High Court 'failed to attach importance to banks' support'

CARROLL SUBMISSION:THE SUPPORT and forbearance of most of developer Liam Carroll's companies' banker creditors is a crucial and almost unique element of the proposed survival scheme for the Zoe group, the Supreme Court heard.

Michael Cush SC, for six Zoe companies, argued the High Court failed to attach enough importance to the support of the banks for the rescue plan when refusing court protection. The fact all the banks, except ACC, were supporting or neutral on examinership was the important element, not their reasons, he said.

This examinership application was unique, involving a plan with the main creditors relating to the Zoe group of 51 companies and two other groups, Orthanc and Dunloe Ewart, and included a moratorium on debt repayments over two years from December 2008.

Counsel said Mr Justice Peter Kelly was wrong to describe as “fanciful” views of the companies about an upturn in the property market. It was also unfair for the High Court to describe as out of date and not truly independent December 2008 valuations by CBRE and Hooke McDonald of property assets of the companies.

Counsel agreed the courts did not have those actual valuations and also agreed an independent accountant, on whose report the companies relied as a basis for their having a reasonable prospect of survival, had himself expressed no view on the valuations. The court heard the banks had provided finance to pay off some 86 per cent of unsecured creditors, including consultants, planning experts and lawyers. A cheque for a €760,000 VAT payment to the Revenue was also sent. This removed the risk of an attack by a lone creditor, counsel said.

Finance, “at least in principle”, was also offered by the banks for development work by the Zoe companies, counsel said. Pressed by the judges, he agreed there was no “explicit” commitment to such finance. Mr Justice Fennelly remarked it was “extraordinary” there was “great reliance” on a pre-agreed business plan which was not exhibited to the court and neither were the property valuations.

Mr Cush said the recovery plan had been seen by the banks. He also argued the High Court took the wrong starting point of the companies’ bank borrowings of €1 billion in rejecting claims a €290 million surplus for the group could be achieved in three years.

Counsel said the €1 billion figure was based on a fire-sale of assets and the correct starting point was the current deficit of €265 million.

The High Court judge also erred in saying he would exercise his discretion against granting protection because of his view the bank’s stance was “artificial”, counsel submitted. The court should have taken into account no creditor was opposing protection; 115 people were employed with hundreds in sub-contracting work; and the impact liquidation would have on the property market.