The High Court has agreed to allow a second application for protection for seven companies in Liam Carroll’s beleaguered Zoe development group to proceed to full hearing before the court.
Mr Justice John Cooke gave his ruling this afternoon in a preliminary hearing on the fresh bid to appoint an examiner in an attempt to devise a long-term survival plan for the grossly insolvent companies.
The judge’s decision gives Mr Carroll’s property companies another chance to plead their case for court protection after their first petition was rejected by the High Court and Supreme Court.
Earlier, counsel for Dutch-owned ACCBank, which opposes the application in an effort to recover unpaid loans of €136 million, argued the companies had made a “tactical and strategic decision” to withhold a crucial business plan showing future property valuations in their failed bid for protection.
Lyndon MacCann SC, for the bank, told Mr Justice Cooke that the companies made the “same deliberate tactical and strategic decision” to withhold the evidence to support their rescue plan when they appealed the High Court’s rejection of their first application to the Supreme Court.
The judge said that “past mistakes and misjudgements, and perhaps misconduct” of the directors of the companies ought not to affect the statutory interests of the companies’ creditors, employees and other companies that have business with them, all of which supported the new application for protection.
Mr Justice Cooke said the court did not discount the serious reservations about the adequacy of the explanations given by the companies for the absence of letters of financial support from some of the group’s banks to fund future development or why a mistaken and misguided strategic decision was made not to make use of the business plan in the first application for protection.
He said it was clear that the overwhelming majority of the companies’ creditors, employees and those having business with the companies appear to support the new petition. The judge said that company law permitted companies to make a second attempt to appoint an examiner.
“There is a clear imperative in allowing the petition to proceed to be heard,” he said and later added that the full hearing will decide whether the “defects” outlined by the High Court and the Supreme Court in the first, unsuccessful petition are “adequately answered”.
The judge will decide on Monday when the full hearing of the application for court protection will take place and how this will affect a provisional liquidator and receiver who has been appointed to a number of the companies on the back of applications by ACC.
The judge said he would also give further details outlining the reasons for his decision on Monday. The full hearing of whether to confirm the appointment of the liquidator will be heard on September 9th.
Prior to the judge’s ruling, ACC’s counsel described the fresh application for protection as “extraordinary and unprecedented” in the history of Irish corporate litigation.
Mr MacCann said the decision not to submit crucial financial information in the first application for protection was “dictated” by Mr Carroll and although his fellow directors disagreed, they acquiesced with this deliberate withholding of information from the court.
He said that the companies sought to justify the withholding of evidence on the stress that Mr Carroll was under at the time and that this “somehow impaired his judgment”.
“There is no suggestion that Mr Carroll did not know what he was doing,” said counsel. “In a time of stress a bad decision was made,” he added, but that bad decision was perpetuated by not submitting the business plan in the Supreme Court appeal.
Mr MacCann said that the companies were trying to distance themselves from that submission and seeking to “start afresh” by submitting a new application for court protection. “That at the very least is an abuse of process,” he said.
Letters of support from some of the group’s banks, which the companies submitted as new evidence in support of the second bid for court protection and the survival plan, were “frankly pathetic”.
He described them as “vague and non-committal” statements to support the application rather the future financing of development that would support the group’s long-term business plan.
Mr MacCann said that the fresh evidence did not address the deficits in information on which the Supreme Court rejected the first application for protection and that the new petition for the appointment of an examiner was “doomed” from the outset as a result.
The bank claimed that the second application was an abuse of process as the matter had already been considered and rejected by the High Court and the Supreme Court, and that the fresh attempt arises only because of the companies’ deliberate decision to withhold information from the court.
Earlier, counsel for the seven companies, Michael Cush SC, said that the court would be “wholly wrong” to dismiss their fresh application for court protection to put in place a rescue plan.
Mr Cush, for Vantive Holdings, Jersey-registered Morston Investments and five related companies in the Zoe Group, said that the application for protection was in the interests of a broad range of persons, including creditors and employees of the companies and the economy as a whole.
Six of the companies are seeking court protection again, together this time with a seventh Carroll-controlled company, Royceton, after an initial application was rejected by the High Court last month and the Supreme Court last week.
The High Court appointed the provisional liquidator, Declan Taite of Dublin accountancy firm FGS, to Vantive and Morston on the back of application by ACC, which has also appointed a receiver to four related companies seeking protection.