A potential €11 million liability arising out of damages claims against a Dublin-based cold storage company has led to it securing a High Court order for the appointment of an interim examiner.
Mr Justice Denis McDonald agreed on Monday to appoint Neil Hughes as interim examiner to VF Cold Stores Ltd after being satisfied, on the evidence before him, it is balance sheet insolvent but has a reasonable prospect of survival once certain conditions are met.
The company, established in 1989, is based in Jamestown Industrial Park Finglas and employs 20 people full-time and also uses five agency workers full-time. It has a number of related companies but those are not involved in the examinership application.
Gary McCarthy SC, instructed by Clarke Jeffers Solicitors, for the company, outlined that an "exceptional" event has caused it to be insolvent on a balance sheet basis.
Ornua Co-operative Ltd and some companies in the Kepak Group have sued the company and other defendants over damages alleged caused to stored products following the collapse of a racking storage system at the company's premises in July 2018, he outlined.
Ornua is claiming some €7.87 million over alleged damage to some 3,360 units of frozen butter while the Kepak companies allege that damage to their meat products gave rise to losses of some €3.14 million.
The company has entered defences to both sets of proceedings, including a defence alleging its terms and conditions meant the Ornua and Kepak plaintiffs bore the risk for their stored goods, counsel said.
As a result of its terms and conditions, VF Cold Stores did not have insurance cover for the risk of damages to goods stored in its premises and is thus not insured against the costs of defending the legal proceedings, estimated at €771,554.
Mr McCarthy said the company, while believing it had a good defence, simply could not afford the litigation costs with the effect, as matter of probability, it could not defend and might face damages claims as a result. It had been advised the combined €11 million claims had to be accounted for as a contingent liability. If those were moved onto the company’s balance sheet, it was balance sheet insolvent, he said.
This comes at a difficult time as the company, like many businesses, was affected by the Covid-19 pandemic, he said. Its storage capacity was also reduced by 25 per cent because it had insufficient investment funding to put mobile stacking into its premises and, following an end-of-year review in 2019, it had written off an uncollectable debt of €549,053 owed by a related company, VF Foods Ltd.
However, an independent expert had, in a report, expressed the view the company, despite its significant debts, has a reasonable prospect of survival for reasons including it has a good underlying business.
There was a shortage of cold storage capacity in the Irish market , the company was well established with a consistent turnover of some €3 million annually and had identified new customers to restore operating storage capacity to previous levels, he said.
Having read the documents grounding the application and heard from counsel, Mr Justice McDonald was satisfied, on the evidence before him, to appoint Neil Hughes as interim examiner. The judge said the evidence indicated the company has a reasonable prospect of survival subject to conditions. He said his observation were limited to the hearing for appointment of an interim examiner and there would be a full hearing of the matter when the petition returns before the court on December 21st.