Battle to prevent Zoe collapse ends as Supreme Court explains ruling

THE LONG-running court battle to prevent the collapse of the Zoe group has finally ended with the Supreme Court making orders confirming the liquidation of key companies in the group and awarding most of the substantial legal costs, estimated at more than €1 million, to ACCBank.

ACC is owed €136 million by developer Liam Carroll’s heavily insolvent Zoe companies and opposed protection. Its claim that the companies had no reasonable prospect of survival was upheld by two High Court judges and the Supreme Court yesterday.

Giving the court’s reasons for restraining the companies’ second bid for court protection, Chief Justice Mr Justice John Murray said they had to bear the consequences of Mr Carroll’s “conscious and deliberate strategic” decision, in “the teeth of legal advice”, to withhold crucial information from the court when first seeking protection in mid July.

Zoe director John Pope has said the withholding of the information, a three-year business plan and updated property valuations, was at Mr Carroll’s insistence, against financial and legal advice and despite the reservations of Mr Pope and another director, David Torpey. Mr Pope also expressed concern that stress adversely affected Mr Carroll’s capacity to make decisions about the business.

The Chief Justice said there was no evidence under which the court could find either Mr Carroll’s health or his concerns about the commercial sensitivities of the information were the exceptional excusing factors necessary under the Companies Act to allow a second petition to proceed.

Evidence that Mr Carroll’s judgment was significantly impaired in mid-July, or impaired at all, was “at best, tentative and conjectural”.

While the court was given letters from doctors confirming that Mr Carroll was suffering from stress at that time and was admitted to hospital in mid-August, there was no expert opinion as to any incapacity of Mr Carroll in conducting his business at the time of the first petition.

While there was no bad faith involved, the deliberate withholding of crucial evidence was an abuse of the court’s process. Other considerations, such as the rights of creditors and employees, could not override a company’s obligation not to abuse that process, the Chief Justice said.

Ms Justice Susan Denham disagreed with the view of Mr Justice John Cooke, who had allowed the second petition to be brought.

She said the “overriding consideration” must be the objective of securing, if feasible, the interests of creditors, employees and those doing business with the companies, by investigating if they had any reasonable prospect of survival.

Such an approach would mean that whatever actions a petitioning company took, they could still bring multiple petitions for protection after each other, she said.

Mr Justice Nial Fennelly agreed with both judges who said the companies were not entitled to bring a second petition in late August after both the High and Supreme Courts refused the first petition, initiated last July. That second petition was refused by Mr Justice Frank Clarke and the companies appealed his decision.

Last week, the Supreme Court upheld arguments by ACC that Mr Justice Cooke should not have permitted the second petition to be brought in light of the withholding of information the first time.

The court yesterday gave its full reasons for that decision and also lifted a stay on winding-up orders over key funding companies in the group. It appointed Declan Taite as official liquidator.

The application for protection was taken by Vantive Holdings and Morsten Investments (key funding companies in the group); Villeer Developments; Peytor Developments; Carragh Enterprises; Parlez International and Royceton.