The High Court has confirmed a lower court’s decision to refuse examinership for a construction firm on Friday.
David Kennan and Shane Connaughton‘s KC Capital is behind a nine-storey office block on Cuffe Street, known as the Greenside Building, with an expected value of €34.62 million once completed. The court heard it has built up more than €53 million in debts but that just two months of work remain.
KC Capital Property Group Ltd, as well as two group companies, sought to have Damien Harper of PUC Consultants appointed as interim examiner in late December. The appointment came days after receivers had been placed over the company.
A Circuit Court judge refused to appoint an examiner after it was opposed by the company’s secured creditor, Fairfield Real Estate Finance fund, which is backed by Oaktree Capital. KC Capital appealed the decision.
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Judge Twomey had “no hesitation” to uphold the decision of the lower court and refused to confirm the appointment of the examiner.
He reasoned that KC Capital was not a suitable company for examinership, that no additional jobs would be saved and that continuing into receivership would not preclude the pursuit of a €15 million legal dispute the company is involved in.
The dispute is over the supply of allegedly defective concrete by one of its suppliers, Keegan Quarries Limited, from which the companies hope to recover approximately €15 million. KC’s counsel had argued that the future of the litigation would be more certain in examinership.
Judge Michael Twomey on Friday gave a verbal judgment at the High Court, noting that pressures caused by the time frames of the examinership process meant he “only had one day” to consider the case.
Friday marked the 68th since the interim appointment was made, with this protection process lasting for 70 days, unless an extension to a maximum of 100 days is approved by the court.
He said KC was “not a company for which examinership was designed”, arguing that Kennan and Connaughton had created a special purpose vehicle (SPV) and that it was “difficult to see” how the company was an enterprise. He said KC was “nothing more and nothing less” than a conduit for investment.
The only employees of the company were its shareholders, who would not be left unemployed as they had other business interests, he said. The real jobs at risk are those of the main building contractor, Townlink, which, the judge noted, was seeking for the company to return to receivership.
He said that allowing KC to enter examinership would be “very far from the raison d’être” of the examinership process, noting that examinership “might be in interests of Kennan and Connaughton” but that it would be “hard to see” how it would benefit the wider economy.
Judge Twomey noted that there were examples of KC “not acting in good faith” – referencing its use of different valuations of properties in different submissions to the High Court and a sum of €50,000 which had been moved from secured account to an unsecured account following the appointment of the receivers in December. He said that was an “apparent attempt to take” money entitled to the secured lender Fairfield before a “freeze” could be placed on it.
The judge also acknowledged as “relevant” that the secured lender would be paying for the examinership should it continue, while being opposed to the process.
A full perfected judgment will follow early next week. The receivers placed over the company in December will resume their work.
