Dunnes petition to be heard

Mon, Nov 26, 2012, 00:00

Dunnes Stores chief Margaret Heffernan has told the National Asset Management Agency it will be held responsible for the "very significant losses" her company will "inevitably" experience if a petition to wind up the retail giant over non-payment of €21.6 million for a shopping centre development in Kilkenny is pursued.

The petition has been fixed for hearing on December 14th.

Dunnes, employer of 18,000 people, is "robustly solvent" but unwilling to pay the money to Holtglen Ltd (which is insolvent with loans gone into Nama) on several grounds including its concerns about the viability of the centre at Ferrybank, Kilkenny, the Commercial Court was told by counsel for Dunnes, Brian O'Moore SC today.

In strongly worded letters to Nama chief executive Brendan McDonagh, Ms Heffernan described the Ferrybank centre as "an unmitigated disaster" and the winding up petition as "an abuse of process".

It cannot be Nama’s belief Dunnes is insolvent and that any petition to wind up Dunnes on grounds of insolvency is justified, she said.

Mrs Heffernan said the mere presentation of the petition would damage Dunnes, an employer of 18,000 people, and Ireland as a whole and advertising the petition would simply exacerbate that harm. Pressing the court to appoint a liquidator to Dunnes was "an extraordinary step" for anybody, particularly a public agency, to take, she added.

Nama wrote to Dunnes on October 30th last warning that unless Dunnes paid €21.6 million to Holtglen within seven days, Holtglen would petition to wind up Dunnes on grounds it was unable to pay its debts and/or it was just and equitable that it be wound up.

Today, seeking to have the petition fast-tracked in the Commercial Court, Maurice Collins SC, for Holtglen, said Dunnes has deliberately decided not to pay despite asserting it has capacity to pay and that was "a novel proposition". Planning issues raised by Ms Heffernan about the development were "just thought up" and issues about the centre's viability were not relevant and subject of separate proceedings, he added.

Mr Justice Peter Kelly agreed to transfer to the Commercial Court Holtglen's petition. In a situation where Dunnes had not appealed his Commerical Court judgment last March enforcing an arbitrator's award to Holtglen against Dunnes, it was difficult to see how Dunnes has a defence to payment, he said. He was not determining the issues, the judge stressed.

Given the large sum involved, the fact Dunnes is a major employer and that 18,000 jobs would be in jeopardy if a winding up order was made, he said he would fast-track the proceedings and list the petition for hearing on December 14th.

Last March, Mr Justice Kelly granted summary judgment for €20.4 million to Holtglen against Dunnes after upholding an arbitrator’s award to Holtglen arising from a 2007 agreement to build the centre for €37 million.

Dunnes says it has to date has paid €18 million for the centre on foot of the 2007 agreement for construction of the development for €37 million and has indicated in correspondence it will pay another €7.5 million and transfer its rights in the centre to Nama if that is accepted as the end of its obligations.

Last September, Holtglen served a notice under Section 214 of the Companies Act on Dunnes. Section 214 provides that where judgment has been obtained against a limited company and the debt is not paid within 21 days of the notice, a petition may be presented seeking to have the company wound up.

In letters to Mr McDonagh this month, Ms Heffernan accused Nama of failing to address any of the "substantial" issues raised by Dunnes concerning the centre and said a report prepared by a planning consultant for Dunnes expressed the view the centre was not compliant with planning permission.

Ms Heffernan raised issues whether the centre complied with planning permission and said she was repeating "yet again" Dunnes invitation to Nama to engage in "meaningful discussions at the highest possible level".

Dunnes employs 18,000 people, contributes very large amounts to the State's coffers via tax payments and continues to be one of the best known and successful Irish companies, she said. It could not be Nama's belief Dunnes is insolvent or that any winding up petition on grounds of insolvency was justified, she wrote.

In relying letters, Mr McDonagh insisted Dunnes must pay the €21.6 million to Holtglen before Nama will engage in any talks about the operation of the Ferrybank development. The fundamental issue was the "pesistent refusal" by Dunnes to pay, he said.

Nama chairman Frank Daly told Ms Heffernan in letters he did not agree the centre was not commercially viable. Dunnes' failure as anchor tenant to fit out and open its anchor store had adversely affected the reputation of the centre and of Holtglen, he said.

Because Dunnes had refused to pay Holtglen despite the arbitrator's award of October 2011 and the court's judgment last March, Nama was left with no option but to take the legal route, Mr Daly told Ms Heffernan. He was disappointed there were no "meaningful proposals" from Dunnes.

In a letter of October 11th, Mr Daly told Ms Heffernan he phoned her personally on June 28th last following the last meeting between Dunnes and Nama on the matter "and you did not return my call".

Mr O'Moore, for Dunnes, said Dunnes was commercially robustly solvent but unwilling to pay the €21.6 million on grounds including Holtglen's insolvency. Dunnes wanted talks with Nama, the interests of Nama and Dunnes were similar, and it made no sense and was a waste of time and money seeking to wind up Dunnes, he added.