Supreme court ends protection of Zoe companies

JUDGMENT:THE SUPREME Court has ended court protection for key companies on whom the survival of the entire Zoe building group depends after they failed to produce any evidence to support their claim they could reasonably survive as a going concern.

Without court protection, the six companies, insolvent with bank borrowings of more than €1 billion, cannot survive in current market circumstances with the property market going through a “grave recession”, the Chief Justice, Mr Justice John Murray, noted.

However, the court could not grant protection where the companies had failed to show their strategy for a future orderly disposal of property assets over the next 30 months was either “credible or reasonably viable”, and where there was “remarkably” no stated commitment by the banks to continue to provide finance for future development and day-to-day operations.

The companies had also failed to produce “absolutely essential” evidence about the likely future development of the property market, including property valuations referred to in documents but not exhibited.

It was significant none of the 90 per cent of the group’s banker creditors who supported examinership had spoken out in court in support of the companies claim to have a reasonable prospect of survival, the judge added.

The Chief Justice, sitting with Ms Justice Susan Denham and Mr Justice Nial Fennelly, was delivering the court’s decision dismissing the companies’ appeal against the refusal on July 31st last of Mr Justice Peter Kelly to appoint an examiner.

Mr Justice Kelly refused protection after rejecting as “fanciful” assertions the companies could trade their way out of their difficulties based on trading projections by management and December 2008 valuations of commercial and residential property assets.

ACC Bank, whose demand for repayment of loans led to the application for court protection, opposed the examinership application yesterday. The other banker creditors all supported examinership or adopted a neutral stance.

The petition was brought by Vantive Holdings which, with Jersey-registered Morston Investments Ltd, are the parent companies of about 50 companies known as Zoe Developments. The four other companies involved are Villeer Developments, Peytor Developments, Caragh Enterprises Ltd and Parlez International Ltd.

The companies argued protection should be granted in the “almost unique” circumstances of the Zoe group and two other groups associated with Mr Carroll, Dunloe Ewart and Orthanc, having agreed a three-year “high-level” business plan six months ago with 90 per cent of their banker creditors.

Mr Justice Murray said the primary issue was whether the High Court correctly concluded the companies had not shown they have a reasonable prospect of survival.

The Chief Justice said the companies’ business plan had two critical elements – an orderly realisation over 30 months of some property assets and extensive support of the banks in the meantime.

It was “rather striking” there was no evidence of any commitment by the banks to continue to provide future finance.

On the other key element of the business plan, the planned orderly disposal of property assets over 30 months, the court was not satisfied this proposal was sufficiently sound given the collapse of the property market and a restriction on the availability of credit.

The business plan was not put before the court, there was no attempt to consider what impact the volume of other comparable properties on the market might have for this group’s future expectations and remarkably no attempt to analyse possible or likely future developments in the property market, the Chief Justice said.

The group had failed to show “a proven reality” to its proposals with a complete absence of objective evidence to support its claim market conditions would change in the short to medium term to allow the properties to be disposed of.

For full text of judgment go to www.irishtimes.com