Tivway Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Brian J. McGovern
• Judgment Date: 13 November 2009
• Neutral Citation: [2009] IEHC 494
• Court: High Court
• Docket Number: [No. 381 COS/2009]
• Date: 13 November 2009

[2009] IEHC 494

THE HIGH COURT

[No. 381 COS/2009]

Tivway Ltd & Ors, In Re

IN THE MATTER OF TIVWAY LIMITED IN EXAMINATON (UNDER THE COMPANIES (AMENDMENT) ACT 1990 )

AND IN THE MATTER OF JOHN J. FLEMING CONSTRUCTION COMPANY IN EXAMINATION (UNDER THE COMPANIES (AMENDMENT) ACT 1990 )

AND IN THE MATTER OF J.J. FLEMING HOLDINGS IN EXAMINATION (UNDER THE COMPANIES (AMENDMENT) ACT 1990

AND IN THE MATTER OF THE COMPANIES ACTS 1963 -2009

COMPANIES (AMDT) ACT 1990 S24

COMPANIES (AMDT) ACT 1990 S24(4)

COMPANIES (AMDT) ACT 1990 S24(4)(C)

COMPANIES (AMDT) ACT 1990 S25(1)

COMPANIES (AMDT) ACT 1990 S2

HOLIDAIR LTD, IN RE 1994 1 IR 416

SOVEREIGN LIFE ASSURANCE CO (IN LIQUIDATION) v DODD 1892 2 QB 573

HAWK INSURANCE CO LTD, IN RE 2001 2 BCLC 480 2002 BCC 300

ANTIGEN HOLDINGS LTD & CASTLEHOLDING INVESTMENT CO LTD, IN RE 2001 4 IR 600 2001/1/111

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

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

COMPANY LAW

Examinership

Scheme of arrangement - Approval of scheme by court -Jurisdiction of court to rule on scheme -Scheme not approved by certain creditors- Classification of creditors by examiner - Floating charges - Crystallisation of floating charges -Effect of examinership on crystallisation of floating charge -Purpose of legislation - Fair and equitable proposals - Reasonable prospect of survival - Contingent creditors - Unsecured creditors - Whether creditor unsecured or contingent - Whether creditors unfairly prejudiced by scheme of arrangement - Whether scheme of arrangement fair and equitable - Whether category of creditors unfairly prejudiced - Whether classification of creditors correct - In re Holidair Ltd [1994] 1 IR 416, Re Antigen Holdings Ltd [2001] 4 IR 600 and Re Traffic Group Limited [2008] 3 IR 253 applied - Sovereign Life Assurance Co v Dodd [1892] 2 QB 573 and Re Hawk Insurance Co Ltd [2001] 2 BCLC 480 considered - Companies (Amendment) Act (No 27) ss 2, 24, 25 - Scheme approved (2009/381COS - McGovern J - 13/11/2009) [2009] IEHC 494

In Re Tivway Ltd

Facts: The proceedings came before the Court by way of application pursuant to s. 24 Companies (Amendment) Act 1990 for confirmation of a Scheme of Arrangement as to the companies at issue. The Examiner laid before the Court a scheme of Arrangement as to each of the companies and urged the Court to approve the schemes and was supported by the companies and all creditors with the exception of ACC Bank. ACC argued inter alia that it was unfairly prejudiced by the proposals, confined to its fixed charge, that it was wrongfully classified as a Contingent creditor, that its floating charge in Tivway had crystallised and thus ranked in priority to Anglo, the holders of a fixed charge and that the proposals as to Tivway contained no financing or injection of working capital.

Held by McGovern J. that if the Schemes of Arrangement were not confirmed by the Court that it was certain that the companies would go into liquidation and a substantial number of jobs would be lost. ACC had not been unfairly prejudiced by the Schemes of Arrangements which were proposed and having regard to the purpose and schema of the Companies (Amendment) Act 1990, the Court would approve the Schemes of Arrangement.

Reporter: E.F.

Mr. Justice Brian J. McGovern

1 This matter comes before the court by way of an application under s. 24 of the Companies (Amendment) Act1990 (hereinafter referred to as "the Act") for confirmation of a Scheme of Arrangement in respect of each of the companies referred to in the title herein.

2 Section 24(4) of the Act provides that,inter alia -

"The court shall not confirm any proposals -"

(a) unless at least one class of creditors whose interests or claims would be impaired by implementation of the proposals has accepted the proposals, or

(b) if the sole or primary purpose of the proposals is the avoidance of payment of tax due, or

(c) unless the court is satisfied that -

(i) the proposals are fair and equitable in relation to any class of members or creditors that has not accepted the proposals and whose interests or claims would be impaired by implementation, and

(ii) the proposals are not unfairly prejudicial to the interests of any interested party."

