Supreme Court dismisses Carroll appeal
The Supreme Court has dismissed an appeal to have an examiner appointed to several companies in the Liam Carroll-controlled Zoe building group.
The court ruled that the companies, which have borrowings from financial institutions of €1.1bn, in seeking the protection of the court had failed to demonstrate that they could survive as a going concern.
Late last month High Court Judge Mr Justice Peter Kelly refused to appoint an examiner to the firms.
Tonight following several hours of deliberations the Supreme Court of Chief Justice John Murray, Ms Justice Susan Denham and Mr Justice Nial Fennelly dismissed the companies' appeal against Mr Justice Kelly's decision.
The petition to have an examiner appointed to Liam Carroll's firms was brought by Vantive Holdings which, with Jersey-registered Morston Investments Ltd, are the parent companies of around 50 companies known as Zoe Developments.
The four other companies involved are Villeer Developments, Peytor Developments, Caragh Enterprises Ltd and Parlez International Ltd. The firms have a very substantial portfolio of investment and development outlets.
The most important of these are six acres at Sheriff Street Upper, which is to be used office and commercial accommodation and another six acres at East road Dublin where planning permission is being sought for office, residential and retail developments.
Giving the three-judge court's judgment the Chief Justice said that the companies had not established that their strategy for a future orderly disposal of key assets was "credible or reasonably viable."
The Zoe group is insolvent and has assets over liabilities of €265m. Zoe has blamed the slowdown on a paralysis for apartment sales, planning difficulties, the economic downturn and the decline in value of investments it has made.
It is estimated that in a winding up scenario the deficit would be €1bn.
Mr Justice Kelly had previously refused court protection to the six companies.
The Judge described the firm's survival proposals as being "fanciful". ACC Bank, whose demand for repayments of loans totalling €136m led to the application for protection, had opposed the appeal.
The companies had argued it had three very strong grounds of appeal, including that it had agreed a business plan six months ago with 88% of their banker creditors.
The banks had agreed to provide finance to pay off third-party unsecured creditors and for ongoing development and to put a moratorium on repayments of the debt for two or three years.
Under the business plan there would be no write down of the debt, nor was additional investment required.
Michael Cush SC for the companies said that Mr Justice Kelly had not given due weight to the level and the type of support the company received from seven out of the eight banks it owes money to.
The Court heard that Bank of Ireland, AIB, Bank of Scotland (Ireland), Ulster Bank, KPC Bank support the examinership and Anglo Irish Bank are neutral, while EBS had not opposed the application.
AIB was the largest lender, accounting for 40% of the monies owed, Bank of Scotland Ireland 23.8%, ACC 10.7%, Bank of Ireland 9.3%, Ulster Bank 6.7%, Anglo Irish 3.1%, while Ulster Bank, KPC and EBS were owed smaller amounts.
Counsel also argued that the judge had taken matters into account when he should not have, while failing to properly take into account matters he should have.
Another ground of appeal was in relation to the weight that Mr Justice Kelly had given to evidence about the property market.
Lyndon McCann SC for ACC, who had previously adopted a position of guarded neutrality toward the examinership when the matter was before the High Court, said his clients were opposed to the Supreme Court allowing the appeal and appointing an examiner.
In dismissing the appeal the Chief Justice said that the companies' ability to trade out of its current state of insolvency depends on the sale of its assets over the next 30 months.
That was within the ambit of a 30-month business plan shown to the banks.
The court said that no evidence was given to validate assumptions made that the property market would improve over the next three years. The fact was that the property market is currently "in a grave recession."
Some evidence of a likely improvement was, the court said: "absolutely essential"
However the court said that neither Mr Liam Carroll in his affidavit to the court seeking the appointment of an examiner nor the an independent accountant's report, which stated that the company had a reasonable prospect of survival, attempted to correct that deficiency.
In the absence of such evidence the court said it was unable to reach any conclusion about the prospects of the firm's survival.
The court also stated that the independent accountant's report was based on a number of assumptions, which were not verified in evidence.
Therefore it could not assist the court to determine if the companies have a reasonable prospect of survival.
However the court noted that there were problems with valuations of the companies properties which were compiled in 2008. The court said that the valuations were not exhibited to the court, they were done six months ago, and were based on assumptions.
The court also said that the business plan agreed between the banks and the companies had also not been put before the court in evidence.
It was also noted that the bank's basis for supporting the appointment of an examiner had not been articulated to the Supreme Court.
He added that no opinion had been expressed on their behalf that the appointment of an examiner could reasonably be expected to result in the firm's survival as a going concern.
