McInerney Homes & Ors -v- Companies Acts

JUDGMENT of Mr. Justice Clarke delivered the 10th January, 2011

At an early stage of the hearing discussion took place involving counsel for respectively Homes and Contracting (“collectively McInerney”), the examiner, and the Banking Syndicate. There was broad agreement that the issues which needed to be addressed were as follows.

First, there was a legal issue raised on behalf of the Banking Syndicate as to whether there was jurisdiction, under the provisions of the 1990 Act, to approve a scheme of arrangement which involved imposing a reduction on the amount to which a secured creditor might be entitled. Both the examiner and McInerney argued that such a jurisdiction existed, while the Banking Syndicate contested that proposition.

It obviously follows that in the event that the Banking Syndicate are right in their contention that no such jurisdiction exists, the scheme of arrangement in this case cannot be approved for there is no doubt but that it seeks to require the Banking Syndicate to take a very significant reduction in the amount which is owing to it. If that issue is, therefore, found in favour of the Banking Syndicate, then that is an end to the matter. However, the Banking Syndicate went on to note that, in the event that there was, at the level of principle, such a jurisdiction then any such jurisdiction was subject to the general overriding requirement under the 1990 Act that a scheme of arrangement be not unfairly prejudicial to any creditor. At the level of principle, neither the examiner nor McInerney disagreed with that proposition. However, there was a significant dispute between the parties as to whether, on the facts of the case, it could be said that the scheme proposed was unfairly prejudicial to the Banking Syndicate. The second overall issue which arises is as to whether, in the event that there be a jurisdiction to reduce the amounts due to secured creditors in the context of a scheme of arrangement, the scheme proposed in this case is unfairly prejudicial to the Banking Syndicate.

However, as part of that general issue a number of what might be called sub-issues were apparent from the legal submissions made in writing by the parties in advance of the hearing. It will be necessary to explore these issues in due course. However, in outline the questions which arose were:

(a) What criteria were to be applied in determining whether a scheme of arrangement was unfairly prejudicial to secured creditors;

(b) What the approach of the court should be in circumstances where conflicting expert evidence, relevant to the question of prejudice, had been put before the court in the form of affidavit evidence, but where no cross examination had taken place; and

(c) In the light of the answers to (a) and (b) whether the scheme in this case, on the facts, is unfairly prejudicial.

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Reference Info:n/a | Ireland

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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