A JUDGE has refused to block the sale of a debt-ridden, family owned Co Tipperary shopping centre by a bank-appointed receiver who claims to have a multimillion euro bid for it.
The High Court is being asked to declare void a remortgaging of O’Connor’s Nenagh Shopping Centre Ltd with Bank of Ireland because it allegedly gives members of the O’Connor family an unfair advantage over other creditors.
Mr Justice John MacMenamin said liquidator Anthony Fitzpatrick had learned the firm, including director members of the O’Connor family, had remortgaged the centre with the Bank of Ireland for just over €3 million on March 28th, 2011, two months before the company closed down.
Mr Fitzpatrick had told the bank it ought not appoint a receiver as its charges against the centre were unsafe given their recent registration under the Companies Act. Despite being told it would not be in the interests of all creditors, the bank had appointed Kieran Wallace as receiver.
The court heard the Companies Act provided that any conveyance, mortgage or other act done by or against a company within six months of its winding-up to give a specific creditor preference over others, would be deemed a fraudulent preference of its creditors and invalid.
The judge said it was a fundamental precept that when a company was insolvent its assets should be available for distribution among unsecured creditors.
The onus of proof was on the liquidator to establish a dominant intention to prefer one creditor over another. When there was no direct evidence of intention, the court could draw an inference.
In the application before him, the registration of the mortgage had undoubtedly taken place within the requisite time period set out in the Act and there was significant evidence that when the charge was registered the company was in extremis.
He said that, at the time of the liquidation, the total value of the company’s assets, as estimated by the directors, was €4.4 million as against debts of €7.8 million.
“It is claimed by the liquidator that the directors and bank both knew of the situation and he says the directors wanted to recoup family monies invested in the company and that this was the motivation behind the fraudulent preference,” the judge said.
Company director Donal O’Connor had told the court his intention was to recover the family’s investment. The directors had signed up to the new charge to keep the company afloat, thereby saving their €2.8 million investment.
The judge said he had been responsibly informed that the receiver, Mr Wallace, had an offer for the shopping centre in a “multiple of millions” and to ignore it would be to look a gift horse in the mouth.
The liquidator was merely proposing to continue to collect rents from shops.
Refusing to block the sale, he said a powerful factor in his decision was that the receiver had undertaken to place the proceeds of sale in a protected account until the ultimate determination of the court.