ACCBANK will ask the High Court today to wind up three insolvent companies in the Fleming building group, which has debts of more than €1 billion, following the Supreme Court’s decision to end court protection for them.
The five-judge Supreme Court yesterday unanimously refused court protection after finding proposed survival schemes for John J Fleming Construction (JJFC), JJ Fleming Holdings (JJFH) and Tivway Ltd did not amount to a plan with a reasonable prospect for their survival as “going concerns”.
The schemes were instead a “holding plan” involving the sale of the profitable “engine” or construction arm of the group to a new company outside the examinership, leaving behind an impaired property development business, Ms Justice Susan Denham said.
The plan was to keep sites in a land bank for 10 years in the “hope” the property market would improve by then and the banks would support a build out programme at an appropriate time.
An examinership was “not a process for sale” and the test was a reasonable prospect of survival as “a going concern”, she said.
These proposals were not a plan for survival as going concerns and the companies would be akin to three aircraft permitted to hover in the air for 10 years in the hope a property market improvement would mean they would not end up as “scrappage”.
The facts of the case were “bleak” and epitomised “the consequences of the recent property boom and bust” which had left many people in “dismal situations”, she said. Some 137 people were employed by JJFC but, even if the schemes had been approved, all but 15 of those jobs were to go to companies outside the survival scheme, she added.
Ms Justice Denham also noted both JJFC and JJFH were unlimited companies whose shareholders, John and Noreen Fleming, had transferred €3 million of their assets to trust funds in May 2009 and also pledged some €5 million to the proposed survival schemes.
ACC had said the guarantees of Mr and Ms Fleming in the two unlimited companies were significant to it and approval of the schemes would deprive it of that “route” to the Flemings.
If the schemes were approved, the judge said, that would terminate the liability of shareholders and the Companies Act was not designed to immunise company principals or shareholders from the consequences of financial difficulties. As the Flemings were not represented in these hearings, her decision was not based on this aspect.
She was giving the court’s judgment allowing the appeal by ACC against a High Court decision last November approving the schemes which ACC, owed €22 million by Tivway, had described as “asset-stripping” and a “personalised Nama”.
The schemes were on hold pending the Supreme Court decision.
The Fleming group has total debts of some €1 billion, including €260 million to Anglo Irish Bank and liabilities to AIB, Bank of Ireland Scotland and hundred of unsecured creditors. All but ACC supported the schemes.
Following the Supreme Court decision yesterday, Paul Sreenan SC, for ACC, sought orders to wind up the companies. ACC had already appointed a receiver to Tivway, he said.
The Chief Justice Mr Justice John Murray directed the High Court should deal with those matters and Mr Justice Brian McGovern will deal with them this morning.
The sides accept the companies have to be wound up but differ on the identity of the liquidator. ACC wants Kieran Wallace of KPMG but the Fleming companies argue that, as Mr Wallace previously provided a report for ACC in the matter, a different liquidator should be appointed.
The struck-down schemes proposed a sale of the Fleming group’s contracting arm and other assets to a new company, Donban, for €3.6 million and meant secured bank creditors would have effective control of Fleming’s property development business, including sites in Sandyford, Co Dublin, with the banks having 10 years to realise their security.
Ms Justice Denham said the case turned on fundamental issues relating to the nature of an examiner, the jurisdiction of the court and the purpose of examinership laws. The court had been told the survival prospects of the three companies were inextricably linked, she noted.
Under the proposed schemes, all three insolvent companies would remain insolvent. The proposals involved a sale, not an “investment” as suggested, of the group’s profitable contracting arm to Donban leaving behind “moribund” sites.
Tivway, she noted, owned the Sentinel building and two-thirds of an Aldi site at Sandyford, assets once valued at €36 million but now valued between €8-9 million.
Anglo Irish Bank had approved €361,943 capital towards the Sandyford scheme to essentially maintain the site “with an aspiration or dream of future business”. This was not funding to build out the site.
