Vantive Holdings Ltd & Others and the

JurisdictionIreland
JudgeMr. Justice Kelly
Judgment Date31 July 2009
Neutral Citation[2009] IEHC 384
Docket Number[2009 No. 402 COS]
CourtHigh Court
Date31 July 2009

[2009] IEHC 384

THE HIGH COURT

[No. 402 COS/2009]
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 CARAGH 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 ACTS 1963 - 2006

COMPANIES ACT 1963 S214

COMPANIES (AMDT) ACT 1990 S2

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

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

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

COMPANY LAW

Examinership

Appointment of examiner - Related companies - Creditors seeking winding up for failure to pay loans - Business plan not sustainable in current economic climate - Power to appoint examiner discretionary - Court must be satisfied of reasonable prospect of survival of company - Independent accountant report - View of accountant that scheme of arrangement offered reasonable prospect of survival - Valuation of property - Report compiled based on projections of petitioner - No evidence of independent views - Projections of petitioners lacking in reality - Failure to discharge onus of proof showing reasonable prospect of survival of companies - In Re Gallium Ltd [2009] IESC 8 (Unrep, SC, 3/2/2009) and In Re Traffic Group Ltd [2007] IEHC 445 [2008] 3 IR 253 approved - Companies Act 1963 (No 33), ss 214 - Companies (Amendment )Act 1990 (No 27), s 2 - Petition dismissed (2009/402COS - Kelly J - 31/7/2009) [2009] IEHC 384

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 Mr. Justice Kelly delivered on the 31st day of July, 2009

Introduction
2

It is sometimes said that when small or modest borrowers from banks encounter difficulties in repaying their loans, then such borrowers have a problem. For those with large borrowings, it is the banks who have a problem. If ever a case demonstrated the accuracy of that proposition, it is this one.

3

Apart from the Revenue Commissioners, the companies in suit have no creditors save banks. The amounts advanced by those banks are enormous by any standards. The companies are insolvent and on winding up, it is estimated that the following will be the likely result: Vantive Holdings will have a shortfall of in excess of €396 million; Villeer Developments, a shortfall of in excess of €37 million; Peytor Developments, a shortfall of in excess of €88 million; Caragh Enterprises Ltd., a shortfall of in excess of €72 million; Parlez International Limited, a shortfall of €71 million; and Morston Investments Limited, a shortfall of €361 million. That gives a grand total of well in excess of €1 billion shortfall.

4

Having lent extraordinary sums of money to companies which form part of a corporate structure of Byzantine complexity, the bank creditors have shown great forbearance in taking any action by way of seeking to recover their money. It is a forbearance remarkably absent when dealing with much smaller borrowers who have defaulted on their obligations, as witnessed by the number of applications for summary judgment that the commercial division of this Court has had to deal with during the legal year just ending today. But in truth the banks can do little else but forebear, because if they take action to recover the monies due to them by the companies in suit, they will bring about a collapse of the house of cards that is the petitioner, its related companies and indeed the wider group associated with them.

5

So the banks have stood back. They have taken no steps to seek repayment of the monies due to them. Indeed they have done more than that; they have actually advanced further sums to the companies in suit so as to enable them to pay off all of the other creditors with the notable exception of the Revenue Commissioners. It is the intention of some of the banks to advance further monies to these insolvent companies.

6

But in the recent past one bank has broken ranks with the others and has gone on the offensive, at least to some extent. On 29 th June, 2009, ACC Bank PLC made a demand upon Vantive Holdings for the repayment of the sum of €63,960,000 and on the same day made demand on Morston Investment Limited, a Jersey company, for the repayment of €72,111,000. The letters of demand made it clear that in the case of the Irish company it constituted a demand within the meaning of s. 214 of the Companies Act, 1963.

7

Section 214 of that Act obliges a company which is the subject of such demand to discharge the liability within 21 days. In default of so doing, the company is deemed by statute to be insolvent and thus the scene is set for an application to have the company wound up. Indeed the letter from the solicitors acting for ACC made it clear that if the sum was not discharged within the 21 days permitted by the Act, ACC would be at liberty to petition this Court for the winding up of the company. A similar intention was made clear in the letter of the Jersey company indicating that an application would be made to the Royal Court of Jersey to commence désastre proceedings there against Morston Investments Limited.

8

The 21 days permitted under s. 214 was due to expire on Monday, 20 th July, 2009. Late in the afternoon of the preceding Friday, at almost the last possible moment, the petition in the present case was presented and an application was made to Clarke J. for directions concerning it. Thus the protection of the court was afforded to the companies in suit. On Tuesday last I heard the application for the appointment of an Examiner to these companies. This is my ruling on that application.

The Companies
9

The petitioner is an Irish company, as indeed are all of the other companies named in the title with the exception of Morston Investments Limited. That is a company incorporated in Jersey.

10

I am satisfied on the basis of the evidence put before me that the companies are related companies as defined under the legislation and that Morston is a company in respect of which this court could make a winding up order. I am also satisfied that a company called Stradbally Investment Company Unlimited together with Vantage Holdings owns the entire shareholding in Villeer. I am also satisfied that the necessary resolutions authorising an application to this Court for the appointment of an examiner were passed by the board of the petitioner and each of the related companies.

11

The evidence further satisfies me that the business and indeed the prospects of the petitioner and the related companies are interdependent. The petitioner and Morston raise the finance which is required by the related companies registered in Ireland as well as the finance required by other connected companies in the wider group of companies which are not party to these proceedings. When the petitioner and Morston borrow monies, they lend those funds onwards to the related companies registered in Ireland as required. These borrowings then take the form of inter company debt to fund this group in its commercial undertakings. It follows, as is said in the petition, that the related companies registered in Ireland are essential to the purpose and undertaking of the petitioner and Morston since they require the finance which the petitioner and Morston raise through bank borrowings. For their commercial life the related companies registered in Ireland are dependent upon the petitioner and Morston for the provision of finance. The relationship between them has been described as symbiotic.

12

The principal activity of the related companies is purchasing land with the funds borrowed from the petitioner and Morston. These lands are then developed and sold. Large amounts of land - some developed, some partially developed and some undeveloped - are owned by the companies in suit and the wider group. The petitioner and the related companies form an integral part of a group of related contracting, development and investment companies known as the Zoe Group. That consists of a large number of additional companies which do not form part of the present proceedings but whose undertaking and prospects are nevertheless dependent upon the continued survival of the petitioner and the related companies.

13

So...

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