The High Court has refused appoint an examiner to companies in the Liam Carroll controlled Zoe group.
As a result of the ruling the group, which has bank borrowings of €1.2bn, now faces collapse.
Mr Justice Frank Clarke dismissed a second application to appoint an examiner to the beleaguered property group.
The judge said that he would set out the reasons for his decision in a written judgment tomorrow.
In addition tomorrow the judge said he will also hear an application by ACC bank to appoint a liquidator to the two holding companies in the group Vantive Holdings and Morston Investments Ltd, which had been on hold due to the examinership application.
It is estimated in a liquidation scenario, the seven companies would have some €1.1bn liabilities.
Previously both the High Court and the Supreme Court had refused to appoint an examiner to the firms on grounds they had failed to display evidence to show they had a reasonable prospect of survival.
The application for examinership was opposed by the Dutch owned ACC bank, whose demand for repayments €136m by companies in the Zoe group lead to the petition being made.
During a 90 minute hearing, the judge was critical of the manner that certain figures contained in an independent accountant’s report.
That report was submitted by the companies as part of their application for examinership, which said the firms had a reasonable prospect of survival as a going concern.
The judge made the criticisms having asked a series of detailed questions of counsel for Zoe arising from the financial projections for the companies in summer 2011. Among a series of concerns, the judge queried figures suggesting the companies would by the end of July 2011 have adequate income to meet their day to day overheads and to service interest.
From his own calculations, the judge said it appeared the companies would, in the seven months to end July 2011, have a deficit of €3 million, even factoring in interest roll-up, and not a surplus of €2.84 million as suggested in the independent accountant's report complied by David Wilkinson of KPMG.
After several discussions inside and outside court between lawyers for Zoe, two of the companies directors — John Pope and David Torpey — and others, Bill Shipsey SC, for the companies, agreed the judge was correct, but added it was possible the companies may generate additional rental income. The roll-up of interest also made a significant difference, he submitted.
However counsel agreed that this had not been mentioned in the reports, and that it should have been.
The judge said he took a very serious view indeed of the quality of the independent accountant’s report which had made not even the slightest mention of the fact that in order to get the “magic 100 per cent cashflow” to meet the companies’ projected financial income one had to assume rents from leases that had not even been entered into yet.
The judge said that the manner in which the financial information had been presented to him made it difficult to analyse it objectively, as required by the Supreme Court.
Mr Justice Clarke said his clarification at the way in which the company had presented its accounts had somewhat altered his picture of the company but “not in a way that materially effected the overall view he intended to take.”
He had prepared a written judgment, which he would read out in court tomorrow afternoon in which he would give his reasons for refusing the petition.
The judge said he had formed his view not to grant the petition independent of any of the matters that had arisen in court yesterday. His views were already expressed in black and white in the judgment he would read to the court.
The petition 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 other companies include Villeer Developments, Paytor Developments, Carragh Enterprises Ltd and Parlez International Ltd. The firms have a very substantial portfolio of investment and development outlets and a seventh company Royceton.
Zoe was seeking the appointment of Mr Ray Jackson, a retired partner of KPMG, as examiner.
Zoe claimed the firms had a reasonable prospect of survival, based on a three year business plan supported grounded on a two-year moratorium on interest repayments on bank loans.
They also relied on economic opinion to the effect the recession will bottom out by 2010 with general recovery beginning in 2011, as well as a modest improvement in the property market by 2011 and valuations by estate agents of some €644 million for the group’s properties in a “firesale” and €1.2 billion over three to five years.
They had claimed they would be solvent by 2011 with sufficient income of some €40
million from property rents, sales and share dividends to meet interest repayments and provide a surplus of some €20 million assets over liabilities.
Zoe’s petition was supported by AIB, bank of Ireland and Bank of Scotland Ireland are supporting the petition.
Other banking creditors such as Anglo Irish Bank, Ulster Bank have not objected to the petition.
Employees, creditors and sub contractors of companies controlled by Mr Carroll had also supported the petition.