Vantive Holdings & Others and the Companies Acts 1963-2006

• Jurisdiction: Ireland
• Judge: Mr. Justice Cooke
• Judgment Date: 24 August 2009
• Neutral Citation: [2009] IEHC 408
• Court: High Court
• Date: 24 August 2009

Vantive Holdings & Ors, In Re

[2009] IEHC 408

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 ROYCETON AND IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009

[2009] IEHC 408

[2009 No. 450 COS]

THE HIGH COURT

COMPANY LAW

Practice & procedure

Res judicata - Petition for examinership - Application for leave to have petition heard - Petition by same petitioner previously brought and dismissed by court - Abuse of process - Information withheld from first petition now relied upon - Whether court permitted by statute to hear second petition by same petitioner - Whether presentation of second petition abuse of process - No obvious statutory impediment to second petition - Whether petitioner acting in bad faith - Henderson v Henderson [1843] 3 Hare 100 distinguished; Carroll v Ryan [2003] 1 IR 309, AA v Medical Council [2003] 4 IR 302, AG v Abinbola [2006] IEHC 325 (Unrep, MacMenamin J, 1/11/2006), Mitchell v Ireland [2007] IESC 11 (Unrep, SC, 28/3/2007) and Johnson v Gore Wood [2002] 2 WLR 72 considered - Companies (Amendment) Act 1990 (No 27), ss 2, 3, 4 & 31 - Rules of Superior Courts 1986 (SI 15/1986),O 75A, r 4 - Leave granted (2009/450COS - Cooke J - 24/8/2009) [2009] IEHC 408

In Re Vantive Holdings

Facts: In the first petition, the petitioner and related companies were refused the protection of the Court under the Examinership process by both the High and Supreme Court, principally by reason of an inadequate and unconvincing statutory report by an independent account as to the reasonable prospect of survival of a group of construction companies. The petition had failed in the Supreme Court by reason of a lack of evidence of any commitment for future financing of the companies, the business plan being withheld from evidence and the property valuations employed in the proceedings. A second petition was made to the High Court for Examinership. One of the controlling shareholders had been taken ill since the decision of the Supreme Court and was not able to give instructions to his legal representatives. The issue arose as to whether the Court could hear the second petition, whether it was an abuse of process and where there was any other factor to incline the court to refuse to give it a hearing on the basis that the issue as to a reasonable prospect of survival had been definitively decided.

Held by Cooke J. That the Court was satisfied that it would not be justified in refusing to give the petition a hearing. The presentation was not so obliviously tainted by an abuse of process or bad faith to warrant it being refused a hearing. While the whole case may have been made on the first petition and the strategic decision not to do so was mistaken, no effort was being made to mislead the court. The overall consideration was whether the Court would investigate the reasonableness of the prospect of survival of the enterprise as a whole. The Court would not be deterred from extending the protection of the Court to the companies because of past mistakes. There were good grounds to give the second petition a hearing.

Reporter: E.F.

RSC O.75A r4(4)

VANTIVE HOLDINGS & ORS, IN RE UNREP KELLY 31.7.2009 2009 IEHC 384

COMPANIES (AMDT) ACT 1990 S2(2)

VANTIVE HOLDINGS & ORS, IN RE UNREP SUPREME 11.8.2009 2009 IESC 68

COMPANIES (AMDT) ACT 1990 S3(3A)

COMPANIES (AMDT) ACT 1990 S3(1)

