Directors challenge receivership

The battle over the future of Superquinn intensified at the High Court today with claims by two of its directors that the appointment of joint receivers to the troubled retail chain earlier this week was invalid while the receivers disputed the validity of a company resolution to present a petition for examinership.

John Douglas, general secretary of Mandate trade union which represents most of Superquinn's 2,700 employees, also told the court the workers, some of whom were in the packed court, are very concerned for their jobs and Mandate is considering whether to seek to be joined to the court proceedings.

Superquinn directors David Courtney and Kieran Ryan, through their counsel Bernard Dunleavy, signalled their intention to seek injunctions restraining Kieran Wallace and Eamonn Richardson of KPMG acting as receivers. The receivers were appointed last Monday evening by Bank of Ireland, AIB and National Irish Bank to the troubled retail chain.

Brian Kennedy, for the receivers, said they wanted the court to decide if a valid resolution had been passed by the Superquinn company board last Monday to present the petition seeking the appointment of an examiner to the trading side of the company.

Counsel said there was an affidavit from a director of Superquinn, Simon Cantrell, which disputed claims by the other directors the company had passed a resolution at a meeting last Monday to petition for examinership.

Mr Dunleavy said there were four people present at that meeting and the other three would swear affidavits, to be provided later, contradicting Mr Cantrell's claims.

Ms Justice Mary Finlay Geoghegan has adjourned to Monday several matters arising from the initiation of the examinership proceedings on Thursday evening, including whether the separate injunction proceedings aimed at restraining the receivers acting will be heard in conjunction with any examinership petition.

An Independent Accountants report, required before the court may appoint an examiner, is being finalised and will be provided to the sides by Monday, the court heard. The petitioners say financial information up to June last indicated the company has a realistic prospect of survival.

The judge has fixed Tuesday for the hearing of preliminary issues as to whether the petition - put before the court yesterday evening at about 5.50pm - was brought within the three day period stipulated under the Companies Act. Another possible issue to be addressed is the alleged invalidity of the resolution to initiate the examinership proceedings.

She will also consider any application by the petitioners for court protection for Superquinn on an "exceptional circumstances" basis.

If the court concludes the petition can be heard, that hearing will proceed on Thursday when it will be vehemently opposed by the banks and Musgrave Group plc.

The petition states it is made on behalf of Superquinn and three directors - Mr Courtney, Mr Ryan and Simon Cantrell - but Mr Cantrell yesterday said, in an affidavit provided to the court by his counsel Aidan Redmond SC, he had not authorised the petition. Mr Cantrell said he was fully supportive of the receivership process and believed the proposed transaction with Musgrave was in the best interests of Superquinn's staff, suppliers and customers.

Mr Cantrell has disputed claims in the petition that the board had passed a resolution at last Monday’s meeting in the offices of Spain Courtney Doyle, following the appointment of the receivers, to bring a petition for examinership.

Rossa Fanning, for Musgrave, told the court today his client has "binding contracts", in place to purchase Superquinn and Mr Kennedy said the matter must be dealt with as quickly as possible because every day was crucial.

John Douglas, of Mandate, said the workers and their families were very concerned at what was happening and, if the legal process goes on, their jobs would be lost. His union was afraid the workers "will get forgotten in all of this" and it would like some standing in the case, he said.

The judge said the thrust of examinership is to see whether a company has a realistic prospect of survival and jobs were always taken into account in determining examinership applications. While she did not recall employees ever being represented in an examinership application, she would not rule on that issue now and, if Mandate wanted to seek representation, it could indicate that to the court on Monday, she said.

Mr Dunleavy said he wanted clarification whether the receivers had directed officers and employees of Superquinn not to engage with the Independent Accountant. Mr Kennedy said he understood the situation was it had been sought to have any requests from the Accountant "routed" through the receivers.

The judge said it would be "on the receivers' heads" if this delayed the court proceedings. It would clearly delay matters if the Accountant could not deal first hand with those who have necessary information, she said. Mr Kennedy said he wanted to make clear there was no withholding of information and the matter would be dealt with. The receivers’ ability to run the business was being greatly affected by the proceedings, he added.

The petition is for appointment of an examiner to the trading side of Superquinn only. The property side of the group has ultimately had a negative impact on the solvency of the company, the petitioners say.

They say the appointment of the joint receivers "spells the end" of Superquinn's undertaking and represents a "disaster" for its creditors and employees. They claim the inevitable outcome of receivership and sale to Musgrave is likely to be substantial involuntary redundancies with trade creditors - owed about €55 million - being "burned" while the liabilities of the bank are met.

The bank's move was aimed at enhancing its position as a secured creditor leaving nothing for the unsecured creditors, they claim. Examinership, they claimed, would mean an increased likelihood of translating the good core business into long-term sustainable profitability and protect Superquinn "as a decent place to work where its employees are paid a decent wage".