Re Vantive Holdings

• Jurisdiction: Ireland
• Judge: Murray C.J.
• Judgment Date: 11 August 2009
• Neutral Citation: [2009] IESC 68
• Court: Supreme Court
• Docket Number: [2009 No. 402 COS]
• Date: 11 August 2009

[2009] IESC 68

THE SUPREME COURT

Murray C.J.

Denham J.

Fennelly J.

316/09

Vantive Holdings & Ors, In Re

IN THE MATTER OF VANTIVE HOLDINGS

AND IN THE MATTER OF VILLEER DEVELOPMENTS

AND IN THE MATTER OF PEYTOR DEVELOPMENTS

AND IN THE MATTER OF CARRAGH ENTERPRISES LIMITED

AND IN THE MATTER OF PARLEZ INTERNATIONAL LIMITED

AND IN THE MATTER OF MORSTON INVESTMENTS LIMITED

AND IN THE MATTER OF THE COMPANIES ACT 1963 -2006

COMPANIES (AMDT) ACT 1990 S4(5)

COMPANIES (AMDT) ACT 1990 S2

COMPANIES (AMDT) ACT 1990 S5

COMPANIES ACT 1963 S214

COMPANIES (AMDT) ACT 1990 S4

COMPANIES (AMDT) ACT 1990 S2(1)

COMPANIES (AMDT) ACT 1990 S2(2)

KEANE COMPANY LAW 3ED 2000

COMPANIES (AMDT) (NO 2) ACT 1999 S5

COMPANIES (AMDT) (NO 2) ACT 1999 S12

COMPANIES (AMDT) ACT 1990 S2(3)

COMPANIES (AMDT) ACT 1990 S2(4)

COMPANIES (AMDT) ACT 1990 S3

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

GALLIUM LTD (T/A FIRST EQUITY GROUP), IN RE UNREP SUPREME 3.2.2009 2009 IESC 8

COMPANIES (AMDT) ACT 1990 S3(3B)(G)

COMPANIES (AMDT) ACT 1990 S3(3B)(C)

COMPANIES (AMDT) ACT 1990 S3(3B)(E)

COMPANY LAW

Examinership

Petition - Appointment - Threshold for appointment of examiner - Whether group as whole had reasonable prospect of survival as going concern - Statutory preconditions to appointment of examiner - Applicable legal principles - Relevant factors to take into account - Whether petitioner discharged onus of proof - Objective appraisal of evidence - Weight to be attached to report of independent accountant - Whether discretionary factors such as prejudice to interests of creditors, interests of employees and implications of liquidation could only be considered if "reasonable prospect of survival" test satisfied - No evidence to validate assumptions of petitioner and accountant - No evidence of banks commitment to future financing - No attempt to analyse future developments in market - Absence of objective evidence to support rationale that conditions would change in market - In re Vantive Holdings [2009] IEHC 384, (Unrep, HC, Kelly J, 31/7/2009), Re Gallium Ltd [2009] IESC 8, [2009] 2 ILRM 11 and Re Tuskar Resources Plc [2001] 1 IR 668 applied- Companies Act 1963 (No 33), s 214 - Companies (Amendment) (No 2) Act 1990 (No 27), ss 2, 3, 3B(G) 4(5), and 5 - Companies (Amendment) Act 1999 (No 27), ss 2(2), 5 and 12 - Petition refused; order of High Court affirmed (316/09 - SC - 11/8/2009) [2009] IESC 68

In Re Vantive Holdings

Facts: The petitioner sought to appeal a decision of the High Court refusing an application for Examinership and had sought a stay on the order pending an appeal to the Supreme Court. The issue arose as to whether the petitioner could demonstrate that the property development and investment companies had a reasonable prospect of survival pursuant to s. 2 Companies (Amendment) Act 1990, as amended. The group of companies was insolvent and the issue arose as to the survival of the company as a going concern.

Held by the Supreme Court per Murray CJ (Denham and Fennelly JJ. concurring), that there were obvious problems about the valuations underlying the state of affairs of the company as no valuations had been exhibited and valuations provided were supplied from late 2008 and not 2009. They were based on an assumption without any expression of opinion as to whether the assumption was reasonable. It was not possible for the Court to reach any conclusion as to the prospect of survival in the absence of evidence. Some evidence was absolutely essential. The opinion of the independent accountant was not verified by evidence. None of the banks had spoken in support of the proposition that there was a reasonable expectation of survival for the petitioner as a going concern if the examiner was appointed. The petition had not established that its strategy for a future orderly disposal of key assets was credible or reasonably viable and the appeal would be dismissed.

