A meat exporting company, Purcell Brothers Limited, is effectively asking the High Court to sanction a quasi-examinership and allow the company continue to trade when there is a real issue concerning insolvency, it was claimed at the High Court yesterday.
Mr Kevin Feeney SC, for National Irish Bank, was opposing an application by Purcell's for an interlocutory order restraining the bank from taking any steps to enforce securities held by the bank against the company's assets. NIB claims it is entitled to sue on foot of a £6.4 million (€8.13 million) debt which, it claims, is owed by Purcell's.
Mr Feeney said there were strict obligations on a company seeking to freeze a secured creditor and the way Purcell's had put its application together was grossly inadequate. This was a company which wanted to continue to trade in circumstances where a secured creditor was not entitled to take action to enforce securities.
This was a concocted case put together to avoid what was the recognised position of this company over a long period of time, counsel said. The court should know of the financial position of a company before it was asked to restrain a receiver going in but this was not the case.
Purcell's claims the £6.4 million debt is a result of unauthorised foreign currency speculation by its former managing director, Mr Gerry Purcell, which speculation, it alleges, was encouraged and facilitated by NIB. Because the company was not authorised to engage in such speculation, it claims it is not liable for the debt. If it were liable, it says the bank's position would be adequately protected because it held fixed charges over several Purcell assets and the company would be prepared to offer additional securities.
NIB denies that it encouraged and facilitated unauthorised foreign currency speculation. It says the foreign exchange transactions were part of Purcell's exporting business, that Mr Gerard Purcell was an experienced businessman and he knew what he was doing. It also claims there were intensive negotiations under way to restructure the company's debt. It says the court action is an attempt by Purcell's to avoid its liabilities or to avoid reaching a responsible agreement on restructuring these. NIB also disputes the valuation placed on some of the Purcell assets.
In an affidavit, Mr Gerry Purcell, who has been replaced as managing director of the company by his father, Mr Seamus Purcell, has referred to recent proposed guidelines issued by the Central Bank regarding the code of conduct for credit institutions in relation to investment business. He said these included a sample generic risk disclosure statement which stated what should be brought to the attention of a customer before entering into a speculative transaction. He believed NIB had not complied with those guidelines in regard to its dealings with him.
NIB has denied all those allegations. In an affidavit, Mr Cormac O'Mahony, said the generic risk disclosure statement referred to was not mandatory here but was part of draft guidelines produced by the Central Bank. Even if those guidelines became binding, such a statement would only have to be provided for complex transactions such as financial futures, options on futures and margin transactions.
