The High Court refused to approve a rescue scheme for Laragan Developments Limited and ordered the company into liquidation, finding that it was not an independent undertaking with a real enterprise to preserve. The orders were made on 17 July 2009, after the company said it would not appeal the court’s announced decision.
Laragan, a wholly owned subsidiary of Laragan (Holdings) Ltd, entered examinership in March 2009. Examiner Paul McCann proposed a scheme that went to creditor meetings and was then considered at a four-day confirmation hearing beginning on 7 July. Mr Justice Clarke gave a brief ruling on 16 July and delivered his reasons in a judgment dated 31 July.
The scheme faced objections from creditors on several grounds. Among them were low proposed dividends, the treatment of purchasers who had paid deposits for homes at Carrickmines Green and Milner’s Square, alleged disclosure failures and concern that the arrangement could limit claims against the company’s controller, Alan Hanly, or related companies.
The proposed scheme offered deposit creditors 1% of their deposits and released them from their purchase contracts. During the hearing, the Examiner also described an option for those creditors to buy a unit at its current, independently verified price, with their full deposit credited toward the price. Justice Clarke considered that a significant improvement. But he said information before him raised a real possibility that many purchasers could already have been entitled to end their contracts because of construction delays. He concluded that, if the scheme were approved, deposit creditors should receive the same dividend as ordinary agreed unsecured creditors. That adjustment would have reduced the latter group’s likely dividend by less than 1%, while raising the deposit creditors’ return by at least four percentage points.
The judge also recorded serious inaccuracies in the independent accountant’s report, including an understatement of inter-company liabilities by more than €12 million. He said those inaccuracies, the inconsistent positions taken in earlier proceedings and Laragan’s commencement of proceedings during examinership without court permission did not, by themselves, justify rejecting a scheme that otherwise merited approval. Nor did the possible claims against Hanly or Laragan (Holdings) decide the application.
The decisive issue was Laragan’s relationship with Hanly and other companies he controlled. Justice Clarke found that the arrangements for construction work, payments and allocation of sale proceeds were unclear and fell far short of an arm’s-length relationship. He concluded that Laragan was a “vehicle of convenience”, rather than an undertaking that could properly be examined on a standalone basis. He was also not satisfied that approval would preserve additional jobs or a meaningful independent enterprise.
Justice Clarke said the Examiner had done his job well and had brought forward the best scheme available in the circumstances, subject to the proposed adjustment for deposit creditors. The court’s final orders refused approval of the scheme and placed Laragan into liquidation; the judgment does not determine the potential personal claims discussed at the hearing.