 JUDGMENT of Mr. Justice Keane delivered on the 29th April 2014

Introduction

2 1. Mount Wolseley Hotel Golf and Country Club ("Mount Wolseley") petitions for the appointment, pursuant to the provisions of s. 2 of the Companies (Amendment) Act 1990 ("the Act"), of an Examiner both to that company and to the separate companies Lismard Properties and Lismard Enterprises, as related companies under the provisions of s. 4 of the Act. For the purpose of the present judgment, I shall refer to those three companies together as "the Companies."

3 2. Bank of Ireland, which is the Companies' largest creditor by a considerable margin, opposes the petition. The Revenue Commissioners have adopted a neutral stance towards it, as have the Companies' other significant creditors.

4 3. By Order made on the 4 ^th April 2014, Charlelon J. appointed an Interim Examiner to the Companies and fixed the 10 ^th April 2014 as the date for the hearing of the petition. On the 10 ^th April 2014, Kelly J. gave further directions and adjourned the hearing to the 16 ^th April 2014, extending the Courtapos;s protection of the Companies up to that date. The petition was heard on the 16 ^th and 17 ^th April 2014 and the Court reserved judgment, further extending the protection afforded to the Companies by continuing the appointment of the Interim Examiner to todayapos;s date.

Background

5 4. Mount Wolseley is an unlimited company that was incorporated within the State on the 19 ^th January 1995. It is a trading company that operates the spa, golf and country club at Mount Wolseley, Tullow, County Carlow ("the hotel business"), and which owns the golf course, golf clubhouse and part of the leisure centre and car park there. Lismard Properties is an unlimited company that was incorporated within the State on the 13 ^th September 1988. It owns various properties, including the greater part of the hotel property at Mount Wolseley. Lismard Enterprises is an unlimited company that was incorporated within the State on the 22 ^th August 1988. It developed the hotel property and owns a portion of it comprising 18 bedrooms and the swimming pool there. In those circumstances, it is asserted that the Companies have conducted their business in such a manner that the separate business of each company, or a substantial part thereof, is not readily identifiable, thus bringing the Companies within the definition of related companies under the terms of s. 4(5)(e) of the Act. That assertion has not been challenged for the purpose of these proceedings.

6 5. The current directors of each of the Companies are three members of the Morrissey family. A company named Holnet Unlimited owns and controls the Companies through a range of intermediate shareholder companies that it owns and controls. The beneficial owners of Holnet Unlimited are a number of members of the Morrissey family, including each of the current directors of the Companies.

The Issues

7 6. The Court is satisfied that the petition for the protection of the Companies has been properly presented by Mount Wolseley in accordance with the applicable requirements of s. 3 of the Act. The petition is accompanied by an independent accountant's report ("IAR"), prepared by Mr. Kieran McCarthy and dated the 4 ^th April 2014. Mr. Ian Lawlor, the interim Examiner, has been nominated as Examiner and has furnished a signed consent to act as such, should he be appointed.

8 7. The hotel business was developed with finance provided to Lismard Properties by Bank of Ireland. That borrowing was the subject of cross-guarantees by the other two companies. The Companies' outstanding debt to Bank of Ireland is circa €28.7 million. The Companies hold other assets subject to borrowings with a number of other financial institutions amounting to circa €32 million in total. The Companies acknowledge that their debt to Bank of Ireland is unsustainable, with the result that each of the Companies is unable, or likely to be unable, to pay its debts. On the 3 ^rd April 2014, at the culmination of extensive and protracted negotiations, Bank of Ireland served 24-hour repayment demands on each of the Companies. On the 4 ^th April 2014, Bank of Ireland appointed Mr. Stephen Tennant as receiver over the Companies' assets. As noted earlier in this judgment, the petition in suit was presented later on the same day with the result that, pursuant to the terms of s. 5(2) of the Act,...