The High Court has ordered two meetings of creditors to consider an amended scheme proposed by Millstream Recycling Limited after animal feed supplied by the company was found to be contaminated with dioxins and PCBs. The meetings were ordered for 1 July 2010, subject to the company filing a supplemental affidavit with the amended scheme.
One meeting is for scheme creditors other than those connected to the company through common shareholders. The other is for connected creditors. The split followed the court’s finding that creditors connected through common ownership could not consult with the other creditors with a view to a common interest. The court rejected arguments that creditors with claims at advanced stages of litigation, or creditors with separate insurance arrangements, required separate classes.
The order is at the first stage of the statutory scheme process: it convenes creditor meetings. The court did not decide whether the scheme is fair, approve its terms, or sanction it. If the scheme wins the required majorities at both meetings, the court set 19 July 2010 for hearings on petitions seeking its sanction.
The company’s proposals would distribute insurance proceeds and, if available, proceeds from separate litigation. The company and insurer FBD put the policy limit at €6.5 million, a figure some creditors disputed. The judge did not rule on the policy’s meaning or limit. She said the scheme should reflect the company’s agreement to initiate proceedings on the policy’s construction if a creditor requests them, but declined to give advance directions for those proceedings.
The court also declined to prescribe how creditor claims should be assessed, while holding that it had jurisdiction to convene meetings for a scheme containing a mechanism to value unliquidated claims. It expressed no view on whether the proposed assessment terms would withstand scrutiny if the scheme later came before it for sanction.
The court stayed proceedings for damages arising from the contamination and restrained further such proceedings against the company until further order. It said the stay was needed to limit the costs of determining claims and was essential to the proposed scheme. The ruling does not establish what creditors will receive: approval and court sanction remain outstanding, and the proposed litigation fund depends on the company succeeding in separate proceedings and being able to enforce any judgment.