COMPANIES (AMDT) ACT 1990 S31

COMPANIES (AMDT) ACT 1990 S4A

HENDERSON v HENDERSON 1843 3 HARE 100

JOHNSON v GORE WOOD & CO (A FIRM) (NO 1) 2002 2 AC 1 2001 2 WLR 72 2001 1 AER 481

CARROLL v RYAN & ORS 2003 1 IR 309 2003 2 ILRM 1 2003/8/1753

A (A) v MEDICAL COUNCIL 2003 4 IR 302 2004 1 ILRM 372 2003/1/49

MITCHELL v IRELAND & ORS UNREP SUPREME 28.3.2007 2007/41/8478 2007 IESC 11

AG v ABINBOLA UNREP MACMENAMIN 1.11.2006 2006/4/602 2006 IEHC 325

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

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

1 In view of the impression that might be given by the representation on this application of a large number of interested parties, including the major creditors, the employees of the petitioning companies and of other companies in the wider group, together with the vigorous opposition expressed by one of the principal secured creditors to the application, it is important to emphasise the limited purpose of this hearing and the sole issue that is now before the court. This is the adjourned hearing of the application made to the court ex parte on 14 ^th August, 2009 upon the presentation of the petition in accordance with O. 75 A, r. 4(4) of the Rules of the Superior Courts for directions as to the proceedings to be taken in relation to the petition. In the majority of cases, such an application is dealt with immediately and directions given as to the service and advertising of the petition and the fixing of a date for its hearing. Thus, the only issue to be decided by the court at this point is whether this petition should be given a hearing.

2 In this case, de Valera J. adjourned the application because it was a second petition and because of the intervention on that occasion of representatives of both a provisional liquidator who had been appointed to the petitioner and to one of the related companies, Morston Investments Limited, and of ACC Bank plc, which is the principal direct secured creditor of the petitioner and Morston and is indirectly a creditor of other companies in the group. ACC Bank indicated its intention to oppose the petition being heard upon the ground, in effect, that its presentation was an abuse of process because the first petition by the same petitioner had been the subject of a considered judgment of the senior judge of the Commercial Court on 31 ^st July, 2009 ( Vantive Holdings v. Companies Acts [2009] I.E.H.C. 384), which was subsequently upheld on appeal. The learned High Court judge rejected that first petition upon the ground, in essence, that it failed to meet the statutory test of s. 2(2) of the Companies (Amendment) Act 1990 (the "Act of 1990"), as amended, by failing to demonstrate that there was a reasonable prospect of survival of the companies and the whole or any part of the undertaking as a going concern. On appeal that decision was affirmed by a unanimous judgment of the Supreme Court given on 11 ^th August, 2009 ( In the matter of Vantive Holdings & ors and in the matter of the Companies Acts 1963 - 2006 [2009] I.E.S.C. 68). In these circumstances, de Valera J. considered that the circumstances required further examination before a date for the petition could be fixed.

3 In those judgments much of the background detail is given of the corporate structure of the companies in the wider group, the interdependence of the companies, the amount due to the major secured creditors, and the charges, guarantees and cross- securities held notably by ACC Bank, together with the recent trading difficulties leading to the current serious insolvency and a likely overall deficit in excess of €1 billion. It is not necessary therefore to repeat much of that information here and this statement of the courts' reasons assumes a knowledge of those judgments where the background history and information remains unchanged since 11 ^th August last. In addition, those judgments cite in detail much of the relevant case law concerning the approach of the court to the criteria governing the appointment of an examiner. Insofar as that is relevant to the limited issue now before the court on the present application, that case law too, will not require reiteration or renewed explanation.

4 In this second petition, the petitioner and the five related companies which were the subject of the first petition are now joined by Royceton, a further unlimited company in the group which is held as to 50% by Vantive and 50% by Stradbally Investment Company. Royceton too is insolvent and, according to the statement of affairs in the statutory report mentioned later in this judgment, will have a deficit of more than €128 million. Royceton appears to be one of the group companies more actively engaged in trading operations and some of those appearing to support the present petition are employees, creditors or subcontractors of that company. According to the statement of affairs, it is owed €126 million by other companies in the group of which it is estimated only €500,000 might be realisable.

5 As appears from the judgment of the High Court on 31 ^st July, 2009 the first petition was refused by Kelly J. for the primary reason that he found that the statutory report of the independent accountant, Mr. McGrath, under s. 3 (3A) of the Act of 1990 to be inadequate and unconvincing. The learned judge noted that the property valuations upon which Mr. McGrath's opinion of a prospect of survival was postulated were out of date such that his optimism as to the possibility of a scheme of arrangement leading to a "significant surplus" which would then fund future development, bordered on the fanciful having regard in particular to current conditions in the property market.

6 Furthermore, in a secondary conclusion, Kelly J. indicated that even if some basis had been shown for a reasonable prospect of survival of the companies, he would have been disinclined to exercise the court's discretion in favour of appointing an examiner. He considered the exercise as presented to be somewhat artificial. It appeared to be designed, in his view, to enhance the value of properties to be realised. Furthermore, of the 650 persons mentioned whose employment was threatened, only 100 or thereabouts...