Reporter: E.F.

1 JUDGMENT of the Court delivered by Murray C.J. on the 11th day of August 2009

2 Judgement of the court delivered by Murray, C.J.

3 On the 17 ^th July 2009 Vantive Holdings and, its related companies within the meaning of s. 4(5) of the Companies (Amendment) Act 1990, Villeer Developments, Peytor Developments, Carragh Enterprises Limited, Parlez International Limited and Morston Investments presented, ex parte, a petition to the High Court for an order pursuant to s. 2 of the Companies (Amendment) Act 1990, as amended, seeking an order appointing Mr. Kieran Wallace as examiner in respect of the petitioner and related companies. Pursuant to s. 5 of the Act of 1990 the company was deemed to be under the protection of the Court from the date of the presentation of the petition to the expiry of 70 days from that date or on the withdrawal or refusal of the petition, whichever should happen first.

4 Vantive Holdings is the petitioner and the High Court has determined that other companies are related companies within the meaning of the Act. According to the affidavit sworn by Mr. Liam Carroll, a director of the petitioner, the business and prospects of the petitioning company and the related companies are interdependent. The business relationship between the respective undertaking is, he says, "entirely symbiotic".

5 Certain directions were given by the High Court on that date and on the 28 ^th July the petition came on for hearing before the High Court. The Court granted liberty to the petitioner to correct and amend the petition in certain respects. On the 31 ^st July 2009 Kelly J., ruled that the application for the appointment of an examiner be refused and that the aforesaid petition be dismissed.

6 On that occasion counsel for the petitioner applied for a stay on the order of the High Court which was granted by the learned High Court judge such a stay to be effective only until Tuesday 4 ^th August 2009. The effect of the stay on the order refusing the application and dismissing the petition was that the petition remained pending before the Courts and the petitioner benefited from the consequential statutory protection during the continuation of the stay.

7 By Notice of Appeal lodged in the Supreme Court on the 4 ^th day of August 2009 the petitioner appealed against the order of the High Court refusing the application for the appointment of an examiner and dismissing the petition.

8 On the 4 ^th day of August 2009 the petitioner applied to this Court for a continuation of the stay on the order of the High Court pending the determination of the substantive appeal against the order of the High Court. On that date this Court continued the stay until Tuesday the 11 ^th day of August which was the date on which this Court heard the substantive appeal.

The Issues

9 The primary and fundamental ground on which the High Court refused the application is the conclusion by the learned High Court judge that the petitioner had failed to show to the satisfaction of the Court that there is a reasonable prospect of the survival of the companies which is a precondition to the making of an order pursuant to s. 2 of the Act of 1990, as amended. Thus the primary issue before the Court in this appeal is whether the High Court was correct in that conclusion.

10 In addition, the High Court decided that even if it had been satisfied that there is a reasonable prospect of survival of the companies it would nonetheless, in the exercise of its discretion, refuse the applications for reasons which are referred to in certain passages of the judgment cited below.

11 The petitioner also appeals from this latter conclusion of the learned High Court judge and that issue only arises if the first and primary issue is resolved in favour of the petitioner.

Background

12 The principal activity of the petitioning company and also Morston Investments Limited is to raise finance for onward lending to inter alia the related companies registered in Ireland. According to the affidavit filed on behalf of the petitioner the principal activity of the related companies registered in Ireland consists of purchasing land, utilising funds borrowed from the petitioner and Morston for development, investment and sales. The petitioner and related companies form an integral part of a group of related contracting, development and investment companies known as the Zoe Group. The aforementioned affidavit states that since its inception in the early 1980s the group has had a "hugely successful track record in the development for sale or letting of apartments, offices and other commercial properties in the State". In that period the related companies have assembled a very substantial portfolio of investment and development outlets.

13 According to the petitioner among the most important of these is first of all a property in Sheriff Street Upper consisting of 6 acres. These lands were purchased for the purpose of providing back-office and call-centre type commercial accommodation and planning permission has been obtained for the provision of 32,357 sq. metres of office accommodation. A second property highlighted by the petitioner as a key property is another 6 acre site of development land at East Road, Dublin which was also acquired to provide back-office or call-centre type accommodation. Planning permission has not been obtained but an application has been made to Dublin City Council for a mixed use development to include 48,649 sq. metres of offices and 3,905 sq. metres of retail space and 73 residential units. It is asserted by the petitioner in the affidavit grounding its application that "despite the current slow down, when the confidence in the market returns, these sites will be at the forefront of the future development of Dublin". The petitioner has also stated that it and the...