The High Court has refused Coolfadda Developers Limited’s request to keep its provisional liquidation in place indefinitely while its building contracts were completed, finding that this would not be a proper use of the court’s discretion.
The company had passed a special resolution to wind itself up on 20 April 2009 and presented a winding-up petition two days later. The court appointed Michael McAteer as provisional liquidator on 22 April. At the petition hearing on 11 May, the company sought an adjournment, initially until early July, to allow work on existing contracts to continue. It argued that termination clauses could put those contracts at risk if a winding-up order were made, and that completing them could increase funds available to creditors.
In a decision given on 18 May and explained in a written judgment delivered on 25 May, Miss Justice Laffoy ruled that the petition would not be adjourned to allow an indefinite continuation of the provisional liquidation. The court had earlier adjourned the hearing briefly to consider the request. At the end of the judgment, the judge said she would hear further submissions from the company on the form of order required. The judgment therefore did not state the final form of the order.
The judge said the Companies Acts provide for winding up or examinership as routes for dealing with insolvency. A provisional liquidator’s primary role is to preserve company assets pending a winding-up order. Continuing that appointment to conduct most of the company’s business and complete developments, she said, was not envisaged by the legislation and would run against its scheme. She acknowledged that exceptional cases might justify such an approach, but found this was not one.
The company was “hopelessly insolvent”, the judgment said. Secured creditors were owed more than €31 million, preferential creditors more than €100,000, and unsecured creditors more than €3.8 million. The provisional liquidator estimated the realisable value of amounts owed to the company at about €8.4 million. The judgment also noted that the company’s main asset was work in progress across eight development sites and that the company had fully disclosed interests connected with the developments.
The judge observed that site owners and secured creditors appeared likely to be the main beneficiaries if the provisional liquidator completed the projects. In each development, a secured creditor had a charge over company assets or work in progress and, in some cases, over the site owner’s interest. The judgment said a secured creditor could appoint a receiver to complete a development. It left open whether, after a winding-up order, the court might permit an official liquidator to finish some or all projects for the beneficial winding up of the company.