3 2. Between 12^th and 13^th October, 2009, the Examiner convened meetings of seven separate classes of creditors of Tivway Limited (hereinafter referred to as "Tivway"). The interests of the following classes of creditors of Tivway are impaired by the implementation of the proposals:-

(i) Secured Creditor

(ii) Contingent Secured Creditor

(iii) Connected Creditor

(iv) Unsecured Creditors

(v) Contingent Creditors

4 Although the meetings of the Secured Creditor, Contingent Secured Creditor and Connected Creditor did not have a quorum, the sole creditor in each of these classes was represented at the meeting. The representatives at the Contingent Secured Creditor and Connected Creditor class meetings voted in favour of the Scheme of Arrangement. ACC Bank plc. (hereinafter referred to as "ACC") which was the only member of the Secured Creditor class, voted against the Scheme of Arrangement.

5 3. A majority in number representing a majority in value of the following classes voted in favour of the Scheme:-

(i) Unsecured Creditors

(ii) Contingent Creditors

6 4. Between 12^th and 13^th October, 2009, the Examiner convened meetings of eight separate classes of creditors of John J. Fleming Construction Company (hereinafter referred to as "Construction"). The interests of the following classes of creditors of Construction are impaired by the implementation of the proposals:-

(i) Secured Creditors

(ii) Connected Creditors

(iii) Unsecured Creditors

(iv) Contingent Creditors

(vi) Leasing Creditors

(vii) Litigation Creditors

7 There was no quorum at the meetings of the Leasing Creditors and Litigation Creditors.

8 5. A majority in number representing a majority in value of the following classes of impaired creditors voted in favour of the Scheme of Arrangement:-

(i) Secured Creditors

(ii) Contingent Creditors

(iii) Connected Creditors

9 6. Although it was classed as a Contingent Creditor, ACC argued that it should have been designated an Unsecured Creditor of the Company and cast its vote against the approval of the Scheme. Two hundred and ninety one votes were cast in favour of the Scheme and three votes - including that of ACC - were cast against. If ACC is regarded as properly belonging to the class of Unsecured Creditors, then the majority in value voted against the proposals while the majority in number - almost 99% of the votes cast - voted in favour. If ACC does not belong to the class of Unsecured Creditors, then the Unsecured Creditors voted overwhelmingly in favour of the Scheme of Arrangement.

10 7. Between 12^th and 13^th October, 2009, the Examiner convened meetings of three separate classes of creditors of J.J. Fleming Holdings (hereinafter called "Holdings"). The interests of the following classes of creditors of Holdings are impaired by implementation of the proposals:-

(i) Contingent Creditors

(ii) Connected Creditors

(iii) Unsecured Creditors

11 8. A majority in number representing a majority in value of the following classes of impaired creditors voted in favour of the Scheme of Arrangement:-

(i) Contingent Creditors

(ii) Connected Creditors

12 ACC was classed as a Contingent Creditor, but, again, it argued that it should have been designated an Unsecured Creditor of the Company and cast its vote against approval of the Scheme. The only other member of the class of Unsecured Creditors - the Company's auditor - cast his vote in favour of the Scheme. If ACC is regarded as properly belonging to the class of Unsecured Creditors, then the majority in value voted against the proposals, while in terms of numbers, the members of the class were evenly divided. If ACC is not properly regarded as an Unsecured Creditor, then the entirety of this class voted in favour of the Scheme of Arrangement.

9. The position can therefore be summarised as follows:-

13 (a) In respect ofTivway, two classes of creditors whose interests are impaired have voted in favour of the Scheme;

14 (b) in respect ofConstruction, three, or - depending on the view adopted by the court regarding the classification of ACC - four classes of creditors whose interests are impaired have voted in favour of the Scheme;

15 (c) in respect ofHoldings, two, or - depending on the view adopted by the court regarding the classification of ACC - three classes of creditors whose interests are impaired have voted in favour of the Scheme of Arrangement.

16 10. Accordingly, it is argued that the court has jurisdiction to approve and confirm the Scheme under s. 24 of the Act. Where the court has jurisdiction, it has a number of options. It can confirm the Scheme, it can confirm the Scheme with modification, or it can refuse to confirm the Scheme.

17 11. Where a class of members or creditors have not accepted the proposals and their interests would be impaired by the implementation, the court cannot confirm the proposals unless it is satisfied that the proposals are fair and equitable in relation to such class of members or creditors. (See s. 24(4)(c) of the Act).

18 12. In this case, ACC comes within the ambit of s. 24(4)(c) being a:

"… class of members of creditors that has not accepted the proposals and whose interests or claims would be impaired by the implementation."

19 The court has to determine whether the Scheme is fair and equitable in relation to ACC.

20 13. The Examiner has laid before the court a Scheme of Arrangement in respect of each of the companies and he urges the court to approved the Schemes. He is supported by the companies and all the creditors,...