The Court of Appeal has ordered examiners to be appointed to seven companies in a group indebted to Deutsche Bank AG by about €684 million, overturning a High Court decision that had refused appointments for four of them.
In a judgment delivered on 4 October 2017, Ms Justice Finlay Geoghegan said the appeal should be allowed and the Bank’s cross appeal dismissed. The court found each company had a reasonable prospect of survival as a going concern, including the holding company, whose prospects depended on the survival of its subsidiaries. The order allows an examination of the companies’ affairs and, if feasible, preparation of proposals for schemes of arrangement. It does not approve any scheme.
The seven companies are KH Kitty Hall Holdings Limited, ML Meyrick Limited, MT Mono Trading Limited, Edward Leisure Assets Unlimited Company, Niche Hotels Unlimited Company, Style City Limited and Radical Properties Unlimited Company. The judgment describes MT Mono, Niche and Style as operating the Meyrick Hotel, G Hotel and Eye Cinema respectively. ML Meyrick, Edward Leisure Assets and Radical are property-owning companies; KH Kitty Hall is a holding company.
The High Court had refused examiners for Edward Leisure Assets, Niche Hotels, Style City and Radical Properties, while appointing examiners to KH Kitty Hall, ML Meyrick and MT Mono. Both sides appealed aspects of that order.
The Bank argued that the petitions breached a December 2016 debt settlement agreement and amounted to an abuse of process. The Court of Appeal rejected the abuse-of-process argument, concluding that the companies were exercising their statutory right to seek examinership for the purpose of rescue. It also found no failure by the petitioners to disclose information or breach of their duty of utmost good faith.
The judgment considered the Bank’s position as a secured creditor, the settlement agreement, possible costs and delay, and the interests of employees and general creditors. The court said the appointment stage was for examining rescue prospects; whether a later scheme would unfairly prejudice the Bank would be considered if a scheme came before the court for confirmation. The judgment did not determine the agreement’s current status or resolve disputes about alleged breaches.
The court concluded that, balancing the potential prejudice to the Bank against examinership’s statutory purpose and the interests of employees and creditors, examiners should be appointed to all seven companies.